The following MD&A is intended to help the reader understand the results of
operations and financial condition of
Factors Affecting Business Conditions and Financial Results
Impact of novel coronavirus ("COVID-19") on
The COVID-19 pandemic has impacted, and is expected to continue to impact, our
employees, our operations, our business and the economy. In early 2020, we began
to see impacts from COVID-19 on the economy and commercial activity in
While a limited number of our employees have contracted COVID-19, we have followed recommended protocols and have thus far not experienced material disruptions to our operations as result of workforce availability issues. Depending upon the rate, extent, and location of future COVID-19 infection, more widespread infection of our employees could cause significant increases to operating expenses at specific facilities, or the curtailment of operations at such facilities on a temporary basis.
Our waste to energy ("WtE") plants and material processing facilities provide a
vital service to our municipal and commercial clients. As waste disposal
facilities, they have been recognized as part of Critical Infrastructure by the
As the COVID-19 pandemic is ongoing and the near term worldwide economic outlook remains uncertain, we cannot reasonably estimate the length or severity of this pandemic, or the extent to which the disruption may materially impact our consolidated financial statements.
Commodity Markets - Our quarterly results within an operating year may be affected substantially by movements in commodity markets relevant to our business, principally those relating to energy and metals. As noted above, the COVID-19 pandemic has had a dampening effect on prices in these markets. Such factors have caused, and may continue to cause, the portion of our energy revenue exposed to the market and/or our materials sales revenue to fluctuate to an extent that may materially affect our quarterly and annual financial results.
Energy Markets - A portion of our energy revenue is sold under short term arrangements at prevailing market prices. Underlying market prices are affected by a variety of factors not within our control such as weather, natural gas supply/demand conditions (including seasonal storage), regional electricity transmission and system conditions, and global demand. We maintain a disciplined program to hedge our exposure to market price volatility, see Item 1. Financial Statements - Note 11. Derivative Instruments. As a result of our hedging program, we have only a limited amount of exposure to market price volatility in the near term, including for the remainder of 2021.
Metals Markets - We sell recycled ferrous and non-ferrous metals under short
term arrangements based on prevailing rates that are affected by regional and
global demand for specific types of recycled metals. Demand for ferrous metals
is not always consistent with demand for non-ferrous metals, or among different
types of non-ferrous metals. In addition, recycled metal prices for both ferrous
and non-ferrous materials are impacted directly and indirectly by tariff and
trade actions both by the
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The following are various published pricing indices relating to the
March 31, 2021 March 31, 2020 Consumer Price Index (1) 2.6% 1.5% PJM Pricing (Electricity) (2)$ 30.22 $ 18.68 NE ISO Pricing (Electricity) (3)$ 50.24 $ 22.23 Henry Hub Pricing (Natural Gas) (4) $ 3.56 $ 1.91 #1 HMS Pricing (Ferrous Metals) (5) $ 367 $ 236
Old Sheet & Old Cast (Non-Ferrous Metals) (6) $ 0.63 $ 0.39
(1)Represents the year-over-year percent change in the Headline CPI number. The Consumer Price Index (CPI-U) data is provided by theU.S. Department of Labor Bureau of Labor Statistics . (2)Average price per megawatt hours ("MWh") for Q1 2021 and Q1 2020. Pricing for thePJM PSEG Zone is provided by the PJM ISO. (3)Average price per MWh for Q1 2021 and Q1 2020. Pricing for theMass Hub Zone is provided by the NE ISO. (4)Average price per MMBtu for Q1 2021 and Q1 2020. The Henry Hub Pricing data is provided by the Natural Gas Weekly Update,Energy Information Administration ,Washington DC . (5)Average price per gross ton for Q1 2021 and Q1 2020. The #1 Heavy Melt Steel ("HMS") composite index ($/gross ton) price as published byAmerican Metal Market . (6)Average price per pound for Q1 2021 and Q1 2020. Calculated using the high price of Old Cast Aluminum Scrap ($/lb.) as published byAmerican Metal Market .
Seasonal - Our quarterly operating results within the same fiscal year typically differ substantially due to seasonal factors, primarily as a result of the timing of scheduled plant maintenance. We conduct scheduled maintenance periodically each year, which requires that individual boiler and/or turbine units temporarily cease operations. During these scheduled maintenance periods, we incur material repair and maintenance expense and receive less revenue until the boiler and/or turbine units resume operations. This scheduled maintenance usually occurs during periods of off-peak electric demand and/or lower waste volumes, which are our first, second and fourth fiscal quarters. The scheduled maintenance period in the first half of the year (primarily first quarter and early second quarter) is typically the most extensive, while the third quarter scheduled maintenance period is the least extensive. Given these factors, we normally experience our lowest operating income from our projects during the first half of each year.
Our operating results may also be affected by seasonal weather extremes during summers and winters. Increased demand for electricity and natural gas during unusually hot or cold periods may affect certain operating expenses and may trigger material price increases for a portion of the electricity and steam we sell.
Brexit Implications - In March, 2017, the
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Table of Contents Quarter Updates Capital Allocation
Our key capital allocation activities for the three months ended
•$11 million declared in dividends to stockholders; and •$2 million for growth investments.
Strategic Review
In
In
The Company remains fully engaged in the strategic review process and continues to analyze all of its assets and operations with a goal of unlocking value.
CONSOLIDATED RESULTS OF OPERATIONS
The following general discussions should be read in conjunction with the condensed consolidated financial statements, the notes to the condensed consolidated financial statements and other financial information appearing and referred to elsewhere in this report. We have one reportable segment which comprises our entire operating business.
The comparability of the information provided below with respect to our revenue, expense and certain other items for the periods presented was affected by several factors. As outlined in Item 1. Financial Statements - Note 1. Organization and Basis of Presentation in this quarterly report on Form 10-Q and in Item 8. Financial Statements And Supplementary Data - Note 1. Organization and Summary of Significant Accounting Policies and Note 3. New Business and Asset Management of our 2020 Annual Report on Form 10-K, our business development initiatives, contract transitions, and acquisitions resulted in various transactions, which are reflected in comparative revenue and expense.
Certain reclassifications of the prior years' amounts have been made to conform
to the current year's presentation. The change in presentation did not affect
our total operating revenue, total operating expense, nor operating loss. For
further information on the reclassifications, see Item 1. Financial Statements -
Note 1. Organization and Basis of Presentation. In addition, comparability of
our results was affected by the COVID-19 pandemic as discussed above under
Impact of COVID-19 on the
The following terms used within the Results of Operations discussion are defined as follows:
•"Organic growth": reflects the performance of the business on a comparable period-over-period basis, excluding the impacts of transactions and contract transitions. •"Transactions": includes the impacts of acquisitions, divestitures, and the addition or loss of operating contracts. •Contract "transitions": includes the impact of the expiration of: (a) long-term major waste contracts, most typically representing the transition to a new contract structure, and (b) long-term energy contracts.
Certain amounts in our Consolidated Results of Operations may not total due to rounding.
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