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(a) For additional information, see Exhibit 4A - Note (a) and (f) of this Press Release.(b) For additional information, see Exhibit 4A - Note (b) - (e) of this Press Release.(c) For additional information, see Exhibit 7A - Note (a) and (b) of this Press Release.(d) For additional information, see Exhibit 4A - Note (i) - (j) of this Press Release.(e) For additional information, see Exhibit 4 of this Press Release. Exhibit 1ACovanta Holding CorporationConsolidated Statements of Comprehensive Income Three Months Ended Twelve Months Ended December 31, December 31, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- --------- (Unaudited, in millions)Net income $ 83 $ 28 $ 116 $ 227 --------- --------- --------- --------- Foreign currency translation 3 11 1 -- Adjustment for pension plan settlement, net of tax expense (a) 6 -- 7 -- Pension plan and postretirement plan unrecognized benefits, net of tax benefit -- (8) -- (8) Net unrealized gain (loss) on derivative instruments, net of tax benefit -- 2 (2) 2 Net unrealized loss on available for sale securities, net of tax (1) -- -- -- --------- --------- --------- ---------Other comprehensive income (loss) attributable to Covanta Holding Corporation 8 5 6 (6) --------- --------- --------- ---------Comprehensive income 91 33 122 221 --------- --------- --------- ---------Less: Net income attributable to noncontrolling interests in subsidiaries (1) (2) (2) (8) Foreign currency translation attributable to noncontrolling interests in subsidiaries -- 1 -- 2 --------- --------- --------- ---------Comprehensive income attributable to noncontrolling interests in subsidiaries (1) (1) (2) (6) --------- --------- --------- ---------Comprehensive income attributable to Covanta Holding Corporation $ 90 $ 32 $ 120 $ 215 ========= ========= ========= =========(a) For additional information, see Exhibit 4A - Note (f) of this Press Release. Exhibit 2Covanta Holding CorporationConsolidated Balance Sheets As of December 31, ------------------------ 2012 2011 ----------- ----------- (Unaudited) (In millions, except per ASSETS share amounts)Current: Cash and cash equivalents $ 246 $ 232 Restricted funds held in trust 53 101 Receivables (less allowances of $6 and $5, respectively) 256 260 Unbilled service receivables 18 20 Deferred income taxes 18 28 Prepaid expenses and other current assets 97 105 Assets held for sale -- 18 ----------- -----------Total Current Assets 688 764 Property, plant and equipment, net 2,561 2,423 Investments in fixed maturities at market (cost: $36 and $31, respectively) 36 31 Restricted funds held in trust 161 90 Unbilled service receivables 17 25 Waste, service and energy contracts, net 399 434 Other intangible assets, net 23 78 Goodwill 249 232 Investments in investees and joint ventures 49 43 Other assets 343 265 ----------- -----------Total Assets $ 4,526 $ 4,385 =========== =========== LIABILITIES AND EQUITYCurrent: Current portion of long-term debt $ 3 $ 32 Current portion of project debt 80 147 Accounts payable 41 25 Deferred revenue 31 61 Accrued expenses and other current liabilities 205 211 Liabilities held for sale -- 3 ----------- -----------Total Current Liabilities 360 479 Long-term debt 2,012 1,454 Project debt 237 533 Deferred income taxes 691 633 Waste and service contracts 35 76 Other liabilities 136 122 ----------- -----------Total Liabilities 3,471 3,297 ----------- -----------Equity:Covanta Holding Corporation stockholders' equity: Preferred stock ($0.10 par value; authorized 10 shares; none issued and outstanding) -- -- Common stock ($0.10 par value; authorized 250 shares; issued 159 and 158 shares; outstanding 132 and 136 shares) 16 16 Additional paid-in capital 806 824 Accumulated other comprehensive income 7 1 Accumulated earnings 222 244 Treasury stock, at par (3) (2) ----------- ----------- Total Covanta Holding Corporation stockholders equity 1,048 1,083 Noncontrolling interests in subsidiaries 7 5 ----------- -----------Total Equity 1,055 1,088 ----------- -----------Total Liabilities and Equity $ 4,526 $ 4,385 =========== =========== Exhibit 3Covanta Holding CorporationConsolidated Statements of Cash Flow Twelve Months Ended December 31, ------------------------ 2012 2011 ----------- ----------- (Unaudited, in millions)OPERATING ACTIVITIES:Net income $ 116 $ 227 Less: (Loss) income from discontinued operations, net of tax expense (2) 143 ----------- -----------Income from continuing operations 118 84Adjustments to reconcile net income from continuing operations to net cash provided by operating activities from continuing operations: Depreciation and amortization expense 195 193 Net (gains) write-offs (a) (46) 5 Loss on extinguishment of debt (b) 3 1 Non-cash convertible debt related expense 25 25 Stock-based compensation expense 17 18 Deferred income taxes 15 30 Pension plan settlement expense (c) 11 -- Other, net (3) (1) Reversal of uncertain tax positions related to pre-emergence tax matters (d) -- (24) Contractual liability to pre-petition creditors (d) -- 15 Change in restricted funds-other related to contractual liability to pre-petition creditors (d) -- 5 Change in restricted funds held in trust 34 4 Change in working capital, net of effects of acquisitions (27) 5 ----------- ----------- Net cash provided by operating activities from continuing operations 342 360 Net cash provided by operating activities from discontinued operations -- 1 ----------- -----------Net cash provided by operating activities 342 361 ----------- -----------INVESTING ACTIVITIES: Proceeds from assets sales -- 12 Purchase of property, plant and equipment (126) (118) Acquisition of businesses, net of cash acquired (94) (10) Acquisition of land use rights (1) (8) Property insurance proceeds 8 1 Other, net (11) (13) ----------- -----------Net cash used in investing activities from continuing operations (224) (136)Net cash provided by investing activities from discontinued operations 11 243 ----------- -----------Net cash (used in) provided by investing activities (213) 107 ----------- -----------FINANCING ACTIVITIES: Proceeds from borrowing on long-term debt (b) 1,034 -- Payment of deferred financing costs (b) (33) -- Principal payments on long-term debt (b) (622) (7) Principal payments on project debt (424) (137) Convertible debenture repurchases (25) (32) Payments of borrowings on revolving credit facility (191) -- Proceeds from borrowings on revolving credit facility 251 -- Proceeds from borrowings on project debt -- 15 Change in restricted funds held in trust 65 38 Cash dividends paid to stockholders (90) (32) Common stock repurchased (88) (229) Financing of insurance premiums, net (10) 10 Payments to pre-petition creditors -- (12) Decrease in restricted funds to pre-petition creditors -- 12 Distributions to partners of noncontrolling interests in subsidiaries (1) (6) Other financing, net 19 (1) ----------- -----------Net cash used in financing activities from continuing operations (115) (381)Net cash (used in) provided by financing activities from discontinued operations (2) 8 ----------- -----------Net cash used in financing activities (117) (373) ----------- -----------Effect of exchange rate changes on cash and cash equivalents -- (1) ----------- -----------Net increase in cash and cash equivalents 12 94Cash and cash equivalents at beginning of period 234 140 ----------- -----------Cash and cash equivalents at end of period 246 234Less: Cash and cash equivalents of discontinued operations at end of period -- 2 ----------- -----------Cash and cash equivalents of continuing operations at end of period $ 246 $ 232 =========== ===========(a) For additional information, see Exhibit 4A - Note (b) - (e) of this Press Release.(b) For additional information, see Exhibit 7A - Note (a) - (b) of this Press Release.(c) For additional information, see Exhibit 4A - Note (f) of this Press Release.(d) For additional information, see Exhibit 4A - Note (i) of this Press Release. Exhibit 4Covanta Holding CorporationReconciliation of Diluted Earnings Per Share to Adjusted EPS Three Months Twelve Months Ended Ended December 31, December 31, ----------------- ---------------- Full Year 2012 2011 2012 2011 Estimated 2013 ------- -------- ------- ------- ---------------- (Unaudited)Continuing Operations - Diluted Earnings Per Share $ 0.62 $ 0.20 $ 0.87 $ 0.56 $0.40 - $0.50Reconciling Items (a) (0.42) 0.07 (0.35) (0.02) -- ------- -------- ------- ------- ----------------Adjusted EPS $ 0.20 $ 0.27 $ 0.52 $ 0.54 $0.40 - $0.50 ======= ======== ======= ======= ================(a) For details related to the Reconciling Items, see Exhibit 4A of this Press Release. Exhibit 4ACovanta Holding CorporationReconciling Items Three Months Ended Twelve Months Ended December 31, December 31, -------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- --------- (Unaudited) (In millions, except per share amounts)Reconciling ItemsOperating loss related to insurance subsidiaries (a) $ 1 $ 1 $ 10 $ 2Write-off of intangible liability (b) -- -- (29) --Write-off of renewable fuels project (c) -- -- 16 --Development costs (d) -- 5 11 5Net gain related to lease termination (e) (44) -- (44) --Gain on sales of business -- (8) -- (9)Pension plan settlement expense (f) 11 -- 11 --Loss on extinguishment of debt (g) 1 -- 3 1Effect on income of derivative instruments not designated as hedging instruments -- (2) (1) (2)Effect of foreign exchange loss (gain) on indebtedness (h) -- 6 (3) 4Contractual liability to pre- petition creditors (i) -- -- -- 15Other (1) 1 -- 1 --------- --------- --------- --------- Total Reconciling Items, pre- tax (32) 3 (26) 17Proforma income tax impact (j) (24) 8 (22) 4Grantor trust activity 1 -- 1 1Reversal of uncertain tax positions related to pre- emergence tax matters (i) -- -- -- (24) --------- --------- --------- --------- Total Reconciling Items, net of tax $ (55) $ 11 $ (47) $ (2) ========= ========= ========= =========Diluted (Loss) Earnings Per Share Impact $ (0.42) $ 0.07 $ (0.35) $ (0.02) ========= ========= ========= =========Weighted Average Diluted Shares Outstanding 132 137 133 142 ========= ========= ========= =========(a) During the year ended December 31, 2012, we transitioned our remaining insurance business to run-off and recorded additional losses and reserve increases of $7 million primarily relating to adverse loss development.(b) During the year ended December 31, 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.(c) During the year ended December 31, 2012, we suspended the 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.(d) During the year ended December 31, 2012, we recorded a non-cash write- off of $11 million comprised of capitalized development costs related to a development project which we ceased to pursue in the United Kingdom. During the year ended December 31, 2011, we recorded a non-cash write- off of $5 million comprised of capitalized development costs and land related to a development project which we ceased to pursue in the United Kingdom.(e) During the year ended December 31, 2012, we recorded a net gain related to the termination of the pre-existing lease in connection with the acquisition of the Delaware Valley energy-from-waste facility.(f) During the three months ended December 31, 2012, we recorded a pension settlement charge of $11 million.(g) For additional information, see Exhibit 7A - Note (a) - (b) of this Press Release.(h) During the year ended December 31, 2012 and 2011, we recorded a foreign exchange (gain) loss related to intercompany loans, respectively.(i) For additional information, see Item 8. Financial Statements and Supplementary Data - Note 16. Income Taxes of Covanta's Annual Report on Form 10-K for the year ended December 31, 2011. (i) The expiration of the statute of limitations in 2011 triggered a contractual liability to pay restricted funds to third party claimants and resulted in other non-operating expense for the year ended December 31, 2011 of $15 million with no related income tax benefit. These payments related to tax liabilities set up in connection with Covanta Energy's emergence from bankruptcy. (ii) For the year ended December 31, 2011, the income tax provision includes a $24 million benefit due to the reversal of uncertain tax positions, following the expiration of applicable statutes of limitations related to pre-emergence tax matters in the Covanta Energy bankruptcy.(j) We are presenting this proforma calculation of the income tax effect on all reconciling items for each period to illustrate the proforma impact on income tax expense and net income. The proforma income tax impact represents the tax provision amount related to the overall tax provision calculated without the reconciling items when compared to the tax provision reported under GAAP in the condensed consolidated statement of income. Exhibit 4BCovanta Holding CorporationEffective Tax Rate "ETR" Three Months Ended Twelve Months Ended December 31, December 31, --------------------- -------------------- 2012 2011 2012 2011 --------- --------- --------- --------- (Unaudited)Effective Tax Rate (a) (5.2)% 48.7% 19.3% 26.8%(a) The ETR decrease during 2012 was primarily due to the impact of no tax expense on the gain on settlement of the pre-existing lease recorded in connection with the Delaware Valley energy-from-waste facility acquisition (see Exhibit 4A - Note (e) above). In 2011, the ETR included the impact of the reversal of uncertain tax positions in 2011 (see Exhibit 4A - Note (i) above). There is no tax benefit from the contractual liability to pre-petition creditors and as a result, this item had an impact on the effective tax rate in 2011.
