Covanta's Q3 results in line with expectations; refinancing announced

By Lisa Kerner

Charlotte, N.C., Oct. 18 - Covanta Holding Corp.'s third quarter "is filled with activity," including establishing and renewing contracts, chief financial officer Sanjiv Khattri said during the company's earnings call on Thursday.

While revenues declined about 5%, adjusted EBITDA and earnings per share were in line with expectations, Khattri said.

On Wednesday, Covanta announced plans to issue $300 million of new tax-exempt bonds to refinance existing tax-exempt project bonds at its Haverhill, Niagara and SEMASS facilities, as well as to fund certain capital expenditures in Massachusetts.

The bonds will have extended maturities up to 30 years, based on several factors, including "investor appetite," said Khattri.

Additional details will be announced when the unsecured bonds are priced.

The transaction is slated to close during the fourth quarter of 2012.

Share buybacks

Covanta returned $45 million to shareholders during the quarter, consisting of $20 million of cash dividends declared and $25 million of share repurchases, or 1.1% of outstanding common stock.

Year to date, the company has returned $146 million to shareholders in the form of $61 million of dividends declared and $85 million of shares repurchased, or 3.8% of common stock outstanding.

As of Sept. 30, Covanta had $90 million of share repurchase authorization remaining.

Khattri said Covanta has returned $750 million to shareholders in the last three years, but is not putting pressure on its strong balance sheet to continue to do so.

The company has "significant dry powder for new potential uses," he said.

Financial highlights

Covanta reported third-quarter revenue of $412 million versus $432 million in the prior-year period.

Adjusted EBITDA for the period was $150 million, down slightly from $153 million a year ago.

The Morristown, N.J.-based waste-to-energy company had free cash flow of $111 million, a $4 million improvement from the same period in 2011.

Adjusted earnings per share were flat at $0.25.

Chief executive officer Tony Orlando said third-quarter results were in line with expectations. Covanta expects to meet its full-year guidance at the lower end.

Despite a challenging organic growth environment, Orlando said that Covanta is intent on growing its bottom line now and in the years to come.

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