þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
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95-6021257
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(State or Other Jurisdiction of
Incorporation or Organization)
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(I.R.S. Employer
Identification Number)
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445 South Street, Morristown, NJ
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07960
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(Address of Principal Executive Office)
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(Zip Code)
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Large accelerated filer
þ
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Accelerated filer
¨
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Non-accelerated filer
¨
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Smaller reporting company
¨
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(Do not check if a smaller reporting company)
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Class
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Outstanding at October 17, 2013
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Common Stock, $0.10 par value
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130,503,593
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PART I. FINANCIAL INFORMATION
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Page
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PART II. OTHER INFORMATION
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OTHER
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•
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seasonal or long-term fluctuations in the prices of energy, waste disposal, scrap metal and commodities, and our ability to renew or replace expiring contracts at comparable prices;
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•
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adoption of new laws and regulations in the United States and abroad, including energy laws, environmental laws, labor laws and healthcare laws;
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•
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our ability to avoid adverse publicity relating to our business expansion efforts;
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•
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advances in technology;
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•
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difficulties in the operation of our facilities, including fuel supply and energy delivery interruptions, failure to obtain regulatory approvals, equipment failures, labor disputes and work stoppages, and weather interference and catastrophic events;
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•
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failure to maintain historical performance levels at our facilities and our ability to retain the rights to operate facilities we do not own;
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•
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difficulties in the financing, development and construction of new projects and expansions, including increased construction costs and delays;
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•
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our ability to realize the benefits of long-term business development and bear the costs of business development over time;
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•
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our ability to utilize net operating loss carryforwards;
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•
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limits of insurance coverage;
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•
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our ability to avoid defaults under our long-term contracts;
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•
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performance of third parties under our contracts and such third parties' observance of laws and regulations;
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•
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concentration of suppliers and customers;
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•
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geographic concentration of facilities;
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•
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increased competitiveness in the energy and waste industries;
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•
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changes in foreign currency exchange rates;
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•
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limitations imposed by our existing indebtedness and our ability to perform our financial obligations and guarantees and to refinance our existing indebtedness;
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•
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exposure to counterparty credit risk and instability of financial institutions in connection with financing transactions;
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•
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the scalability of our business;
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•
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restrictions in our certificate of incorporation and debt documents regarding strategic alternatives;
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•
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failures of disclosure controls and procedures and internal controls over financial reporting;
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•
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our ability to attract and retain talented people;
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•
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general economic conditions in the United States and abroad, including the availability of credit and debt financing; and
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•
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other risks and uncertainties affecting our businesses described in Item 1A. Risk Factors of Covanta's Annual Report on Form 10-K for the year ended December 31, 2012 and in other filings by Covanta with the SEC.
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Three Months Ended
September 30, |
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Nine Months Ended
September 30, |
||||||||||||
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2013
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2012
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2013
|
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2012
|
||||||||
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(Unaudited)
(In millions, except per share amounts) |
||||||||||||||
OPERATING REVENUES:
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||||||||
Waste and service revenues
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$
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257
|
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$
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247
|
|
|
$
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747
|
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$
|
747
|
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Recycled metals revenues
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19
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|
|
17
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|
|
52
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|
|
55
|
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||||
Electricity and steam sales
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117
|
|
|
115
|
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322
|
|
|
297
|
|
||||
Other operating revenues
|
34
|
|
|
33
|
|
|
92
|
|
|
115
|
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||||
Total operating revenues
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427
|
|
|
412
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1,213
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|
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1,214
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OPERATING EXPENSES:
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|
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||||||||
Plant operating expenses
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232
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|
|
225
|
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|
765
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|
|
735
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|
||||
Other operating expenses
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26
|
|
|
31
|
|
|
67
|
|
|
100
|
|
||||
General and administrative expenses
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22
|
|
|
24
|
|
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72
|
|
|
74
|
|
||||
Depreciation and amortization expense
|
52
|
|
|
46
|
|
|
157
|
|
|
145
|
|
||||
Net interest expense on project debt
|
3
|
|
|
7
|
|
|
10
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|
|
22
|
|
||||
Net write-offs (gains)
|
12
|
|
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(2
|
)
|
|
63
|
|
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(2
|
)
|
||||
Total operating expenses
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347
|
|
|
331
|
|
|
1,134
|
|
|
1,074
|
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||||
Operating income
|
80
|
|
|
81
|
|
|
79
|
|
|
140
|
|
||||
Other income (expense):
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|
|
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|
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||||||||
Interest expense
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(30
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)
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(25
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)
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(88
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)
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(67
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)
|
||||
Non-cash convertible debt related expense
|
(7
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)
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(6
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)
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(21
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)
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(19
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)
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||||
Loss on extinguishment of debt
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—
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—
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(1
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)
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(2
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)
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||||
Other income, net
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—
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—
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—
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3
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||||
Total other expenses
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(37
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)
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(31
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)
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(110
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)
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(85
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)
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||||
Income (loss) from continuing operations before income tax expense and equity in net income from unconsolidated investments
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43
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50
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(31
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)
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55
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|
||||
Income tax expense
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(19
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)
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(27
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)
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(9
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)
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(30
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)
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||||
Equity in net income from unconsolidated investments
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4
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4
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4
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10
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||||
Income (loss) from continuing operations
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28
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27
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(36
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)
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35
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Loss from discontinued operations, net of income tax expense of $0, $0, $0 and $1, respectively
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—
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—
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—
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(2
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)
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||||
NET INCOME (LOSS)
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28
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27
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(36
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)
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33
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||||
Less: Net (income) loss from continuing operations attributable to noncontrolling interests in subsidiaries
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—
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(1
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)
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1
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(1
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)
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NET INCOME (LOSS) ATTRIBUTABLE TO COVANTA HOLDING CORPORATION
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$
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28
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$
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26
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$
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(35
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)
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$
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32
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|
|
|
|
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Amounts Attributable to Covanta Holding Corporation stockholders:
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Continuing operations
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$
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28
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|
|
$
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26
|
|
|
$
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(35
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)
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|
$
|
34
|
|
Discontinued operations
|
—
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—
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|
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—
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(2
|
)
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||||
Net Income (Loss) Attributable to Covanta Holding Corporation
|
$
|
28
|
|
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$
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26
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|
|
$
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(35
|
)
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|
$
|
32
|
|
|
|
|
|
|
|
|
|
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Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
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2013
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|
2012
|
|
2013
|
|
2012
|
||||||||
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(Unaudited)
(In millions, except per share amounts) |
||||||||||||||
Earnings (Loss) Per Share Attributable to Covanta Holding Corporation stockholders:
|
|
|
|
|
|
|
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||||||||
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.25
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
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|
|
(0.01
|
)
|
||||
Covanta Holding Corporation
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.24
|
|
Weighted Average Shares
|
129
|
|
|
131
|
|
|
129
|
|
|
133
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
0.22
|
|
|
$
|
0.19
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.25
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Covanta Holding Corporation
|
$
|
0.22
|
|
|
$
|
0.19
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.24
|
|
Weighted Average Shares
|
130
|
|
|
132
|
|
|
129
|
|
|
134
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash Dividend Declared Per Share:
|
$
|
0.165
|
|
|
$
|
0.15
|
|
|
$
|
0.495
|
|
|
$
|
0.45
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
|
(Unaudited)
(In millions)
|
||||||||||||||
Net income (loss)
|
$
|
28
|
|
|
$
|
27
|
|
|
$
|
(36
|
)
|
|
$
|
33
|
|
Foreign currency translation
|
2
|
|
|
2
|
|
|
(3
|
)
|
|
(2
|
)
|
||||
Adjustment for defined benefit pension plan settlement, net of tax benefit of $0, $0, $2 and $0, respectively
|
—
|
|
|
1
|
|
|
(4
|
)
|
|
1
|
|
||||
Pension and postretirement plan unrecognized benefits, net of tax expense of $0, $0, $1 and $0, respectively
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
Net unrealized gain (loss) on derivative instruments, net of tax (benefit) expense of $0, $1, $0 and $1, respectively
|
1
|
|
|
(3
|
)
|
|
1
|
|
|
(2
|
)
|
||||
Net unrealized (loss) gain on available for sale securities, net of tax expense of $0, $0, $0 and $0, respectively
|
(1
|
)
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
||||
Other comprehensive income (loss) attributable to Covanta Holding Corporation
|
2
|
|
|
1
|
|
|
(4
|
)
|
|
(2
|
)
|
||||
Comprehensive income (loss)
|
30
|
|
|
28
|
|
|
(40
|
)
|
|
31
|
|
||||
Less:
|
|
|
|
|
|
|
|
||||||||
Net (income) loss attributable to noncontrolling interests in subsidiaries
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
(1
|
)
|
||||
Comprehensive (income) loss attributable to noncontrolling interests in subsidiaries
|
—
|
|
|
(1
|
)
|
|
1
|
|
|
(1
|
)
|
||||
Comprehensive income (loss) attributable to Covanta Holding Corporation
|
$
|
30
|
|
|
$
|
27
|
|
|
$
|
(39
|
)
|
|
$
|
30
|
|
|
For the Nine Months Ended
September 30, |
||||||
|
2013
|
|
2012
|
||||
|
(Unaudited, in millions)
|
||||||
OPERATING ACTIVITIES:
|
|
|
|
||||
Net (loss) income
|
$
|
(36
|
)
|
|
$
|
33
|
|
Less: Loss from discontinued operations, net of tax expense
|
—
|
|
|
(2
|
)
|
||
(Loss) income from continuing operations
|
(36
|
)
|
|
35
|
|
||
Adjustments to reconcile net (loss) income from continuing operations to net cash provided by operating activities from continuing operations:
|
|
|
|
||||
Depreciation and amortization expense
|
157
|
|
|
145
|
|
||
Amortization of long-term debt deferred financing costs
|
6
|
|
|
5
|
|
||
Amortization of debt premium and discount
|
(1
|
)
|
|
(3
|
)
|
||
Net write-offs (gains)
|
63
|
|
|
(2
|
)
|
||
Defined benefit pension plan settlement gain
|
(6
|
)
|
|
—
|
|
||
Loss on extinguishment of debt
|
1
|
|
|
2
|
|
||
Non-cash convertible debt related expense
|
21
|
|
|
19
|
|
||
Stock-based compensation expense
|
12
|
|
|
13
|
|
||
Equity in net income from unconsolidated investments
|
(4
|
)
|
|
(10
|
)
|
||
Dividends from unconsolidated investments
|
7
|
|
|
7
|
|
||
Deferred income taxes
|
6
|
|
|
23
|
|
||
Other, net
|
(11
|
)
|
|
(8
|
)
|
||
Change in restricted funds held in trust
|
17
|
|
|
(10
|
)
|
||
Change in working capital
|
35
|
|
|
52
|
|
||
Total adjustments for continuing operations
|
303
|
|
|
233
|
|
||
Net cash provided by operating activities from continuing operations
|
267
|
|
|
268
|
|
||
Net cash provided by operating activities from discontinued operations
|
—
|
|
|
—
|
|
||
Net cash provided by operating activities
|
267
|
|
|
268
|
|
||
INVESTING ACTIVITIES:
|
|
|
|
||||
Proceeds from the sale of investment securities
|
6
|
|
|
2
|
|
||
Purchase of investment securities
|
(15
|
)
|
|
(10
|
)
|
||
Purchase of property, plant and equipment
|
(140
|
)
|
|
(94
|
)
|
||
Acquisition of business, net of cash acquired
|
(49
|
)
|
|
—
|
|
||
Acquisition of noncontrolling interest in subsidiary
|
(14
|
)
|
|
—
|
|
||
Acquisition of land use rights
|
—
|
|
|
(1
|
)
|
||
Property insurance proceeds
|
4
|
|
|
7
|
|
||
Other, net
|
(2
|
)
|
|
(2
|
)
|
||
Net cash used in investing activities from continuing operations
|
(210
|
)
|
|
(98
|
)
|
||
Net cash provided by investing activities from discontinued operations
|
—
|
|
|
11
|
|
||
Net cash used in investing activities
|
(210
|
)
|
|
(87
|
)
|
||
FINANCING ACTIVITIES:
|
|
|
|
||||
Proceeds from borrowings on long-term debt
|
22
|
|
|
699
|
|
||
Payment of deferred financing costs
|
(1
|
)
|
|
(26
|
)
|
||
Principal payments on long-term debt
|
(2
|
)
|
|
(621
|
)
|
||
Principal payments on project debt
|
(53
|
)
|
|
(46
|
)
|
||
Convertible debenture repurchases
|
—
|
|
|
(25
|
)
|
||
Payments of borrowings on revolving credit facility
|
(396
|
)
|
|
(63
|
)
|
||
Proceeds from borrowings on revolving credit facility
|
462
|
|
|
83
|
|
||
Change in restricted funds held in trust
|
3
|
|
|
(11
|
)
|
||
Cash dividends paid to stockholders
|
(45
|
)
|
|
(51
|
)
|
||
Common stock repurchased
|
(34
|
)
|
|
(83
|
)
|
||
Financing of insurance premiums, net
|
—
|
|
|
(10
|
)
|
||
Distributions to partners of noncontrolling interests in subsidiaries
|
—
|
|
|
(1
|
)
|
||
Other, net
|
(8
|
)
|
|
3
|
|
||
Net cash used in financing activities from continuing operations
|
(52
|
)
|
|
(152
|
)
|
||
Net cash used in financing activities from discontinued operations
|
—
|
|
|
(2
|
)
|
||
Net cash used in financing activities
|
(52
|
)
|
|
(154
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
1
|
|
|
1
|
|
||
Net increase in cash and cash equivalents
|
6
|
|
|
28
|
|
||
Cash and cash equivalents at beginning of period
|
246
|
|
|
234
|
|
||
Cash and cash equivalents at end of period
|
252
|
|
|
262
|
|
||
Less: Cash and cash equivalents of discontinued operations at end of period
|
—
|
|
|
—
|
|
||
Cash and cash equivalents of continuing operations at end of period
|
$
|
252
|
|
|
$
|
262
|
|
|
Three Months Ended
September 30, 2012 |
|
Nine Months Ended
September 30, 2012 |
||||
Revenues
|
$
|
—
|
|
|
$
|
—
|
|
Operating expenses
|
$
|
—
|
|
|
$
|
(3
|
)
|
Loss before income tax expense and equity in net income from unconsolidated investments
|
$
|
—
|
|
|
$
|
(3
|
)
|
Equity in net income from unconsolidated investments
|
$
|
—
|
|
|
$
|
2
|
|
Loss from discontinued operations, net of income tax expense of $0 and $1, respectively
|
$
|
—
|
|
|
$
|
(2
|
)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Regular cash dividend
|
|
|
|
|
|
|
|
||||||||
Declared
|
$
|
21
|
|
|
$
|
20
|
|
|
$
|
65
|
|
|
$
|
61
|
|
Per Share
|
$
|
0.165
|
|
|
$
|
0.15
|
|
|
$
|
0.495
|
|
|
$
|
0.45
|
|
|
Amount
|
|
Shares
Repurchased
|
|
Weighted
Average Cost
per Share
|
|||||
Three Months Ended March 31, 2013
|
$
|
24
|
|
|
1.2
|
|
|
$
|
19.27
|
|
Three Months Ended June 30, 2013
|
10
|
|
|
0.5
|
|
|
$
|
19.62
|
|
|
Three Months Ended September 30, 2013
|
—
|
|
|
—
|
|
|
$
|
—
|
|
|
Nine Months Ended September 30, 2013
|
$
|
34
|
|
|
1.7
|
|
|
$
|
19.37
|
|
|
|
As of September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Noncontrolling interests in subsidiaries, balance as of beginning of period
|
|
$
|
7
|
|
|
$
|
5
|
|
Acquisition of noncontrolling interests in subsidiaries
|
|
(2
|
)
|
|
—
|
|
||
Net (loss) income
|
|
(1
|
)
|
|
1
|
|
||
Noncontrolling interests in subsidiaries, balance as of end of period
|
|
$
|
4
|
|
|
$
|
6
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net income (loss) from continuing operations
|
$
|
28
|
|
|
$
|
26
|
|
|
$
|
(35
|
)
|
|
$
|
34
|
|
Net loss from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||
Net income (loss) attributable to Covanta Holding Corporation
|
$
|
28
|
|
|
$
|
26
|
|
|
$
|
(35
|
)
|
|
$
|
32
|
|
|
|
|
|
|
|
|
|
||||||||
Basic earnings (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Weighted average basic common shares outstanding
|
129
|
|
|
131
|
|
|
129
|
|
|
133
|
|
||||
Continuing operations
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.25
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Basic earnings (loss) per share
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings (loss) per share:
|
|
|
|
|
|
|
|
||||||||
Weighted average basic common shares outstanding
|
129
|
|
|
131
|
|
|
129
|
|
|
133
|
|
||||
Dilutive effect of stock options
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Dilutive effect of restricted stock
|
1
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Dilutive effect of convertible securities
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Dilutive effect of warrants
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Weighted average diluted common shares outstanding
|
130
|
|
|
132
|
|
|
129
|
|
|
134
|
|
||||
Continuing operations
|
$
|
0.22
|
|
|
$
|
0.19
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.25
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
||||
Diluted earnings (loss) per share
|
$
|
0.22
|
|
|
$
|
0.19
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.24
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||
Securities excluded from the weighted average dilutive common shares outstanding because their inclusion would have been anti-dilutive:
|
|
|
|
|
|
|
|
||||
Stock options
|
1
|
|
|
2
|
|
|
1
|
|
|
2
|
|
Restricted stock
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
Restricted stock units
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Warrants
|
29
|
|
|
28
|
|
|
29
|
|
|
28
|
|
|
Americas
|
|
All Other
(1)
|
|
Total
|
||||||
Three Months Ended September 30, 2013
|
|
|
|
|
|
||||||
Operating revenues
|
$
|
417
|
|
|
$
|
10
|
|
|
$
|
427
|
|
Depreciation and amortization expense
|
51
|
|
|
1
|
|
|
52
|
|
|||
Net write-offs (gains)
|
12
|
|
|
—
|
|
|
12
|
|
|||
Operating income (loss)
|
83
|
|
|
(3
|
)
|
|
80
|
|
|||
Three Months Ended September 30, 2012
|
|
|
|
|
|
||||||
Operating revenues
|
$
|
402
|
|
|
$
|
10
|
|
|
$
|
412
|
|
Depreciation and amortization expense
|
46
|
|
|
—
|
|
|
46
|
|
|||
Net write-offs (gains)
|
(13
|
)
|
|
11
|
|
|
(2
|
)
|
|||
Operating income (loss)
|
105
|
|
|
(24
|
)
|
|
81
|
|
|
Americas
|
|
All Other
(1)
|
|
Total
|
||||||
Nine Months Ended September 30, 2013
|
|
|
|
|
|
||||||
Operating revenues
|
$
|
1,182
|
|
|
$
|
31
|
|
|
$
|
1,213
|
|
Depreciation and amortization expense
|
155
|
|
|
2
|
|
|
157
|
|
|||
Net write-offs (gains)
|
16
|
|
|
47
|
|
|
63
|
|
|||
Operating income (loss)
|
140
|
|
|
(61
|
)
|
|
79
|
|
|||
Nine Months Ended September 30, 2012
|
|
|
|
|
|
||||||
Operating revenues
|
$
|
1,183
|
|
|
$
|
31
|
|
|
$
|
1,214
|
|
Depreciation and amortization expense
|
143
|
|
|
2
|
|
|
145
|
|
|||
Net write-offs (gains)
|
(13
|
)
|
|
11
|
|
|
(2
|
)
|
|||
Operating income (loss)
|
176
|
|
|
(36
|
)
|
|
140
|
|
(1)
|
All other is comprised of the financial results of our insurance subsidiaries’ operations and all assets outside of North America.
|
|
As of
|
||||||
|
September 30,
2013 |
|
December 31,
2012 |
||||
LONG-TERM DEBT:
|
|
|
|
||||
Revolving credit facility
|
$
|
126
|
|
|
$
|
60
|
|
|
|
|
|
||||
Term loan due 2019
|
295
|
|
|
298
|
|
||
Debt discount related to Term loan
|
(1
|
)
|
|
(1
|
)
|
||
Term loan, net
|
294
|
|
|
297
|
|
||
Credit Facilities Sub-total
|
$
|
420
|
|
|
$
|
357
|
|
7.25% Senior Notes due 2020
|
$
|
400
|
|
|
$
|
400
|
|
6.375% Senior Notes due 2022
|
400
|
|
|
400
|
|
||
|
|
|
|
||||
3.25% Cash Convertible Senior Notes due 2014
|
460
|
|
|
460
|
|
||
Debt discount related to 3.25% Cash Convertible Senior Notes
|
(21
|
)
|
|
(42
|
)
|
||
Cash conversion option derivative at fair value
|
176
|
|
|
105
|
|
||
3.25% Cash Convertible Senior Notes, net
|
615
|
|
|
523
|
|
||
Notes Sub-total
|
$
|
1,415
|
|
|
$
|
1,323
|
|
4.00% - 5.25% Tax-Exempt Bonds due from 2024 to 2042
|
$
|
335
|
|
|
$
|
335
|
|
Variable Rate Tax-Exempt Bonds due 2043
|
22
|
|
|
—
|
|
||
Tax-Exempt Bonds Sub-total
|
$
|
357
|
|
|
$
|
335
|
|
Total long-term debt
|
$
|
2,192
|
|
|
$
|
2,015
|
|
Less: current portion (includes $21 and $0 of unamortized discount, respectively, and $176 and $0 of cash conversion option derivative at fair value, respectively)
|
(618
|
)
|
|
(3
|
)
|
||
Noncurrent long-term debt
|
$
|
1,574
|
|
|
$
|
2,012
|
|
PROJECT DEBT:
|
|
|
|
||||
Americas project debt
|
|
|
|
||||
4.00% - 7.00% Americas project debt related to Service Fee structures due 2013 through 2022
|
$
|
195
|
|
|
$
|
223
|
|
5.248% - 8.375% Americas project debt related to Tip Fee structures due 2013 through 2020
|
45
|
|
|
68
|
|
||
Unamortized debt premium, net
|
2
|
|
|
3
|
|
||
Total Americas project debt
|
242
|
|
|
294
|
|
||
Other project debt
|
23
|
|
|
23
|
|
||
Total project debt
|
265
|
|
|
317
|
|
||
Less: Current project debt (includes $1 and $1 of unamortized premium, respectively)
|
(59
|
)
|
|
(80
|
)
|
||
Noncurrent project debt
|
$
|
206
|
|
|
$
|
237
|
|
TOTAL CONSOLIDATED DEBT
|
$
|
2,457
|
|
|
$
|
2,332
|
|
Less: Current debt
|
(677
|
)
|
|
(83
|
)
|
||
TOTAL NONCURRENT CONSOLIDATED DEBT
|
$
|
1,780
|
|
|
$
|
2,249
|
|
•
|
incur additional indebtedness (including guarantee obligations);
|
•
|
create certain liens against or security interests over certain property;
|
•
|
pay dividends on, redeem, or repurchase our capital stock or make other restricted junior payments;
|
•
|
enter into agreements that restrict the ability of our subsidiaries to make distributions or other payments to us;
|
•
|
make investments;
|
•
|
consolidate, merge or transfer all or substantially all of our assets and the assets of our subsidiaries on a consolidated basis;
|
•
|
dispose of certain assets; and
|
•
|
make certain acquisitions.
|
•
|
a maximum Leverage Ratio of
4.00
to 1.00 for the trailing four quarter period, which measures the principal amount of Covanta Energy’s consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs (“Consolidated Adjusted Debt”) to its adjusted earnings before interest, taxes, depreciation and amortization, as calculated in the Credit Agreement (“Adjusted EBITDA”). The definition of Adjusted EBITDA in the Credit Facilities excludes certain non-recurring and non-cash charges.
|
•
|
a minimum 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 as calculated in the Credit Agreement.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Waste and service revenue unrelated to project debt
|
$
|
248
|
|
|
$
|
235
|
|
|
$
|
718
|
|
|
$
|
710
|
|
Revenue earned explicitly to service project debt - principal
|
8
|
|
|
10
|
|
|
25
|
|
|
31
|
|
||||
Revenue earned explicitly to service project debt - interest
|
1
|
|
|
2
|
|
|
4
|
|
|
6
|
|
||||
Total waste and service revenue
|
$
|
257
|
|
|
$
|
247
|
|
|
$
|
747
|
|
|
$
|
747
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Construction costs
|
$
|
32
|
|
|
$
|
25
|
|
|
$
|
86
|
|
|
$
|
95
|
|
Insurance subsidiary operating expenses
(1)
|
1
|
|
|
8
|
|
|
3
|
|
|
13
|
|
||||
Defined benefit pension plan settlement gain
(2)
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||||
Insurance recoveries
(3)
|
(4
|
)
|
|
—
|
|
|
(4
|
)
|
|
(5
|
)
|
||||
Other
(4)
|
(3
|
)
|
|
(2
|
)
|
|
(12
|
)
|
|
(3
|
)
|
||||
Total other operating expenses
|
$
|
26
|
|
|
$
|
31
|
|
|
$
|
67
|
|
|
$
|
100
|
|
(1)
|
Insurance subsidiary operating expenses are primarily comprised of incurred but not reported loss reserves, loss adjustment expenses and policy acquisition costs. During the three months ended September 30, 2012, we transitioned our remaining insurance business to run-off and recorded losses and reserve increases of
$7 million
primarily relating to adverse loss development.
|
(2)
|
During the first quarter of 2013, we had final settlement of our defined benefit pension plan. For additional information see Note 9. Benefit Obligations.
|
(3)
|
See Stanislaus Energy-from-Waste Facility discussion below.
|
(4)
|
During the three and nine months ended September 30, 2013, we recognized a gain of
$3 million
related to a contract amendment. During the nine months ended September 30, 2013, we recognized a gain of
$8 million
related to early termination of a power purchase agreement.
|
|
|
Twelve Months Ended
December 31, 2012 |
|
Nine Months Ended
September 30, 2013 |
||||
Insurance Recoveries for Repair and reconstruction costs (net of write-down of assets, recorded to Other operating expenses)
|
|
$
|
7
|
|
|
$
|
4
|
|
Insurance Recoveries for Business Interruption and Clean-up costs, net of costs incurred (reduction to Plant operating expenses)
|
|
$
|
—
|
|
|
$
|
3
|
|
|
Waste, Service and
Energy Contract Intangibles
(Amortization Expense)
|
|
Waste, Service and Other
Contract Intangibles
(Contra-Expense)
|
||||
Nine Months Ended September 30, 2013
|
$
|
23
|
|
|
$
|
(7
|
)
|
Remainder of 2013
|
$
|
8
|
|
|
$
|
(3
|
)
|
2014
|
29
|
|
|
(10
|
)
|
||
2015
|
26
|
|
|
(6
|
)
|
||
2016
|
23
|
|
|
(6
|
)
|
||
2017
|
15
|
|
|
(4
|
)
|
||
Thereafter
|
272
|
|
|
(3
|
)
|
||
Total
|
$
|
373
|
|
|
$
|
(32
|
)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Americas segment:
|
|
|
|
|
|
|
|
||||||||
Write-down of Wallingford EfW facility assets
(1)
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
Write-down of equity investment in biomass facility
(2)
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
Write-off of loan issued for the Harrisburg EfW facility to fund certain facility improvements
(3)
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Write-off of intangible liability
(4)
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
||||
Write-down of renewable fuels project
(5)
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
||||
Sub-total:
|
12
|
|
|
(13
|
)
|
|
16
|
|
|
(13
|
)
|
||||
Other:
|
|
|
|
|
|
|
|
||||||||
Development costs - UK
(6)
|
—
|
|
|
11
|
|
|
47
|
|
|
11
|
|
||||
Total net write-offs (gains)
|
$
|
12
|
|
|
$
|
(2
|
)
|
|
$
|
63
|
|
|
$
|
(2
|
)
|
(1)
|
During the three and nine months ended September 30, 2013, we recorded a non-cash write-down of
$9 million
resulting from an impairment charge related to our Wallingford EfW facility assets in Connecticut.
|
(2)
|
During the three and nine months ended September 30, 2013, we recorded a non-cash write-down of
$3 million
related to our 55% equity investment in the Pacific Ultrapower Chinese Station biomass facility in California.
|
(3)
|
See Harrisburg Energy-from-Waste Facility discussion below.
|
(4)
|
During the nine months ended September 30, 2012, our service contract for the Essex EfW facility was amended and we recorded a non-cash write-off of an intangible liability of
$29 million
related to the below-market service contract which was recorded at fair value upon acquisition of the facility.
|
(5)
|
During the nine months ended September 30, 2012, we suspended construction of a facility that transformed waste materials into renewable liquid fuels. We recorded a non-cash write-off of
$16 million
representing the capitalized costs related to this project.
|
(6)
|
See Development Costs - United Kingdom discussion below.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Debt discount accretion related to the 3.25% Notes
|
$
|
7
|
|
|
$
|
7
|
|
|
$
|
21
|
|
|
$
|
20
|
|
Fair value changes related to the cash convertible note hedge
|
(35
|
)
|
|
8
|
|
|
(71
|
)
|
|
(33
|
)
|
||||
Fair value changes related to the cash conversion option derivative
|
35
|
|
|
(9
|
)
|
|
71
|
|
|
32
|
|
||||
Total non-cash convertible debt related expense
|
$
|
7
|
|
|
$
|
6
|
|
|
$
|
21
|
|
|
$
|
19
|
|
|
Foreign Currency Translation
|
|
Pension and Other Postretirement Plan Unrecognized Net Gain (Loss)
|
|
Net Unrealized Gain on Derivatives
|
|
Net Unrealized Gain (Loss) on Securities
|
|
Total
|
||||||||||
Balance December 31, 2012
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
—
|
|
|
$
|
1
|
|
|
$
|
7
|
|
Other comprehensive (loss) income before reclassifications
|
(3
|
)
|
|
3
|
|
|
1
|
|
|
(1
|
)
|
|
—
|
|
|||||
Amounts reclassified from accumulated other comprehensive income
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
|||||
Net current period comprehensive (loss) income
|
(3
|
)
|
|
(1
|
)
|
|
1
|
|
|
(1
|
)
|
|
(4
|
)
|
|||||
Balance September 30, 2013
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
3
|
|
|
As of September 30, 2013
|
||
|
Unrecognized stock-
based compensation
|
|
Weighted-average years
to be recognized
|
Restricted Stock Awards
|
$ 10
|
|
1.5
|
Restricted Stock Units
|
$ 3
|
|
2.3
|
•
|
For cash and cash equivalents, restricted funds, and marketable securities, the carrying value of these amounts is a reasonable estimate of their fair value. The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee.
|
•
|
Fair values for long-term debt and project debt are determined using quoted market prices.
|
•
|
The fair value of the note hedge and the cash conversion option are determined using an option pricing model based on observable inputs such as implied volatility, risk free interest rate, and other factors. The fair value of the note hedge is adjusted to reflect counterparty risk of non-performance, and is based on the counterparty’s credit spread in the credit derivatives market. The contingent interest features related to the Debentures and the 3.25% Notes are valued quarterly using the present value of expected cash flow models incorporating the probabilities of the contingent events occurring.
|
|
|
|
|
As of
|
||||||
Financial Instruments Recorded at Fair Value on a Recurring Basis:
|
|
Fair Value Measurement Level
|
|
September 30, 2013
|
|
December 31, 2012
|
||||
|
|
|
|
(In millions)
|
||||||
Assets:
|
|
|
|
|
|
|
||||
Cash and cash equivalents:
|
|
|
|
|
|
|
||||
Bank deposits and certificates of deposit
|
|
1
|
|
$
|
246
|
|
|
$
|
240
|
|
Money market funds
|
|
1
|
|
6
|
|
|
6
|
|
||
Total cash and cash equivalents:
|
|
|
|
252
|
|
|
246
|
|
||
Restricted funds held in trust:
|
|
|
|
|
|
|
||||
Bank deposits and certificates of deposit
|
|
1
|
|
2
|
|
|
2
|
|
||
Money market funds
|
|
1
|
|
63
|
|
|
64
|
|
||
U.S. Treasury/Agency obligations
(1)
|
|
1
|
|
15
|
|
|
17
|
|
||
State and municipal obligations
|
|
1
|
|
112
|
|
|
119
|
|
||
Commercial paper/Guaranteed investment contracts/Repurchase agreements
|
|
1
|
|
2
|
|
|
12
|
|
||
Total restricted funds held in trust:
|
|
|
|
194
|
|
|
214
|
|
||
Restricted funds — other:
|
|
|
|
|
|
|
||||
Bank deposits and certificates of deposit
(2)(3)
|
|
1
|
|
1
|
|
|
5
|
|
||
Money market funds
(3)
|
|
1
|
|
7
|
|
|
8
|
|
||
Residential mortgage-backed securities
(3)
|
|
1
|
|
1
|
|
|
1
|
|
||
Total restricted funds other:
|
|
|
|
9
|
|
|
14
|
|
||
Investments:
|
|
|
|
|
|
|
||||
Mutual and bond funds
(2)(3)
|
|
1
|
|
13
|
|
|
2
|
|
||
Investments available for sale:
|
|
|
|
|
|
|
||||
U.S. Treasury/Agency obligations
(4)
|
|
1
|
|
6
|
|
|
6
|
|
||
Residential mortgage-backed securities
(4)
|
|
1
|
|
10
|
|
|
11
|
|
||
Other government obligations
(4)
|
|
1
|
|
4
|
|
|
5
|
|
||
Corporate investments
(4)
|
|
1
|
|
13
|
|
|
14
|
|
||
Equity securities
(3)
|
|
1
|
|
4
|
|
|
3
|
|
||
Total investments:
|
|
|
|
50
|
|
|
41
|
|
||
Derivative Asset — Note Hedge
|
|
2
|
|
175
|
|
|
104
|
|
||
Total assets:
|
|
|
|
$
|
680
|
|
|
$
|
619
|
|
Liabilities:
|
|
|
|
|
|
|
||||
Derivative Liability — Cash Conversion Option
|
|
2
|
|
$
|
176
|
|
|
$
|
105
|
|
Derivative Liabilities — Contingent interest features of the 3.25% Notes and Debentures
|
|
2
|
|
0
|
|
|
0
|
|
||
Derivative Liability — Energy Hedges
|
|
2
|
|
—
|
|
|
1
|
|
||
Total liabilities:
|
|
|
|
$
|
176
|
|
|
$
|
106
|
|
|
|
As of September 30, 2013
|
|
As of December 31, 2012
|
||||||||||||
Financial Instruments Recorded at Carrying Amount:
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
|
Carrying
Amount
|
|
Estimated
Fair Value
|
||||||||
Assets:
|
|
|
|
|
|
|
|
|
||||||||
Accounts receivables
(5)
|
|
$
|
291
|
|
|
$
|
291
|
|
|
$
|
283
|
|
|
$
|
283
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
||||||||
Long-term debt
|
|
$
|
2,192
|
|
|
$
|
2,137
|
|
|
$
|
2,015
|
|
|
$
|
2,081
|
|
Project debt
|
|
$
|
265
|
|
|
$
|
277
|
|
|
$
|
317
|
|
|
$
|
329
|
|
(1)
|
The U.S. Treasury/Agency obligations in restricted funds held in trust are primarily comprised of Federal Home Loan Mortgage Corporation securities at fair value.
|
(2)
|
Included in other noncurrent assets in the condensed consolidated balance sheets.
|
(3)
|
Included in prepaid expenses and other current assets in the condensed consolidated balance sheets.
|
(4)
|
Included in investments in fixed maturities at market in the condensed consolidated balance sheets.
|
(5)
|
Includes
$23 million
and
$27 million
of noncurrent receivables in other noncurrent assets in the condensed consolidated balance sheets as of
September 30, 2013
and December 31, 2012, respectively.
|
|
As of September 30, 2013
|
||||||
|
Amortized Cost
|
|
Fair Value
|
||||
Available-for-sale:
|
|
|
|
||||
One year or less
|
$
|
4
|
|
|
$
|
4
|
|
Over one year to five years
|
16
|
|
|
16
|
|
||
Over five years to ten years
|
13
|
|
|
13
|
|
||
More than ten years
|
—
|
|
|
—
|
|
||
Total fixed maturities
|
$
|
33
|
|
|
$
|
33
|
|
|
|
As of September 30, 2013
|
|
As of December 31, 2012
|
||||||||
Description of Investments
|
|
Fair
Value
|
|
Number of Investments
|
|
Fair
Value
|
|
Number of Investments
|
||||
U.S. Treasury and other direct U.S. Government obligations
|
|
$
|
3
|
|
|
5
|
|
$
|
1
|
|
|
1
|
Residential mortgage-backed securities
|
|
9
|
|
|
17
|
|
9
|
|
|
12
|
||
Other government obligations
|
|
1
|
|
|
2
|
|
—
|
|
|
1
|
||
Corporate bonds
|
|
2
|
|
|
5
|
|
1
|
|
|
3
|
||
Total fixed maturities
|
|
15
|
|
|
|
|
11
|
|
|
|
||
Equity securities
|
|
—
|
|
|
3
|
|
1
|
|
|
8
|
||
Total temporarily impaired investments
|
|
$
|
15
|
|
|
|
|
$
|
12
|
|
|
|
Derivative Instruments Not Designated
As Hedging Instruments
|
|
|
|
Fair Value as of
|
||||||
Balance Sheet Location
|
|
September 30,
2013 |
|
December 31,
2012 |
||||||
Asset Derivatives:
|
|
|
|
|
|
|
||||
Note Hedge
|
|
Note Hedge
|
|
$
|
175
|
|
|
$
|
—
|
|
Note Hedge
|
|
Other noncurrent assets
|
|
$
|
—
|
|
|
$
|
104
|
|
Liability Derivatives:
|
|
|
|
|
|
|
||||
Cash Conversion Option
|
|
Current portion of long-term debt
|
|
$
|
176
|
|
|
$
|
—
|
|
Cash Conversion Option
|
|
Long-term debt
|
|
$
|
—
|
|
|
$
|
105
|
|
Contingent interest features of the Debentures and 3.25% Notes
|
|
Other noncurrent liabilities
|
|
$
|
0
|
|
|
$
|
0
|
|
|
|
Commitments Expiring by Period
|
||||||||||
|
|
Total
|
|
Less Than
One Year
|
|
More Than
One Year
|
||||||
Letters of credit
|
|
$
|
281
|
|
|
$
|
6
|
|
|
$
|
275
|
|
Surety bonds
|
|
304
|
|
|
—
|
|
|
304
|
|
|||
Total other commitments — net
|
|
$
|
585
|
|
|
$
|
6
|
|
|
$
|
579
|
|
•
|
holders may require us to repurchase their 7.25% Notes, 6.375% Notes and their 3.25% Notes if a fundamental change occurs; and
|
•
|
holders may exercise their conversion rights upon the occurrence of certain events, which would require us to pay the conversion settlement amount in cash.
|
•
|
increased our quarterly cash dividend by 10%, to $0.66 per share on an annualized basis;
|
•
|
increased the current share repurchase authorization to a total of $150 million;
|
•
|
lowered the pricing on our $296 million senior secured term loan B due 2019 by approximately 0.50% from the prior rate; an estimated annual interest savings of approximately $1.5 million, based on the current LIBOR rate;
|
•
|
successfully refinanced $22 million of tax-exempt project debt at our Delaware Valley facility which matured on July 1, 2013 with new tax-exempt corporate variable-rate demand bonds which will mature on July 1, 2043;
|
•
|
were awarded a 20 year contract with New York City's Department of Sanitation for Covanta to use a multi-modal approach estimated to begin in early 2015, to handle waste transport and disposal from two marine transfer stations located in Queens and Manhattan utilizing capacity at existing facilities for the disposal of approximately 800,000 tons per year of New York City's municipal solid waste. We expect our total investment associated with this contract will be approximately $140 million. This investment will be made over several years beginning in 2013; and
|
•
|
acquired the Camden Resource Recovery Facility for $49 million. The 1,050 ton-per-day EfW facility in Camden, New Jersey provides sustainable waste management services to Camden County and surrounding communities while generating approximately 21 megawatts of renewable energy which is sold at prevailing market rates.
|
•
|
Grow the value of our existing portfolio.
We intend to maximize the long-term value of our existing portfolio by continuously improving safety, health and environmental performance, working in partnership with our client communities, continuing to operate at our historic production levels, maintaining our facilities in optimal condition, and managing our expenses. We also intend to effect organic growth through adding or extending waste and service contracts, seeking incremental revenue opportunities by investing in and enhancing the capabilities of our existing assets, deploying new or improved technologies targeted at increasing revenue or reducing costs and expanding our customer base and sustainable service offerings.
|
•
|
Expand through acquisitions and/or development in selected attractive markets.
We seek to grow our business primarily through acquisitions and the development of new facilities or businesses where we believe that market and regulatory conditions will enable us to utilize our skills and invest our capital at attractive risk-adjusted rates of return. We are currently focusing on opportunities in the United States and Canada, which we consider to be our core markets. In addition, we believe that there are attractive opportunities in countries where policies are supportive of energy-from-waste projects.
|
•
|
Develop and commercialize new technology.
We believe that our efforts to protect and expand our business will be enhanced by the development of additional technologies in such fields as emission controls, residue disposal, alternative waste treatment processes, gasification, and combustion controls. We have advanced our research and development efforts in these areas, and have developed and have patents and patents pending for major advances in controlling nitrogen oxide (“NO
x
”) emissions and have a patent for a proprietary process to improve the handling of the residue from our energy-from-waste facilities. We have also entered into various agreements with multiple partners to invest in the development, testing or licensing of new technologies related to the transformation of waste materials into renewable fuels or the generation of energy, as well as improved environmental performance.
|
•
|
Advocate for public policy favorable to energy-from-waste.
We seek to educate policymakers and regulators about the environmental and economic benefits of energy-from-waste and advocate for policies and regulations that appropriately reflect these benefits. Our business is highly regulated, and as such we believe that it is critically important for us, as an industry leader, to play an active role in the debates surrounding potential policy developments that could impact our business.
|
•
|
Allocate capital efficiently.
We plan to allocate capital to maximize stockholder value by: investing in our existing businesses to maintain and enhance assets; effecting organic growth; investing in high value core business development projects and strategic acquisitions when available; and returning surplus capital to our stockholders.
|
|
|
As of September 30,
|
||||||
|
|
2013
|
|
2012
|
||||
Consumer Price Index
(1)
|
|
1.5
|
%
|
|
2.0
|
%
|
||
PJM Pricing (Electricity)
(2)
|
|
$
|
41.63
|
|
|
$
|
38.12
|
|
Henry Hub Pricing (Natural Gas)
(3)
|
|
$
|
3.55
|
|
|
$
|
2.87
|
|
#1 HMS Pricing (Ferrous Metals)
(4)
|
|
$
|
339
|
|
|
$
|
340
|
|
|
|
|
|
|
(1)
|
Represents the year-over-year percent change in the Headline CPI number. The Consumer Price Index (CPI-U) data is provided by the U.S. Department of Labor Bureau of Labor Statistics. Reflects that most recently published CPI which is August 2013.
|
(2)
|
Average price per MWh for Q3 2013 and Q3 2012. Pricing for the PJM PSEG Zone is provided by the PJM ISO.
|
(3)
|
Average price per MMBtu for Q3 2013 and Q3 2012. The Henry Hub Pricing data is provided by the Natural Gas Weekly Update, Energy Information Administration, Washington, DC. Nebraska Energy Office, Lincoln, NE.
|
(4)
|
Average price per gross ton for Q3 2013 and Q3 2012. The #1 Heavy Melt Steel ("HMS") composite index ($/gross ton) price is published by American Metal Market.
|
•
|
seasonal or long-term changes in market prices for waste, energy, or ferrous and non-ferrous metals for projects where we sell into those markets;
|
•
|
seasonal or geographic changes in the price and availability of wood waste as fuel for our biomass facilities;
|
•
|
seasonal, geographic and other variations in the heat content of waste processed, and thereby the amount of waste that can be processed by an energy-from-waste facility;
|
•
|
our ability to operate at historic performance levels as our facilities age, and the extent to which our annual maintenance expense increases over time;
|
•
|
our ability to avoid increases in operating and maintenance costs and unscheduled or extended outages while ensuring that adequate facility maintenance is conducted so that historic levels of operating performance can be sustained;
|
•
|
contract counterparties’ ability to fulfill their obligations, including the ability of our various municipal customers to supply waste in contractually committed amounts, and the availability of alternate or additional sources of waste if excess processing capacity exists at our facilities;
|
•
|
our ability to extend or replace existing waste and energy contracts , and the extent to which prevailing market conditions result in decreased or increased pricing under such contracts;
|
•
|
the success or lack of success in implementing our organic growth programs which are focused on growing our waste revenue, increasing our metal revenue, managing our assets and improving efficiency to reduce cost;
|
•
|
the extent and success of our construction activity and the timing of payments we receive for such activity; and
|
•
|
the availability and adequacy of insurance to cover losses from business interruption in the event of casualty or other insured events.
|
|
|
Tip Fee
|
|
Service Fee
(Owned)
|
|
Service Fee
(Operated)
|
Number of facilities:
|
|
17
|
|
9
|
|
15
|
Client(s):
|
|
Host community and municipal and commercial waste customers
|
|
Host community, with limited merchant capacity in some cases
|
|
Dedicated to host community exclusively
|
Waste or service
revenue:
|
|
Per ton “tipping fee”
|
|
Fixed fee, with performance incentives and inflation escalation
|
||
Energy revenue:
|
|
Covanta retains 100%
|
|
Share with client
(Covanta retains approximately 20% on average)
|
||
Metals revenue:
|
|
Covanta retains 100%
|
|
Share with client
(Covanta typically retains approximately 50%)
|
||
Operating costs:
|
|
Covanta responsible for all operating costs
|
|
Pass through certain costs to municipal client
(e.g. ash disposal)
|
||
Project debt service:
|
|
Covanta project subsidiary responsible
|
|
Paid explicitly as part of service fee
|
|
Client responsible for debt service
|
After service contract
expiration:
|
|
N/A
|
|
Covanta owns the facility; clients have certain rights set forth in contracts; facility converts to Tip Fee or remains Service Fee with new terms
|
|
Client owns the facility; extend with Covanta or tender for new contract
|
•
|
We design the facility, help to arrange for financing and then we either construct and equip the facility on a fixed price and schedule basis, or we undertake an alternative role, such as construction management, if our municipal client so desires.
|
•
|
Our projects were generally financed at construction with project debt in the form of tax-exempt municipal bonds issued by a sponsoring municipality, which generally mature at the same time the initial term of our service contract expires and are repaid over time based on set amortization schedules. At Tip Fee facilities, our project subsidiary is responsible for meeting any debt service or lease payment obligations out of the revenue generated by the facility. At Service Fee projects that we own and where project debt is in place, a portion of our monthly fee from the municipal client is dedicated, dollar-for-dollar, to project debt service. For these facilities, the bond proceeds are loaned to us to pay for facility construction and to fund a debt service reserve for the project, which is generally sufficient to pay principal and interest for one year. Project-related debt is included as “project debt” and the debt service reserves are included as “restricted funds held in trust” in our condensed consolidated financial statements. Generally, project debt is secured by the project’s revenue, contracts and other assets of our project subsidiary. When the service contract expires and the debt is paid off, the project owner (either Covanta or the municipal entity) will determine the form of any new contractual arrangements. We are not responsible for debt service for projects that we neither own nor lease.
|
Project Debt Repayment
|
2008 - 2012
|
|
2013 Projected
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
Beyond 2017
|
||||||||||||||
Total Principal Payments
(1)
|
$
|
740
|
|
|
$
|
82
|
|
|
$
|
50
|
|
|
$
|
37
|
|
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
93
|
|
Total Change in Principal-Related Restricted Funds
|
(140
|
)
|
|
(27
|
)
|
|
(21
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(14
|
)
|
|||||||
Net Cash Used for Project Debt Principal Repayment
|
$
|
600
|
|
|
$
|
55
|
|
|
$
|
29
|
|
|
$
|
31
|
|
|
$
|
14
|
|
|
$
|
15
|
|
|
$
|
79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Client Payments for Debt Service
|
2008 - 2012
|
|
2013 Projected
|
|
2014
|
|
2015
|
|
2016
|
|
2016
|
|
Beyond 2016
|
||||||||||||||
Debt Service Revenue - Principal
(2)
|
$
|
293
|
|
|
$
|
30
|
|
|
$
|
19
|
|
|
$
|
9
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
2
|
|
Debt Service Revenue - Interest
|
86
|
|
|
5
|
|
|
3
|
|
|
2
|
|
|
1
|
|
|
1
|
|
|
—
|
|
|||||||
Debt Service Billings in Excess of Revenue Recognized
|
94
|
|
|
9
|
|
|
2
|
|
|
2
|
|
|
5
|
|
|
5
|
|
|
—
|
|
|||||||
Client Payments for Debt Service
(3)
|
$
|
473
|
|
|
$
|
44
|
|
|
$
|
24
|
|
|
$
|
13
|
|
|
$
|
9
|
|
|
$
|
9
|
|
|
$
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Net Change in Debt Service Billings Per Period
|
$
|
(63
|
)
|
|
$
|
(16
|
)
|
|
$
|
(20
|
)
|
|
$
|
(11
|
)
|
|
$
|
(4
|
)
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
•
|
Following construction and during operations, we receive revenue from three primary sources: fees we receive for operating and maintaining projects or for processing waste received, payments we receive from the sale of electricity and/or steam, and payments we receive from the sale of recycled metals we recover.
|
•
|
We agree to operate the facility and meet minimum waste processing capacity and efficiency standards, energy production levels and environmental standards. Failure to meet these requirements or satisfy the other material terms of our agreement (unless the failure is caused by our client community or by events beyond our control), may result in damages charged to us or, if the breach is substantial, continuing and unremedied, termination of the applicable agreement. These damages could include amounts sufficient to repay project debt (as reduced by amounts held in trust and/or proceeds from sales of facilities securing project debt) and as such, these contingent obligations cannot readily be quantified. We have issued performance guarantees to our client communities and, in some cases other parties, which guarantee that our project subsidiaries will perform in accordance with contractual terms including, where required, the payment of such damages. If one or more contracts were terminated for our default, these contractual damages may be material to our cash flow and financial condition. To date, we have not incurred material liabilities under such performance guarantees.
|
•
|
The client community generally must deliver minimum quantities of municipal solid waste to the facility on a put-or-pay basis and is obligated to pay a fee for its disposal. A put-or-pay commitment means that the client community promises to deliver a stated quantity of waste and pay an agreed amount for its disposal, regardless of whether the full amount of waste is actually delivered. Client communities have consistently met their commitment to deliver the stated quantity of waste. Where a Service Fee structure exists, portions of the service fee escalate to reflect indices for inflation, and in many cases, the client community must also pay for other costs, such as insurance, taxes, and transportation and disposal of the ash residue to the disposal site. Generally, expenses resulting from the delivery of unacceptable and hazardous waste on the site are also borne by the client community. In addition, the contracts generally require the client community to pay increased expenses and capital costs resulting from unforeseen circumstances, subject to specified limits. At three publicly-owned facilities we operate, our client community may terminate the operating contract under certain circumstances without cause.
|
•
|
At facilities we own or lease, we also either own or lease the related real estate. Where we have a leasehold interest, we generally have renewal rights which extend beyond our service contracts with client communities. Rent prior to the expiration of service contracts is generally nominal; during site lease renewal periods rent may be either factored into service renewal terms, or set based on market conditions. If we are unable to negotiate leasehold extensions beyond all existing renewal terms, we generally have rights to remove and retain the facility components.
|
•
|
Our financial returns are expected to be stable if we do not incur material unexpected operation and maintenance costs or other expenses. In addition, most of our energy-from-waste project contracts are structured so that contract counterparties generally bear, or share in, the costs associated with events or circumstances not within our control, such as uninsured force majeure events and changes in legal requirements. The stability of our revenues and returns could be affected by our ability to continue to enforce these obligations. Also, at some of our energy-from-waste facilities, commodity price risk is mitigated by passing through commodity costs to contract counterparties. With respect to our other renewable energy projects, such structural features generally do not exist because either we operate and maintain such facilities for our own account or we do so on a cost-plus basis rather than a fixed-fee basis.
|
•
|
We receive the majority of our revenue under short- and long-term contracts, with little or no exposure to price volatility, but with adjustments intended to reflect changes in our costs. Where our revenue is received under other arrangements and depending upon the revenue source, we have varying amounts of exposure to price volatility. The largest component of our revenue is waste revenue, which has generally been subject to less price volatility than our revenue derived from the sale of energy and metals. At some of our renewable energy projects, our operating subsidiaries purchase fuel in the open markets which exposes us to fuel price risk.
|
•
|
We generally sell the energy output from our projects to local utilities pursuant to long-term contracts. At several of our energy-from-waste projects, we sell energy output under short-term contracts or on a spot-basis to our customers.
|
•
|
organic growth;
|
•
|
new energy-from-waste and other renewable energy projects;
|
•
|
existing project expansions, acquisitions, and businesses ancillary to our existing business, such as additional waste transfer, transportation, recycling, processing, recovery and disposal businesses.
|
Growth Investments
|
Nine Months Ended
September 30, 2013 |
||
|
|
||
Metals recovery projects
|
$
|
32
|
|
Other growth investments
|
32
|
|
|
New York City Contract (Intermodal equipment purchases and enhancements to existing facilities)
|
12
|
|
|
Total Organic Growth Investments:
|
$
|
76
|
|
|
|
|
|
Consolidated
|
|
Americas
|
|
Variance
Increase (Decrease)
|
||||||||||||||||||
Three Months Ended September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Consolidated
|
|
Americas
|
||||||||||||
|
|
(In millions)
|
||||||||||||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Waste and service revenues
|
|
$
|
257
|
|
|
$
|
247
|
|
|
$
|
255
|
|
|
$
|
246
|
|
|
$
|
10
|
|
|
$
|
9
|
|
Recycled metals revenues
|
|
19
|
|
|
17
|
|
|
19
|
|
|
17
|
|
|
2
|
|
|
2
|
|
||||||
Electricity and steam sales
|
|
117
|
|
|
115
|
|
|
109
|
|
|
109
|
|
|
2
|
|
|
—
|
|
||||||
Other operating revenues
|
|
34
|
|
|
33
|
|
|
34
|
|
|
30
|
|
|
1
|
|
|
4
|
|
||||||
Total operating revenues
|
|
427
|
|
|
412
|
|
|
417
|
|
|
402
|
|
|
15
|
|
|
15
|
|
||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Plant operating expenses
|
|
232
|
|
|
225
|
|
|
222
|
|
|
218
|
|
|
7
|
|
|
4
|
|
||||||
Other operating expenses
|
|
26
|
|
|
31
|
|
|
26
|
|
|
21
|
|
|
(5
|
)
|
|
5
|
|
||||||
General and administrative expenses
|
|
22
|
|
|
24
|
|
|
20
|
|
|
18
|
|
|
(2
|
)
|
|
2
|
|
||||||
Depreciation and amortization expense
|
|
52
|
|
|
46
|
|
|
51
|
|
|
46
|
|
|
6
|
|
|
5
|
|
||||||
Net interest expense on project debt
|
|
3
|
|
|
7
|
|
|
3
|
|
|
7
|
|
|
(4
|
)
|
|
(4
|
)
|
||||||
Net write-offs (gains)
|
|
12
|
|
|
(2
|
)
|
|
12
|
|
|
(13
|
)
|
|
14
|
|
|
25
|
|
||||||
Total operating expenses
|
|
347
|
|
|
331
|
|
|
334
|
|
|
297
|
|
|
16
|
|
|
37
|
|
||||||
Operating income
|
|
$
|
80
|
|
|
$
|
81
|
|
|
$
|
83
|
|
|
$
|
105
|
|
|
$
|
(1
|
)
|
|
$
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Plus: Net write-offs (gains)
|
|
$
|
12
|
|
|
$
|
(2
|
)
|
|
$
|
12
|
|
|
$
|
(13
|
)
|
|
|
|
|
|
|
||
Operating income excluding Net write-offs (gains):
|
|
$
|
92
|
|
|
$
|
79
|
|
|
$
|
95
|
|
|
$
|
92
|
|
|
$
|
13
|
|
|
$
|
3
|
|
|
|
Consolidated
|
|
Americas
|
|
Variance
Increase (Decrease)
|
||||||||||||||||||
Nine Months Ended September 30,
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Consolidated
|
|
Americas
|
||||||||||||
|
|
(In millions)
|
||||||||||||||||||||||
OPERATING REVENUES:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Waste and service revenues
|
|
$
|
747
|
|
|
$
|
747
|
|
|
$
|
741
|
|
|
$
|
745
|
|
|
$
|
—
|
|
|
$
|
(4
|
)
|
Recycled metals revenues
|
|
52
|
|
|
55
|
|
|
52
|
|
|
55
|
|
|
(3
|
)
|
|
(3
|
)
|
||||||
Electricity and steam sales
|
|
322
|
|
|
297
|
|
|
300
|
|
|
276
|
|
|
25
|
|
|
24
|
|
||||||
Other operating revenues
|
|
92
|
|
|
115
|
|
|
89
|
|
|
107
|
|
|
(23
|
)
|
|
(18
|
)
|
||||||
Total operating revenues
|
|
1,213
|
|
|
1,214
|
|
|
1,182
|
|
|
1,183
|
|
|
(1
|
)
|
|
(1
|
)
|
||||||
OPERATING EXPENSES:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Plant operating expenses
|
|
765
|
|
|
735
|
|
|
736
|
|
|
712
|
|
|
30
|
|
|
24
|
|
||||||
Other operating expenses
|
|
67
|
|
|
100
|
|
|
66
|
|
|
86
|
|
|
(33
|
)
|
|
(20
|
)
|
||||||
General and administrative expenses
|
|
72
|
|
|
74
|
|
|
60
|
|
|
58
|
|
|
(2
|
)
|
|
2
|
|
||||||
Depreciation and amortization expense
|
|
157
|
|
|
145
|
|
|
155
|
|
|
143
|
|
|
12
|
|
|
12
|
|
||||||
Net interest expense on project debt
|
|
10
|
|
|
22
|
|
|
9
|
|
|
21
|
|
|
(12
|
)
|
|
(12
|
)
|
||||||
Net write-offs (gains)
|
|
63
|
|
|
(2
|
)
|
|
16
|
|
|
(13
|
)
|
|
65
|
|
|
29
|
|
||||||
Total operating expenses
|
|
1,134
|
|
|
1,074
|
|
|
1,042
|
|
|
1,007
|
|
|
60
|
|
|
35
|
|
||||||
Operating income
|
|
$
|
79
|
|
|
$
|
140
|
|
|
$
|
140
|
|
|
$
|
176
|
|
|
$
|
(61
|
)
|
|
$
|
(36
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Plus: Net write-offs (gains)
|
|
$
|
63
|
|
|
$
|
(2
|
)
|
|
$
|
16
|
|
|
$
|
(13
|
)
|
|
|
|
|
|
|
||
Operating income excluding Net write-offs (gains):
|
|
$
|
142
|
|
|
$
|
138
|
|
|
$
|
156
|
|
|
$
|
163
|
|
|
$
|
4
|
|
|
$
|
(7
|
)
|
Consolidated (In millions):
|
|
For the Three Months Ended
September 30, |
|
For the Nine Months Ended
September 30, |
|
Variance
Increase (Decrease)
|
||||||||||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Three Month
|
|
Nine Month
|
||||||||||||
Waste and service revenue unrelated to project debt
|
|
$
|
248
|
|
|
$
|
235
|
|
|
$
|
718
|
|
|
$
|
710
|
|
|
$
|
13
|
|
|
$
|
8
|
|
Revenue earned explicitly to service project debt - principal
|
|
8
|
|
|
10
|
|
|
25
|
|
|
31
|
|
|
(2
|
)
|
|
(6
|
)
|
||||||
Revenue earned explicitly to service project debt - interest
|
|
1
|
|
|
2
|
|
|
4
|
|
|
6
|
|
|
(1
|
)
|
|
(2
|
)
|
||||||
Total waste and service revenue
|
|
$
|
257
|
|
|
$
|
247
|
|
|
$
|
747
|
|
|
$
|
747
|
|
|
10
|
|
|
—
|
|
|
|
For the Quarters Ended
|
||||||||||
Recycled Metal Revenues (In millions)
|
|
2013
|
|
2012
|
|
2011
|
||||||
March 31,
|
|
$
|
16
|
|
|
$
|
20
|
|
|
$
|
17
|
|
June 30,
|
|
17
|
|
|
18
|
|
|
18
|
|
|||
September 30,
|
|
19
|
|
|
17
|
|
|
20
|
|
|||
December 31,
|
|
—
|
|
|
17
|
|
|
19
|
|
|||
Total for the Year Ended December 31,
|
|
N/A
|
|
|
$
|
72
|
|
|
$
|
74
|
|
|
|
Last Twelve Months Ended September 30,
|
||||||||||||
|
|
Recycled Metal Revenue by Type
(In millions)
|
|
Net Tons Recovered by Type
(In thousands)
(1)
|
||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||
Ferrous Metal
|
|
$
|
53
|
|
|
$
|
60
|
|
|
304
|
|
|
316
|
|
Non-Ferrous Metal
|
|
16
|
|
|
13
|
|
|
17.7
|
|
|
14.7
|
|
||
Total
|
|
$
|
69
|
|
|
$
|
73
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
|
|
|||||||||||||||||||||
|
|
2013
|
|
2012
|
|
Variance
Increase (Decrease)
|
|||||||||||||||||||||
Americas:
|
|
Revenue
(1)
|
|
Volume
(1), (2)
|
|
% of Total Volume
|
|
Revenue
(1)
|
|
Volume
(1), (2)
|
|
% of Total Volume
|
|
Revenue
|
|
Volume
|
|||||||||||
EfW
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
At Market
|
|
$
|
11
|
|
|
0.27
|
|
|
17
|
%
|
|
$
|
7
|
|
|
0.17
|
|
|
12
|
%
|
|
|
|
|
|||
Contracted & Hedged
|
|
76
|
|
|
1.09
|
|
|
70
|
%
|
|
75
|
|
|
1.03
|
|
|
72
|
%
|
|
|
|
|
|||||
Total EfW
|
|
$
|
87
|
|
|
1.36
|
|
|
87
|
%
|
|
$
|
82
|
|
|
1.20
|
|
|
84
|
%
|
|
$
|
5
|
|
|
0.16
|
|
Biomass
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
At Market
|
|
$
|
4
|
|
|
0.10
|
|
|
6
|
%
|
|
$
|
3
|
|
|
0.09
|
|
|
7
|
%
|
|
|
|
|
|||
Contracted
|
|
18
|
|
|
0.10
|
|
|
7
|
%
|
|
24
|
|
|
0.13
|
|
|
9
|
%
|
|
|
|
|
|||||
Total Biomass
|
|
$
|
22
|
|
|
0.20
|
|
|
13
|
%
|
|
$
|
27
|
|
|
0.22
|
|
|
16
|
%
|
|
$
|
(5
|
)
|
|
(0.02
|
)
|
Total
|
|
$
|
109
|
|
|
1.56
|
|
|
100
|
%
|
|
$
|
109
|
|
|
1.42
|
|
|
100
|
%
|
|
$
|
—
|
|
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas (In millions):
|
|
For the Three Months Ended
September 30,
|
|
For the Nine Months Ended
September 30,
|
|
Variance
Increase (Decrease)
|
||||||||||||||||||
|
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Three Month
|
|
Nine Month
|
||||||||||||
Plant Operating Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Plant maintenance
(1)
|
|
$
|
36
|
|
|
$
|
42
|
|
|
$
|
187
|
|
|
$
|
179
|
|
|
$
|
(6
|
)
|
|
$
|
8
|
|
All other
|
|
186
|
|
|
176
|
|
|
549
|
|
|
533
|
|
|
10
|
|
|
16
|
|
||||||
Plant operating expenses
|
|
$
|
222
|
|
|
$
|
218
|
|
|
$
|
736
|
|
|
$
|
712
|
|
|
4
|
|
|
24
|
|
(1)
|
Plant maintenance costs include our internal maintenance team and non-facility employee costs for facility scheduled and unscheduled maintenance and repair expenses.
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
Variance
Increase (Decrease)
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Three Month
|
|
Nine Month
|
||||||||||||
|
(In millions)
|
||||||||||||||||||||||
Other expenses:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Interest expense
|
$
|
30
|
|
|
$
|
25
|
|
|
$
|
88
|
|
|
$
|
67
|
|
|
$
|
5
|
|
|
$
|
21
|
|
Non-cash convertible debt related expense
|
7
|
|
|
6
|
|
|
21
|
|
|
19
|
|
|
1
|
|
|
2
|
|
||||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
|
—
|
|
|
(1
|
)
|
||||||
Other income, net
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
3
|
|
||||||
Total other expenses
|
$
|
37
|
|
|
$
|
31
|
|
|
$
|
110
|
|
|
$
|
85
|
|
|
6
|
|
|
25
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
Variance
Increase (Decrease)
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Three Month
|
|
Nine Month
|
||||||||||||
|
(In millions, except percentages)
|
||||||||||||||||||||||
CONSOLIDATED RESULTS OF OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Income tax expense
|
$
|
19
|
|
|
$
|
27
|
|
|
$
|
9
|
|
|
$
|
30
|
|
|
$
|
(8
|
)
|
|
$
|
(21
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Effective income tax rate
|
42
|
%
|
|
54
|
%
|
|
(28
|
)%
|
|
55
|
%
|
|
N/A
|
|
|
N/A
|
|
|
For the Three Months
Ended September 30,
|
|
For the Nine Months
Ended September 30,
|
|
Variance
Increase (Decrease)
|
||||||||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
|
Three Month
|
|
Nine Month
|
||||||||||||
|
(In millions, except per share amounts)
|
||||||||||||||||||||||
CONSOLIDATED RESULTS OF OPERATIONS:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Net Income (Loss) Attributable to Covanta Holding Corporation stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Continuing operations
|
$
|
28
|
|
|
$
|
26
|
|
|
$
|
(35
|
)
|
|
$
|
34
|
|
|
$
|
2
|
|
|
$
|
(69
|
)
|
Discontinued operations
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
2
|
|
||||||
Net Income (Loss) Attributable to Covanta Holding Corporation
|
$
|
28
|
|
|
$
|
26
|
|
|
$
|
(35
|
)
|
|
$
|
32
|
|
|
2
|
|
|
(67
|
)
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Earnings (Loss) Per Share Attributable to Covanta Holding Corporation stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Basic
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Continuing operations
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.25
|
|
|
$
|
0.02
|
|
|
$
|
(0.52
|
)
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
0.01
|
|
||||||
Covanta Holding Corporation
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.24
|
|
|
0.02
|
|
|
(0.51
|
)
|
||
Weighted Average Shares
|
129
|
|
|
131
|
|
|
129
|
|
|
133
|
|
|
(2
|
)
|
|
(4
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Diluted
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Continuing operations
|
$
|
0.22
|
|
|
$
|
0.19
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.25
|
|
|
$
|
0.03
|
|
|
$
|
(0.52
|
)
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
0.01
|
|
||||||
Covanta Holding Corporation
|
$
|
0.22
|
|
|
$
|
0.19
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.24
|
|
|
0.03
|
|
|
(0.51
|
)
|
||
Weighted Average Shares
|
130
|
|
|
132
|
|
|
129
|
|
|
134
|
|
|
(2
|
)
|
|
(5
|
)
|
||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Cash Dividend Declared Per Share
(1)
|
$
|
0.165
|
|
|
$
|
0.15
|
|
|
$
|
0.495
|
|
|
$
|
0.45
|
|
|
0.015
|
|
|
0.045
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Adjusted EPS — Non-GAAP:
(2)
|
$
|
0.28
|
|
|
$
|
0.25
|
|
|
$
|
0.17
|
|
|
$
|
0.32
|
|
|
0.03
|
|
|
(0.15
|
)
|
(1)
|
For information on dividends declared to stockholders and share repurchases, see
Liquidity and Capital Resources
below.
|
(2)
|
See
Supplementary Financial Information — Adjusted EPS (Non-GAAP Discussion)
below.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Continuing Operations - Diluted (Loss) Earnings Per Share
|
$
|
0.22
|
|
|
$
|
0.19
|
|
|
$
|
(0.27
|
)
|
|
$
|
0.25
|
|
Reconciling Items
(1)
|
0.06
|
|
|
0.06
|
|
|
0.44
|
|
|
0.07
|
|
||||
Adjusted EPS
|
$
|
0.28
|
|
|
$
|
0.25
|
|
|
$
|
0.17
|
|
|
$
|
0.32
|
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
Reconciling Items
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Operating loss related to insurance subsidiaries
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
1
|
|
|
$
|
9
|
|
Net write-offs (gains)
(1)
|
12
|
|
|
(2
|
)
|
|
63
|
|
|
(2
|
)
|
||||
UK Severance and other restructuring
(2)
|
—
|
|
|
—
|
|
|
3
|
|
|
|
|||||
Defined benefit pension plan settlement gain
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||
Effect on income of derivative instruments not designated as hedging instruments
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Effect of foreign exchange gain on indebtedness
|
—
|
|
|
—
|
|
|
—
|
|
|
(3
|
)
|
||||
Other
|
1
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Total reconciling items, pre-tax
|
13
|
|
|
5
|
|
|
63
|
|
|
6
|
|
||||
Pro forma income tax impact
(3)
|
(5
|
)
|
|
3
|
|
|
(6
|
)
|
|
2
|
|
||||
Total reconciling items, net of tax
|
$
|
8
|
|
|
$
|
8
|
|
|
$
|
57
|
|
|
$
|
8
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted Earnings Per Share Impact
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.44
|
|
|
$
|
0.07
|
|
Weighted Average Diluted Shares Outstanding
|
130
|
|
|
132
|
|
|
129
|
|
|
134
|
|
(1)
|
The components of Net write-off (gains) are outlined in the table below.
|
(2)
|
During the nine months ended September 30, 2013, we recorded approximately $3 million of severance and other restructuring expenses related to the United Kingdom development office which was recorded to general and administrative expenses. For additional information, see
Item 1. Financial Statements - Note 8. Supplementary Information
.
|
(3)
|
There is no expected tax benefit from the non-cash write-off related to the UK development costs in the second quarter of 2013 and the third quarter of 2012. As a result, these non-cash write-offs had a significant impact on the effective tax rates. Accordingly, we are presenting this proforma calculation of the income tax effect from the total non-cash write-offs. For additional information, see
Item 1. Financial Statements - Note 8. Supplementary Information
.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Americas segment:
|
|
|
|
|
|
|
|
||||||||
Write-down of Wallingford EfW facility assets (1)
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
—
|
|
Write-down of equity investment in biomass facility (2)
|
3
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
Write-off of loan issued for the Harrisburg EfW facility to fund certain facility improvements (3)
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
||||
Write-off of intangible liability (4)
|
—
|
|
|
(29
|
)
|
|
—
|
|
|
(29
|
)
|
||||
Write-down of renewable fuels project (5)
|
—
|
|
|
16
|
|
|
—
|
|
|
16
|
|
||||
Sub-total:
|
12
|
|
|
(13
|
)
|
|
16
|
|
|
(13
|
)
|
||||
Other:
|
|
|
|
|
|
|
|
||||||||
Development costs - UK (6)
|
—
|
|
|
11
|
|
|
47
|
|
|
11
|
|
||||
Total net write-offs (gains)
|
$
|
12
|
|
|
$
|
(2
|
)
|
|
$
|
63
|
|
|
$
|
(2
|
)
|
(1)
|
During the three and nine months ended September 30, 2013, we recorded a non-cash write-down of $9 million resulting from an impairment charge related to our Wallingford EfW facility assets in Connecticut.
|
(2)
|
During the three and nine months ended September 30, 2013, we recorded a non-cash write-down of
$3 million
related to our 55% equity investment in the Pacific Ultrapower Chinese Station biomass facility in California.
|
(3)
|
During the nine months ended September 30, 2013, we recorded other non-cash write-offs $4 million associated with funds advanced related to the Harrisburg EfW facility. For additional information, see
Item 1. Financial Statements - Note 8. Supplementary Information
.
|
(4)
|
During the nine months ended September 30, 2012, our service contract for the Essex EfW facility was amended and we recorded a non-cash write-off of an intangible liability of
$29 million
related to the below-market service contract which was recorded at fair value upon acquisition of the facility.
|
(5)
|
During the nine months ended September 30, 2012, we suspended construction of a facility that transformed waste materials into renewable liquid fuels. We recorded a non-cash write-off of
$16 million
representing the capitalized costs related to this project.
|
(6)
|
During the nine months ended September 30, 2013 and 2012, we recorded non-cash write-offs of $47 million and $11 million, respectively, of capitalized development costs and land related to United Kingdom development projects which we ceased to pursue in their current form. For additional information, see
Item 1. Financial Statements - Note 8. Supplementary Information
.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Net Income (Loss) from Continuing Operations Attributable to Covanta Holding Corporation
|
$
|
28
|
|
|
$
|
26
|
|
|
$
|
(35
|
)
|
|
$
|
34
|
|
|
|
|
|
|
|
|
|
||||||||
Operating loss related to insurance subsidiaries
|
—
|
|
|
8
|
|
|
1
|
|
|
9
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Depreciation and amortization expense
|
52
|
|
|
46
|
|
|
157
|
|
|
145
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Debt service:
|
|
|
|
|
|
|
|
||||||||
Net interest expense on project debt
|
3
|
|
|
7
|
|
|
10
|
|
|
22
|
|
||||
Interest expense
|
30
|
|
|
25
|
|
|
88
|
|
|
67
|
|
||||
Non-cash convertible debt related expense
|
7
|
|
|
6
|
|
|
21
|
|
|
19
|
|
||||
Subtotal debt service
|
40
|
|
|
38
|
|
|
119
|
|
|
108
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income tax expense
|
19
|
|
|
27
|
|
|
9
|
|
|
30
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net write-offs (gains)
(1)
|
12
|
|
|
(2
|
)
|
|
63
|
|
|
(2
|
)
|
||||
|
|
|
|
|
|
|
|
||||||||
Severance related to UK restructuring
(1)
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Defined benefit pension plan settlement gain
|
—
|
|
|
—
|
|
|
(6
|
)
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Loss on extinguishment of debt
|
—
|
|
|
—
|
|
|
1
|
|
|
2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income attributable to noncontrolling interests in subsidiaries
|
—
|
|
|
1
|
|
|
(1
|
)
|
|
1
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Other adjustments:
|
|
|
|
|
|
|
|
||||||||
Debt service billing in excess of revenue recognized
|
1
|
|
|
—
|
|
|
9
|
|
|
6
|
|
||||
Non-cash compensation expense
|
3
|
|
|
3
|
|
|
12
|
|
|
13
|
|
||||
Other non-cash item
(2)
|
1
|
|
|
3
|
|
|
2
|
|
|
3
|
|
||||
Subtotal other adjustments
|
5
|
|
|
6
|
|
|
23
|
|
|
22
|
|
||||
Total adjustments
|
128
|
|
|
124
|
|
|
369
|
|
|
315
|
|
||||
Adjusted EBITDA
|
$
|
156
|
|
|
$
|
150
|
|
|
$
|
334
|
|
|
$
|
349
|
|
(1)
|
See
Adjusted EPS
above.
|
(2)
|
Includes certain non-cash items that are added back under the definition of Adjusted EBITDA in Covanta Energy’s credit agreement.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Cash flow provided by operating activities from continuing operations
|
$
|
170
|
|
|
$
|
124
|
|
|
$
|
267
|
|
|
$
|
268
|
|
|
|
|
|
|
|
|
|
||||||||
Cash flow provided by operating activities from insurance subsidiaries
|
1
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Debt service
|
40
|
|
|
38
|
|
|
119
|
|
|
108
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Change in working capital
|
(52
|
)
|
|
(30
|
)
|
|
(35
|
)
|
|
(52
|
)
|
||||
Change in restricted funds held in trust
|
(9
|
)
|
|
12
|
|
|
(17
|
)
|
|
10
|
|
||||
Non-cash convertible debt related expense
|
(7
|
)
|
|
(6
|
)
|
|
(21
|
)
|
|
(19
|
)
|
||||
Equity in net income from unconsolidated investments
|
4
|
|
|
4
|
|
|
4
|
|
|
10
|
|
||||
Dividends from unconsolidated investments
|
(1
|
)
|
|
(4
|
)
|
|
(7
|
)
|
|
(7
|
)
|
||||
Current tax provision
|
6
|
|
|
4
|
|
|
3
|
|
|
7
|
|
||||
Other
|
4
|
|
|
6
|
|
|
17
|
|
|
20
|
|
||||
Sub-total:
|
(55
|
)
|
|
(14
|
)
|
|
(56
|
)
|
|
(31
|
)
|
||||
Adjusted EBITDA
|
$
|
156
|
|
|
$
|
150
|
|
|
$
|
334
|
|
|
$
|
349
|
|
|
As of September 30, 2013
|
||
Cash
|
$
|
252
|
|
Available capacity under Revolving Credit Facility
|
493
|
|
|
Total available liquidity
|
$
|
745
|
|
|
Nine Months Ended
September 30, |
|
Increase
(Decrease)
2013 vs 2012
|
||||||||
|
2013
|
|
2012
|
|
|||||||
|
(Unaudited, in millions)
|
||||||||||
Net cash provided by operating activities
|
$
|
267
|
|
|
$
|
268
|
|
|
$
|
(1
|
)
|
Net cash used in investing activities
|
(210
|
)
|
|
(98
|
)
|
|
112
|
|
|||
Net cash used in financing activities
|
(52
|
)
|
|
(152
|
)
|
|
(100
|
)
|
|||
Effect of exchange rate changes on cash and cash equivalents
|
1
|
|
|
1
|
|
|
—
|
|
|||
Net increase in cash and cash equivalents
|
$
|
6
|
|
|
$
|
19
|
|
|
(13
|
)
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Cash flow provided by operating activities
|
$
|
170
|
|
|
$
|
124
|
|
|
$
|
267
|
|
|
$
|
268
|
|
Plus: Cash flow used in operating activities from insurance activities
|
1
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
Less: Maintenance capital expenditures
(1)
|
(10
|
)
|
|
(15
|
)
|
|
(67
|
)
|
|
(67
|
)
|
||||
Free Cash Flow
|
$
|
161
|
|
|
$
|
111
|
|
|
$
|
204
|
|
|
$
|
205
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted Average Diluted Shares Outstanding
|
130
|
|
|
132
|
|
|
129
|
|
|
134
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Uses of Free Cash Flow
|
|
|
|
|
|
|
|
||||||||
Investments:
|
|
|
|
|
|
|
|
||||||||
Acquisition of business, net of cash acquired
|
$
|
(49
|
)
|
|
$
|
—
|
|
|
$
|
(49
|
)
|
|
$
|
—
|
|
Acquisition of noncontrolling interests in subsidiary
|
—
|
|
|
—
|
|
|
(14
|
)
|
|
—
|
|
||||
Property insurance proceeds
|
4
|
|
|
7
|
|
|
4
|
|
|
7
|
|
||||
Non-maintenance capital expenditures
(2)
|
(33
|
)
|
|
(13
|
)
|
|
(73
|
)
|
|
(27
|
)
|
||||
Acquisition of land use rights
(2)
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
Other growth investments
(2)
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
(2
|
)
|
||||
Other investing activities, net
(3)
|
6
|
|
|
(16
|
)
|
|
(8
|
)
|
|
(8
|
)
|
||||
Total investments
|
$
|
(75
|
)
|
|
$
|
(22
|
)
|
|
$
|
(143
|
)
|
|
$
|
(31
|
)
|
|
|
|
|
|
|
|
|
||||||||
Return of capital to stockholders:
|
|
|
|
|
|
|
|
||||||||
Cash dividends paid to stockholders
|
$
|
(23
|
)
|
|
$
|
(20
|
)
|
|
$
|
(45
|
)
|
|
$
|
(51
|
)
|
Common stock repurchased
|
—
|
|
|
(24
|
)
|
|
(34
|
)
|
|
(83
|
)
|
||||
Total return of capital to stockholders
|
$
|
(23
|
)
|
|
$
|
(44
|
)
|
|
$
|
(79
|
)
|
|
$
|
(134
|
)
|
|
|
|
|
|
|
|
|
||||||||
Capital raising activities:
|
|
|
|
|
|
|
|
||||||||
Net proceeds from issuance of corporate debt
(4)
|
$
|
21
|
|
|
$
|
(2
|
)
|
|
$
|
21
|
|
|
$
|
673
|
|
Other financing activities, net
|
1
|
|
|
2
|
|
|
(8
|
)
|
|
3
|
|
||||
Net proceeds from capital raising activities
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
13
|
|
|
$
|
676
|
|
|
|
|
|
|
|
|
|
||||||||
Debt repayments:
|
|
|
|
|
|
|
|
||||||||
Net cash used for scheduled principal payments on corporate debt
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(2
|
)
|
|
$
|
(25
|
)
|
Net cash used for scheduled principal payments on project debt
(5)
|
(18
|
)
|
|
(17
|
)
|
|
(50
|
)
|
|
(57
|
)
|
||||
Optional repayment of corporate debt
(6)
|
—
|
|
|
—
|
|
|
—
|
|
|
(621
|
)
|
||||
Total debt repayments
|
$
|
(18
|
)
|
|
$
|
(18
|
)
|
|
$
|
(52
|
)
|
|
$
|
(703
|
)
|
|
|
|
|
|
|
|
|
||||||||
Borrowing activities - Revolving credit facility, net
|
$
|
(20
|
)
|
|
$
|
20
|
|
|
$
|
66
|
|
|
$
|
20
|
|
|
|
|
|
|
|
|
|
||||||||
Short-term borrowing activities - Financing of insurance premiums, net
|
$
|
—
|
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
(10
|
)
|
|
|
|
|
|
|
|
|
||||||||
Distribution to partners of noncontrolling interests in subsidiaries
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
|
|
|
|
|
|
|
||||||||
Effect of exchange rate changes on cash and cash equivalents
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Net change in cash and cash equivalents
|
$
|
48
|
|
|
$
|
44
|
|
|
$
|
10
|
|
|
$
|
23
|
|
(1)
|
Purchases of property, plant and equipment are also referred to as capital expenditures. Capital expenditures that primarily maintain existing facilities are classified as maintenance capital expenditures. The following table provides the components of total purchases of property, plant and equipment:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Maintenance capital expenditures
|
$
|
(10
|
)
|
|
$
|
(15
|
)
|
|
$
|
(67
|
)
|
|
$
|
(67
|
)
|
Capital expenditures associated with organic growth initiatives and technology development
(2)
|
(33
|
)
|
|
(7
|
)
|
|
(73
|
)
|
|
(18
|
)
|
||||
Capital expenditures – other
(2)
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(9
|
)
|
||||
Total purchases of property, plant and equipment
|
$
|
(43
|
)
|
|
$
|
(28
|
)
|
|
$
|
(140
|
)
|
|
$
|
(94
|
)
|
(2)
|
Growth investments includes
investments in growth opportunities including organic growth initiatives, technology, business development, and other similar expenditures, net of capital expenditures associated with property insurance events.
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Capital expenditures associated with organic growth initiatives and technology development
|
$
|
(33
|
)
|
|
$
|
(7
|
)
|
|
$
|
(73
|
)
|
|
$
|
(18
|
)
|
Capital expenditures - other
|
—
|
|
|
(6
|
)
|
|
—
|
|
|
(9
|
)
|
||||
Total non-maintenance capital expenditures
|
(33
|
)
|
|
(13
|
)
|
|
(73
|
)
|
|
(27
|
)
|
||||
Acquisition of land use rights
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
Other growth investments
|
(3
|
)
|
|
—
|
|
|
(3
|
)
|
|
(2
|
)
|
||||
Less: Capital expenditures associated with property insurance events
|
—
|
|
|
6
|
|
|
—
|
|
|
9
|
|
||||
Organic growth investments
|
(36
|
)
|
|
(7
|
)
|
|
(76
|
)
|
|
(21
|
)
|
||||
Acquisition of business, net of cash acquired
|
(49
|
)
|
|
—
|
|
|
(49
|
)
|
|
—
|
|
||||
Total growth investments
|
$
|
(85
|
)
|
|
$
|
(7
|
)
|
|
$
|
(125
|
)
|
|
$
|
(21
|
)
|
(3)
|
Other investing activities is primarily comprised of net payments from the purchase/sale of investment securities.
|
(4)
|
Excludes borrowings under Revolving Credit Facility. Calculated as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Proceeds from borrowings on long-term debt
|
$
|
22
|
|
|
$
|
—
|
|
|
$
|
22
|
|
|
$
|
699
|
|
Less: Financing costs related to issuance of long-term debt
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(26
|
)
|
||||
Net proceeds from issuance of corporate debt
|
$
|
21
|
|
|
$
|
(2
|
)
|
|
$
|
21
|
|
|
$
|
673
|
|
(5)
|
Calculated as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Total scheduled principal payments on project debt
|
$
|
(24
|
)
|
|
$
|
(7
|
)
|
|
$
|
(53
|
)
|
|
$
|
(46
|
)
|
Decrease (increase) in related restricted funds held in trust
|
6
|
|
|
(10
|
)
|
|
3
|
|
|
(11
|
)
|
||||
Net cash used for principal payments on project debt
|
$
|
(18
|
)
|
|
$
|
(17
|
)
|
|
$
|
(50
|
)
|
|
$
|
(57
|
)
|
(6)
|
Calculated as follows:
|
|
Three Months Ended
September 30, |
|
Nine Months Ended
September 30, |
||||||||||||
|
2013
|
|
2012
|
|
2013
|
|
2012
|
||||||||
Redemption of Term Loan due 2014
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(619
|
)
|
Redemption of Convertible Debentures
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||
Total optional repayment of corporate debt
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(621
|
)
|
|
As of
|
||||||
|
September 30, 2013
|
|
December 31, 2012
|
||||
|
(in millions)
|
||||||
Domestic
|
$
|
17
|
|
|
$
|
12
|
|
International
|
228
|
|
|
215
|
|
||
Insurance Subsidiary
|
7
|
|
|
19
|
|
||
Total Cash and Cash Equivalents
|
$
|
252
|
|
|
$
|
246
|
|
|
Credit Facility Commitments
As of September 30, 2013
|
||
Term loan
|
$
|
300
|
|
Revolving credit facility
|
$
|
900
|
|
|
Total
Available
Under Facility
|
|
Maturing
|
|
Outstanding Borrowings as of
September 30, 2013 |
|
Outstanding Letters of Credit as of
September 30, 2013 |
|
Availability as of
September 30, 2013 |
||||||||
Revolving Credit Facility
|
$
|
900
|
|
|
2017
|
|
$
|
126
|
|
|
$
|
281
|
|
|
$
|
493
|
|
•
|
a maximum Leverage Ratio of 4.00 to 1.00 for the trailing four quarter period, which measures the principal amount of Covanta Energy’s consolidated debt less certain restricted funds dedicated to repayment of project debt principal and construction costs (“Consolidated Adjusted Debt”) to its adjusted earnings before interest, taxes, depreciation and amortization, as calculated under the Credit Facilities (“Adjusted EBITDA”). The definition of Adjusted EBITDA in the Credit Facilities excludes certain non-cash charges.
|
•
|
a minimum 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.
|
|
As of September 30, 2013
|
|
As of December 31, 2012
|
||||||||||||
|
Face
Value
|
|
Book
Value
|
|
Face
Value
|
|
Book
Value
|
||||||||
Corporate Debt:
|
|
||||||||||||||
Revolving Credit Facility
|
$
|
126
|
|
|
$
|
126
|
|
|
$
|
60
|
|
|
$
|
60
|
|
Term Loan due 2019
|
295
|
|
|
294
|
|
|
298
|
|
|
297
|
|
||||
7.25% Senior Notes due 2020
|
400
|
|
|
400
|
|
|
400
|
|
|
400
|
|
||||
6.375% Senior Notes due 2022
|
400
|
|
|
400
|
|
|
400
|
|
|
400
|
|
||||
3.25% Cash Convertible Senior Notes due 2014
|
460
|
|
|
615
|
|
|
460
|
|
|
523
|
|
||||
4.00% - 5.25% Tax-Exempt Bonds due 2024 - 2042
|
335
|
|
|
335
|
|
|
335
|
|
|
335
|
|
||||
Variable Rate Tax-Exempt Bonds due 2043
|
22
|
|
|
22
|
|
|
—
|
|
|
—
|
|
||||
Total corporate debt (including current portion)
|
$
|
2,038
|
|
|
$
|
2,192
|
|
|
$
|
1,953
|
|
|
$
|
2,015
|
|
|
|
|
|
|
|
|
|
||||||||
Project Debt:
|
|
|
|
|
|
|
|
||||||||
Domestic project debt - service fee facilities
|
$
|
195
|
|
|
$
|
197
|
|
|
$
|
223
|
|
|
$
|
226
|
|
Domestic project debt - tip fee facilities
|
45
|
|
|
45
|
|
|
68
|
|
|
68
|
|
||||
International project debt
|
23
|
|
|
23
|
|
|
23
|
|
|
23
|
|
||||
Total project debt (including current portion)
|
$
|
263
|
|
|
$
|
265
|
|
|
$
|
314
|
|
|
$
|
317
|
|
|
|
|
|
|
|
|
|
||||||||
Total Debt Outstanding
|
$
|
2,301
|
|
|
$
|
2,457
|
|
|
$
|
2,267
|
|
|
$
|
2,332
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
2017
|
|
Thereafter
|
|
Total
|
||||||||||||||
Revolving Credit Facility
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
126
|
|
|
$
|
—
|
|
|
$
|
126
|
|
Term Loan
|
|
—
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
283
|
|
|
295
|
|
|||||||
Senior Notes
|
|
—
|
|
|
460
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
800
|
|
|
1,260
|
|
|||||||
Tax-Exempt Bonds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
357
|
|
|
357
|
|
|||||||
Project Debt
|
|
28
|
|
|
57
|
|
|
40
|
|
|
17
|
|
|
19
|
|
|
102
|
|
|
263
|
|
|||||||
Total
|
|
$
|
28
|
|
|
$
|
520
|
|
|
$
|
43
|
|
|
$
|
20
|
|
|
$
|
148
|
|
|
$
|
1,542
|
|
|
$
|
2,301
|
|
|
As of
|
||||||||||||||
|
September 30, 2013
|
|
December 31, 2012
|
||||||||||||
|
Current
|
|
Noncurrent
|
|
Current
|
|
Noncurrent
|
||||||||
Debt service funds - principal
|
$
|
42
|
|
|
$
|
28
|
|
|
$
|
33
|
|
|
$
|
39
|
|
Debt service funds - interest
|
3
|
|
|
—
|
|
|
6
|
|
|
—
|
|
||||
Total debt service funds
|
45
|
|
|
28
|
|
|
39
|
|
|
39
|
|
||||
Revenue funds
|
4
|
|
|
—
|
|
|
9
|
|
|
—
|
|
||||
Other funds
|
5
|
|
|
112
|
|
|
5
|
|
|
122
|
|
||||
Total
|
$
|
54
|
|
|
$
|
140
|
|
|
$
|
53
|
|
|
$
|
161
|
|
|
Commitments Expiring by Period
|
||||||||||
|
Total
|
|
Less Than
One Year
|
|
More Than
One Year
|
||||||
Letters of credit
|
$
|
281
|
|
|
$
|
6
|
|
|
$
|
275
|
|
Surety bonds
|
304
|
|
|
—
|
|
|
304
|
|
|||
Total other commitments — net
|
$
|
585
|
|
|
$
|
6
|
|
|
$
|
579
|
|
•
|
holders may require us to repurchase their 7.25% Notes, 6.375% Notes and their 3.25% Notes if a fundamental change occurs; and
|
•
|
holders may exercise their conversion rights upon the occurrence of certain events, which would require us to pay the conversion settlement amount in cash.
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average Price Paid
Per Share (a) |
|
Total Number of
Shares Purchased
as Part of Publicly
Announced
Program
|
|
Maximum Approximate Dollar Value of
Shares that May Yet Be Purchased Under
the Program
|
||||||
|
|
(in millions, except per share amounts)
|
||||||||||||
July 1 - July 31
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
116
|
|
August 1 - August 31
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
116
|
|
September 1 - September 30
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
116
|
|
Total:
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
|
(a)
|
This amount represents the weighted average price paid per common share. This price includes a per share commission paid for all repurchases.
|
Exhibit
Number
|
|
Description
|
10.1
|
|
Agreement, dated as of August 22, 2013, by and among Covanta Holding Corporation and John M. Huff, as Director of the Missouri Department of Insurance, Financial Institutions and Professional Registration (the "Trustee"), solely in his capacity as trustee and statutory receiver of the Mission Reinsurance Corporation Trust and the Holland-America Insurance Company Trust.
|
31.1
|
|
Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 by the Chief Executive Officer.
|
31.2
|
|
Certification pursuant to Section 302 of Sarbanes-Oxley Act of 2002 by the Chief Financial Officer.
|
32
|
|
Certification of periodic financial report pursuant to Section 906 of Sarbanes-Oxley Act of 2002 by the Chief Executive Officer and Chief Financial Officer.
|
Exhibit 101.INS:
|
|
XBRL Instance Document*
|
Exhibit 101.SCH:
|
|
XBRL Taxonomy Extension Schema*
|
Exhibit 101.CAL:
|
|
XBRL Taxonomy Extension Calculation Linkbase*
|
Exhibit 101.DEF:
|
|
XBRL Taxonomy Extension Definition Linkbase*
|
Exhibit 101.LAB:
|
|
XBRL Taxonomy Extension Labels Linkbase*
|
Exhibit 101.PRE:
|
|
XBRL Taxonomy Extension Presentation Linkbase*
|
*
|
XBRL information is furnished, not filed.
|
|
COVANTA HOLDING CORPORATION
(Registrant)
|
|
|
|
|
|
By:
|
/
S
/ S
ANJIV
K
HATTRI
|
|
|
Sanjiv Khattri
|
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
By:
|
/
S
/ T
HOMAS
E. B
UCKS
|
|
|
Thomas E. Bucks
|
|
|
Senior Vice President and Chief Accounting Officer
|
Title:
|
Executive Vice President, General Counsel
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Covanta Holding Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/
S
/ A
NTHONY
J. O
RLANDO
|
|
Anthony J. Orlando
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of Covanta Holding Corporation;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
(a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
(b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
(c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and
|
(d)
|
Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect the registrant's internal control over financial reporting; and
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
(a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
(b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
|
/
S
/
Sanjiv Khattri
|
|
Sanjiv Khattri
|
|
Executive Vice President and Chief Financial Officer
|
(1)
|
the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Covanta Holding Corporation;
|
|
|
|
/
S
/ A
NTHONY
J. O
RLANDO
|
|
Anthony J. Orlando
|
|
President and Chief Executive Officer
|
|
|
|
/
S
/ S
ANJIV
K
HATTRI
|
|
Sanjiv Khattri
|
|
Executive Vice President and Chief Financial Officer
|
|
|