DECEMBER 2011

Covanta profits increase on strong recycled metals pricing

Covanta Holding Corporation reported financial results for the 3 and 9 months ended September 30, 2011.

For the 3 months ended September 30, 2011, operating revenues increased to $432 million, up $29 million or 7 percent, from $403 million in the prior year comparative period. Two-thirds of this increase is attributable to higher construction revenue related to the Honolulu expansion project.

The remainder of the increase was driven by strong recycled metals pricing, contract escalations and higher tip fee pricing and volume. These increases were partially offset by lower debt service pass through revenues, lower energy revenues from biomass plants and lower energy pricing.

Operating expenses of $345 million declined 3 percent from $357 million in the prior year comparative period as higher construction costs in the current quarter partially offset $32 million of asset write-downs in the third quarter of last year.

Adjusted EBITDA of $152 million was up $2 million compared with last year’s third quarter of $150 million as increases in recycled metals revenues and waste revenues were offset by lower debt service revenue and lower contribution from our biomass facilities.

Free cash flow was $106 million in the third quarter, an increase of $11 million compared to $95 million in the prior year comparative period, primarily attributable to an improvement in working capital, which was partially offset by a year over year increase in maintenance capital expenditures.

Adjusted EPS for the quarter was $0.24, which was flat with last year’s third quarter, as the lower number of shares outstanding due to the company’s common stock buyback program and improved operating income, were offset by higher interest expense and a higher effective tax rate.

For the 9 months ended September 30, 2011, total operating revenues increased 5 percent to $1,220 million. Free cash flow was $215 million for the year-to-date period compared to $236 million for the same period last year. Adjusted EBITDA was $346 million compared to $341 million for the same period last year and Adjusted EPS was $0.26 compared to $0.24 Adjusted EPS in 2010.

During the quarter, Covanta repurchased $81 million in common stock, or 5.2 million shares (3.6 percent of the company’s outstanding shares), at a weighted average cost of $15.58 per share. Aggregate repurchases since June 2010 total $300 million, or 18.7 million shares, representing 12.1 percent of outstanding shares. The company also paid a quarterly dividend on July 6, 2011 and declared another quarterly dividend which was paid on October 14, 2011, both for $0.075 per share. During the quarter, Covanta also increased its share repurchase authorization by $100 million, bringing the total authorized amount to $400 million. Covanta has now returned $565 million to shareholders since the inception of its shareholder return program in the third quarter of last year.