Covanta Holding's CEO Discusses Q4 2011 Results - Earnings Call Transcript

Covanta Holding Corporation ( CVA)

Q3 2011 Earnings Call

February 9, 2012 8:30 am ET


Alan Katz - VP of IR

Tony Orlando - President and CEO

Sanjiv Khattri - CFO

Tom Bucks - CAO

Brad Helgelson - Treasurer


Al Kaschalk - Wedbush Securities

Michael Hoffman - Wunderlich Securites

Hamzah Mazari - Credit Suisse

Dan Mannes - Avondale

Chris Kovacs - Robert Baird

Peter Christiansen - Merrill Lynch



Good morning, everyone, and welcome to the Covanta Holding Corporation's fourth quarter and yearend 2011 financial results conference call and webcast. (Operator Instructions) At this time, for opening remarks and introductions, I would like to turn the call over to Alan Katz, Covanta's Vice President of Investor Relations.

Alan Katz

Welcome to Covanta's fourth quarter and full year 2011 conference call. The Investor Relations team has been very busy since our last call. We've been on the road and have attended several conferences since that time. We'll be attending more conferences and meetings over the next several months. So I look forward to seeing many of you. As always, we appreciate your continued support to Covanta.

Joining me today on the call will be Tony Orlando, our President and CEO; Sanjiv Khattri, our CFO; Tom Bucks, our Chief Accounting Officer; and Brad Helgelson, our Treasurer.

We will provide an operational and business update, review of financial results and then take your questions. We will be ending before 9:30 am. During their prepared remarks, Tony and Sanjiv will be referencing certain slides that we prepared to supplement the audio portion of this call. These slides can be accessed now or after the call in the Investor Relations section of These prepared remarks should be listened to in conjunction with those slides.

Today's slide deck is substantial to say the least. We have a number of appendix slides that Tony and Sanjiv will reference throughout their remarks, but might not discuss in detail. We continue to try to improve this level of transparency around our results. You will see additional data and analysis and hopefully will find it useful. As always, we look forward to your input. If you have any additional questions on these slides, we can discuss them during the Q&A portion of the call or offline.

Now, on to the Safe Harbor. The following discussion may contain forward-looking statements and our actual results may differ materially from those expectations. Information regarding factors that could cause such differences can be found in the company's reports and registration statements filed with the SEC.

The content of this conference call contains time sensitive information that is only accurate as of the date of this live broadcast, February 9, 2012. We do not assume any obligation to update our forward-looking information unless required by law. Any redistribution, retransmission or rebroadcast of this call in any form without the express written consent of Covanta is prohibited.

The information presented includes non-GAAP financial measures. Reconciliation to the most directly comparable GAAP measure and management's reasons for presenting such information is set forth in the press release that was issued last night as well as in the slides posted on our website. Because these measures are not calculated in accordance with U.S. GAAP, they should not be considered in isolation from our financial statements, which are prepared in accordance with GAAP. It should also be noted that our computations of free cash flow, adjusted EBITDA and adjusted EPS may differ from similarly titled computations used by other companies.

With that, I'd like to turn the call over to our President and CEO, Tony Orlando.

Tony Orlando

Thanks, Alan. Good morning, everyone. Let's begin with a quick summary of 2011. For those of you using the web deck, please turn to slide three. We executed on our plan and came in at the midpoint of our guidance. That's a very good performance in the midst of some market ups and downs. Compared to 2010, revenue was up 4%, adjusted EBITDA was up 5%, free cash flow was down 12% and adjusted EPS was up 24%.

I am pleased with these financial results as well as our operating performance, and our disciplined capital allocation. However, I must say, I am not satisfied with the fact that our efforts have not yet rewarded our shareholders. I assure you, our management team is completely focused on the things we can do to create value and provide investors with transparency, so that you can more easily understand the value that we see in the business.

For us, it all starts with world-class facility operations benefit our clients and the communities we serve. Our team is tireless in pursuing innovation that continues improvement. As a result, in 2011, we've recorded our best ever safety record and our highest boiler availability.

That strong performance continued to fill confidence in our clients. That is evidenced by our numerous contract extensions, including several in the last couple of months. In addition, our newest clients Durham and York, in Ontario, demonstrated their confidence in Covanta last year, when they issued us the Notice to Proceed with construction of their showcase energy-from-waste facility.

The combination of our long-term client relationship and our stellar operational performance supports continued earnings growth and predictable cash flow generation, which we're utilizing to deliver on our commitment to return capital to shareholders. We established a regular quarterly dividend and continued to actively repurchase stock. Since the program began in 2010, we have repurchased approximately 14% of the shares outstanding.

Let's move to Slide 4 and discuss this year's guidance. Our 2012 guidance call for continued growth of about 5% in adjusted EBITDA to a range of $500 million to $530 million. Achieving this will not be an easy task in the phase of depressed energy markets and certain contract transition. But I am confident that based on the organic growth initiatives we have underway, our team will get it done.

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