Covanta Holding (CVA) 10-Q2020 FY Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Registrant’s telephone number including area code)

Securities registered pursuant to Section 12(b) of the Act:

This report contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934. Forward-looking statements are those that address activities, events or developments that we or our management intends, expects, projects, believes or anticipates will or may occur in the future. They are based on management’s assumptions and assessments in light of past experience and trends, current economic and industry conditions, expected future developments and other relevant factors. They are not guarantees of future performance and actual results. Developments and business decisions may differ from those envisaged by our forward-looking statements. Our forward-looking statements are also subject to risks and uncertainties, which can affect our performance in both the near and long-term. These forward-looking statements should be considered in light of the information included in this report and our other filings with the Securities and Exchange Commission, including, without limitation, the Risk Factors, as well as the description of trends and other factors in Management’s Discussion and Analysis of Financial Condition and Results of Operations, set forth in our 2019 Annual Report on Form 10-K.

The terms “we,” “our,” “ours,” “us”, "Covanta" and “Company” refer to Covanta Holding Corporation and its subsidiaries; the term “Covanta Energy” refers to our subsidiary Covanta Energy, LLC and its subsidiaries.

Covanta is one of the world’s largest owners and operators of infrastructure for the conversion of waste to energy (known as “WtE”), and also owns and operates related waste transport, processing and disposal assets. WtE serves as both a sustainable waste management solution that is environmentally superior to landfilling and as a source of clean energy that reduces overall greenhouse gas emissions and is considered renewable under the laws of many states and under federal law. Our facilities are critical infrastructure assets that allow our customers, which are principally municipal entities, to provide an essential public service.

In addition, we offer a variety of sustainable waste management solutions in response to customer demand, including industrial, consumer products and healthcare waste handling, treatment and assured destruction, industrial wastewater treatment and disposal, product depackaging and recycling, on-site cleaning services, and transportation services. Together with our processing of non-hazardous "profiled waste" for purposes of assured destruction or sustainability goals in our WtE facilities, we offer these services under our Covanta Environmental Solutions ("CES") brand.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States Generally Accepted Accounting Principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes thereto required by GAAP for complete consolidated financial statements. In the opinion of management, all adjustments considered necessary for fair presentation have been included in our condensed consolidated financial statements. All intercompany accounts and transactions have been eliminated. Operating results for the interim period are not necessarily indicative of the results that may be expected for the year ending December 31, 2020. The condensed consolidated balance sheet at December 31, 2019, was derived from audited annual consolidated financial statements, but does not contain all of the notes thereto from the annual consolidated financial statements. This Form 10-Q should be read in conjunction with the Audited Consolidated Financial Statements and accompanying Notes in our 2019 Annual Report on Form 10-K.

In August 2019, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ASU 2018-15, Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract. The amendments in this update align the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. We adopted this guidance on January 1, 2020 on a prospective basis. The adoption of this guidance did not have a material impact on our consolidated financial statements.

In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” which amends the impairment model to utilize an expected loss methodology in place of the incurred loss methodology for financial instruments and off balance sheet credit exposures. The amendment requires entities to consider a broader range of information to estimate expected credit losses, which may result in earlier recognition of losses. We adopted this guidance on January 1, 2020 using a modified retrospective approach. The adoption of this guidance did not have a material impact on our consolidated financial statements.

NOTE 2. RECENT ACCOUNTING PRONOUNCEMENTS

The following table summarizes recent ASU's issued by the FASB that could have a material impact on our consolidated financial statements.

NOTE 3. NEW BUSINESS AND ASSET MANAGEMENT

On December 31, 2019, we made an equity investment in a venture that signed a concession agreement with Zhao County, China for the construction and operation of a new 1,200 ton-per-day WtE facility located approximately 200 miles from Beijing ("Zhao County"). The project is being developed jointly by Covanta and a strategic local partner, Longking Energy Development Co. Ltd. Construction began in April 2020, with completion expected in 2021.

As of June 30, 2020 and December 31, 2019, our equity investment in the venture totaled RMB 35 million ($5 million), which amounted to a 26% ownership interest. We are required to contribute an additional RMB 61 million ($9 million) by the end of 2021, when our eventual ownership interest in the venture is expected to be 49%.

In January 2020, in connection with our Zhao County agreement, we obtained local equity financing in the amount of RMB 61 million ($9 million), the proceeds of which we provided to the project in the form of a shareholder loan. The loan is due in January 2022 and is collateralized through a pledge of our equity in the project.

This investment is accounted for under the equity method of accounting and was included in Other assets on our consolidated balance sheets.

In February 2020, we reached financial close on the Newhurst Energy Recovery Facility (“Newhurst”), a 350,000 metric ton-per-year, 42 megawatt WtE facility under construction in Leicestershire, England. Through a 50/50 jointly-owned and governed entity (“Covanta Green”), we and GIG own a 50% interest in Newhurst, with Biffa plc, a UK waste services provider, holding the remaining 50% interest. Biffa will provide approximately 70% of the waste supply to the project, and we will provide operations and maintenance services, in each case under a 20-year arrangement. Newhurst is expected to commence commercial operations in 2023.

As of June 30, 2020, our equity method investment in the JV of $6 million was included in Other assets in our condensed consolidated balance sheet. The fair value of our retained equity investment in Covanta Green was determined by the fair value of the consideration received from GIG for the right to invest in 25% in the project.

In March 2019, we reached financial close on the Rookery South Energy Recovery Facility (“Rookery”), a 1,600 metric ton-per-day, 60 megawatt WtE facility under construction in Bedfordshire, England. Through Covanta Green, we and GIG own an 80% interest in the project. We co-developed the project with Veolia ES (UK) Limited (“Veolia”), who owns the remaining 20%. We provide technical oversight during construction and will provide operations and maintenance (“O&M”) services for the facility, and Veolia will be responsible for providing at least 70% of the waste supply for the project. The facility is expected to commence commercial operations in 2022.

In connection with the transaction, we received $44 million (£34 million) of total consideration for the value of our development costs incurred to date and related fees and for GIG’s right to invest 40% in the project (50% investment in Covanta Green). For the six months ended June 30, 2019, as a result of this consideration and a step-up in the fair value of our retained equity investment, we recorded a gain of $57 million in Net gain on sale of business and investments in our condensed consolidated statement of operations. As of June 30, 2020, $17 million of the consideration received remains in Covanta Green. As of June 30, 2020 and December 31, 2019, our equity method investment of $2 million and $9 million, respectively, was included in Other assets on our condensed consolidated balance sheets. The fair value of our retained equity investment in Covanta Green was determined by the fair value of the consideration received from GIG for the right to invest in 40% in the project.

During the second quarter of 2019, as part of our ongoing asset rationalization and portfolio optimization efforts, we divested our Pittsfield and Springfield WtE facilities. During the three and six months ended June 30, 2019, we recognized a loss of $3 million and $12 million, respectively, which was included in Net (loss) gain on sale of business and investments in our condensed consolidated statement of operations.

We calculate basic Earnings Per Share ("EPS") using net earnings for the period and the weighted average number of outstanding shares of our common stock, par value $0.10 per share, during the period. Diluted earnings per share computations, as calculated under the treasury stock method, include the weighted average number of shares of additional outstanding common stock issuable for stock options, restricted stock awards and restricted stock units whether or not currently exercisable. Diluted earnings per share does not include securities if their effect was anti-dilutive.

Basic and diluted weighted average shares outstanding were as follows (in millions):

The changes in accumulated other comprehensive loss are as follows (in millions):

A disaggregation of revenue from contracts with customers is presented in our condensed consolidated statements of operations for the three and six months ended June 30, 2020 and 2019. We have one reportable segment which comprises our entire operating business.

ASC 606 requires disclosure of the aggregate amount of transaction price that is allocated to performance obligations that have not yet been satisfied as of June 30, 2020. The guidance provides certain conditions (identified as "practical expedients") that limit this disclosure requirement. We have contracts that meet the following practical expedients provided by ASC 606:

Our remaining performance obligation primarily consists of the fixed consideration contained in our contracts. As of June 30, 2020 our total remaining performance obligation was $6.1 billion, of which we expect to recognize 6% for the remainder of 2020 and 10% in 2021.

The following table reflects the balance in our contract assets, which we classify as accounts receivable unbilled and present net in Receivables, and our contract liabilities, which we classify as deferred revenue and present in Accrued expenses and other current liabilities in our condensed consolidated balance sheet (in millions):

For the six months ended June 30, 2020, revenue recognized that was included in deferred revenue in our condensed consolidated balance sheet at the beginning of the period totaled $6 million.

During the six months ended June 30, 2020, we awarded certain employees grants of 1,687,293 restricted stock units ("RSUs"). The RSUs will be expensed over the requisite service period. The terms of the RSUs include vesting provisions based solely on continued service. If the service criteria are satisfied, the RSUs will generally vest during March of 2021, 2022, and 2023.

During the six months ended June 30, 2020, we awarded 158,148 RSUs and 26,160 restricted stock awards ("RSAs") for annual director compensation. In addition, during the six months ended June 30, 2020, we issued 15,667 RSUs for quarterly director fees to certain of our directors who elected to receive RSUs in lieu of cash payments. We determined the service vesting condition of these RSU's to be non-substantive and, in accordance with accounting principles for stock compensation, recorded the entire fair value of the awards as compensation expense on the grant date.

During the six months ended June 30, 2020, we awarded certain employees grants of 629,094 Free Cash Flow per share ("FCF") and total shareholder return ("TSR") performance awards. The FCF awards and the TSR awards will each cliff vest at the end of the 3 year performance period, however, the number of shares delivered will vary based upon the attained level of performance and may range from 0 to 2 times the number of target units awarded.

During the six months ended June 30, 2020, we withheld 432,344 shares of our common stock in connection with tax withholdings for vested stock awards.

Compensation expense related to our stock-based awards was as follows (in millions):

Unrecognized stock-based compensation expense and weighted-average years to be recognized are as follows (in millions, except for weighted average years):

Pass through costs

Pass through costs are costs for which we receive a direct contractually committed reimbursement from the public sector client that sponsors a WtE project. These costs generally include utility charges, insurance premiums, ash residue transportation and disposal, and certain chemical costs. These costs are recorded net of public sector client reimbursements as a reduction to Plant operating expense in our condensed consolidated statement of operations.

Pass through costs were as follows (in millions):

During June 2020, we issued a £8 million ($9 million) note to a related party on market terms. The note is expected to be redeemed within 12 months and is classified within Accrued expenses and other current liabilities on our balance sheet as of June 30, 2020. If the note is not redeemed within 12 months, the final redemption date is December 2024.

We generally record our interim tax provision based upon a projection of the Company’s annual effective tax rate ("AETR"). This AETR is applied to the year-to-date consolidated pre-tax income to determine the interim provision for income taxes before discrete items. We update the AETR on a quarterly basis as the pre-tax income projections are revised and tax laws are enacted. The effective tax rate ("ETR") each period is impacted by a number of factors, including the relative mix of domestic and international earnings, adjustments to the valuation allowances and discrete items. The currently forecasted ETR may vary from the actual year-end due to the changes in these factors.

The Company’s global ETR for the six months ended June 30, 2020 and 2019 was 16% and 7%, respectively, including discrete tax items. The current year increase in the ETR was primarily due to the combined effect of (i) the overall increase in pre-tax loss; (ii) the impact of a smaller gain on the Newhurst transaction in 2020 compared to gain on the Rookery transaction in 2019; (iii) a discrete tax expense in 2020 related to the reduction in the value of stock based compensation from grant date; and (iv) a discrete tax benefit adjustment in 2020 related to tax carryforwards.

NOTE 9. ACCOUNTS RECEIVABLE SECURITIZATION

Amounts recognized in connection with the RPA were as follows (in millions):

We are not required to offer to sell any receivables and the Purchasers are not committed to purchase any receivable offered. The RPA has a scheduled termination date of December 5, 2020. Additionally, we may terminate the RPA at any time upon 30 days’ prior written notice. The agreement governing the RPA contains certain covenants and termination events. An occurrence of an event of default or the occurrence of a termination event could lead to the termination of the RPA. As of June 30, 2020, we were in compliance with the covenants, and no termination events had occurred. As of June 30, 2020, $100 million, the maximum amount available under the RPA, was fully utilized.

We are exposed to credit losses primarily from our trade receivables from waste disposal services, sale of electricity and/or steam and the sale of ferrous and non-ferrous metals.

For our trade receivables, we assess each counterparty’s ability to pay for service by conducting a credit review. The credit review considers the counterparty’s established credit rating or our assessment of the counterparty’s creditworthiness based on our analysis of their financial statements when a credit rating is not available.

We monitor our ongoing credit exposure through active review of counterparty balances against contract terms and due dates. Our activities include timely account reconciliation, dispute resolution, payment confirmation and monitoring current economic conditions and future forecast of economic conditions, to the extent that they impact the credit loss determination and can be reasonably estimated.

Changes in the allowance for credit losses of our trade receivables for the six months ended June 30, 2020 were as follows (in millions):

The Company held the followings shareholder loans in connection with our equity method investments (in millions):

We assess the collectability of the shareholder loans each reporting period through the impairment analysis procedures of our equity method investments which considers the loss history of the investments and the viability of the associated development projects. As of June 30, 2020 there were no credit losses recorded associated with our shareholder loans.

Fair Value Measurements

Authoritative guidance associated with fair value measurements provides a framework for measuring fair value and establishes a fair value hierarchy that prioritizes the inputs used to measure fair value, giving the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 inputs), then significant other observable inputs (Level 2 inputs) and the lowest priority to significant unobservable inputs (Level 3 inputs). The following methods and assumptions were used to estimate the fair value of each class of financial instruments:

The estimated fair value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that we would realize in a current market exchange and are based on pertinent information available to us as of June 30, 2020. Such amounts have not been comprehensively revalued for purposes of these financial statements and current estimates of fair value may differ significantly from the amounts presented herein.

The following table presents information about the fair value measurement of our assets and liabilities as of June 30, 2020 and December 31, 2019 (in millions):

The following financial instruments are recorded at their carrying amount (in millions):

We are required to disclose the fair value of financial instruments for which it is practicable to estimate that value. The fair value of short-term financial instruments such as cash and cash equivalents, restricted cash, accounts receivables, prepaid expenses and other assets, accounts payable and accrued expenses approximates their carrying value on the condensed consolidated balance sheets due to their short-term nature.

In addition to the recurring fair value measurements, certain assets are measured at fair value on a non-recurring basis when an indication of impairment is identified. Long-lived assets, such as property and equipment and identifiable intangibles with finite useful lives, are periodically evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. For the purpose of impairment testing, we review the recoverable amount of individual assets or groups of assets at the lowest level of which there are there are identifiable cash flows, which is generally at the facility level. Assets are reviewed using factors including, but not limited to, our future operating plans and projected cash flows. The determination of whether impairment has occurred is based on the assets fair value as compared to the carrying value. Fair value is generally determined using an income approach, which requires discounting the estimated future cash flows associated with the asset. If the asset carrying amount exceeds its fair value, an impairment charge is recognized in the amount by which the carrying amount exceeds the fair value of the asset.

Energy Price Risk

We have entered into a variety of contractual hedging arrangements, designated as cash flow hedges, in order to mitigate our exposure to energy market risk, and will continue to do so in the future. Our efforts in this regard involve only mitigation of price volatility for the energy we produce and do not involve taking positions (either long or short) on energy prices in excess of our physical generation. The amount of energy generation which we have hedged on a forward basis under agreements with various financial institutions as of June 30, 2020 is indicated in the following table (in millions):

As of June 30, 2020, the fair value of the energy derivative asset was $13 million. The change in fair value was recorded as a component of AOCI.

During the six months ended June 30, 2020, cash provided by and used in energy derivative settlements of $27 million and 0, respectively, was included in net cash provided by operating activities on our condensed consolidated statement of cash flows.

During the six months ended June 30, 2019, cash provided by and used in energy derivative settlements of $12 million and $1 million, respectively, was included in net cash provided by operating activities on our condensed consolidated statement of cash flows.

Interest Rate Swaps

As of June 30, 2020, the fair value of the interest rate swap derivative liability was $11 million. The change in fair value was recorded as a component of AOCI.

As of June 30, 2020, we had unutilized capacity under the Revolving Credit Facility as follows (in millions):

The loan documentation governing the Credit Facilities contains various affirmative and negative covenants, as well as financial maintenance covenants (financial ratios), that limit our ability to engage in certain types of transactions. We were in compliance with all of the affirmative and negative covenants under the Credit Facilities as of June 30, 2020.

The components of lease expense were as follows (in millions):

 

Supplemental cash flow and other information related to leases was as follows (in millions):

As of June 30, 2020, we had no additional significant operating or finance leases that had not yet commenced.

We and/or our subsidiaries are party to a number of claims, lawsuits and pending actions, most of which are routine and all of which are incidental to our business. We assess the likelihood of potential losses on an ongoing basis to determine whether losses are considered probable and reasonably estimable prior to recording an estimate of the outcome. If we can only estimate the range of a possible loss, an amount representing the low end of the range of possible outcomes is recorded. The final consequences of these proceedings are not presently determinable with certainty. As of June 30, 2020 and December 31, 2019, accruals for our loss contingencies recorded in Accrued expenses and other current liabilities in our condensed consolidated balance sheets were $3 million and $3 million, respectively.

Our operations are subject to environmental regulatory laws and environmental remediation laws. Although our operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, which may result in fines, penalties, damages or other sanctions, we believe that we are in substantial compliance with existing environmental laws and regulations.

We may be identified, along with other entities, as being among parties potentially responsible for contribution to costs associated with the correction and remediation of environmental conditions at disposal sites subject to federal and/or analogous state laws.

In certain instances, we may be exposed to joint and several liabilities for remedial action or damages. Our liability in connection with such environmental claims will depend on many factors, including our volumetric share of waste, the total cost of remediation, and the financial viability of other companies that also sent waste to a given site and, in the case of divested operations, the contractual arrangement with the purchaser of such operations.

The potential costs related to the matters described below and the possible impact on future operations are uncertain due in part to the complexity of governmental laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery and the questionable level of our responsibility. Although the ultimate outcome and expense of any litigation, including environmental remediation, is uncertain, we believe that the following proceedings will not have a material adverse effect on our consolidated results of operations, financial position or cash flows.

Other commitments as of June 30, 2020 were as follows (in millions):

The letters of credit were issued to secure our performance under various contractual undertakings related to our domestic and international projects or to secure obligations under our insurance program. Each letter of credit relating to a project is required to be maintained in effect for the period specified in related project contracts, and generally may be drawn if it is not renewed prior to expiration of that period.

We believe that we will be able to fully perform under our contracts to which these existing letters of credit relate, and that it is unlikely that letters of credit would be drawn because of a default of our performance obligations. If any of these letters of credit were to be drawn by the beneficiary, the amount drawn would be immediately repayable by us to the issuing bank. If we do not immediately repay such amounts drawn under letters of credit issued under the Revolving Credit Facility, unreimbursed amounts would be treated under the Credit Facilities as either additional term loans or as revolving loans.

The surety bonds listed in the table above relate primarily to construction and performance obligations and support for other obligations, including closure requirements of various energy projects when such projects cease operating. Were these bonds to be drawn upon, we would have a contractual obligation to indemnify the surety company. The bonds do not have stated expiration dates. Rather, we are released from the bonds as the underlying performance is completed.

We have issued or are party to guarantees and related contractual support obligations undertaken pursuant to agreements to construct and operate waste and energy facilities. For some projects, such performance guarantees include obligations to repay certain financial obligations if the project revenue is insufficient to do so, or to obtain or guarantee financing for a project. With respect

to our businesses, we have issued guarantees to municipal clients and other parties that our subsidiaries will perform in accordance with contractual terms, including, where required, the payment of damages or other obligations. Additionally, damages payable under such guarantees for our waste-to-energy facilities could expose us to recourse liability on project debt. If we must perform under one or more of such guarantees, our liability for damages upon contract termination would be reduced by funds held in trust and proceeds from sales of the facilities securing the project debt and is presently not estimable. Depending upon the circumstances giving rise to such damages, the contractual terms of the applicable contracts, and the contract counterparty’s choice of remedy at the time a claim against a guarantee is made, the amounts owed pursuant to one or more of such guarantees could be greater than our then-available sources of funds. To date, we have not incurred material liabilities under such guarantees.

We have entered into certain guarantees of performance in connection with our recent divestiture activities. Under the terms of the arrangements, we guarantee performance should the guaranteed party fail to fulfill its obligations under the specified arrangements.

The following MD&A is intended to help the reader understand the results of operations and financial condition of Covanta for the three and six months ended June 30, 2020. The financial information as of June 30, 2020 should be read in conjunction with the financial statements for the year ended December 31, 2019 contained in our 2019 Annual Report on Form 10-K.

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 expense at specific facilities, or curtail operations at such facilities on a temporary basis.

Our 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 Department of Homeland Security and as essential services by state and local governments. While we remain a primary waste outlet for numerous municipalities and commercial customers, the downturn in economic activity has affected patterns and volumes of waste generation. Residential waste represents the substantial majority of our contracted volumes, and while we experienced limited reduction in these volumes during the early stages of the pandemic, residential volumes have returned to, and in some areas exceeded, pre-pandemic levels. We also process commercial waste, including profiled waste, at many facilities, and volumes of these materials for disposal fell during the early stages of the pandemic, which required us to internalize more waste volumes from our transfer station network as well as access third party replacement waste volumes at a lower revenue basis per ton. Volumes of commercial waste generally have returned closer to pre-pandemic levels, and revenue per ton levels have returned as well. Three of our WtE facilities are currently permitted to accept Regulated Medical Waste (“RMW”) and while we have received some COVID-19 material to date, we have seen reductions in other types of RMW and so overall volumes of RMW have not materially changed as a result of the pandemic.

In addition, while our operations have experienced only limited disruption to date, we have incurred, and expect to continue to incur, additional costs associated with instituting measures to ensure employee safety, access to contractors needed for construction and maintenance activities, and delays of previously scheduled projects that have been placed on hold or rescheduled to later in the year. .

Most of the construction activity at our projects in the UK has continued during the pandemic, and we are working to mitigate any impacts. In England, construction activities are considered essential and so our Rookery and Newhurst sites, adhering to guidance set by Public Health England, have proceeded on schedule. The government in Scotland initially took a different approach,

and construction at the Earls Gate site was suspended or curtailed through early June, but has now resumed. We are uncertain, at this time, of the ultimate impact to these projects and other UK projects under development.

In light of the uncertainty around the macroeconomic impacts of COVID-19, we implemented a program of expense reduction intended to mitigate the financial impacts to our business, with an initial goal of reducing 2020 costs by $15 to $30 million. This program includes several elements, among which are:

During the second quarter these efforts resulted in cost savings of approximately $10 million and we now expect a full year impact of $15 to $25 million.

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 the Company's consolidated financial statements.

The following are various published pricing indices relating to the U.S. economic drivers that are relevant to those aspects of our business where we have market exposure; however, there is not an exact correlation between our results and changes in these metrics.

During the first half of 2020, we experienced some modest delays in our normal scheduled maintenance activities due to COVID-19 related quarantines, travel restrictions and social distancing requirements. As a result, we expect our scheduled maintenance will be more heavily weighted towards the second half of the year than it has been historically.

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.

Our key capital allocation activities for the three months ended June 30, 2020 included the following:

During the second quarter of 2020, we entered into an amended and extended service agreement with Marion County through 2021.

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 following terms used within the Results of Operations discussion are defined as follows:

Certain amounts in our Consolidated Results of Operations may not total due to rounding.

For the three month comparative period, waste and service revenue decreased by $15 million, primarily resulting from the impact of the COVID-19 pandemic on economic activity and waste markets.

For the six month comparative period, waste and service revenue increased by $4 million, primarily driven by $7 million of organic growth and $3 million due to service contract transitions, partially offset by divestitures. Within organic growth, WtE tip fee revenue increased by $11 million, with $6 million due to higher average revenue per ton and increased volume processed, partially offset by lower environmental services of $4 million.