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Covanta Holding's CEO Discusses Q2 2012 Results - Earnings Call Transcript

With that, I’ll now turn the call over to our President and CEO, Tony Orlando.

Anthony J. Orlando

Thanks Alan, and good morning everyone. Let’s begin with a quick summary of the quarter.

For those of you using the web deck, please turn to slide 3. Our second quarter results were right in line with expectations. Revenue was $410 million, essentially flat with 2011. Adjusted EBITDA was $125 million, a $2 million increase over last year. Our organic growth initiatives were largely offset by lower debt service pass through billings and softness in the energy market. That’s consistent with the outlook we gave you on the Q1 call.

Free cash flow declined by $27 million to $16 million. Again, this result was consistent with our Q1 discussion. The decline was due to the timing of construction working capital. And finally, adjusted EPS was $0.15, $0.01 increase over last year.

Operationally we performed exceptionally well. Boiler availability, waster throughput and steam production were all very good. In fact, we achieved some of our highest performance levels on all three metrics for the first half of this year. We commenced start-up testing at our Honolulu expansion project. We renewed a number of important client contracts and we’ve made some great headway on both revenue generating and cost saving organic growth initiatives. I will give you some concrete examples of those in a few minutes.

The strong operational performance enables us to reaffirm our guidance despite the weak energy markets and the recent downturn in metal prices. We are intent on growing our adjusted EBITDA even in a down market. Furthermore, the work we’re doing this year will pay off in coming years.

Now let’s turn to the business outlook. We will start with waste on slide 4. A few of the waste markets is essentially unchanged from our last earnings call. We are largely contracted and those contracts generally move up with inflation on an annual basis. This provides a nice base to work from. Tip fees continued to be under some pressure, primarily due to low waste generation. Fortunately, we have a relatively small amount of net spot exposure and we’ve been managing our portfolio very well.

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