<PAGE>
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Fiscal Year Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to____________________
Commission File Number 1-3122
OGDEN CORPORATION
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-5549268
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employee
Incorporation or Organization) Identification No.)
Two Pennsylvania Plaza, New York, N.Y. 10121
- ---------------------------------------- -------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code - (212) 868-6100
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
- ------------------- -----------------------------------
Common Stock, par value New York Stock Exchange
$.50 per share
$1.875 Cumulative Convertible
Preferred Stock (Series A) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
The aggregate market value of registrant's voting stock, held by non-affiliates
based on the New York Stock Exchange closing price as reported in the
consolidated transaction reporting system as of the close of business on
February 27, 1998 was as follows:
Common Stock, par value $.50 per share $1,350,616,712
$1.875 Cumulative Convertible
Preferred Stock (Series A) $ 6,713,487
The number of shares of the registrant's Common Stock outstanding as of
February 28, 1998 was 50,453,559 shares.
The following documents are hereby incorporated by reference into this Form
10-K:
(1) Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1997 (Parts II and IV).
(2) Portions of the Registrant's 1998 Proxy Statement to be filed with the
Securities and Exchange Commission (Part III).
<PAGE>
INDEX
PART I PAGE
- ------ ----
ITEM 1. BUSINESS 1-27
Entertainment 1-7
Aviation 7-10
Energy 11-27
Other 27-28
Other Information 28-36
Markets, Competition and General Business Conditions 28-29
Equal Employment Opportunity 29-30
Employee and Labor Relations 30
Environmental Regulatory Laws 31-33
Energy and Water Regulation 33-35
Flow Control 35-36
Ash Residue 36
ITEM 2. PROPERTIES 37-40
ITEM 3. LEGAL PROCEEDING 41-42
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 42-46
Executive Officers of Ogden
PART II
ITEM 5. MARKET FOR OGDEN'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS 46
ITEM 6. SELECTED FINANCIAL DATA 46
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 46
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE 47
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OGDEN 47
ITEM 11. EXECUTIVE COMPENSATION 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 47
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K 47-53
<PAGE>
PART I
Item 1. BUSINESS
Ogden Corporation, a Delaware corporation (hereinafter together with
its consolidated subsidiaries referred to as "Ogden" or the "Company"), is a
global company engaged in providing a wide range of operations and services
through its operating groups within each of its four business segments,
Entertainment, Aviation, Energy and Other. The amounts of revenue, operating
profit or loss and identifiable assets attributable to each of Ogden's four
business segments for each of the last three fiscal years is set forth in
footnote 26. Information Concerning Business Segments of Ogden's 1997 Annual
Report to Shareholders, certain specified portions of which are incorporated
herein by reference.
The operations and services provided by the Entertainment, Aviation
and Energy segments are performed through joint ventures, consortiums,
partnerships and wholly-owned subsidiaries within each of the segments. Each
segment provides a wide range of services to private and public facilities
throughout the United States and many foreign countries. In foreign countries
the development, construction, ownership and the providing of services may
expose Ogden to potential risks that typically are not involved in such
activities in the United States. Each group seeks to manage and mitigate these
risks through political and financial analysis of the foreign country; the
analysis of key participants in each operation; insurance; participation by
international finance institutions; and joint ventures or consortiums with other
companies. Payment for services is often made in whole or in part in the
domestic currencies of the foreign country and the conversion of such currencies
into U.S. dollars may not be assured by a governmental or other creditworthy
foreign country agency. In addition, fluctuations in value of such currencies
against the U.S. dollar may cause the operation to yield less return than
expected. Also, the transfer of earnings and profits in any form beyond the
borders of the foreign country may be subject to special taxes or limitations
imposed by the laws of the foreign country.
Some customers of the Entertainment and Aviation segments are billed
on a cost-plus or fixed-price basis. Where services are performed on a
cost-plus basis, the customer reimburses the appropriate segment for all
acceptable reimbursable expenditures made in connection with the job and also
pays a management fee, which may be a percentage of the reimbursable
expenditures, a specific dollar amount, or a combination of the two. Many
contracts in the Aviation group segment be written on a month-to-month basis or
provide for a longer or indefinite term but are terminable by either party on
notice varying from 30 to 180 days.
ENTERTAINMENT
Entertainment consists of owned and operated themed attractions as
well as providing services to a wide variety of public and private facilities
including stadiums, convention and exposition centers, arenas, parks,
amphitheaters, and fairgrounds located in the United States, Canada, Germany,
Australia, and the United Kingdom. The themed attraction business includes food
service and merchandising. In addition, the Entertainment group operates a race
track and four off-track betting parlors in Illinois. Also the Entertainment
<PAGE>
2
group through its 50% interest in Metropolitan Entertainment Company, Inc., is
involved in live theater, concerts, recorded music and video development.
Entertainment offers its customers a wide range of project-development
options, including an operational design review, consultation during
construction, assistance with financing arrangements, as well as operations of
facilities, usually in return for long-term services and concession contracts.
In some cases Ogden guarantees Entertainment's performance of these contracts as
well as the financing arrangements.
Entertainment's American Wilderness, Zoo and Aquarium-TM- ("American
Wilderness") is a nature-themed attraction concept which has targeted three
sites for development, all at megamalls developed by The Mills Corporation in
the United States. These nature-themed attractions are developed and operated by
Entertainment and feature live animals, foliage, scents and climates,
motion-simulation rides, themed retailing and restaurants. The first American
Wilderness location-based entertainment concept was opened at the Ontario Mills
mall in California during late October 1997. The other sites slated for
development during 1998 with The Mills Corporation include Arizona Mills (Tempe,
Arizona) and Grapevine Mills (Dallas, Texas).
Through a long-term leasehold interest, Entertainment operates Silver
Springs, a nature-based attraction, and Wild Waters, an adjacent water park,
located near Ocala, Florida. Silver Springs, located on a 250-acre park, is open
365 days a year and features attractions consisting of jungle cruise boat rides,
jeep safari rides, animal shows, gift shops and eateries. Wild Waters, located
on a six acre park, features a variety of slides, a wave pool, miniature golf,
food services and other attractions and is open March through Labor Day. During
1997 an approximate $5.0 million expansion, consisting of new attractions,
exhibits, shops, restaurants and concessions, was completed at these two
facilities.
Grizzly Park, a nature-based entertainment center located at the
entrance to Yellowstone National Park, is owned and operated by Entertainment.
Within Grizzly Park are, among other attractions, the Grizzly Discovery Center,
a natural habitat with grizzly bears and gray wolves, and a variety of stores
and restaurants.
In 1995 the Port Authority of New York and New Jersey awarded
Entertainment an eleven and one-half year lease to renovate and operate the
107th Floor Observation Deck at the World Trade Center in New York City. The
Observation Deck was re-opened to the public in April 1997 after being
substantially renovated. The lease agreement provides that Entertainment will
pay the Port Authority an annual fee plus a percentage of gross revenues above a
certain level.
Entertainment, through a joint venture, operates La Rural de Palermo,
a 28-acre fair and exhibition center located in Buenos Aires, Argentina. The
joint venture will continue the existing fair and exhibition business on the
property while developing a master plan for the development of the property to
include a retail, multi-screen theater and other entertainment components.
Entertainment owns a 50% interest in the joint venture and serves as the
<PAGE>
3
managing partner. As such, Entertainment directs day-to-day operations and is
responsible for creating and implementing the development plan for this
property.
Entertainment also owns a 28% equity interest in Parques
Tecnocultiroles, S.A. ("Partecsa"), a Spanish corporation based in Seville,
Spain. Partecsa was awarded a 30-year contract to convert, remodel, manage and
operate Isla Magica, a 200-acre theme park located in Seville, Spain, where the
1992 Exposition Fair was held. The park opened and commenced operations in June
1997.
During late 1997 Entertainment commenced construction of $15 million,
40,000 square foot seat facility, to be called Tinseltown Studios-Trademark-, on
a 1.25 acre parcel of land purchased from the City of Anaheim and located on the
Northwest quadrant of the Anaheim Stadium parking lot. Entertainment also leased
from the City property to accommodate 550 parking spaces. Tinseltown
Studios-Trademark- is a newly developed audience-participation experience which
will feature live entertainment and full dinner service, culminating in the
Tinseltown awards ceremony, where selected members of the audience will be
featured on a big screen acting opposite their favorite actors in film clips
from well-known motion pictures. The site is expected to open in late 1998.
During 1998 Entertainment intends to develop "Jazzland", a theme park
to be located on a 100-plus acre site in New Orleans, Louisiana. The park is
expected to open in 2000. "Jazzland" will be owned and operated by
Entertainment and will consist of a theme park including food, beverage and
merchandising operations.
During late 1997 Entertainment completed the acquisition of the
Enchanted Castle Family Entertainment Center - a large themed restaurant and
indoor family entertainment complex located in the Chicago, Illinois area.
Entertainment is also engaged in the large-format film and theater
business. These large-format films are usually shown on screens six stories
high in specially designed theaters. Entertainment and Toronto-based Imax
Corporation have agreed to co-develop, build and operate fifteen (15)
large-format IMAX-Registered Trademark- theaters domestically and
internationally over the next five years. Entertainment has also formed a
three-year co-production agreement with two-subsidiaries of Sony Corporation of
America for several large-format films.
In May 1997 Entertainment's first large-format IMAX-Registered
Trademark- feature movie, AMAZON, premiered at the Ultra Screen-TM- theater
adjacent to its American Wilderness attraction at Ontario, California. AMAZON
has been booked into over 25 large-format theaters. In February 1998, AMAZON
was nominated by the Academy of Motion Picture Arts and Sciences-Registered
Trademark- for an Academy Award-Registered Trademark- in the category "Best
Documentary (Short Subject)." Entertainment's next large-format film, MARK
TWAIN'S AMERICA, produced under a three-year co-production and distribution
agreement with the two subsidiaries of Sony Corporation of America, is scheduled
for release in May 1998.
Entertainment's gaming business currently consists of the operations
of the
<PAGE>
4
casino at the Americana Beach Resort in Aruba. Entertainment's focus on gaming
will be primarily on international properties linked to wider entertainment
endeavors.
The facility management and concession arrangements under which
Entertainment operates are individually negotiated and vary widely as to terms
and duration. Concession contracts and leases usually provide for payment by
Entertainment of commissions or rentals based on a stipulated percentage of
gross sales or net profits, sometimes with a minimum rental or payment. Most of
the facility management contracts are on a cost-plus-a-fee basis but a number of
such contracts provide for a sharing of profits and losses between Entertainment
and the facility owner. Food, beverage and novelty services are provided by
Entertainment in the United States and Canada at a number of locations including
those listed in the following table:
NAME LOCATION
---- --------
Anaheim Stadium Anaheim, California
Wrigley Field Chicago, Illinois
Los Angeles Convention Center Los Angeles, California
The Kingdome Seattle, Washington
Veterans Stadium Philadelphia, Pennsylvania
Market Square Arena Indianapolis, Indiana
McNichols Arena Denver, Colorado
Cobo Hall Detroit, Michigan
Tempe Diablo Stadium Tempe, Arizona
University of Oklahoma Stadium Norman, Oklahoma
The MGM Grand Gardens Arena Las Vegas, Nevada
Saint John Regional Exhibition Centre New Brunswick, Canada
General Motors Place Vancouver, British Columbia
Mile High Stadium Denver, Colorado
Victory Field Indianapolis, Indiana
MCI Center Washington, D.C.
Alameda County Coliseum Complex Oakland, California
During 1997: Entertainment opened its first megamall food court
operation under a long term lease at Arizona Mills in Tempe, Arizona; was
awarded a food and beverage contract at the Oakland-Alemeda County Coliseum
Complex, a 64,400-seat stadium and a 19,200 seat arena, in California; and began
its exclusive food and beverage operations at the MCI Center located in downtown
Washington, D.C., a new 20,000-seat facility which serves as the home of the
Washington Wizards National Basketball Association team and the Washington
Capitals National Hockey League team. Entertainment provides concession services
to the general seating area.
In addition, Entertainment was awarded concession contracts at the
following facilities scheduled to open over the next few years: the 20,000-seat
Staples Center, the new home of the National Hockey League's Los Angeles Kings
and the National Basketball
<PAGE>
5
Association's Los Angeles Lakers in California (2000); and the 66,000 seat Paul
Brown Stadium in Cincinnati, Ohio (2000).
Entertainment provides food and beverage services at amphitheaters
throughout the United States, including those listed in the following table:
NAME LOCATION
---- --------
Starlake Amphitheatre Pittsburgh, PA
Fiddlers Green Amphitheatre Englewood, CO
Sandstone Amphitheatre Kansas City, MO
Cynthia Woods Mitchell Pavilion Woodlands,TX
Meadows Music Theater Hartford, CT
Camden Amphitheatre Camden, NJ
Polaris Amphitheatre Columbus, OH
Nissan Amphitheatre Manassas, VA
Molson Amphitheatre Toronto, Canada
Virginia Beach Amphitheatre Virginia Beach, VA
Entertainment, through long-term management agreements, operates and
manages, and in some cases provides concession services, at various convention
centers, arenas and public facilities including the following:
NAME LOCATION
---- --------
Arrowhead Pond Anaheim, CA
Corel Centre Ottawa, Canada
Pensacola Civic Center Pensacola, FL
Sullivan Arena Anchorage, Alaska
Egan Convention Center Anchorage, Alaska
Target Center Minneapolis, MN
Northlands Coliseum Edmonton, Alberta
The Great Western Forum Los Angeles, CA
Newcastle Arena Newcastle, England
NYNEX arena Manchester Manchester, England
Bridgewater Hall Manchester, England
Stadium Australia Sydney, Australia
Arena Oberhausen Oberhausen, Germany
Providence Civic Center Providence, Rhode Island
In addition, Entertainment was awarded venue management contracts at
the following facilities scheduled to open over the next few years: the 100,000
square foot Chareston Area Convention and Performing Arts Center in South
Carolina (2000), the 10,000 - seat Bakersfield Arena & Convention Center, in
Bakersfield, California, and the Victory Theatre in Evansville, Indiana (1998).
<PAGE>
6
The Corel Centre (formerly the Ottawa Palladium), a 19,000-seat
multipurpose indoor arena in Ottawa, Canada, which is owned by a third party,
opened in January of 1996, and Entertainment commenced operations under a
30-year contract to provide complete facility management and concession services
at this arena, which is the home of the Ottawa Senators of the National Hockey
League. Pursuant to the 30-year contract, Entertainment has agreed that the
Corel Centre, under Entertainment's management, will generate a minimum amount
of revenues and has agreed to advance funds, if necessary, to its customer to
assist in refinancing senior secured debt incurred in connection with
construction of the facility. During 1997, Ogden repurchased the customer's
senior secured debt in the amount of $95,000,000 using borrowed funds, which
senior secured debt was subsequently sold and the borrowed funds repaid. Ogden
is obligated to repurchase such senior secured debt in the amount of $97,679,000
on December 20, 2002, if such debt is not refinanced prior to that date.
Ogden's repurchase obligation is collateralized by bank letters of credit.
Ogden is also required to repurchase the outstanding amount of certain
subordinated secured debt issued for such customer on December 30, 2002. The
amount outstanding at December 31, 1997, was $46,562,000. In February 1998,
this amount was increased to $51,624,000. During 1997, this customer purchased
certain subordinated secured debt and repaid other amounts owed to Ogden in an
aggregate amount of $38,900,000. In February 1998, this customer repaid an
additional $7,343,000 owned to Ogden. In addition, at December 31, 1997 Ogden
had guaranteed indebtedness of $20,683,000 of an affiliate and principal tenant
of this customer, which indebtedness is due in September 1998. The owners of the
Corel Centre are parties to a 30-year license agreement with the owner of the
Ottawa Senators, pursuant to which the Ottawa Senators play their home games at
the arena.
Pursuant to a management agreement between the City of Anaheim,
California and a wholly-owned subsidiary of Ogden, Entertainment manages and
operates the Arrowhead Pond, a facility owned by and located within the City of
Anaheim. Ogden has agreed that the Arrowhead Pond, under Entertainment's
management, will generate a minimum amount of revenues computed in accordance
with this 30-year management agreement with the City. The Arrowhead Pond is a
multi-purpose facility capable of accommodating professional basketball and
hockey, concerts and other attractions, and has a maximum seating capacity of
approximately 19,400. Entertainment also has a 30-year lease agreement with The
Walt Disney Company at the Arrowhead Pond pursuant to which the Anaheim Mighty
Ducks, a National Hockey League team owned by The Walt Disney Company, plays its
home games.
Entertainment owns a 50% interest in the Australian and New Zealand
business of the International Facility Corporation Pty Ltd. ("IFC"), a private
facility management firm based in Brisbane, Australia. IFC is the managing
general partner for all of the Entertainment/IFC joint venture accounts in
Australia and New Zealand. These accounts include the Brisbane Entertainment
Centre, the Newcastle Entertainment Centre, the Cairns Convention Centre, and a
significant interest in Convex, operator of the Brisbane Convention and
Exposition Centre. IFC is also acting as a consultant for the design and
construction and will be providing ongoing management of the Olympic 2000
Stadium in Sydney, Australia.
<PAGE>
7
Metropolitan Entertainment Company Inc. ("Metropolitan"), is a leading
concert promoter in New York, New Jersey, Connecticut, and parts of
Massachusetts in which Entertainment owns a 50% interest. Metropolitan and
Entertainment, conduct concert promotion activities, operate amphitheaters in
the eastern United States and concentrate on national and global music tours,
artist management, Broadway and television productions, recording, and music
publishing. MEG, through a long-term lease, operates the 20,000 capacity Darien
Lake Performing Arts Center located in Darien Lake, New York. MEG has also
established its own record label, Hybrid Recordings.
Entertainment leases and operates a thoroughbred and harness racetrack
and four off-track betting parlors in Illinois where it telecasts races from
Fairmount Park and other racing facilities. Restaurants and other food and
beverage services are provided by Entertainment at these facilities. A large
portion of the track's revenue is derived from its share of the pari-mutuel
pool, which can be adjusted by state legislation. Other income is derived from
admission charges, parking, programs and concessions.
Entertainment also provides concessions at zoos located in Seattle,
Washington; Cleveland, Ohio; and Columbia, South Carolina.
AVIATION
The Aviation group, directly and indirectly through consortiums, joint
ventures and partnerships, provides specialized support services to airlines and
designs, finances, builds and operates major airport facilities and other
aviation infrastructure projects throughout the world. The specialized support
services provided by this group include comprehensive ground handling, ramp,
passenger, cargo and warehouse, aviation fueling and in-flight catering
services. These services are performed through joint ventures, consortiums,
contracts with individual airlines, consolidated agreements with several
airlines, and contracts with various airport authorities. The Aviation group's
operations have undergone and continue to undergo review and refinement through
the sale of certain under-performing operations.
Ground handling services include diversified ramp operations such as
baggage unloading and loading, aircraft cleaning, aircraft maintenance, flight
planning, de-icing, cargo handling, warehouse operations and passenger-related
services such as ticketing, check-in, passenger lounge operations,
cargo/warehouse services and other miscellaneous services.
While these services were principally conducted (and continue to be
conducted) in the United States domestic market, global expansion by the
Aviation group has resulted in providing comprehensive ground handling and
related services at many international locations throughout Europe, Canada,
South America, Asia and other countries. Set forth below is a sampling of major
foreign airports where Aviation currently conducts ground and cargo handling
operations:
<PAGE>
8
AIRPORT LOCATION
- ------- --------
Arturo Merino Benitez Airport Santiago, Chile
Heathrow Airport England
Schiphol International Airport Netherlands
Auckland International Airport New Zealand
Jorge Chavez International Airport Lima, Peru
Guarulhos International Airport Sao Paulo, Brazil
Galeao International Airport Rio de Janeiro, Brazil
Eduardo Gomes International Airport Manaus, Brazil
Pearson International Airport Toronto, Canada
Mirabel Airport Montreal, Canada
Simon Bolivar International Airport Caracas, Venezuela
Mexico International Airport Mexico City, Mexico
Hong Kong International Airport Hong Kong*
Macau International Airport Macau
* Expected to open in July 1998.
Aviation also performs ground handling operations and other aviation
related services at eight different airports throughout Germany and in the Czech
Republic through a 50% interest in a Prague-based airport handling company which
began construction of a new $18 million cargo facility scheduled to open by
mid-1998, at Praha Ruzyne Airport in Prague, Czech Republic. During 1997
Aviation began performing ground handling services at Otopeni International
Airport in Bucharest, Romania, through Ogden Romanian Aviation Services, a joint
venture. Ogden Aviation continues to perform services at St. Maarten's Princess
Juliana International Airport where its license has been extended through 2008.
In Aruba, through a corporation jointly owned by Aviation and Air Aruba,
Aviation provides ramp and passenger services at Reina Beatrix International
Airport. Other ground handling operations include the Aeroporto International
Gregorio Luperon Airport in Puerto Plata, Dominican Republic; the Belo Horizonte
International Airport, Brazil; eleven (11) airports in Mexico; and, through a
joint venture with Aldeasa S.A. of Spain, Aviation provides cargo handling and
warehousing services at airports located in Madrid and Barcelona, Spain.
Aviation is in the process of finalizing arrangements to provide a
range of services under a long-term license at Wattay International Airport in
Vientiane, Laos; negotiating a contract to provide a complete spectrum of
airport services, including all passenger, ramp and cargo services at a new
international airport in Cochin, India which is scheduled to open in January
1999; and has formed a joint venture with Dresdner Kleinwort Benson ("DKB") to
seek ground handling and cargo handling opportunities throughout Asia. Pursuant
to the joint venture a financial subsidiary of DKB has acquired a 10% interest
as of March 1, 1998 and has the right to acquire an additional 10% interest in
the new venture for a total price of approximately $17 million. The joint
venture will include Aviation's operations at the new Hong Kong International
Airport in Hong Kong, scheduled to open in 1998.
<PAGE>
9
Aviation will retain the majority interest and operating control of the joint
venture which geographically will extend from India into mid-Asia and the
Pacific Rim, excluding Aviation's existing operations in Macau.
Aviation operates fueling facilities, including storage and hydrant
fueling systems for the fueling of aircraft. This operation assists airlines in
designing, arranging financing for, and installing underground fueling systems.
These fueling operation services are principally performed in the North American
market, including the maintenance and operation of a new fuel farm located at
the San Diego International Airport (See the Environmental Regulatory Laws
Section of this Report).
Aviation operates 11 in-flight kitchens for over 85 airline customers
at a number of locations, including the following:
AIRPORT LOCATION
------- --------
John F. Kennedy International (3 kitchens) New York
LaGuardia New York
Newark International New Jersey
Los Angeles International (2 kitchens) California
San Francisco International California
Washington Dulles International Washington, D.C.
McCarren International (Las Vegas) Nevada
Honolulu International Hawaii
In 1995 a consortium, composed of Ogden Aviation Services, Inc., Macau
Aviation Services Corporation, EVA Airways, Air Macau and several local
companies and prominent businessmen, entered into a 19-year contract, with a
16-year exclusivity arrangement, to provide ramp and cargo handling, passenger
services, and aircraft line maintenance service at the Macau International
Airport. The consortium, of which Aviation Services is the managing partner with
a 29% participation, provides all necessary passenger and ramp equipment and
constructed a cargo warehouse, cargo and engineering facilities, an aircraft
hangar and a state-of-the-art training center at the airport. The consortium's
investment in infrastructure improvements and equipment at the Macau airport is
approximately $40 million.
During January 1998, a consortium, owned 28% by Ogden and 36% each by
an Italian and Argentine partner, was awarded a 30-year license by the
Government of Argentina to provide management services, improvements and
operations at 33 airports in Argentina, including the airports located in Buenos
Aires. The consortium will be required to commit $100 million in equity to the
project and provide the Government of Argentina with fixed concession payments
of at least $171 million per year.
Compania de Desarrallo Aeropuerto Eldorado, S.A. ("CODAD"), a
consortium of which Aviation has a 19% interest, pursuant to a 20-year
concession contract awarded to
<PAGE>
10
CODAD by the Civil Aviation Authority of Colombia, is building a new
3.8-kilometer runway at the El Dorado Airport in Bogota, Colombia at an
estimated cost of $120 million. Construction, which began in 1996, is expected
to be completed by July 1998. The consortium will maintain the new runway, and
the pre-existing runway, for approximately 17 years in return for runway landing
fees.
<PAGE>
11
ENERGY
The operations of Ogden's Energy segment are conducted by Ogden Energy
Group, Inc. through four principal business areas: independent power,
waste-to-energy, water and waste water and environmental consulting and
engineering (collectively, the "Energy Group"). Since the early 1980's,
affiliates and subsidiaries of the Energy Group have been engaged in developing
and in some cases owning energy-generating projects fueled by municipal solid
waste, and providing long term services from these projects to communities. The
Energy Group is now the largest full service vendor (i.e., builder/operator) in
the world for large scale waste-to-energy projects. In addition, since 1989,
subsidiaries have been engaged in developing, owning and/or operating
independent power production projects. The Company seeks to utilize the
expertise gained from these activities in developing, owning or operating energy
generating facilities in the United States and abroad that utilize a variety of
other fuels, as well as water and wastewater facilities that will similarly
serve communities on a long term basis.
The Energy Group generally seeks to participate in projects in which
it can make an equity investment and become the operator; its returns will be
derived from equity distributions and/or operating fees. It also seeks to have
a role in the development of the projects. The types of projects in which the
Energy Group seeks to participate sell the electrical power services they
generate, or the waste or water-related services they provide, under long term
contracts or market concessions to utilities, government agencies providing
power distribution, creditworthy industrial users, or local government units
providing waste disposal or water and wastewater services. For power projects
utilizing a combustible fuel or geothermal sources, the Energy Group typically
seeks projects which have a secure supply of fuel or geothermal brine through
long-term supply arrangements or by obtaining control of the fuel source.
The Energy Group generally looks to finance its projects using equity
or capital commitments provided by it or other investors, combined with
nonrecourse debt for which the lender's source of payment is project revenues
and assets. Consequently, the ability of the Energy Group's project
subsidiaries to declare and pay cash dividends to the Company is subject to
certain limitations in the project loan and other documents entered into by such
project subsidiaries. Such limitations typically permit the payment of cash
dividends out of current cash flow for quarterly, semiannual or annual periods
only at the end of such periods and only after payment of principal and interest
on project loans due at the end of such periods, and in certain cases after
providing for debt service and other reserves. In some project situations,
limited support of the Energy Group or Ogden also may be considered, such as
operating guarantees, financial guarantees of bridge loans or other interim debt
arrangements.
The number of projects being pursued at any given time by the Energy
Group will fluctuate. The complexities and uniqueness of international project
development in particular requires that the Energy Group continually assess the
likelihood of successful project financing throughout the development stage and
weigh that against the expected benefits. In addition, the Energy Group may,
depending upon circumstances and at the appropriate time, elect to dispose of a
portion of an equity interest it may have in a project after financing.
<PAGE>
12
The Energy Group presently has interests in projects with an aggregate
generating capacity in excess of 2200 MW (gross) either operating or under
construction in the United States, Central and South America, China and the
Philippines. It continues to seek to expand its ownership and operation of
projects in these and other regions. The Energy Group's business is facilitated
through field offices in Hong Kong; Manila, the Philippines; Taipei, Taiwan; and
Sao Paulo, Brazil.
INDEPENDENT POWER
The Energy Group's independent power business is conducted by its
wholly-owned subsidiary, Ogden Energy, Inc. ("OEI"). OEI develops, operates
and/or invests in independent (i.e., nonutility) energy generation ("Independent
Power Production" or "IPP") projects which sell their output to utilities,
electricity distribution companies or industrial consumers in the United States
and abroad. The activities of this group do not include the development of
generating facilities fueled by municipal solid waste, which are conducted by
the waste-to-energy group, discussed below.
Where possible, the Energy Group attempts to sell electricity under
long-term power sales contracts. The Energy Group attempts to structure the
revenue provisions of such power sales contracts such that changes in the cost
components of a facility (primarily fuel costs) correspond, as effectively as
possible, to changes in the revenue components of the contract. A plant's
revenue from a power sales contract usually consists of two components: energy
payments and capacity payments. Energy payments are usually indexed to the fuel
costs of the customer and to general inflation indices reasonably related to the
cost structure of the operation. Capacity payments are based on either a
plant's net electrical output or its available capacity. Capacity payment rates
vary over the term of a power sales contract according to various schedules.
Some power sales contracts permit the utility customer to dispatch the plant
(i.e., direct the plant to deliver a reduced amount of electric output) within
certain specified parameters. The Energy Group attempts to structure the power
sales contract payments so that, even when dispatching occurs, the plant
continues to receive capacity payments (which provide substantially all of the
plant's debt service and profits, if any), while it receives reduced energy
payments (which primarily cover the variable operating, maintenance and fuel
costs associated with operating at different levels).
The Energy Group attempts to provide fuel for its operating plants
generally under long-term supply agreements, either through contractual
arrangements between third parties and the project subsidiary or, in some
instances, through acquisition of a dependable source of fuel.
On many of its projects, an affiliate of the Energy Group performs
operation and maintenance services on behalf of the project owner. While all
operation and maintenance contracts are different, the Energy Group typically
seeks to perform these services on a cost-plus-fixed-fee basis, with a bonus and
limited penalty payment mechanism related to specified benchmarks of plant
performance.
<PAGE>
13
(a) FACILITIES UNDER CONSTRUCTION. During 1996 and early 1997, the
Energy Group successfully completed the development stage of its largest
international project to date. A consortium, of which an Energy Group
subsidiary is a 26% member, has developed and is now constructing a 480 MW
(gross) coal-fired electric generating facility in the Republic of the
Philippines (the "Quezon Project"). The other members of the consortium are
affiliates of International Generating Company, an affiliate of Bechtel
Enterprises, Inc., and PMR Limited Co., a Philippines partnership. The
consortium entered into a power purchase agreement with Manila Electric Company
("Meralco"), the largest electric distribution company in the Philippines, which
serves the area surrounding and including metropolitan Manila. Under the terms
of the agreement, Meralco is obligated, for a period of 25 years, to take or pay
for stated minimum annual quantities of electricity produced by the facility on
terms and at prices set forth in the agreement. The consortium has entered into
contracts for the supply of coal at stated prices for a portion of the term of
the power purchase agreement.
The power purchase agreement has been approved by the Philippines
Energy Regulatory Board. The project has received an environmental clearance
certificate, the primary environmental permit required for construction and
operation. Total cost of development and construction of the Quezon Project is
expected to be approximately $800 million. All associated financing has been
obtained. The turnkey contractors, which are affiliates of Bechtel Enterprises,
Inc., commenced construction of the facility on December 27, 1996, and
construction is proceeding according to schedule. An Energy Group subsidiary
will operate the Quezon Project on behalf of the consortium for a 25 year term
from the commencement of commercial operation.
The Energy Group will receive certain limited amounts of revenue
from the Quezon Project during construction. Operating revenue is expected to
commence upon commercial operation, projected for the fourth quarter of 1999.
(b) OPERATING FACILITIES. The Energy Group's operating IPP projects
utilize a variety of energy sources: water (hydroelectric), natural gas, coal,
geothermal energy, wood waste, landfill gas, and diesel fuel.
- China
In 1997, the Energy Group added four additional coal fired
facilities to its portfolio through the acquisition of majority equity interests
in four small coal-fired cogeneration facilities in three different provinces in
the Peoples Republic of China. These projects are operated, in each case, by an
affiliate of the minority equity stakeholder in the project. Parties holding
minority positions in the projects include a private company, a local government
enterprise and in the remaining two cases, affiliates of the local municipal
government. A majority of the electrical output of the projects is sold to the
relevant local Municipal Power Bureau and steam is sold to various host
industrial facilities, respectively pursuant to long term power and steam sales
agreements respectively.
<PAGE>
14
- Ogden Power Pacific
On September 30, 1997, a subsidiary of OEI successfully completed the
purchase of the stock of Pacific Energy from Pacific Enterprises Energy
Management Services, a wholly owned subsidiary of Southern California Gas
Company. Ogden Power Pacific, Inc. ("OPPI"), the renamed entity, holds a 100%
equity interest in thirteen (13) independent power project and a 50% interest in
seven (7) independent power projects located in California, Washington, Maine
and Maryland. The projects generate a total of 180 MW using geothermal,
landfill gas, hydro and wood-waste fuel sources.
OPPI owns a 50% partnership interest in Mammoth-Pacific, L.P., which
owns three geothermal power plants located on the eastern slopes of the Sierra
Nevada Mountains at Casa Diablo Hot Springs, California. The projects have a
gross capacity of 40MW and use geothermal brine to generate electricity. The
projects have contractual rights to the geothermal brine resource for a term not
less than the term of the power contracts. All three projects sell electricity
to Southern California Edison under long term contracts.
Bangor Pacific Hydroelectric Project ("Bangor"), Koma Kulshan
Hydroelectric Project ("Koma Kulshan") and Weeks Falls Hydroelectric Project
("Weeks Falls") are three run-of-river hydroelectric projects in which OPPI owns
50% equity interests. Bangor is a 13 MW Project that is located on the
Penobscot River 50 miles north of Bangor, Maine. Koma Kulshan is a 12 MW
project that is located in the state of Washington about 100 miles northeast of
Seattle. Weeks Falls is a 5 MW project located on the south fork of the
Snoqualmie River in the Cascade Mountain region of the state of Washington.
Bangor sells its electricity to Bangor-Hydro Electric Company under a long term
contract, while Koma Kulshan and Weeks Falls each sell electricity to Puget
Sound Power & Light Company.
OPPI owns and operates eight landfill gas projects which produce
electricity by burning methane gas produced by the anaerobic digestion of the
solid waste contained in sanitary landfills. Seven of the projects are located
in California and one is located in Maryland. The eight projects have a gross
capacity of 43 MW. All sell electricity generated to local utilities, under
contracts having varying lengths, the longest expiring in 2011.
OPPI owns interests in four wood waste fired electric power plants in
California. Three are owned 100% by OPPI affiliates, Burney Mountain Power
Station, Mount Lassen Power Station and Pacific Oroville Power Station, and one,
Pacific Ultrapower Chinese Station Power Station, is owned by a partnership in
which an OPPI affiliate holds a 50% interest. Generally, fuel supply is
procured from local sources through a variety of short term wood waste supply
agreements. The four projects have a gross capacity of 67 MW using wood waste
from forestry lumber mills, agriculture and urban areas. All four projects sell
electricity to Pacific Gas & Electric Company under long term contracts.
<PAGE>
15
- Other Operating Projects
The Group's hydroelectric projects (other than those associated
with OPPI, include the New Martinsville, West Virginia project, which is
operated through a subsidiary. The output is sold under a long term contract
with Monongohela Power Company. The Energy Group has an ownership interest in
the Don Pedro project in Costa Rica through an equity investment in Energia
Global, Inc. ("EGI"). Don Pedro is owned by EGI and is operated by a subsidiary
of the Energy Group. A second hydroelectric project owned by EGI, Rio Volcan,
commenced operation in 1997 and also is operated by an Energy Group subsidiary.
The electric output from both of these facilities is sold to Instituto
Costarricense de Electricidad, a local utility.
The Energy Group's natural gas projects include; (i) the
Brandywine, Maryland facility which began operation in 1996 and is operated by a
subsidiary of the Energy Group, and whose output is sold to Potomac Electric
Power Company; and (ii) the facility located in Bolivia, where subsidiaries of
the Energy Group own an interest in Empresa Valle Hermoso ("EVH") which was
formed by the Bolivian government as part of the capitalization of the
government-owned utility ENDE. EVH owns and operates 215 MW of gas-fired
generating capacity. A subsidiary of OEI participates in a joint venture that
supplies EVH with management services support.
In addition to its geothermal assets associated with OPPI, the
Energy Group is the lessee of two geothermal facilities in California, both of
which are operated by the Energy Group's subsidiaries, and a geothermal
resource which is adjacent to and supplies fluid to both geothermal facilities.
The electricity from both projects, the Heber and SIGC facilities, is sold under
long-term contracts with Southern California Edison.
In 1996, the Energy Group added diesel fuel facilities to its
portfolio through the acquisition of equity interests in two projects in the
Philippines: the Bataan Cogeneration project and the Island Power project.
These projects are operated by a subsidiary of the Energy Group. The Bataan
Cogeneration project has a long-term contract to sell its electrical output to
the National Power Corporation (with which it also has entered into a fuel
management agreement for fuel supply) and the Bataan Export Processing Zone
Authority, while the Island Power project has a long-term power contract with
the Occidental Mindoro Electric Cooperative.
(c) PROJECT SUMMARIES. Certain information with respect to the Energy Group's
IPP projects as of March 1, 1998 is summarized in the following table:
<PAGE>
16
IPP PROJECTS
<TABLE>
<CAPTION>
DATE OF
ACQUISITION/
ENERGY COMMENCEMENT
IN OPERATION: LOCATION SOURCE SIZE NATURE OF INTEREST OF OPERATIONS
------------ -------- ------ ---- ------------------ -------------
<S> <C> <C> <C> <C> <C>
1. New Martinsville West Virginia Hydro 40MW Lessee/Operator 1991
2. Heber (1)(2) California Geothermal 52MW Lessee/ Operator 1989
3. SIGC (2) California Geothermal 48MW Lessee/Operator 1994
4. Don Pedro Costa Rica Hydro 16MW Part Owner/Operator 1996
5. Island Power Philippines Diesel 7MW Part Owner/ 1996
Corporation(3) Operator
6. Bataan Philippines Diesel 65MW Owner/Operator 1996
Cogeneration
7. Empresa Valle Bolivia Natural Gas 215MW Part Owner/ 1995
Hermoso (4) Operations Mgmt.
8. Brandywine Maryland Natural Gas 240MW Operator 1996
9. Rio Volcan Costa Rica Hydro 16MW Part Owner/Operator 1997
10. Mammoth G1(6) California Geothermal 10MW Part Owner/Operator 1997
11. Mammoth G2(6) California Geothermal 15MW Part Owner/Operator 1997
12. Mammoth G3(6) California Geothermal 15MW Part Owner/Operator 1997
13. Gude Maryland Landfill Gas 3MW Owner/Operator 1997
</TABLE>
<PAGE>
17
<TABLE>
<CAPTION>
DATE OF
ACQUISITION/
ENERGY COMMENCEMENT
IN OPERATION: LOCATION SOURCE SIZE NATURE OF INTEREST OF OPERATIONS
------------ -------- ------ ---- ------------------ -------------
<S> <C> <C> <C> <C> <C>
14. Otay California Landfill Gas 3.7MW Owner/Operator 1997
15. Oxnard California Landfill Gas 5.6MW Owner/Operator 1997
16. Penrose California Landfill Gas 10MW Owner/Operator 1997
17. Salinas California Landfill Gas 1.5MW Owner/Operator 1997
18. Santa Clara California Landfill Gas 1.5MW Owner/Operator 1997
19. Stockton California Landfill Gas .8MW Owner/Operator 1997
20. Toyon California Landfill Gas 10MW Owner/Operator 1997
21. Burney California Wood Waste 11.4MW Owner/Operator 1997
22. Chinese(6) California Wood Waste 25.6MW Part Owner 1997
23. Mount Lassen California Wood Waste 11.4 MW Owner/Operator 1997
24. Oroville California Wood Waste 18.7MW Owner/Operator 1997
25. Bangor(6) Maine Hydroelectric 13MW Part Owner/Operator 1997
26. Koma Kulshan(6) Washington Hydroelectric 12MW Part Owner 1997
27. Weeks Falls(6) Washington Hydroelectric 5MW Part Owner 1997
28. Lin'an(7) China Coal 24MW Part Owner 1997
29. Huantai(7) China Coal 24MW Part Owner 1997
30. Taixing(7) China Coal 24MW Part Owner 1997
31. Yanjiang(7) China Coal 24MW Part Owner 1997
UNDER CONSTRUCTION:
1. Quezon (5) Philippines Coal 500MW Part Owner/Operator 1999(est.)
</TABLE>
<PAGE>
18
NOTES
- -----
(1) An OEI subsidiary is a 50% partner in the project entity which leases the
facility from a third-party lessor. The lease expires in 2000 and is
subject to a 15-year renewal at the OEI subsidiary's option.
(2) An OEI subsidiary is a 50% partner of the lessee of the resource supplying
fluid to the project, and the lessor is the same third-party that leases
the Heber project to that project entity.
(3) An OEI subsidiary has an approximately 40% ownership interest in this
project.
(4) The OEI subsidiary owns an approximately 24% interest in a consortium that
purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by
Bolivian pension funds.
(5) An OEI subsidiary has an approximately 26% ownership interest in the
project.
(6) An OEI subsidiary has a 50% ownership interest in the project.
(7) An OEI subsidiary has a 60% ownership interest in this project.
(d) OTHER DEVELOPMENT EFFORTS. The Energy Group is actively pursuing
several projects, some of which have achieved significant development
milestones such as executed power purchase agreements, or receipt of key
governmental approvals. As with all development efforts, however, there are
in each case numerous conditions to be satisfied prior to financing, some of
which are not within the Energy Group's control. As such, no assurance can
be given that these projects will ultimately be developed successfully.
WASTE-TO-ENERGY
The Energy Group's waste-to-energy operations have been
consolidated in a wholly-owned subsidiary, Ogden Waste to Energy, Inc.
("OWTE"). Waste-to-energy facilities combust municipal solid waste to make
saleable energy in the form of electricity or steam. This group completed
construction of its first waste-to-energy project in 1986. It currently
operates 28 waste-to-energy projects at 27 locations. The Energy Group's
subsidiaries are the owners or lessees of 17 of its waste-to-energy projects.
OWTE has the exclusive right to market in the United States the proprietary,
mass-burn technology of Martin GmbH fur Umwelt-und Energietechnik ("Martin").
All of the waste-to-energy facilities the Energy Group has constructed use
this Martin technology. In addition, the Energy Group operates
waste-to-energy facilities using other technologies.
Generally, OWTE, through subsidiaries, provides waste-to-energy
services pursuant to long-term service contracts ("Service Agreements") with
local governmental units
<PAGE>
19
sponsoring the waste-to-energy project ("Client Communities"). Certain of its
waste-to-energy facilities do not have sponsoring Client Communities.
(a) TERMS AND CONDITIONS OF SERVICE AGREEMENTS. Each Service Agreement is
different in order to reflect the specific needs and concerns of the Client
Community, applicable regulatory requirements, and other factors. The following
description sets forth terms that are generally common to these agreements:
- The Energy Group subsidiary designs the facility, helps to
arrange for financing, and then constructs and equips the
facility on a fixed price and schedule basis.
- The Energy Group subsidiary operates the facility and generally
guarantees it will meet minimum processing capacity and
efficiency standards, energy production levels, and environmental
standards. The Energy Group subsidiary's failure to meet these
guarantees or to otherwise observe the material terms of the
Service Agreement (unless caused by the Client Community or by
events beyond its control ("Unforeseen Circumstances")) may
result in liquidated damages being charged to the Energy Group
subsidiary or, if the breach is substantial, continuing and
unremedied, the termination of the Service Agreement. In the
case of such Service Agreement termination, the Energy Group
subsidiary may be obligated to discharge project indebtedness;
- The Client Community is generally required to deliver minimum
quantities of municipal solid waste ("MSW") to the facility and
is obligated to pay a service fee for its disposal, regardless of
whether that quantity of waste is delivered to the facility. The
service fee escalates to reflect indices of inflation. In many
cases the Client Community must also pay for transportation of
the residue to the disposal site. Generally, expenses resulting
from the delivery of unacceptable and hazardous waste on the site
are also borne by the Client Community. In addition, the Client
Community is also generally responsible to pay increased expenses
and capital costs resulting from Unforeseen Circumstances,
subject to limits which may be specified in the Service
Agreement;
- Ogden Corporation typically guarantees each Energy Group
subsidiary's performance under its respective Service Agreement.
- The Client Community generally reimburses the Energy Group
subsidiary for certain costs specified in the Service Agreement
including taxes, governmental impositions (other than income
taxes), certain consumables, ash disposal and utility expenses.
The Client Community usually retains a portion of the energy
revenues (generally 90%) generated by the facility, with the
balance paid to the Energy Group subsidiary. If the facility is
<PAGE>
20
owned by the Energy Group subsidiary, the Client Community also
pays as part of the Service Fee an amount equal to the debt
service due to be paid on the bonds issued to finance the
facility. At most facilities, the Energy Group may earn
additional fees from accepting waste from the Client Community
or others utilizing the capacity of the facility, which exceeds
the amount of waste committed by the Client Community.
Affiliates of the Energy Group operate transfer stations in
connection with some of its waste-to-energy facilities and, in connection
with the Montgomery County, Maryland project, use a railway system to
transport MSW and ash residue to and from the facility. In addition,
affiliates lease and operate a landfill located at its Haverhill,
Massachusetts, facility, and lease, but do not operate, a landfill in
connection with its Bristol, Connecticut, facility.
(b) OTHER ARRANGEMENTS FOR PROVIDING WASTE-TO-ENERGY SERVICES. The Energy
Group owns two facilities that are not operated pursuant to Service
Agreements with Client Communities and may undertake additional such projects
in the future. In such projects, the Energy Group subsidiary must obtain
sufficient waste under contracts with haulers or communities to ensure
sufficient project revenues. In these cases, the Energy Group subsidiary is
subject to risks usually assumed by the Client Community, such as those
associated with Unforeseen Circumstances and the supply and price of
municipal waste to the extent not contractually assumed by other parties.
The Energy Group's current contracts with waste suppliers for these two
facilities provide that the tipping fee charged for waste disposal service
generally escalates with specified indices but otherwise is subject to
limited increases in the event that costs of operation increase as a result
of Unforeseen Circumstances. On the other hand, in these cases, the Energy
Group subsidiary generally retains all of the energy revenues from sales of
power to utilities or industrial power users and disposal fees for waste
accepted at these facilities. Accordingly, the Energy Group believes that
such projects carry both greater risks and greater potential rewards than
projects in which there is a Client Community.
(c) PROJECT FINANCING. Financing for domestic projects is generally
accomplished through the issuance of a combination of tax-exempt and taxable
revenue bonds issued by or on behalf of the Client Community. If the
facility is owned by the Energy Group subsidiary the Client Community loans
the bond proceeds to the subsidiary and pays to the subsidiary amounts
necessary to pay debt service. For such facilities, project-related debt is
included as a liability in Ogden's consolidated financial statements.
Generally, such debt is secured by the revenues pledged under the respective
indenture and is collateralized by the assets of the Energy Group subsidiary
and otherwise provides no recourse to Ogden, subject to construction and
operating performance guarantees and commitments.
<PAGE>
21
(d) OWTE PROJECTS. Certain information with respect to projects as of March 1,
1998 is summarized in the following table:
WASTE-TO-ENERGY PROJECTS
BOILER COMMENCEMENT
UNITS TONS PER DAY UNITS OF OPERATIONS
- ----- ------------ ------ -------------
Tulsa, OK (I) (1) 750 2 1986
Haverhill/Lawrence,(8) 950 1 1984
MA-RDF
Marion County, OR 550 2(2) 1987
Hillsborough County, FL (3) 1,200 3(2) 1987
Tulsa, OK (II) (1)(4) 375 1 1987
Bristol, CT 650 2(2) 1988
Alexandria/Arlington, VA 975 3 1988
Indianapolis, IN 2,362 3(2) 1988
Hennepin County, MN (1)(5) 1,000 2 1989
Stanislaus County, CA 800 2 1989
Babylon, NY 750 2(2) 1989
Haverhill, MA-Mass Burn 1,650 2 1989
Warren County, NJ (5) 400 2 1988
Kent County, MI (3) 625 2(2) 1990
Wallingford, CT (5) 420 3(2) 1989
Fairfax County, VA 3,000 4(2) 1990
Huntsville, AL (3) 690 2(2) 1990
Lake County, FL 520 2(2) 1991
Lancaster County, PA (3) 1,200 3(2) 1991
Pasco County, FL (3) 1,050 3(2) 1991
Huntington, NY (6) 750 3(2) 1991
Hartford, CT (3)(7)(8) 2,000 3 1987
Detroit, MI (1)(8) 3,300 3 1991
Honolulu, MI (1)(8) 2,160 2 1990
Union County, NJ (3) 1,440 3 1994
Lee County, FL (3) 1,200 2(2) 1994
Onondaga County NY (6) 990 3 1995
Montgomery County, MD (3) 1,800 3(2) 1995
------
Total 33,565
======
____________________
(1) Facility is owned by an owner/trustee pursuant to a sale/leaseback
arrangement.
(2) Facility has been designed to allow for the addition of another unit.
(3) Facility is owned by the Client Community.
(4) Phase II of the Tulsa facility, which was financed as a separate project,
expanded the capacity of the facility from two to three units.
<PAGE>
22
(5) Energy Group subsidiaries were purchased after completion, and use a
mass-burn technology that is not the Martin Technology.
(6) Owned by a limited partnership in which the limited partners are not
affiliated with Ogden.
(7) Under contracts with the Connecticut Resource Recovery Authority and
Northeast Utilities, the Energy Group subsidiary operates only the boiler
and turbine for this facility.
(8) Operating contracts were acquired after completion. Facility uses a
refuse-derived fuel technology and does not employ the Martin Technology.
(e) TECHNOLOGY. The principal feature of the Martin Technology is
the reverse-reciprocating stoker grate upon which the waste is burned. The
patent for the basic stoker grate technology used in the Martin Technology
expired in 1989. The Energy Group has no information that would cause it to
believe that any other company uses the basic stoker grate technology that
was protected by the expired patent. Moreover, the Energy Group believes
that unexpired patents on other portions of the Martin technology and other
proprietary know how would limit the ability of other companies to
effectively use the basic stoker grate technology in competition with the
Energy Group. There are several unexpired patents related to the Martin
Technology including: (i) Grate Bar for Grate Linings, especially in
Incinerators - expires, 1999; (ii) Method and Arrangement for Reducing NOx
Emissions from Furnaces - expires 2000; (iii) Method and Apparatus for
Regulating the Furnace Output of Incineration Plants - expires 2007; (iv)
Method for Regulating the Furnace Output in Incineration Plants - expires
2008; and (v) Feed Device with Filling Hopper and Adjoining Feed Chute for
Feeding Waste to Incineration Plants - expires 2008. More importantly, the
Energy Group believes that it is Martin's know-how and worldwide reputation
in the waste-to-energy field, and the Energy Group know-how in designing,
constructing and operating waste-to-energy facilities, rather than the use of
patented technology, that is important to the Energy Group's competitive
position in the waste-to-energy industry in the United States. Ogden does
not believe that the expiration of the patent covering the basic stoker grate
technology or patents on other portions of the Martin Technology will have a
material adverse effect on Ogden's financial condition or competitive
position.
The Energy Group believes that mass burn technology is now the
predominant technology used for the combustion of solid waste. Overall,
there are several other mass-burn technologies available in the market
including those of Von Roll, W&E, Takuma, Volund, Steinmueller, Deutsche
Babcock, and Detroit Stoker. In addition, other innovative non-mass burn
technologies have been developed from time-to-time. Such technologies may
claim reduced air emissions, but to date have been unproven on a large scale
operation and appear likely to be substantially more expensive. Martin seeks
to implement improvements and modifications to its technology in order to
maintain its competitive position with non-mass burn technologies. However,
should such technologies develop that offer competitive advantages to mass
burn, the Energy Group's ability to respond in the United States would be
limited by the Cooperation Agreement--see (f) below.
<PAGE>
23
(f) THE COOPERATION AGREEMENT. Under an agreement between Martin
and an Ogden affiliate (the "Cooperation Agreement"), the Energy Group's
subsidiary, Ogden Projects, Inc. ("OPI") has the exclusive rights to market
the proprietary technology (the "Martin Technology") of Martin in the United
States, Canada, Mexico, Bermuda, certain Caribbean countries, most of Central
and South America, and Israel. Martin is obligated to assist OPI in
installing, operating, and maintaining facilities incorporating the Martin
technology. The fifteen year term of the Cooperation Agreement renews
automatically each year unless notice of termination is given, in which case
the Cooperation Agreement would terminate 15 years after such notice.
Additionally, the Cooperation Agreement may be terminated by either party if
the other fails to remedy its material default within 90 days or notice. The
Cooperation Agreement is also terminable by Martin if there is a change of
control (as defined in the Cooperation Agreement) of Ogden Martin Systems,
Inc. ("OMS"), a wholly-owned subsidiary of OPI or any direct or indirect
parent of OMS not approved by its respective board of directors. Although
termination would not affect the rights of OPI to design, construct, operate,
maintain, or repair waste-to-energy facilities for which contracts have been
entered into or proposals made prior to the date of termination, the loss of
OPI's right to use the Martin Technology could have a material adverse effect
on OPI's future business and prospects.
(g) OTHER DEVELOPMENT EFFORTS. The Energy Group has no
commitments in its waste-to-energy backlog as of December 31, 1997.
WATER AND WASTEWATER
The Energy Group's water and wastewater business is conducted
through Ogden Yorkshire Water Company ("OYWC"). OYWC's mission is to
develop, design, construct, maintain, operate and, in some cases, own, water
and wastewater treatment facilities and distribution and collection networks
in the United States, Canada, Latin America and elsewhere. Although OYWC was
formed in 1994 as a joint venture with a British water utility, Yorkshire
Water PLC, in 1996 Yorkshire Water PLC determined that it needed to refocus
its efforts on its core business in the United Kingdom, and terminated its
ownership interest in OYWC and its projects. Yorkshire Water PLC and its
affiliates will, however, continue to provide by contract engineering,
operations and marketing support and services to OYWC.
In the United States, OYWC seeks to participate in water projects
in which, under contracts with municipalities, it privatizes water and/or
wastewater facilities, agrees to build new or substantially augment existing
facilities and agrees to operate and maintain the facilities under long term
contracts. Although in certain situations it would consider entering into
operational contracts for facilities in which it has no ownership or long
term leasehold interest, and presently has such contracts with three small
communities in New York State, the Energy Group generally does not believe
such contracts provide adequate returns.
The development of the privatization market for water and
wastewater projects in the United States has been hampered by certain legal
constraints, primarily restrictions imposed by federal tax regulations that
have historically limited the ability of municipalities to enter into long
term operating contracts with private entities for facilities financed with
tax exempt municipal
<PAGE>
24
bonds. In early 1997, the Internal Revenue Service significantly relaxed
these restrictions. It is expected that these changes should allow
municipalities to more easily privatize existing water and wastewater
systems. OYWC believes there are opportunities for projects in the United
States, especially in circumstances where substantial new construction is
required.
In countries other than the United States, the Energy Group is
seeking water and wastewater opportunities in which it will provide services
to municipalities in which it can own an equity interest in water facilities
under a concession that grants it the right to provide service to, and
collect revenues from, consumers. The Energy Group believes that the lack of
creditworthiness of non-U.S. municipalities, which may result from their
limited ability to raise revenues or from other causes, makes the collection
of tariffs from the consumer a more secure source of revenue.
Under contractual arrangements, OYWC may be required to warrant
certain levels of performance and may be subject to financial penalties or
termination if it fails to meet these warranties. The Company may be
required to guarantee the performance of OYWC. OYWC seeks not to take
responsibility for conditions that are beyond its control.
(a) WATER AND WASTEWATER PROJECTS. OYWC operates and maintains
wastewater treatment facilities for three small municipalities in New York
State. Such facilities cumulatively process approximately 11.8 million
gallons per day ("mgd"). In addition, OYWC operates and maintains the
municipal wastewater treatment facilities for several other small government
and privately owned concerns that cumulatively process less than 1 mgd. All
of the facilities are operated pursuant to short-term contracts.
(b) OTHER DEVELOPMENT EFFORTS. A subsidiary of OYWC entered into a
Water Facilities Services Agreement with The Governmental Utility Services
Corporation of the City of Bessemer, Alabama in February 1997. The Agreement
provides that OYWC will design, construct, operate and maintain a 25 mgd
potable water treatment facility and associated transmission and pumping
equipment, which will supply water to residents and businesses in Bessemer,
Alabama, a suburb of Birmingham. OYWC will be compensated on a fixed price
basis for design and construction of the facility, and will be paid a fixed
fee plus passthrough costs for delivering processed water to the City's water
distribution system. The obligations of OYWC under the Agreement will be
guaranteed by Ogden Energy Group. The parties' obligations under the
Agreement are subject to the satisfaction of certain conditions precedent,
including the issuance of bonds to fund the capital cost of the facility. The
parties are working together to cause the satisfaction of these conditions
precedent, and anticipate that the bonds will be issued and all other
conditions precedent under the Agreement will be satisfied in the second
quarter of 1998.
The Energy Group currently has no other commitments in its water
and wastewater backlog. A consortium of which it is a member has, however,
received a project award with respect to a 32 year concession serving a
population in excess of 700,000 in the City of Muscat, the capital of the
Sultanate of Oman. The project encompasses taking over the existing
wastewater and sewage facilities in Muscat, as well as the construction and
operation of new water and wastewater infrastructure. The infrastructure
capital program would be phased in
<PAGE>
25
over eight years, with the first phase projected to require approximately
$250 million in new construction. OYWC's role would be as operator on behalf
of a joint venture to be formed. The joint venture's arrangement with the
government would be on a Build/Own/Operate/Transfer basis, and some equity
capital, expected to be approximately $12 million, would be required of OYWC.
The implementation of the Muscat project remains subject to several
conditions precedent, many of which are beyond the control of OYWC.
ENVIRONMENTAL CONSULTING AND ENGINEERING
The Energy Group's environmental consulting services are provided
through Ogden Environmental and Energy Services Co., Inc. ("OEES") which
provides a comprehensive range of environmental, infrastructure and energy
consulting, engineering and design services to industrial and commercial
companies, electric utilities and governmental agencies. These services
include analysis and characterization, remedial investigations, engineering
and design, data management, project management, and regulatory assistance
which are provided to a variety of clients in the public and private sectors
in the United States and abroad. Principal clients include major Federal
agencies, particularly the Department of Defense and the Department of
Energy, as well as major corporations in the chemical, petroleum,
transportation, public utility and health care industries and Federal and
state regulatory authorities. United States Government contracts may be
terminated, in whole or in part, at the convenience of the government or for
cause. In the event of a convenience termination, the government is
obligated to pay the costs incurred under the contract plus a fee based upon
work completed.
Professional environmental engineering services, including program
management, environmental analysis, and restoration continues to be provided
by OEES to the United States Navy CLEAN Program (Comprehensive Long Term
Environmental Action Navy) pursuant to a 10-year contract awarded during
1991. Thus far OEES has provided these services at Navy bases in Hawaii,
Guam, Japan, Hong Kong, the Philippines, Australia and Korea.
OEES also continues to oversee the removal of storage tanks and
contaminated soil from Air Force bases across the United States and in U.S.
territories.
INTERNATIONAL BUSINESS DEVELOPMENT
The Energy Group develops projects in many countries, and in doing
so seeks to implement its strategy for the development of its business in
selected international markets where private development is encouraged. It
seeks to do so by focusing on a limited number of opportunities which can be
developed in conjunction with local and international partners. Offices have
been established in Hong Kong, Manila, Sao Paulo, and Taipei in order to
service foreign projects. Opportunities in foreign countries for the services
provided by the Energy Group are highly dependent upon the elimination of
historic legal and political barriers to the participation of foreign capital
and foreign companies in the financing, construction, ownership and operation
of infrastructure facilities. For example, in many countries, the
production, distribution and delivery of electricity has traditionally been
provided by governmental or quasi-governmental agencies. Although a number of
these countries have recently liberalized their laws and policies with regard
<PAGE>
26
to the participation of private interests and foreign capital in their
electric sectors, not all have done so, and not all that have done so may
afford acceptable opportunities for the Energy Group.
The development, construction, ownership and operation of
facilities in foreign countries also exposes the Company to several potential
risks that typically are not involved in such activities in the United States.
Many of the countries in which the Energy Group is or intends to be
active are lesser developed countries or developing countries. The financial
condition and creditworthiness of the potential purchasers of power and
services provided by the Energy Group (which may be a governmental or private
utility or industrial consumer) or of the suppliers of fuel for projects in
these countries may not be as strong as those of similar entities in
developed countries. The obligations of the purchaser under the power
purchase agreement, the service recipient under the related service agreement
and the supplier under the fuel supply agreement generally are not guaranteed
by any host country or other creditworthy governmental agency. Whenever such
governmental guarantees are not available, the Energy Group undertakes a
credit analysis of the proposed power purchaser or fuel supplier. It also
seeks to cause such parties to adequately secure the performance of their
obligations through contractual commitments and, where necessary, through the
provision by such entities of financial instruments such as letters of credit
or arrangements regarding the escrowing of the receivables of such parties in
the case of power purchasers.
The Energy Group's IPP and waste-to-energy projects in particular
are dependent on the reliable and predictable delivery of fuel meeting the
quantity and quality requirements of the project facilities. The Energy
Group will typically seek to negotiate long-term contracts for the supply of
fuel with creditworthy and reliable suppliers. However, the reliability of
fuel deliveries may be compromised by one or more of several factors that may
be more acute or may occur more frequently in developing countries than in
developed countries, including a lack of sufficient infrastructure to support
deliveries under all circumstances, bureaucratic delays in the import,
transportation and storage of fuel in the host country, customs and tariff
disputes and local or regional unrest or political instability. In most of
the projects in which the Energy Group participates internationally, it seeks
to shift the consequences of interruptions in the delivery of fuel, whether
due to the fault of the fuel supplier or due to reasons beyond the fuel
supplier's control, to the electricity purchaser or service recipient by
securing a suspension of its operating responsibilities under the applicable
agreements and an extension of its operating concession under such agreements
and/or, in some instances, by requiring the energy purchaser or service
recipient to continue to make payments in respect of fixed costs. In order to
mitigate the effect of short term interruptions in the supply of fuel, the
Energy Group endeavors to provide on-site storage of fuel in sufficient
quantities to address such interruptions.
Payment for services that the Energy Group provides will often be
made in whole or part in the domestic currencies of the host countries.
Conversion of such currencies into U.S. dollars generally is not assured by a
governmental or other creditworthy country agency, and may be subject to
limitations in the currency markets, as well as restrictions of the host
country. In addition, fluctuations in value of such currencies against the
value of the U.S. dollar may cause
<PAGE>
27
the Energy Group's participation in such projects to yield less return than
expected. Transfer of earnings and profits in any form beyond the borders of
the host country may be subject to special taxes or limitations imposed by
host country laws. The Energy Group seeks to participate in projects in
jurisdictions where limitations on the convertibility and expatriation of
currency have been lifted by the host country and where such local currency
is freely exchangeable on the international markets. In most cases,
components of project costs incurred or funded in the currency of the United
States are recovered without risk of currency fluctuation through negotiated
contractual adjustments to the price charged for electricity or service
provided. This contractual structure may cause the cost in local currency to
the project's power purchaser or service recipient to rise from time to time
in excess of local inflation, and consequently there is risk in such
situations that such power purchaser or service recipient will, at least in
the near term, be less able or willing to pay for the project's power or
service.
Due to the fact that many of the countries in which the Energy
Group is or intends to be active are lesser developed countries or developing
countries, the successful development of a project or projects may be
adversely impacted by macro-economic changes in the economic environment of
such countries or by changes in government support for such projects.
Adverse economic changes may, and have, resulted in initiatives (by local
governments alone or at the request of world financial institutions) to
reduce local commitments to pay long term obligations in US dollars or US
dollar equivalents. There is therefore risk that the Energy Group's
development efforts in such countries may from time to time be adversely
affected by such changes on a temporary or long-term basis.
In addition, the Energy Group will generally participate in
projects which provide services that are treated as a matter of national or
key economic importance by the laws and politics of many host countries.
There is therefore risk that the assets constituting the facilities of these
projects could be temporarily or permanently expropriated or nationalized by
a host country, or made subject to martial or exigent law or control.
The Energy Group will seek to manage and mitigate these risks
through all available means that it deems appropriate. They will include:
political and financial analysis of the host countries and the key
participants in each project; guarantees of relevant agreements with
creditworthy entities; political risk and other forms of insurance;
participation by international finance institutions, such as affiliates of
the World Bank, in financing of projects in which it participates; and joint
ventures with other companies to pursue the development, financing and
construction of these projects.
OTHER
During 1997 and early 1998 Ogden substantially completed the
disposition of its non-core businesses, principally through the sale of the
remaining Facility Services operations (New York Region) which provided
facility management, maintenance, janitorial and manufacturing support
services and the sale of the Charlotte, North Carolina, Binghamton, New York
and Cork, Ireland operations of Atlantic Design Company, Inc. Atlantic
Design continues to provide contract manufacturing at its remaining facility
located in Reynosa, Mexico near the
<PAGE>
28
boarder with McAllen, Texas which operations are supported by the
administrative officers located in Charlotte, North Carolina.
Applied Data Technology, Inc. ("ADTI"), located in San Diego,
California, is a leading supplier of air combat maneuvering instrumentation
systems and after-action reporting and display systems. ADTI's range systems
are installed at Navy and Air Force aircraft training ranges to facilitate
air-to-air combat exercises and monitor, record and graphically display the
exact maneuvers of the aircraft on the ranges and simulate the various
weapons systems aboard the aircraft. These range automated systems are used
by the U.S. Navy and Air Force to train pilots for combat conditions and by
the Department of Defense in training pilots to avoid "friendly fire"
incidents.
OTHER INFORMATION
MARKETS, COMPETITION AND GENERAL BUSINESS CONDITIONS
Ogden's Entertainment, Aviation and Energy segments businesses can
be adversely affected by general economic conditions, war, inflation, adverse
competitive conditions, governmental restrictions and controls, natural
disasters, energy shortages, weather, the adverse financial condition of
customers and suppliers, various technological changes and other factors over
which Ogden has no control.
Energy's Independent Power business faces a domestic market that is
expected to change substantially in the years ahead from a mature, highly
regulated and uncompetitive market for energy services to a less regulated
and more competitive market as utilities restructure for deregulation and
termination of their traditional monopolies. The international market for
energy services is characterized by a large demand and much competition for
projects within a relatively immature market framework.
The domestic market for Energy's waste-to-energy services has
largely matured and is now heavily regulated. New opportunities for domestic
projects are expected to be scarce for the foreseeable future. Foreign
demand for waste to energy projects is also expected to exist only in unique
circumstances where other disposal options are unavailable or unusually
costly. This reflects a number of factors that adversely affected
communities' willingness to make long-term capital commitments to waste
disposal projects, including: declining prices at which energy can be sold;
declining alternative disposal costs; uncertainties about the impact of
recycling on the waste stream; and continuing concerns arising from the Clean
Air Act Amendments of 1990. Another factor adversely affecting the demand for
new waste-to-energy projects was a 1994 United States Supreme Court decision
invalidating state and local laws and regulations mandating that waste
generated within a given jurisdiction be taken to a designated facility. See
"Flow Control". Notwithstanding the decline in opportunities for new
waste-to-energy facilities, OWTE believes there may be opportunities at
existing facilities for expansion. Many of these factors also impact, to
varying degrees, the competitiveness of the pricing established by Client
Communities at OWTE's operating projects. For example, in most of the
markets that OWTE currently serves, the cost of waste-to-energy services is
competitive with the cost of other disposal alternatives, mainly landfilling.
However, much of the landfilling done in the United States is done on a spot
<PAGE>
29
market or through short-term contracts (less than 5 years), and the resulting
price volatility means that market prices may at times be lower than prices
at waste-to-energy facilities, which, like OWTE's, are typically based on
long-term contracts and pricing. In addition, the cost competitiveness of
operating waste-to-energy facilities also depends on the prices at which the
facility can sell the energy it generates, and the additional charges that
some Client Communities add to their fee structures.
The Energy group's water and wastewater business faces an immature but
developing domestic market for private water and wastewater services, and,
like energy, a large foreign demand within an immature marketplace.
Competition for business is intense in all the domestic and foreign
markets in which Ogden conducts or intends to conduct its businesses and its
businesses are subject to a variety of competitiveness and market influences
which are different for each of its three principal businesses. The economic
climate can adversely affect several of Ogden's operations, including, but
not limited to, domestic and foreign government regulations, fewer airline
flights, reduced in-flight meals and flight cancellations in the Aviation
group and reduced event attendance in its Entertainment group. In addition,
disputes between owners of professional sports organizations and the
professional players of such organizations have affected and may continue to
affect the operations of the Entertainment group. Ogden's Entertainment,
Aviation and Energy groups expend substantial amounts for the development of
new businesses, some of which expenditures are capitalized. The financial
support required to undertake some of these activities comes from Ogden.
Beyond staffing costs, expenditures can include the costs of contract and
site acquisition, feasibility and environmental studies, technical and
financial analysis, and in some cases the preparation of extensive proposals
in response to public or private requests for proposals. Development of some
projects by the Entertainment, Aviation and Energy groups involves
substantial risks which are not within their control. Success of a project
may depend upon obtaining in a timely manner acceptable contractual
arrangements and financing, appropriate sites, acceptable licenses,
environmental permits and governmental approvals. Even after the required
contractual arrangements are achieved, implementation of the project often is
subject to substantial conditions that may be outside the control of the
group. If development opportunities in which Ogden's businesses are involved
are no longer viewed as viable, any capitalized costs are written off as an
expense. In some, but not all, circumstances, the applicable Entertainment,
Aviation or Energy group will make contractual arrangements for the partial
recovery of development costs if the project fails to be implemented for
reasons beyond its control.
EQUAL EMPLOYMENT OPPORTUNITY
In recent years, governmental agencies (including the Equal
Employment Opportunity Commission) and representatives of minority groups and
women have asserted claims against many companies, including some Ogden
subsidiaries, alleging that certain persons have been discriminated against
in employment, promotions, training, or other matters. Frequently, private
actions are brought as class actions, thereby increasing the practical
exposure. In some instances, these actions are brought by many plaintiffs
against groups of defendants in the same industry, thereby increasing the
risk that any defendant may incur liability as a result of activities which
are the primary responsibility of other defendants. Although Ogden and its
<PAGE>
30
subsidiaries have attempted to provide equal opportunity for all of its
employees, the combination of the foregoing factors and others increases the
risk of financial exposure.
EMPLOYEE AND LABOR RELATIONS
As of March 1, 1997, Ogden and its subsidiaries had approximately
28,400 U.S. and foreign employees.
Certain employees of Ogden are employed pursuant to collective
bargaining agreements with various unions. During 1997 Ogden successfully
renegotiated collective bargaining agreements in certain of its business
sectors with no strike-related loss of service. Ogden considers relations
with its employees to be good and does not anticipate any significant labor
disputes in 1998.
ENVIRONMENTAL REGULATORY LAWS
(a) DOMESTIC. Ogden's business activities in the United States
are pervasively regulated pursuant to Federal, state and local environmental
laws. Federal laws, such as the Clean Air Act and Clean Water Act, and their
state counterparts, govern discharges of pollutants to air and water. Other
federal, state, and local laws, comprehensively govern the generation,
transportation, storage, treatment, and disposal of solid waste, and also
regulate the storage and handling of petroleum products, including hazardous
waste (such laws and the regulations thereunder, "Environmental Regulatory
Laws").
The Environmental Regulatory Laws and other federal, state, and
local laws, such as the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") (collectively, "Environmental Remediation Laws"),
make Ogden potentially liable on a joint and several basis for any
environmental contamination which may be associated with the Aviation group's
activities (including fueling) and the activities at sites, including
landfills, which the Energy Group's subsidiaries have owned, operated, or
leased or at which there has been disposal of residue or other waste handled
or processed by such subsidiaries or at which there has been disposal of
waste generated by the Aviation groups activities. Through its subsidiaries,
the Energy Group leases and operates a landfill in Haverhill, Massachusetts,
and leases a landfill in Bristol, Connecticut, in connection with its
projects at those locations. Some state and local laws also impose
liabilities for injury to persons or property caused by site contamination.
Some Service Agreements provide for indemnification of the operating
subsidiaries from some such liabilities.
<PAGE>
31
The Environmental Regulatory Laws require that many permits be
obtained before the commencement of construction and operation of
waste-to-energy, independent power and water and wastewater projects. There
can be no assurance that all required permits will be issued, and the process
of obtaining such permits can often cause lengthy delays, including delays
caused by third-party appeals challenging permit issuance. Failure to meet
conditions of these permits or of the Environmental Regulatory Laws and the
corresponding regulations can subject an Operating Subsidiary to regulatory
enforcement actions by the appropriate governmental unit, which could include
monetary penalties, and orders requiring certain remedial actions or limiting
or prohibiting operation. Ogden's Aviation groups fueling activities also
must comply with various regulatory and permitting requirements and can be
subject to regulatory enforcement actions. To date, Ogden has not incurred
material penalties, been required to incur material capital costs or
additional expenses, nor been subjected to material restrictions on its
operations as a result of violations of environmental laws, regulations, or
permits.
The Environmental Regulatory Laws and Federal and state
governmental regulations and policies governing their enforcement are subject
to revision. New technology may be required or stricter standards may be
established for the control of discharges of air or water pollutants for
storage and handling of petroleum products or for solid or hazardous waste or
ash handling and disposal. Thus as new technology is developed and proven,
it may be required to be incorporated into new facilities or major
modifications to existing facilities. This new technology may often be more
expensive than that used previously.
The Clean Air Act Amendments of 1990 required EPA to promulgate New
Source Performance Standards ("NSPS") and Emission Guidelines ("EG")
applicable to new and existing municipal waste combustion units for
particulate matter (total and fine), opacity, sulfur dioxide, hydrogen
chloride, oxides of nitrogen, carbon monoxide, dioxins and dibenzofurans.
The NSPS and EG, which were issued in final form in 1995, will
require capital improvements or operating changes to most of the
waste-to-energy facilities operated by OWTE to control emissions of nitrogen
oxides, organics, mercury and acid gases. The timing and cost of the
modifications required at OWTE facilities will depend on the provisions of
implementing regulations that states must adopt and EPA approve. The
deadline for states to submit their implementing regulations was December 19,
1996. On December 6, 1996, however, the Court of Appeals for the D.C.
Circuit vacated the NSPS and EG in its decision in DAVIS COUNTY SOLID WASTE
MANAGEMENT AND ENERGY RECOVERY SPECIAL SERVICES DISTRICT V. USEPA. Most
states suspended preparation of their implementation plans as a result.
Following a petition for reconsideration, on April 8, 1997 the Court vacated
the NSPS and EG only as they apply to individual combustion units of less
than 250 ton per day capacity. OWTE operates only one facility with units of
this size. The NSPS and EG applicable to units greater than or equal to 250
tons per day was remanded to EPA with the direction that EPA review and
modify any emission limits that were inconsistent with the Court's decisions.
EPA issued a final rule that took effect on October 24, 1997 which slightly
revised the emission limits for NOX, SO2, HCl, and lead, tightening all but
the NOX limit. While the compliance deadline for the 1995 NSPS and EG
remains as December 19, 2000, the deadline for these four revised limits is
August 26, 2002.
<PAGE>
32
States have now resumed submitting their plans for both the original and
revised NSPS and EG limits. While there is technically about 21 additional
months in which to achieve compliance with the revised emission limits, as a
practical matter the capital and operating changes necessary to meet them is
very nearly identical to that needed to achieve the prior NSPS and EG limits.
OWTE anticipates that projects to install all new equipment needed to
achieve the applicable new limits under the NSPS and EG will be undertaken
in a single effort, to be completed by December 19, 2000.
The costs to meet new rules for existing facilities owned by Client
Communities generally will be borne by the Client Communities. For projects
owned or leased by Ogden and operated under a Service Agreement, the Client
Community has the obligation to fund such capital improvements, to which
Ogden may be required to make an equity contribution. In certain cases,
Ogden is required to fund the full cost of these capital improvements at
those facilities that are either not operated pursuant to a Service Agreement
or whose Service Agreement does not require the costs to be borne by the
Client Community. The Company estimates that its commitments for these
capital improvements will total approximately $40 million between 1998 and
2000. Only moderate additional costs are likely to be incurred between 2000
and 2002. OWTE believes that most costs incurred to meet EG and operating
permit requirements at facilities it operates may be recovered from Client
Communities and other users of its facilities through increased service fees
permitted under applicable contracts. Such increased service fees will be
paid for either out of their general revenues or by increasing fees charged
to facility users by the Client Community. Because of the reluctance or
inability of some municipalities to increase taxes, or tipping fees if the
market may not bear the increase without some loss of waste deliveries,
Client Communities may seek to have OWTE subsidize the cost, or modify its
contractual relationship.
Domestic drinking water facilities developed in the future by OYWC
will be subject to regulation of water quality by the EPA under the Federal
Safe Drinking Water Act and by similar state laws. Domestic wastewater
facilities are subject to regulation under the Federal Clean Water Act and by
similar state laws. These laws provide for the establishment of uniform
minimum national water quality standards, as well as governmental authority
to specify the type of treatment processes to be used for public drinking
water. Under the Federal Clean Water Act, OYWC may be required to obtain and
comply with National Pollutant Discharge Elimination System permits for
discharges from its treatment stations. Generally, under its current
contracts, the client community is responsible for fines and penalties
resulting from the delivery to OYWC's treatment facilities of water not
meeting standards set forth in those contracts.
The Environmental Remediation Laws prohibit disposal of hazardous
waste other than in small, household-generated quantities at OWTE's municipal
solid waste facilities. The Service Agreements recognize the potential for
improper deliveries of hazardous wastes and specify procedures for dealing
with hazardous waste that is delivered to a facility. Although certain
Service Agreements require the Operating Subsidiary to be responsible for
some costs related to hazardous waste deliveries, to date, no Operating
Subsidiary has incurred material hazardous waste disposal costs.
<PAGE>
33
(b) INTERNATIONAL. Among the Energy Group's objectives is
providing energy generating and other infrastructure through environmentally
protective project designs, regardless of the location of a particular
project. This approach is consistent with the increasingly stringent
environmental requirements of multilateral financing institutions, such as
the World Bank, and also with the Energy Group's experience in domestic
waste-to-energy projects, where environmentally protective facility design
and performance has been required. The laws of other countries also may
require regulation of emissions into the environment, and provide
governmental entities with the authority to impose sanctions for violations,
although these requirements are generally not as rigorous as those applicable
in the United States. Compliance with environmental standards comparable to
those of the United States may be conditions to the provision of credit by
multilateral banking agencies as well as other lenders or credit providers.
As with domestic project development, there can be no assurance that all
required permits will be issued, and the process can often cause lengthy
delays.
ENERGY AND WATER REGULATIONS
OWTE and OEI's domestic businesses are subject to the provisions of
federal, state and local energy laws applicable to their development,
ownership and operation of their domestic facilities, and to similar laws
applicable to their foreign operations. Federal laws and regulations govern
transactions with utilities, the types of fuel used and the power plant
ownership. State regulatory regimes govern rate approval and other terms
under which utilities purchase electricity from independent producers, except
to the extent such regulation is pre-empted by federal law.
Pursuant to Federal Public Utility Regulatory Policies Act
("PURPA"), the Federal Energy Regulatory Commission ("FERC") has promulgated
regulations that exempt qualifying facilities (facilities meeting certain
size, fuel and ownership requirements, or "QFs") from compliance with certain
provisions of the Federal Power Act ("FPA"), the Public Utility Holding
Company Act of 1935 ("PUHCA"), and, except under certain limited
circumstances, state laws regulating the rates charged by, or the financial
and organizational activities of, electric utilities. PURPA was enacted in
1978 to encourage the development of cogeneration facilities and small
facilities making use of non-fossil fuel power sources, including
waste-to-energy facilities. The exemptions afforded by PURPA to qualifying
facilities from the FPA and PUHCA and most aspects of state electric utility
regulation are of great importance to the Energy Group and its competitors in
the waste-to-energy and independent power industries.
State public utility commissions must approve the rates, and in
some instances other contract terms, by which public utilities purchase
electric power from the Group's projects. PURPA requires that electric
utilities purchase electric energy produced by QFs' at negotiated rates or at
a price equal to the incremental or "avoided" cost that would have been
incurred by the utility if it were to generate the power itself or purchase
it from another source. PURPA does not require public utilities to enter
into long-term contracts.
<PAGE>
34
Under PUHCA, any entity owning or controlling ten percent or more
of the voting securities of a "public utility company" or company which is a
"holding company" of a public utility company is subject to registration with
the Securities and Exchange Commission (the "SEC") and regulation by the SEC
unless exempt from registration. Under PURPA, most projects that satisfy the
definition of a "qualifying facility" are exempt from regulation under PUHCA.
Under the Energy Policy Act of 1992, projects that are not QFs under PURPA
but satisfy the definition of an "exempt wholesale generator" ("EWG") are not
public utility companies under PUHCA. Finally, projects that satisfy the
definition of "foreign utility companies" are exempt from regulation under
PUHCA. The Energy Group believes that all of its projects involved in the
generation, transmission and/or distribution of electricity, both
domestically and internationally, will qualify for an exemption from PUHCA
and that it will not be required to register with the SEC.
In the past there has been consideration in the U.S. Congress of
legislation to repeal PURPA entirely, or at least to repeal the obligation of
utilities to purchase power from QFs. It is likely that similar legislation
will be introduced in the current Congress. There is strong support for
grandfathering existing QF contracts if such legislation is passed, and also
support for requiring utilities to conduct competitive bidding for new
electric generation if the PURPA purchase obligation is eliminated. Various
bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both
independents and vertically integrated utilities to acquire retail utilities
in the United States that are geographically widespread, as opposed to the
current limitations of PUHCA which require that retail electric systems be
capable of physical integration. Also, registered holding companies would be
free to acquire non-utility businesses, which they may not do now, with
certain limited exceptions. With the repeal of PURPA or PUHCA, competition
for independent power generators from vertically integrated utilities would
likely increase.
In addition, the FERC, many state public utility commissions and
Congress are currently studying a number of proposals to restructure the
electric utility industry in the United States to permit utility customers to
choose their utility supplier in a competitive electric energy market. The
FERC has issued a series of orders requiring utilities to offer wholesale
customers and suppliers open access on their transmission lines on a
comparable basis to the utilities' own use of the line. All public utilities
have already filed "open access" tariffs to implement this requirement. The
utilities contend that they should recover from departing customers their
fixed costs that will be "stranded" by the ability of their wholesale
customers (and perhaps eventually, their retail customers) to choose new
electric power suppliers. These include the costs utilities are required to
pay under many QF contracts which the utilities view as excessive when
compared with current market prices. Many utilities are therefore seeking
ways to lower these contract prices, or rescind or buy out these contracts
altogether, out of concern that their shareholders will be required to bear
all or part of such "stranded" costs. Regulatory agencies to date have
recognized the continuing validity of approved power purchase agreements.
At the same time, regulatory agencies have encouraged renegotiation of power
contracts where rate payer savings can be achieved as a result. Future U.S.
electric rates may be deregulated in a restructured U.S. electric utility
industry and increased competition may result in lower rates and less profit
for U.S.
<PAGE>
35
electricity sellers developing new projects. Falling electricity prices and
uncertainty as to the future structure of the industry can be expected to
inhibit United States utilities from entering into long-term power purchase
contracts. On the other hand, deregulation could open up markets for the
sale of electricity previously available only to regulated utilities.
The Energy Group presently has, and intends to continue to acquire,
ownership and operating interests in projects outside the United States.
Most countries have expansive systems for the regulation of the power
business. These generally include provisions relating to ownership,
licensing, rate setting and financing of generating and transmission
facilities.
OYWC's business may be subject to the provisions of state, local
and, in the case of foreign operations, national utility laws applicable to
the development, ownership and operation of water supply and wastewater
facilities. Whether such laws apply depends upon the local regulatory scheme
as well as the manner in which OYWC provides its services. Where such
regulations apply, they may relate to rates charged, services provided,
accounting procedures, acquisitions and other matters. In the United States,
rate regulations have typically been structured to provide a predetermined
return on the regulated entities investments. In other jurisdictions, the
trend is towards periodic price reviews comparing rates to anticipated
capital and operating revenues. The regulated entity benefits from
efficiencies achieved during the period for which the rate is set.
FLOW CONTROL
Many states provide for local and regional solid waste planning and
require that new solid waste facilities may be constructed only in conformity
with these plans. Certain of these laws, sometimes referred to as legal flow
control, authorize state agencies to require delivery of waste generated
within their jurisdiction to designated facilities. In 1994, the United
States Supreme Court held that such laws were constitutionally invalid.
Federal legislation proposed to authorize flow control has not been adopted
to date.
The rates OWTE charges its Client Communities are generally
competitive with other disposal options. Some Client Communities have
experienced erosion of waste deliveries, but overall 1997 deliveries to OWTE
facilities generally were consistent with 1996 levels, and higher than 1995
levels. Under most Service Agreements, the Client Community bears the
economic impact of waste delivery shortfalls. Client Communities are now
evaluating options to attract additional waste to facilities. Certain of
these options have been tested in the federal courts and sustained.
During 1997, New Jersey's system of flow control, which had been
tested in the Federal courts since 1994, was finally ruled unconstitutional.
This ruling, which was expected, has adversely affected the ability of OWTE's
two New Jersey Client Communities (public authorities for Union County and
Warren County) to continue to attract sufficient waste flows at the prices
previously charged, which were among the highest in the nation. OWTE and
these Client Communities have since worked cooperatively to adjust pricing in
order to avoid
<PAGE>
36
interruptions in waste flow to each Facility, while at the same time
negotiating a comprehensive restructuring of the Service Agreements in order
to provide a mutually acceptable long term solution. Any such solution is
likely to involve two key features: the dedication of public funds to pay for
significant portions of project debt; and the acceptance by OWTE of
additional risk with respect to securing cash flows (either from tipping fees
or energy revenues) to each Facility. As these negotiations are proceeding,
state legislation has been introduced that would create a source of funding
for payment of project debt service. There can be no assurance, however,
that an acceptable contractual and legislative resolution will be achieved.
If such a resolution cannot be achieved, these Client Communities may be
forced to default on their obligations, including obligations to bondholders,
in which case a restructuring would need to be addressed between the OWTE and
each project's lenders and credit enhancement providers. The State of New
Jersey has publicly stated that it will not allow a bond default to occur.
Although it is likely that the Supreme Court's decision has
adversely affected the market for new waste-to-energy facilities, other
factors are believed by Ogden to be more significant for low projected market
activity. SEE OTHER INFORMATION: Markets, Competition, and General Business
Conditions.
ASH RESIDUE
In 1994, the United States Supreme Court held that municipal solid
waste ash residue demonstrated by testing to possess hazardous
characteristics is subject to Resource Conservation and Recovery Act's
provisions for management as a hazardous waste relating to transportation,
disposal and treatment downstream of the point of generation. The Supreme
Court's ruling has not had a significant impact on OWTE's business.
<PAGE>
37
Item 2. PROPERTIES
Ogden's executive offices are located at Two Pennsylvania Plaza,
New York, New York 10121, pursuant to a lease that expires on April 30, 2008,
subject to an option by Ogden to renew the lease for an additional five
years. Ogden Services Corporation also owns a 12,000 square-foot warehouse
and office facility located in Long Island City, New York.
(a) Entertainment and Aviation
The Entertainment and Aviation groups own and lease buildings in
various areas in the United States and several foreign countries which house
office and warehousing operations. The leases range from a month-to-month
term to as long as five years.
Entertainment operates Fairmount Park racetrack pursuant to a
long-term lease which expires in 2017. Fairmount Park conducts thoroughbred
and harness racing on a 150-acre site located in Collinsville, Illinois,
eight miles from downtown St. Louis. Entertainment also (i)owns a 148-acre
site located at East St. Louis, Illinois; (ii) owns and operates Grizzly
Park, a nature-based entertainment facility located on approximately 25-acres
near Yellowstone National Park in West Yellowstone, Montana; and pursuant to
a lease agreement with the State of Florida, which expires in 2008 has a
leasehold interest in Silver Springs (a 250-acre nature-based park) and Wild
Waters (a 6-acre park) featuring a variety of water slides and events,
located near Ocala, Florida.
Entertainment operates Fairmount Park racetrack pursuant to a long
term lease which expires in 2017. Fairmount Park conducts thoroughbred and
harness racing on a 150 acre site located in Collinsville, Illinois, eight
miles from downtown St. Louis. Entertainment also owns a 148 acre site
located at East St. Louis, Illinois.
Entertainment also owns and operates Grizzly Park, a nature-based
entertainment facility located on approximately 25 acres near Yellowstone
National Park in West Yellowstone, Montana. Pursuant to a lease agreement
with the State of Florida, which expires in 2008, Entertainment also has a
leasehold interest in Silver Springs, a 250-acre nature based park, and Wild
Waters, a 6-acre park featuring a variety of water slides and events. Both
parks are located near Ocala, Florida.
The Aviation group's fueling business leases fueling installations
located at various airports in the United States and Canada. The Aviation
group's in-flight food service operation facilities, aggregating
approximately 600,000 square feet, are leased, except at Newark which is
owned.
<PAGE>
38
(b) Energy
The principal executive offices of Ogden Energy Group, Inc. are
located in Fairfield, New Jersey, in an office building located on a 5.4 acre
site owned by Ogden Projects, Inc. It also leases approximately 47,000
square feet of office space in Fairfax, Virginia.
The following table summarizes certain information relating to the
locations of the properties owned or leased by Ogden Energy Group, Inc. or
its subsidiaries as of March 1, 1998.
<TABLE>
<CAPTION>
APPROXIMATE
SITE SIZE
LOCATION IN ACRES SITE USE NATURE OF INTEREST(1)
- -------- ----------- -------- ---------------------
<S> <C> <C> <C>
1. Fairfield, New Jersey 5.4 Office space Own
2. Marion County, Oregon 15.2 Waste-to-energy facility Own
3. Alexandria/Arlington,
Virginia 3.3 Waste-to-energy facility Lease
4. Bristol, Connecticut 18.2 Waste-to-energy facility Own
5. Bristol, Connecticut 35.0 Landfill Lease
6. Indianapolis, Indiana 23.5 Waste-to-energy facility Lease
7. Stanislaus County, California 16.5 Waste-to-energy facility Lease
8, Babylon, New York 9.5 Waste-to-energy facility Lease
9. Haverhill, Massachusetts 12.7 Waste-to-energy facility Lease
10. Haverhill, Massachusetts 16.8 RDF processing facility Lease
11. Haverhill, Massachusetts 20.2 Landfill Lease
12. Lawrence, Massachusetts 11.8 RDF power plant Own
13. Lake County, Florida 15.0 Waste-to-energy facility Own
14. Wallingford, Connecticut 10.3 Waste-to-energy facility Lease
15. Fairfax County, Virginia 22.9 Waste-to-energy facility Lease
16. Montgomery County, 35.0 Waste-to-energy facility Lease
Maryland
17. Huntington, New York 13.0 Waste-to-energy facility Lease
18. Warren County, New Jersey 19.8 Waste-to-energy facility Lease
</TABLE>
<PAGE>
39
<TABLE>
<CAPTION>
APPROXIMATE
SITE SIZE
LOCATION IN ACRES SITE USE NATURE OF INTEREST(1)
- -------- ----------- -------- ---------------------
<S> <C> <C> <C>
19. Hennepin County, Minnesota 14.6 Waste-to-energy facility Lease
20. Tulsa, Oklahoma 22.0 Waste-to-energy facility Lease
21. Onondaga County, New York 12.0 Waste-to-energy facility Lease
22. New Martinsville, W. VA N/A Hydroelectric Power Generating Lease
23. Heber, California N/A Geothermal Power Plant Lease
24. Heber, California N/A Geothermal Power Plant Lease
25. Bataan, Philippines 3,049 sq. meters Diesel Power Plant Lease
26. Zhejiang Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China
China Joint Venture Partner
Upon termination of
Joint Venture
Agreement.
27. Shandong Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China Joint
China Venture Partner upon
termination of Joint
Venture Agreement.
28. Jiangsu Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China Joint
China Venture Partner upon
termination of Joint
Venture Agreement
29. Jiangsu Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China Joint
China Venture Partner upon
termination of Joint Venture
Agreement
30. Casa Diablo Hot Springs, 1510 Geothermal Projects Land Use Rights from
California Geothermal Resource
Lease
31. Rockville, Maryland N/A Landfill Gas Project Lease
32. San Diego, California N/A Landfill Gas Project Lease
</TABLE>
<PAGE>
40
<TABLE>
<CAPTION>
APPROXIMATE
SITE SIZE
LOCATION IN ACRES SITE USE NATURE OF INTEREST(1)
- -------- ----------- -------- ---------------------
<S> <C> <C> <C>
33. Oxnard, California N/A Landfill Gas Project Lease
34. Sun Valley, California N/A Landfill Gas Project Lease
35. Salinas, California N/A Landfill Gas Project Lease
36. Santa Clara, California N/A Landfill Gas Project Lease
37. Stockton, California N/A Landfill Gas Project Lease
38. Los Angeles, California N/A Landfill Gas Project Lease
39. Burney, California 40 Wood Waste Project Lease
40. Jamestown, California 26 Wood Waste Project Own (50%)
41. Westwood, California 60 Wood Waste Project Own
42. Oroville, California 43 Wood Waste Project Lease
43. Penobscot County, Maine N/A Hydroelectric Project Own (50%)
44. Whatcom County, Washington N/A Hydroelectric Project Own (50%)
45. Weeks Falls, Washington N/A Hydroelectric Project Lease
</TABLE>
_______________________
(1) All ownership or leasehold interests are subject to material liens in
connection with the financing of the related project, except those listed
above under items 1, 26-29, and 31-42. In addition, all leasehold
interests extend at least as long as the term of applicable project
contracts, and several of the leasehold interests are subject to renewal
and/or purchase options.
<PAGE>
41
ITEM 3. LEGAL PROCEEDINGS
The Company has various legal proceedings involving matters arising
in the ordinary course of business. The Company does not believe that there
are any pending legal proceedings other than ordinary routine litigation
incidental to its business to which the Company or any of its subsidiaries is
a party or to which any of their property is subject, the outcome of which
would have a material adverse effect on the Company's consolidated financial
statements.
The Company conducts regular inquiries of its subsidiaries
regarding litigation and environmental violations which include determining
the nature, amount and likelihood of liability for any such claims, potential
claims or threatened litigation.
In the ordinary course of its business, the Company may become
involved in Federal, state, and local proceedings relating to the laws
regulating the discharge of materials into the environment and the protection
of the environment. These include proceedings for the issuance, amendment, or
renewal of the licenses and permits pursuant to which a Company subsidiary
operates. Such proceedings also include actions brought by individuals or
local governmental authorities seeking to overrule governmental decisions on
matters relating to the subsidiaries' operations in which the subsidiary may
be, but is not necessarily, a party. Most proceedings brought against the
Company by governmental authorities or private parties under these laws
relate to alleged technical violations of regulations, licenses, or permits
pursuant to which a subsidiary operates. The Company believes that such
proceedings will not have a material adverse effect on the Company's
consolidated financial statements.
The Company's operations are subject to various Federal, state and
local environmental laws and regulations, including the Clean Air Act, the
Clean Water Act, the Comprehensive Environmental Response Compensation and
Liability Act (CERCLA) and Resource Conservation and Recovery Act (RCRA).
Although the Company operations are occasionally subject to proceedings and
orders pertaining to emissions into the environment and other environmental
violations, the Company believes that it is in substantial compliance with
existing environmental laws and regulations.
In connection with certain previously divested operations, the
Company may be identified, along with other entities, as being among
potentially responsible parties responsible for contribution for costs
associated with the correction and remediation of environmental conditions at
various hazardous waste disposal sites subject to CERCLA. In certain
instances the Company may be exposed to joint and several liability for
remedial action or damages. The Company's ultimate liability in connection
with such environmental claims will depend on many factors, including its
volumetric share of waste, the total cost of remediation, the financial
viability of other companies that also sent waste to a given site and its
contractual arrangement with the purchaser of such operations.
<PAGE>
42
The potential costs related to all of the foregoing matters and the
possible impact on future operations are uncertain due in part to the
complexity of government 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 the
Company's responsibility. Although the ultimate outcome and expense of
environmental remediation is uncertain, the Company believes that currently
required remediation and continuing compliance with environmental laws will
not have a material adverse effect on the Company's consolidated financial
statements.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of
Ogden during the fourth quarter of 1997.
EXECUTIVE OFFICERS OF OGDEN
Set forth below are the names, ages, position and office held and
year appointed, of all "executive officers" (as defined by Rule 3b-7 of the
Securities Exchange Act of 1934) of Ogden as of March 1, 1998:
CONTINUALLY
AN OGDEN
POSITION AND EXECUTIVE
NAME OFFICE HELD AGE AS OF 3/1/98 OFFICER SINCE
---- ----------- ---------------- -------------
R. Richard Ablon Chairman of the 48 1987
Board, President &
Chief Executive
Officer
Scott G. Mackin Executive Vice 41 1992
President
Jesus Sainz Executive Vice 54 1998
President
Philip G. Husby Senior Vice 51 1991
President and Chief
Financial Officer
Lynde H. Coit Senior Vice 43 1991
President and
General Counsel
<PAGE>
43
CONTINUALLY
AN OGDEN
POSITION AND EXECUTIVE
NAME OFFICE HELD AGE AS OF 3/1/98 OFFICER SINCE
---- ----------- ---------------- -------------
Rodrigo Arboleda Senior Vice 57 1995
President, Business
Development, Latin
America
David L. Hahn Senior Vice 46 1995
President, Aviation
Quintin G. Marshall Senior Vice 36 1995
President, Corporate
Development
Gary D. Perusse Senior Vice 49 1996
President, Risk
Management
Peter Allen Senior Vice 61 1998
President
Bruce W. Stone Executive Vice 50 1997
President for Waste-
to-Energy Operations
and Managing
Director-Ogden
Energy Group, Inc.
B. Kent Burton Vice President, 46 1997
Policy and
Communications
Peter Cain Vice President, 40 1997
Finance and
Treasurer
<PAGE>
44
CONTINUALLY
AN OGDEN
POSITION AND EXECUTIVE
NAME OFFICE HELD AGE AS OF 3/1/98 OFFICER SINCE
---- ----------- ---------------- -------------
Robert M. DiGia Vice President, 73 1965
Controller and Chief
Accounting Officer
Kathleen Ritch Vice President and 55 1981
Secretary
There is no family relationship by blood, marriage or adoption (not more
remote than first cousins) between any of the above individuals and any
Ogden director, except that R. Richard Ablon, an Ogden director and
Chairman of the Board, President and Chief Executive Officer, is the son
of Ralph E. Ablon, an Ogden director.
The term of office of all officers shall be until the next election of
directors and until their respective successors are chosen and qualified.
There are no arrangements or understandings between any of the above
officers and any other person pursuant to which any of the above was
selected as an officer.
The following briefly describes the business experience, the principal
occupation and employment of the foregoing Executive Officers during the
past five years:
R. Richard Ablon has been President and Chief Executive Officer of Ogden
since May 1990 and Chairman of the Board since May, 1996.
Scott G. Mackin, considered an Executive Officer of Ogden since 1992, was
elected Executive Vice President of Ogden in 1997. He has been President
and Chief Operating Officer of Ogden Energy Group, Inc., since January
1991.
Jesus Sainz served as an Ogden director from 1994 until his resignation on
January 1, 1998. On January 15, 1998 he was elected Executive Vice
President of Ogden. Mr. Sainz also serves as Executive Vice Chairman of
Trebol International, S.A., a private Spanish company which he created in
1984 which holds interests in companies operating in such fields as foreign
trade, fast food, real estate, etc.
Philip G. Husby has been Senior Vice President and Chief Financial Officer
of Ogden for more than the past five years.
<PAGE>
45
Lynde H. Coit has been a Senior Vice President and General Counsel of Ogden
more than the past five years.
Rodrigo Arboleda was elected Senior Vice President of Ogden in January
1995. Since 1992, he has served as Senior Vice President-Business
Development for Latin America of Ogden Services Corporation.
David L. Hahn was elected Senior Vice President, Aviation of Ogden in
January 1995 and is currently Chief Operating Officer of Ogden's
Aviation group. He previously served as Vice President-Marketing of
Ogden Services Corporation for more than the past five years.
Quintin G. Marshall was elected Senior Vice President - Corporate
Development of Ogden on January 16, 1997. From October 1995 to January
1997 he served as Ogden's Vice President - Investor Relations. From May
1993 to October 1995 he served as Managing Director of CDA Investment
Technologies, a division of Thomson Financial. From July 1992 to May 1993
he served as Senior Vice President at Gavin Andersen & Company, an investor
relations consulting firm. From September 1986 to March 1992 he served
first as Managing Director and then Co-Chief Operations Officer of
Georgeson & Company, a proxy solicitation and consulting company.
Gary D. Perusse was elected Senior Vice President - Risk Management in
September, 1996. Prior thereto he had served as Director - Risk Management
of Ogden for more than the past five years.
Peter Allen has served as Senior Vice President and General Counsel of
Ogden Services Corporation for more than the past five years. He was
elected a Senior Vice President of Ogden in January 1998.
Bruce W. Stone was designated an Executive Officer of Ogden in 1997. Mr.
Stone served as Co-President and Chief Operating Officer of Ogden Projects,
Inc. and the Energy Group between October 5, 1990 and January 29, 1991 he
currently serves as Executive Vice President and Managing Director of Ogden
Energy Group, Inc., a position he has held since January 29, 1991.
B. Kent Burton has served as Senior Vice President of the Ogden Energy
Group, Inc. since January 16, 1997 in Political Affairs and lobbying
activities and was elected Vice President - Policy and Communications of
Ogden in May 1997.
Peter Cain has served in various financial capacities as a senior officer
of many of Ogden's major subsidiaries for more than ten (10) years. He
served as Ogden's Vice President of Finance since 1997 and was appointed
Ogden's Treasurer in 1998.
<PAGE>
46
Robert M. DiGia has been Vice President, Controller and Chief Accounting
Officer of Ogden for more than the past five years.
Kathleen Ritch has been Vice President and Secretary of Ogden for more than
the past five years.
PART II
ITEM 5. MARKET FOR OGDEN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal U.S. market for Ogden's common stock and $1.875
cumulative convertible preferred stock is the New York Stock Exchange, Inc. (the
"NYSE"). As of March 1, 1998, the approximate number of record holders of Ogden
common stock was 7,345. Pursuant to General Instruction G (2), the information
called for by this item is hereby incorporated by reference from Page 50 of
Ogden's 1997 Annual Report to Shareholders. The prices set forth therein are as
reported on the consolidated transaction reporting system of the NYSE
ITEM 6. SELECTED FINANCIAL DATA
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Page 26 of Ogden's 1997
Annual Report to Shareholders.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Pages 22 through 25 of
Ogden's 1997 Annual Report to Shareholders.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not Applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Pages 26 through 47 and Page
50 of Ogden's 1997 Annual Report to Shareholders.
<PAGE>
47
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OGDEN
Pursuant to General Instruction G (3), the information regarding
directors called for by this item is hereby incorporated by reference from
Ogden's 1998 Proxy Statement to be filed with the Securities and Exchange
Commission. The information regarding officers called for by this item is
included at the end of Part I of this document under the heading "Executive
Officers of Ogden."
ITEM 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1998 Proxy Statement
to be filed with the Securities and Exchange Commission.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1998 Proxy Statement
to be filed with the Securities and Exchange Commission.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1998 Proxy statement
to be filed with the Securities and Exchange Commission.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Listed below are the documents filed as a part of this report:
1). All financial statements contained on pages 27through 47 and the
Independent
<PAGE>
48
Auditors' Report on page 48 of Ogden's 1997 Annual Report to
Shareholders are incorporated herein by reference.
2). Financial statement schedules as follows:
(i) Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1997, 1996 and 1995.
3). Those exhibits required to be filed by Item 601 of Regulation S-K:
EXHIBITS
2.0 Plans of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1 Agreement and Plan of Merger, dated as of October 31, 1989,
among Ogden, ERCI Acquisition Corporation and ERC
International, Inc.*
2.2 Agreement and Plan of Merger among Ogden Corporation, ERC
International, Inc., ERC Acquisition Corporation and ERC
Environmental and Energy Services Co., Inc., dated as of
January 17, 1991.*
2.3 Amended and Restated Agreement and Plan of Merger among Ogden
Corporation, OPI Acquisition Corp. and Ogden Projects, Inc.,
dated as of September 27, 1994.*
3.0 Articles of Incorporation and By-laws.
3.1 Ogden's Restated Certificate of Incorporation as amended.*
3.2 Ogden's By-Laws, as amended.*
4.0 Instruments Defining Rights of Security Holders.
4.1 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of June 1, 1987, and Offering Memorandum
dated June 12, 1987, relating to U.S. $85 million Ogden 6%
Convertible Subordinated Debentures, Due 2002.*
4.2 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of October 15, 1987, and Offering Memorandum,
dated October 15, 1987, relating to U.S. $75 million Ogden
5-3/4% Convertible Subordinated Debentures, Due 2002.*
4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to
The
<PAGE>
49
Bank of New York, Trustee, relating to Ogden's $100 million
debt offering.*
10.0 Material Contracts
10.1 Credit Agreement by and among Ogden, The Bank of New York, as
Agent and the signatory bank Lenders thereto dated as of September
20, 1993.*
(i) Amendment to Credit Agreement, dated as of November 16,
1995.*
10.1(a) U.S. $95 million Term Loan and Letter of Credit and Reimbursement
Agreement among Ogden, the Deutsche Bank AG, New York Branch and
the signatory Banks thereto, dated March 26, 1997. Filed as
Exhibit 10.6 to Ogden's Form 10-Q for the quarterly period ended
March 31, 1997 and incorporated herein by reference.*
10.1(b) $200 million Credit Agreement among Ogden, The Bank of New York as
Agent and the signatory Lenders thereto, dated as of June 30,
1997. Filed as Exhibit 10.1() to Ogden's Form 10-Q for the
quarterly period ended June 30, 1997 and incorporated herein by
reference.*
10.2 Stock Purchase Agreement, dated May 31, 1988, between Ogden and
Ogden Projects, Inc.*
10.3 Tax Sharing Agreement, dated January 1, 1989, between Ogden, Ogden
Projects, Inc. and subsidiaries, Ogden Allied Services, Inc. an
subsidiaries, and Ogden Financial Services, Inc. and
subsidiaries.*
10.4 Stock Purchase Option Agreement, dated June 14, 1989, between
Ogden and Ogden Projects, Inc. as amended on November 16, 1989.*
10.5 Preferred Stock Purchase Agreement, dated July 7, 1989, between
Ogden Financial Services, Inc. and Image Data Corporation.*
10.6 Rights Agreement between Ogden Corporation and Manufacturers
Hanover Trust Company, dated as of September 20, 1990 and amended
August 15, 1995 to provide The Bank of New York as successor
agent.*
10.7 Executive Compensation Plans
(a) Ogden Corporation 1990 Stock Option Plan.*
<PAGE>
50
(i) Ogden Corporation 1990 Stock Option Plan as Amended and
Restated as of January 19, 1994.*
(ii) Amendment adopted and effective as of September 18, 1997.
Transmitted herewith as Exhibit 10.7(b)(ii).
(b) Ogden Services Corporation Executive Pension Plan.*
(c) Ogden Services Corporation Select Savings Plan.*
(i) Ogden Services Corporation Select Savings Plan
Amendment and Restatement as of January 1, 1995.*
(ii) Amendment Number One to the Ogden Services Corporation
Select Savings Plan as amended and Restated January 1,
1995, effective January 1, 1998. Transmitted herewith
as Exhibit 10.7(c)(ii).
(d) Ogden Services Corporation Select Savings Plan Trust.*
(i) Ogden Services Corporation Select Savings Plan Trust
Amendment and Restatement dated as of January 1,
1995.*
(e) Ogden Services Corporation Executive Pension Plan Trust.*
(f) Changes effected to the Ogden Profit Sharing Plan effective
January 1, 1990.*
(g) Ogden Corporation Profit Sharing Plan.*
(i) Ogden Profit Sharing Plan as amended and restated
January 1, 1991 and as in effect through January 1,
1993.*
(ii) Ogden Profit Sharing Plan as amended and restated
effective as of January 1, 1995.*
(h) Ogden Corporation Core Executive Benefit Program.*
(i) Ogden Projects Pension Plan.*
<PAGE>
51
(j) Ogden Projects Profit Sharing Plan.*
(k) Ogden Projects Supplemental Pension and Profit Sharing
Plans.*
(l) Ogden Projects Employee's Stock Option Plan.*
(i) Amendment, dated as of December 29, 1994 to the Ogden
Projects Employees' Stock Option Plan. Transmitted
herewith as Exhibit 10.7 (u)(i).*
(m) Ogden Projects Core Executive Benefit Program.*
(n) Form of amendments to the Ogden Projects, Inc. Pension Plan
and Profit Sharing Plans effective as of January 1, 1994.*
(i) Form of Amended Ogden Projects, Inc. Profit Sharing
Plan, effective as of January 1, 1994. Transmitted
herewith as Exhibit 10.7 (w)(i).*
(ii) Form of Amended Ogden Projects, Inc. Pension Plan,
effective as of January 1, 1994. Transmitted herewith
as Exhibit 10.7 (w)(ii).*
(o) Ogden Corporation CEO Formula Bonus Plan.*
(p) Ogden Key Management Incentive Plan. Transmitted herewith
as Exhibit 10.7(p).
10.8 Employment Agreements
(a) Employment Letter Agreement between Ogden and Lynde H. Coit dated
January 30, 1990.*
(b) Employment Agreement between Ogden and R.Richard Ablon dated as of
May 24, 1990.*
(i) Letter Amendment Employment Agreement between Ogden and R.
Richard Ablon dated as of October 11, 1990.*
(c) Employment Agreement between Ogden and C. G. Caras dated as of
July 2, 1990.*
(i) Letter Amendment to Employment Agreement between Ogden
<PAGE>
52
Corporation and C.G. Caras, dated as of October 11, 1990.*
(ii) Termination Agreement between C.G. Caras and Ogden dated
April 30, 1996.*
(d) Employment Agreement between Ogden and Philip G. Husby as of July
2, 1990.*
(e) Termination Letter Agreement between Maria P. Monet and Ogden
dated as of October 22, 1990.*
(f) Letter Agreement between Ogden Corporation and Ogden's Chairman of
the Board, dated as of January 16, 1992.*
(g) Employment Agreement between Ogden and Ogden's Chief Accounting
Officer dated as of December 18, 1991.*
(h) Employment Agreement between Scott G. Mackin and Ogden Projects,
Inc. dated as of January 1, 1994.*
(i) Letter Amendment to Employment Agreement between Ogden
Projects, Inc. and Scott G. Mackin, dated December 20,
1996.*
(i) Employment Agreement between David L. Hahn and Ogden Corporation,
dated December 1, 1995.*
(j) Employment Agreement between Ogden Services Corporation and
Rodrigo Arboleda dated January 1, 1997.*
(k) Employment Agreement between Ogden Projects, Inc. and Bruce W.
Stone dated June 1, 1990.*
(i) Employment Agreement between Ogden Corporation and Quintin
G. Marshall, dated October 30, 1996.*
(l) Employment Agreement's between Ogden Corporation and Jesus Sainz,
effective as of January 1, 1998. Transmitted herewith as Exhibit
10.8(m).
10.9 First Amended and Restated Ogden Corporation Guaranty Agreement
made as of January 30, 1992 by Ogden Corporation for the benefit
of Mission Funding Zeta and Pitney Bowes Credit Corporation.*
<PAGE>
53
10.10 Ogden Corporation Guaranty Agreement as of January 30, 1992 by
Ogden Corporation for the benefit of Allstate Insurance Company
and Ogden Martin Systems of Huntington Resource Recovery Nine
Corporation.*
11 Ogden Corporation and Subsidiaries Detail of Computation of
Earnings Applicable to Common Stock for the years ended December
31, 1997, 1996 and 1995.*
13 Those portions of the Annual Report to Stockholders for the year
ended December 31, 1997, which are incorporated herein by
reference. Transmitted herewith as Exhibit 13.
21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21.
23 Consent of Deloitte & Touche LLP. Transmitted herewith as Exhibit
23.
27 Financial Data Schedule (EDGAR Filing Only).
* INCORPORATED BY REFERENCE AS SET FORTH IN THE EXHIBIT INDEX OF THIS
ANNUAL REPORT ON FORM 10-K.
(b) No Reports on Form 8-K were filed by Ogden during the fourth
quarter of 1997.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OGDEN CORPORATION
DATE: MARCH 12, 1998
By /s/ R. Richard Ablon
---------------------------------
R. Richard Ablon
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.
SIGNATURE TITLE
--------- -----
/s/ R. Richard Ablon Chairman of the Board, President and Chief
- ------------------------------ Executive Officer and Director
R. RICHARD ABLON
/s/ Ralph E. Ablon Director
- ------------------------------
RALPH E. ABLON
/s/ Philip G. Husby Senior Vice President and Chief Financial
- ------------------------------ Officer
PHILIP G. HUSBY
/s/ Robert M. Digia Vice President, Controller and Chief
- ------------------------------ Accounting Officer
ROBERT M. DIGIA
/s/ David M. Abshire Director
- ------------------------------
DAVID M. ABSHIRE
/s/ Norman G. Einspruch Director
- ------------------------------
NORMAN G. EINSPRUCH
<PAGE>
/s/ Jeffrey F. Friedman Director
- ------------------------------
JEFFREY F. FRIEDMAN
/s/ Attallah Kappas Director
- ------------------------------
ATTALLAH KAPPAS
Director
- ------------------------------
TERRY ALLEN KRAMER
/s/ JUDITH D. MOYERS Director
- ------------------------------
JUDITH D. MOYERS
Director
- ------------------------------
HOMER A. NEAL
/s/ Stanford S. Penner Director
- ------------------------------
STANFORD S. PENNER
/s/ Frederick Seitz Director
- ------------------------------
FREDERICK SEITZ
/s/ Robert E. Smith Director
- ------------------------------
ROBERT E. SMITH
/s/ Helmut F.o. Volcker Director
- ------------------------------
HELMUT F.O. VOLCKER
/s/ Abraham Zaleznik Director
- ------------------------------
ABRAHAM ZALEZNIK
<PAGE>
INDEPENDENT AUDITORS' REPORT
- ----------------------------
The Board of Directors and Shareholders of
Ogden Corporation:
We have audited the consolidated financial statements of Ogden Corporation and
subsidiaries as of December 31, 1997 and 1996, and for each of the three years
in the period ended December 31, 1997, and have issued our report thereon dated
February 27, 1998, which report includes an explanatory paragraph relating to
the adoption of Statement of Financial Accounting Standards No. 121; such
consolidated financial statements and report are included in your 1997 Annual
Report to Shareholders and are incorporated herein by reference. Our audits
also included the consolidated financial statement schedule of Ogden Corporation
and subsidiaries, included in Item 14. This consolidated financial statement
schedule is the responsibility of the Corporation's management. Our
responsibility is to express an opinion based on our audits. In our opinion,
such consolidated financial statement schedule, when considered in relation to
the basic consolidated financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
Deloitte & Touche LLP
New York, New York
February 27, 1998
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
OGDEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowances deducted in the balance sheet
from the assets to which they apply:
Doubtful receivables - current $32,783,000 $ 7,204,000 $ 64,000 (A) $ 3,012,000 (B) $37,039,000
Deferred charges on projects 7,000,000 3,670,000 7,000,000 (C) 3,670,000
----------------------------------------------------------------------------------
TOTAL $39,783,000 $10,874,000 $ 64,000 $10,012,000 $40,709,000
==================================================================================
Allowances not deducted:
Provision for consolidation of facilities $ 3,400,000 $ 2,850,000 (D)
550,000 (E)
Estimated cost of disposal of discontinued
operations 945,000 $ 4,510,000 5,269,000 (E) $ 186,000
Estimated cost of disposal of assets 14,993,000 14,993,000
Provision for restructuring 8,200,000 2,090,000 (E) 6,110,000
Reserves relating to tax indemnification and
other contingencies in connection with the
sale of limited partnership interests in and
related tax benefits a of waste-to-energy
facility 6,000,000 3,000,000 (D) 3,000,000
Other 3,604,000 7,267,000 1,500,000 (D) 9,371,000
----------------------------------------------------------------------------------
TOTAL $13,949,000 $34,970,000 $ 15,259,000 $33,660,000
==================================================================================
</TABLE>
Notes:
- ------
(A) Recoveries of amounts previously written off.
(B) Write-offs of receivables considered uncollectible.
(C) Write-offs of unsuccessful development costs.
(D) Reversal to operating costs of provisions no longer required.
(E) Payments charged to allowances.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
OGDEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowances deducted in the balance sheet
from the assets to which they apply:
Doubtful receivables - current $37,039,000 $10,442,000 $370,000 (A) $ 9,576,000 (B) $38,275,000
Doubtful receivables-noncurrent 6,000,000 6,000,000
Deferred charges on projects 3,670,000 4,968,000 8,638,000
----------------------------------------------------------------------------------
TOTAL $40,709,000 $21,410,000 $370,000 $ 9,576,000 $52,913,000
==================================================================================
Allowances not deducted:
Estimated cost of disposal of discontinued
operations $ 186,000 $ 186,000 (C)
Estimated cost of disposal of assets 14,993,000 14,130,000 (C) $ 863,000
Provision for restructuring 6,110,000 $ 682,000 4,285,000 (C) 2,507,000
Reserves relating to tax indemnification and
other contingencies in connection with the
sale of limited partnership interests in and
related tax benefits of a waste-to-energy
facility. 3,000,000 3,000,000
Other 9,371,000 3,743,000 6,221,000 (D) 6,893,000
----------------------------------------------------------------------------------
TOTAL $33,660,000 $ 4,425,000 $24,822,000 $13,263,000
==================================================================================
</TABLE>
Notes:
- ------
(A) Recoveries of amounts previously written off.
(B) Write-offs of receivables considered uncollectible.
(C) Payments charged to allowances.
(D) Reversal to operating costs of provisions no longer required.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
OGDEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
-----------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowances deducted in the balance sheet
from the assets to which they apply:
Doubtful receivables - current $38,275,000 $ 3,485,000 $14,009,000 (A) $20,207,000
1,544,000 (D)
6,000,000 (C)
Doubtful receivables - noncurrent 6,000,000 3,000,000 (C) 3,000,000
Deferred charges on projects 8,638,000 6,707,000 4,604,000 (E) 10,741,000
----------------------------------------------------------------------------------
TOTAL $52,913,000 $10,192,000 $29,157,000 $33,948,000
==================================================================================
Allowances not deducted:
Estimated cost of disposal of assets $ 863,000 $ 567,000 (B) $ 296,000
Provision for restructuring 2,507,000 1,213,000 (B) 1,141,000
153,000 (C)
Reserves relating to tax indemnification
and other contingencies in connection
with the sale of limited partnership
interests in and related tax benefits of
a waste-to-energy facility 3,000,000 3,000,000
Other 6,893,000 $ 2,832,000 2,273,000 (B) 5,052,000
1,900,000 (C)
500,000 (F)
----------------------------------------------------------------------------------
TOTAL $13,263,000 $ 2,832,000 $ 6,606,000 $ 9,489,000
==================================================================================
</TABLE>
Notes:
- ------
(A) Write-offs of receivables considered uncollectible.
(B) Payments charged to allowances.
(C) Reversal of provisions no longer required.
(D) Allowance of company sold during 1997.
(E) Write-off of deferred charges.
(F) Write-off to other accounts.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT FILING INFORMATION
- ----------- ----------------------- ------------------
<S> <C> <C>
2 Plans of Acquisition, Reorganization
Arrangement, Liquidation or Succession.
2.1 Agreement and Plan of Merger, dated as Filed as Exhibit 2 to Ogden's Form
of October 31, 1989, among Ogden, ERCI S-4 Registration Statement File No.
Acquisition Corporation and ERC 33-32155, and incorporated herein by
International Inc. reference.
2.2 Agreement and Plan of Merger among Ogden Filed as Exhibit (10)(x) to Ogden's Form
Corporation, ERC International Inc., ERC 10-K for the fiscal year ended December
Acquisition Corporation and ERC 31, 1990 and incorporated herein by
Environmental and Energy Services Co., reference.
Inc. dated as of January 17, 1991.
2.3 Amended and Restated Agreement and Plan Filed as Exhibit 2 to Ogden's Form S-4
of Merger among Ogden Corporation, OPI Registration Statement File No. 33-56181
Acquisition Corporation sub. and Ogden and incorporated herein by reference.
Projects, Inc. dated as of September 27,
1994.
3 Articles of Incorporation and By-Laws.
3.1 Ogden Restated Certificate of Filed as Exhibit (3)(a) to Ogden's Form
Incorporation as amended. 10-K for the fiscal year ended December
31, 1988 and incorporated herein by
reference.
3.2 Ogden By-Laws, as amended. Filed as Exhibit 3.2 to Ogden's Form
10-Q for the quarterly period ended June
30, 1997 and incorporated herein by
reference.
4 Instruments Defining Rights of Security
Holders.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4.1 Fiscal Agency Agreement between Ogden Filed as Exhibits (C)(3) and (C)(4) to
and Bankers Trust Company, dated as of Ogden's Form 8-K filed with the
June 1, 1987 and Offering Memorandum Securities and Exchange Commission on
dated June 12, 1987, relating to U.S. July 7, 1987 and incorporated herein by
$85 million Ogden 6% Convertible reference.
Subordinated Debentures, Due 2002.
4.2 Fiscal Agency Agreement between Ogden Filed as Exhibit (4) to Ogden's Form S-3
and Bankers Trust Company, dated as of Registration Statement filed with the
October 15, 1987, and Offering Securities and Exchange Commission on
Memorandum, dated October 15, 1987, December 4, 1987, Registration No.
relating to U.S.$75 million Ogden 5-3/4% 33-18875, and incorporated herein by
Convertible Subordinated Debentures, Due reference.
2002.
4.3 Indenture dated as of March 1, 1992 from Filed as Exhibit (4)(C) to Ogden's Form
Ogden Corporation to The Bank of New 10-K for fiscal year ended December 31,
York, Trustee, relating to Ogden's $100 1991, and incorporated herein by
million debt offering. reference.
10 Material Contracts
10.1 Credit Agreement by and among Ogden, The Filed as Exhibit No. 10.2 to Ogden's
Bank of New York, as Agent and the Form 10-K for fiscal year ended December
signatory Lenders thereto dated as of 31, 1993, and incorporated herein by
September 20, 1993. reference.
(i) Amendment to Credit Agreement, Filed as Exhibit 10.1(i) to Ogden's Form
dated as of November 16, 1995. 10-K for fiscal year ended December 31,
1995, and incorporated herein by
reference.
10.1(a) U.S. $95 million Term Loan and Letter of Filed as Exhibit 10.6 to Ogden's Form
Credit and Reimbursement Agreement among 10-Q for the quarterly period ended
Ogden, the Deutsche Bank AG, New York March 31, 1997 and incorporated herein
Branch and the signatory Banks thereto, by reference.
dated March 26, 1997.
10.1(b) $200 million Credit Agreement among Filed as Exhibit 10.1(i) to Ogden's Form
Ogden, The Bank of New York as Agent and 10-Q for the quarterly period ended June
the signatory Lenders thereto, dated as 30, 1997 and incorporated herein by
of June 30, 1997. reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.2 Stock Purchase Agreement dated May 31, Filed as Exhibit (10)(d) to Ogden's Form
1988, between Ogden and Ogden Projects, 10-K for the fiscal year ended December
Inc. 31, 1989 and incorporated herein by
reference.
10.3 Tax Sharing Agreement, dated January 1, Filed as Exhibit (10)(e) to Ogden's Form
1989 between Ogden, Ogden Projects, Inc. 10-K for the fiscal year ended December
and subsidiaries, Ogden Allied Services, 31, 1989 and incorporated herein by
Inc. and subsidiaries and Ogden reference.
Financial Services, Inc. and
subsidiaries.
10.4 Stock Purchase Option Agreement, dated Filed as Exhibit (10)(f) to Ogden's Form
June 14, 1989, between Ogden and Ogden 10-K for the fiscal year ended December
Projects, Inc. as amended on November 31, 1989 and incorporated herein by
16, 1989. reference.
10.5 Preferred Stock Purchase Agreement, Filed as Exhibit (10)(g) to Ogden's Form
dated July 7, 1989, between Ogden 10-K for the fiscal year ended December
Financial Services, Inc. and Image Data 31, 1989 and incorporated herein by
Corporation. reference
10.6 Rights Agreement between Ogden Filed as Exhibit (10)(h) to Ogden's Form
Corporation and Manufacturers Hanover 10-K for the fiscal year ended December
Trust Company, dated as of September 20, 31, 1990 and incorporated herein by
1990 and amended August 15, 1995 to reference.
provide The Bank of New York as
successor agent.
10.7 Executive Compensation Plans.
(a) Ogden Corporation 1990 Stock Option Filed as Exhibit (10)(j) to Ogden Form
Plan. 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference.
(i) Ogden Corporation 1990 Stock Filed as Exhibit 10.6(b)(i) to Ogden's
Option Plan as Amended and Form 10-Q for the quarterly period ended
Restated as of January 19, September 30, 1994 and incorporated
1994. herein by reference.
(ii) Amendment adopted and effective Transmitted herewith as Exhibit
as of September 18, 1997. 10.7(a)(ii).
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(b) Ogden Services Corporation Filed as Exhibit (10)(k) to Ogden's Form
Executive Pension Plan. 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference.
(c) Ogden Services Corporation Select Filed as Exhibit (10)(l) to Ogden Form
Savings Plan. 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference.
(i) Ogden Services Corporation Filed as Exhibit 10.7(d)(I) to Ogden's
Select Savings Plan Amendment Form 10-K for the fiscal year ended
and Restatement as of January December 31, 1994 and incorporated
1, 1995. herein by reference.
(ii) Amendment Number One to the Transmitted herewith as Exhibit
Ogden Services Corporation 10.7(c)(ii).
Select Savings Plan as Amended
and Restated January 1, 1995,
effective January 1, 1998.
(d) Ogden Services Corporation Select Filed as Exhibit (10)(m) to Ogden's Form
Savings Plan Trust. 10-K for the fiscal year ended December
31, 1990 and incorporated herein by
reference.
(i) Ogden Services Corporation Select Filed as Exhibit 10.7(e)(i) to Ogden's
Savings Plan Trust Amendment and Form 10-K for the fiscal year ended
Restatement as of January 1, 1995. December 31, 1994 and incorporated
herein by reference.
(e) Ogden Services Corporation Filed as Exhibit (10)(n) to Ogden's
Executive Pension Plan Trust. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(f) Changes effected to the Ogden Filed as Exhibit (10)(o) to Ogden's Form
Profit Sharing Plan effective 10-K for the fiscal year ended December
January 1, 1990. 31, 1990 and incorporated herein by
reference.
(g) Ogden Corporation Profit Sharing Filed as Exhibit 10.8(p) to Ogden's Form
Plan. 10-K for fiscal year ended December 31,
1992 and incorporated herein by
reference.
(i) Ogden Profit Sharing Plan as Filed as Exhibit 10.8(p)(i) to Ogden's
amended and restated January Form 10-K for fiscal year ended December
1, 1991 and as in effect 31, 1993 and incorporated herein by
through January 1, 1993. reference.
(ii) Ogden Profit Sharing Plan as Filed as Exhibit 10.7(p)(ii) to Ogden's
amended and restated effective Form 10-K for fiscal year ended December
as of January 1, 1995. 31, 1994 and incorporated herein by
reference.
(h) Ogden Corporation Core Executive Filed as Exhibit 10.8(q) to Ogden's Form
Benefit Program. 10-K for fiscal year ended December 31,
1992 and incorporated herein by
reference.
(i) Ogden Projects Pension Plan. Filed as Exhibit 10.8(r) to Ogden's Form
10-K for fiscal year ended December 31,
1992 and incorporated herein by
reference.
(j) Ogden Projects Profit Sharing Plan. Filed as Exhibit 10.8(s) to Ogden's Form
10-K for fiscal year ended December 31,
1992 and incorporated herein by
reference.
(k) Ogden Projects Supplemental Pension Filed as Exhibit 10.8(t) to Ogden's Form
and Profit Sharing Plans. 10-K for fiscal year ended December 31,
1992 and incorporated herein by
reference.
(l) Ogden Projects Employees' Stock Filed as Exhibit 10.8(u) to Ogden's Form
Option Plan. 10-K for fiscal year ended
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
December 31, 1992 and incorporated
herein by reference.
(i) Amendment dated as of December Filed as Exhibit 10.7(u)(i) to Ogden's
29, 1994, to the Ogden Form 10-K for fiscal year ended December
Projects Employees' Stock 31, 1994 and incorporated herein by
Option Plan. reference.
(m) Ogden Projects Core Executive Filed as Exhibit 10.8(v) to Ogden's Form
Benefit Program. 10-K for fiscal year ended December 31,
1992 and incorporated herein by
reference.
(n) Form of amendments to the Ogden Filed as Exhibit 10.8(w) to
Projects, Inc. Pension Plan and Ogden's Form 10-K for fiscal year
Profit Sharing Plans effective as ended December 31, 1993 and
of January 1, 1994. incorporated herein by reference.
(i) Form of amended Ogden Projects Filed as Exhibit 10.7(w)(i) to Ogden's
Profit Sharing Plan effective Form 10-K for fiscal year ended December
as of January 1, 1994. 31, 1994 and incorporated herein by
reference.
(ii) Form of amended Ogden Projects Filed as Exhibit 10.7(w)(ii) to Ogden's
Pension Plan, effective as of Form 10-K for fiscal year ended December
January 1, 1994. 31, 1994 and incorporated herein by
reference.
(o) Ogden Corporation CEO Formula Bonus Filed as Exhibit 10.6(w) to Ogden's Form
Plan. 10-Q for the quarterly period ended
September 30, 1994 and incorporated
herein by reference.
(p) Ogden Key Management Incentive Transmitted herewith as Exhibit 10.7(p).
Plan.
10.8 Employment Agreements
(a) Employment Letter Agreement between Filed as Exhibit (10)(p) to Ogden's Form
Ogden and an executive officer 10-K for the fiscal year ended December
dated January 30, 1990. 31, 1990 and incorporated herein by
reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(b) Employment Agreement between R. Filed as Exhibit (10)(r) to Ogden's Form
Richard Ablon and Ogden dated as of 10-K for the fiscal year ended December
May 24, 1990. 31, 1990 and incorporated herein by
reference.
(i) Letter Amendment to Employment Filed as Exhibit (10)(r)(i) to Ogden's
Agreement between Ogden Form 10-K for the fiscal year ended
Corporation ad R. Richard December 31, 1990 and incorporated
Ablon, dated as of October 11, herein by reference.
1991.
(c) Employment Agreement between Ogden Filed as Exhibit (10)(s) to Ogden's Form
and C.G. Caras dated as of July 2, 10-K for the fiscal year ended December
1990. 31, 1990 and incorporated herein by
reference.
(i) Letter Amendment to Employment Filed as Exhibit (10)(s)(i) to Ogden's
Agreement between Ogden Form 10-K for the fiscal year ended
Corporation and C.G. Caras, December 31, 1990 and incorporated
dated as of October 11, 1990. herein by reference.
(ii) Termination Letter Agreement Filed as Exhibit 10.8(c)(ii) to Ogden's
between C.G. Caras and Ogden Form 10-K for the fiscal year ended
Corporation dated April 30, December 31, 1996 and incorporated
1996. herein by reference.
(d) Employment Agreement between Ogden Filed as Exhibit (10)(t) to Ogden's Form
and Philip G. Husby, dated as of 10-K for the fiscal year ended December
July 2, 1990. 31, 1990 and incorporated herein by
reference.
(e) Termination Letter Agreement Filed as Exhibit (10)(v) to Ogden's Form
between Maria P. Monet and Ogden 10-K for the fiscal year ended December
dated as of October 22, 1990. 31, 1990 and incorporated herein by
reference.
(f) Letter Agreement between Ogden Filed as Exhibit 10.2(p) to Ogden's Form
Corporation and Ogden's Chairman of 10-K for fiscal year ended December 31,
the Board, dated as of January 16, 1991 and incorporated herein by
1992. reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(g) Employment Agreement between Ogden Filed as Exhibit 10.2(q) to Ogden's Form
Corporation and Ogden's Chief 10-K for fiscal year ended December 31,
Accounting Officer dated as of 1991 and incorporated herein by
December 18, 1991. reference.
(h) Employment Agreement between Scott Filed as Exhibit 10.8(o) to Ogden's Form
G. Mackin and Ogden Projects, Inc. 10-K for fiscal year ended December 31,
dated as of January 1, 1994. 1993 and incorporated herein by
reference.
(i) Letter Amendment to Employment Filed as Exhibit 10.8(h)(i) to Ogden's
Agreement between Ogden Form 10-K for fiscal year ended December
Projects, Inc. and Scott G. 31, 1996 and incorporated herein by
Mackin, dated December 20, reference.
1996.
(i) Employment Agreement between Ogden Filed as Exhibit 10.8(i) to Ogden's Form
Corporation and David L. Hahn, 10-K for fiscal year ended December 31,
dated December 1, 1995. 1995 and incorporated herein by
reference.
(j) Employment Agreement between Ogden Filed as Exhibit 10.8(j) to Ogden's Form
Corporation and Rodrigo Arboleda, 10-K for fiscal year ended December 31,
dated January 1, 1997. 1996 and incorporated herein by
reference.
(k) Employment Agreement between Ogden Filed as Exhibit 10.8(k) to Ogden's Form
Projects, Inc. and Bruce W. Stone, 10-K for fiscal year ended December 31,
dated June 1, 1990. 1996 and incorporated herein by
reference.
(l) Employment Agreement between Ogden Filed as Exhibit 10.8(l) to Ogden's Form
Corporation and Quintin G. 10-K for fiscal year ended December 31,
Marshall, dated October 30, 1996. 1996 and incorporated herein by
reference.
(m) Employment Agreements between Ogden Transmitted herewith as Exhibit 10.8(m).
and Jesus Sainz, effective as of
January 1, 1998.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
10.9 First Amended and Restated Ogden Filed as Exhibit 10.3(b)(i) to Ogden's
Corporation Guaranty Agreement made as Form 10-K for fiscal year ended December
of January 30, 1992 by Ogden 31, 1991 and incorporated herein by
Corporation for the benefit of Mission reference.
Funding Zeta and Pitney Bowes Credit.
10.10 Ogden Corporation Guaranty Agreement Filed as Exhibit 10.3(b)(iii) to Ogden's
made as of January 30,1992 by Ogden Form 10-K for fiscal year ended December
Corporation for the benefit of Allstate 31, 1991 and incorporated herein by
Insurance Company and Ogden Martin reference.
Systems of Huntington Resource Recovery
Nine Corp.
11 Ogden Corporation and Subsidiaries Filed as part of Ogden's Annual Report
Detail of Computation of Earnings to Shareholders on pages 43 and 44
Applicable to Common Stock for the years thereof which is filed as Exhibit 13 to
ended December 31, 1997, 1996 and 1995. Ogden's Form 10-K for fiscal year ended
December 31, 1996 and incorporated
herein by reference.
13 Those portions of the Annual Report to Transmitted herewith as Exhibit 13.
Stockholders for the year ended December
31, 1997, which are incorporated herein
by reference.
21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21.
23 Consent of Deloitte & Touche LLP. Transmitted herewith as Exhibit 23.
27 Financial Data Schedule. Transmitted herewith as Exhibit 27.
</TABLE>
<PAGE>
EXHIBIT 10.7(a)(ii) TO OGDEN'S 1997 FORM 10-K
AMENDMENT TO OGDEN'S 1990 STOCK OPTION PLAN:
- -------------------------------------------
Ogden's 1990 Stock Option Plan currently provides that in the event the
employment of an employee is terminated for any reason (other than termination
because of retirement, disability, cause, or death), the employee may exercise
his vested options at any time during the one-year period following the date of
the employee's termination. The usual and customary period of time is three to
six months following such termination. Management believes that the one-year
period to exercise is too long during periods when employee cutbacks are
necessary and is not in line with the usual period of time found in many other
plans. Therefore, management, with the concurrence of the Management Committee,
recommended that the 1990 Stock Option Plan be amended to provide that the
period of time to exercise an option upon an employee's termination should be
shortened to three months.
Following discussion, where all questions posed were answered
satisfactorily, and upon motion made and seconded, it was
RESOLVED, that effective as of September 18, 1997, Paragraph 4.(e)(1) of
the Ogden Corporation 1990 Stock Option Plan, Amended and Restated as of January
19, 1994, is hereby amended and restated in its entirety as follows:
(1) In the event that the employment of a Participant with the Company
shall terminate for any reason other than Disability, Retirement, Cause or Death
(i) Options granted to such Participant, to the extent that they were
exercisable at the time of such termination, shall remain exercisable for a
period of ninety (90) days following such termination, on which date they shall
expire, and (ii) Options granted to such Participant, to the extent that they
were not exercisable at the time of such termination, shall expire at the close
of business on the date of such termination; provided, however, that no Option
shall be exercisable after the expiration of its term;" and it was further
RESOLVED, that the foregoing amendment shall apply prospectively only and
will not apply retroactively to any stock option grants made prior to September
18, 1997.
<PAGE>
EXHIBIT 10.7(C)(II) TO OGDEN 1997 FORM 10-K
OGDEN SELECT SAVINGS PLAN
CONSENT OF COMMITTEE MEMBERS
IN LIEU OF MEETING
The undersigned, being all of the members of the Administrative Committee
of The Ogden 401(k) Plan (formerly known as the Administrative Committee of the
Ogden Profit Sharing Plan) (the "Committee"), by unanimous consent in writing,
without the formality of convening a meeting, do hereby severally and
collectively consent to the following action:
WHEREAS, effective as of October 1, 1990, the Board of Directors of Ogden
Services Corporation adopted the Ogden Select Savings Plan (the "Plan") to
enable certain employees of Ogden Services Corporation (the "Corporation") to
defer a portion of their compensation to a later date or event; and
WHEREAS, effective January 1, 1995, the Plan was amended and restated;
WHEREAS, the Committee desires to amend the Plan to provide a brokerage
investment option and to change the Plan's eligibility provisions; and
WHEREAS, Section 7.2 of the Plan authorizes the Committee to amend the
Plan, provided that such amendment does not have a material effect on the cost
to the Corporation on maintaining the Plan;
NOW, THEREFORE, BE IT
RESOLVED, that effective January 1, 1998, Section 3.1 of the Plan,
"ELIGIBILITY", is amended by adding the following sentence to the end thereof:
"Participation in the Plan by the Executive shall commence on the
first day of the month following or coincident with the completion of
30 days of employment with the Company."
and it is
FURTHER RESOLVED, that effective January 1, 1998, Section 6.2,
"INVESTMENT", is amended by adding the following to the end thereof:
"The Investment Committee shall not be limited or restricted to
investments of a character authorized for trustees or other
fiduciaries under any
<PAGE>
present or future laws. The Investment Committee is authorized to
establish, on behalf of each Participant, a "brokerage option" or
account, to direct the Investment Committee to purchase or sell any
capital, common, and preferred stocks, corporate and governmental or
other obligations, whether debt or equity, mortgages, oil, gas or
mineral properties and rights, royalties, payments or other interests
in such properties, put and call options, and such other investments
that the Investment Committee may deem appropriate;" and it is
FURTHER RESOLVED, that the proper members of the Committee be, and each of
them hereby is, authorized and directed to execute and deliver all documents,
and take all such other actions which, with the advice of counsel, deemed
necessary or desirable to implement the purpose and intent of this and the
foregoing resolutions.
This instrument may be executed in one or more counterparts.
IN WITNESS WHEREOF, the undersigned have executed this instrument and
directed that it be filed with the minutes of the proceedings of the Committee
this 21st day of January, 1998.
- ----------------------------------- -----------------------------------
Alane Baranello Carl Pope
-----------------------------------
J. L. Effinger
<PAGE>
EXHIBIT 10.7(P) TO OGDEN'S 1997 FORM 10-K
KEY MANAGEMENT INCENTIVE PLAN
OBJECTIVE
Ogden Corporation is introducing an alternative incentive plan designed to
maximize shareholder value by increasing earnings per share.
PLAN DESIGN
The plan establishes target incentive awards by participant such that
participants receive competitive market cash compensation for budget performance
on two performance measures.
The two performance measures are as follows:
Measure EARNINGS PER SHARE (1) relative to actual levels achieved in 1997
by Ogden Corporation and targets set for 1998.
Measure INDIVIDUAL CONTRIBUTION relative to the achievement of
pre-determined goals.
The weights that will be applied to the two performance measures are as follows:
- The earnings per share award will constitute 50% of the total
award at target.
- The individual contribution award will constitute 50% of the
total award.
The size of the earnings per share component varies based on earnings per share
performance above or below target. Threshold (or minimum) performance levels
have been established. No maximum performance levels have been established.
The size of the individual contribution component will be determined by
operating income results, business development efforts, control of operating
expenses and the achievement of individual, pre-determined goals.
EPS
OPERATING UNIT % GOAL ACHIEVED PAYOUT (AS % OF AWARD COMPONENT)
- -------------- --------------- --------------------------------
Aviation < $1.35 0
Entertainment $1.50 25%
Energy $1.65 100%
Corporate $1.80 150%
Individual performance represents 50% of the total incentive award.
The total award is the sum of the earnings per share award and individual
performance.
____________________
(1) Earnings per share shall be defined as primary earnings per share reported.
<PAGE>
PLAN A 2
EXAMPLE (NEW PLAN)
Ogden Executive - Entertainment
Base Salary $130,000
Target Incentive $ 60,000
(50% EPS $30,000)
(50% Individual
Cont. $30,000)
Individual contribution will be determined based on operating income, business
development (if applicable), controlling operating expenses, staff development,
etc.
<TABLE>
<CAPTION>
Performance Measure Actual Performance % Goal Achieved
------------------- ------------------ ---------------
<S> <C> <C> <C>
Earnings Per Share $1.65 $1.65 100%
Individual contribution Above Average
</TABLE>
Incentive Award Payout
----------------------
Earnings Per Share Performance earns 100% of $30,000 $30,000
Individual Contribution $25,000
-------
TOTAL AWARD $55,000
=======
(EXISTING PLAN)
PLEASE NOTE: Under the existing incentive plan, the incentive award payout is
calculated as follows:
Base $130,000
Target Incentive $ 40,000
(75% Operating Income $30,000)
(25% Individual Performance $10,000)
Performance Measure Actual Measure
------------------- --------------
Operating Income Target $31.3 Operating Income $34.3
Incentive Award Payout
----------------------
Operating Income Performance
at 110% of 30,000 $33,000
Individual Performance $10,000(2)
-------
Total Award $43,000
=======
____________________
(2) May vary dependent upon individual contribution.
<PAGE>
PLAN A 3
PLAN PARTICIPANTS
A total of twenty-one (21) management employees may participate in the revised
incentive plan in 1997. Employees are expected to be selected to participate in
the plan based upon level of responsibility and ability to impact the
performance measures stated. A breakdown of suggested participants by operating
units is as follows:
OPERATING UNIT NUMBER OF PARTICIPANTS
Entertainment Four (4)
Aviation Four (4)
Energy Seven (7)
Corporate Six (6)
<PAGE>
EXHIBIT 10.8(M)
---------------
CONFIDENTIAL AND
LEGALLY PRIVILEGED
- ------------------
AGREEMENT
---------
THIS AGREEMENT, made and entered into on the 15th day of January 1998, by
and between OGDEN CORPORATION, a Delaware corporation maintaining its principal
office at Two Pennsylvania Plaza, New York, New York (the "Company") and Jesus
Sainz, an individual now residing at Paseo Conde de los Gaitanes, 34, La
Maraleja 28109, Madrid Spain ("Sainz").
WHEREAS, the Company desires to retain Sainz in an executive capacity as an
Executive Vice President of the Company and Sainz desires to be retained by the
Company in such capacity; and
WHEREAS, the Company desires that Sainz be contracted by Ogden Spain, S.A.,
a wholly-owned subsidiary of the Company ("Ogden Spain") and Sainz desires to
render his services to Ogden Spain.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto agree as follows:
1. SERVICES/CAPACITY/TERM.
(a)(i) The Company and Sainz agree to and hereby do enter into this
Agreement effective as of January 1, 1998 upon the terms and conditions set
forth herein, pursuant to which Sainz shall be retained in an executive capacity
as Executive Vice President of the Company.
(ii) Sainz will be located in Madrid Spain and will be contracted
by Ogden Spain pursuant to a services agreement executed simultaneously herewith
(the "Ogden Spain Agreement"), whereby Sainz will have the responsibility for
developing and expanding Ogden Spain's site based entertainment opportunities in
Latin America, Spain and other parts of Europe.
(iii) Immediately upon execution of this Agreement the consulting
arrangement between Sainz and the Company dated July 12, 1996 shall terminate
and become null and void.
(b) This Agreement and Sainz's contracted services under the
Ogden Spain Agreement shall be effective as of January 1, 1998 and shall be for
a period of three (3) years, commencing on January 1, 1998 and continuing
through December 31, 2000, and from year to year thereafter, subject to the
right of the Company or Sainz to terminate this Agreement and his rendering of
services under the Ogden Spain Agreement as of December 31, 1998, or any
subsequent December 31, by written notice given to the other party at least
sixty (60) days prior to such date stating an intention to terminate this
Agreement and his rendering of services under the Ogden Spain Agreement (the
"Termination Date"). Termination by the Company, or Sainz, in accordance with
the provisions of the preceding sentence shall not require a statement of the
reason or cause for such termination and shall not be deemed a breach or
violation of this Agreement by the party giving such notice. As used in this
Agreement, the phrase "term of this Agreement" shall be deemed to include the
period subsequent to the date hereof and prior to the Termination Date.
<PAGE>
2. TIME AND EFFORT/ABSENCES.
During the "term of this Agreement", Sainz as a professional rendering
his services to Ogden Spain (a) shall devote his entire time and attention
during normal business hours to the business of Ogden Spain subject to the
supervision of the Board of Directors of Ogden Spain, the Company and the
President and Chief Executive Officer of the Company, and (b) shall not, without
the prior written consent of the Company and Ogden Spain, engage in any other
business activity whether or not such business activity is pursued for gain,
profit, or other pecuniary advantage, provided, however, this restriction shall
not be construed to restrict Sainz from (i) serving as a member of the Board,
advisory Board or any Committee of EDS Spain, S.A.; (ii) performing services as
a member of the Board of Directors, Board of Trustees or the like of any
non-profit entity for which Sainz receives no compensation, PROVIDED THAT, such
services do not unreasonably interfere with the ability of Sainz to perform the
services and discharge the responsibilities required of Sainz under this
Agreement and under the Ogden Spain Agreement; and (iii) from investing Sainz's
assets in such form or manner as will not require any services on the part of
Sainz in the operation of the business of the entity in which such investments
are made. Sainz as a professional rendering his service to Ogden Spain and as
an Executive Vice President of the Company shall be excused from rendering
services during reasonable vacation periods and during other reasonable
temporary absences as authorized from time to time by the Board of Directors of
Ogden Spain or by the President and Chief Executive Officer of the Company.
3. CORPORATE OFFICES.
If elected, Sainz will serve, without additional compensation, as an
officer and director (or in either capacity) of any of the Company's other
subsidiaries.
4. REMUNERATION/BONUS/OTHER BENEFITS.
In consideration of the services and duties to be rendered and
performed by Sainz as an Executive Officer of the Company and to Ogden Spain
under the Ogden Spain Agreement, Sainz shall be provided with the compensation
and benefits as described below:
(a) An ANNUAL REMUNERATION, payable by Ogden Spain in equal
monthly or bi-weekly installments, in the amount of Three Hundred Twenty Five
Thousand Dollars ($325,000) or in such greater amount as may from time to time
be fixed by the Board of Directors of Ogden Spain and authorized by the Company;
(b) An AUTOMOBILE ALLOWANCE payable by Ogden Spain in the amount
of $700 per month;
(c) An ANNUAL INCENTIVE bonus, payable by Ogden Spain in such
amount as may from time to time be fixed by the Board of Directors of Ogden
Spain and authorized by the Company;
(d) OTHER BENEFITS. It is intended that the Company shall provide
Sainz with benefits at least as favorable as benefits provided on behalf of
other executives of the Company who furnish services of comparable significance,
as they may exist from time to time. Such benefits presently include Group Life
Insurance, Supplemental Executive Group Life Insurance, Medical and Dental
Insurance, the Ogden Stock Option Plan, the Executive Pension Plan, the Ogden
Select Plan, and the Ogden Profit Sharing and 401(k). Provided, however,
participation in any of the foregoing plans shall be in accordance
2
<PAGE>
with the provisions of such plans and nothing contained in this Agreement is
intended to or shall be deemed to affect adversely any of Sainz's rights as a
participant under any such plans. However, nothing herein shall prevent the
Company from modifying or discontinuing any benefit plan on a consistent and
non-discriminatory basis applicable to all such executives.
5. EXPENSES.
Upon the presentation of such supporting documents and forms as the
Company and Ogden Spain shall reasonably request, Sainz shall be reimbursed for
out-of-pocket expenses incurred from time to time on behalf of Ogden Spain and
the Company in the performance of Sainz's duties under this Agreement and the
Ogden Spain Agreement.
6. MEDICAL LEAVE, REASONABLE ACCOMMODATION, TERMINATION FOR MEDICAL
INCAPACITY AND DISABILITY BENEFITS.
The Company and Ogden Spain agree to provide Sainz with a medical
leave of absence not to exceed six (6) months in total duration in any twelve
(12) month period if Sainz has a medical condition that precludes Sainz from
being fully functional to perform in his duties under this Agreement and the
Ogden Spain Agreement. The term "fully functional" means able to travel to and
from work, be at work, perform satisfactorily all essential functions of the
positions as identified herein, and otherwise meet the demands of the position
and the conditions of the Ogden Spain Agreement without significant risk of
substantial harm to self or others. Any leave entitlement granted by Spanish
law shall run concurrently with the commencement of Sainz's six month period of
leave, whether such leave is taken all at once, intermittently or on a reduced
time basis. Nothing herein is intended to diminish any entitlement granted by
law. If appropriate under Spanish law, Ogden Spain will support Sainz's
application for disability benefits.
If Sainz is not able to return to his position with Ogden Spain in a
fully functional capacity at the conclusion of six months of medical leave in a
twelve month period, this Agreement and the Ogden Spain Agreement may be
terminated by Ogden Spain and the Company at its sole discretion, without prior
notice.
Unless otherwise prohibited by law, Sainz agrees that he will furnish
for review by a medical professional designated by Ogden Spain, copies of his
medical records pertaining to any medical condition for which he requests a
medical leave of more than twelve (12) weeks in duration, return to work from
any such leave, work restrictions, modification or accommodation; or Sainz or
Ogden Spain and the Company believes that Sainz has a medical condition that
may be causing or contributing to performance or conduct deficiencies. Sainz
also agrees to authorize any health care professional from whom Sainz is
receiving diagnostic evaluation, treatment or other medical care, to discuss
Sainz's medical condition with the medical professional designated by Ogden
Spain to receive and review Sainz's medical records. Sainz further agrees that
he will undergo, at the sole expense of Ogden Spain, any medical specialty
evaluation if requested to do so by Ogden Spain.
Ogden Spain shall provide Sainz, if he is otherwise qualified for the
position, with medically necessary accommodation if it likely will enable Sainz
to be fully functional in the position and is reasonable, feasible and will not
impose undue hardship on Ogden Spain's operations. The term "medically
necessary" means that the accommodation has risk-avoiding or therapeutic value
in accordance with scientifically valid medical principles and practice and that
Sainz requires similar accommodation when performing comparable non-work
functions.
3
<PAGE>
The inability of Sainz to be fully functional in his position for
medical reasons shall not constitute a breach of this Agreement or the Ogden
Spain Agreement by Sainz. If this Agreement or the Ogden Spain Agreement is
terminated by Ogden Spain or the Company because Sainz is not fully functional
in his position for medical reasons, as provided for in this paragraph, Ogden
Spain shall be obligated to continue the then existing salary of Sainz as
required by Paragraph 4.(a) hereof for a period equal to the greater of (a)
twelve (12) months, or (b) such longer period as may be determined by the
Company and Ogden Spain, in each case, reduced by any disability insurance
benefits provided for the benefit of Sainz at the expense of the Company or
Ogden Spain and by and workers compensation, social security and State
disability programs, if applicable.
7. DEATH/DEATH BENEFIT.
In the event of the death of Sainz during the "term of this
Agreement", this Agreement and the Ogden Spain Agreement shall immediately
terminate and Sainz's salary in effect at such time shall continue to be paid by
Ogden Spain to Sainz's designated beneficiary or, if none, to Sainz's personal
representative, through the last day of the month in which such death occurs.
8. SEVERANCE PAY.
If the Company or Ogden Spain gives notice to terminate this Agreement
in accordance with Paragraph 1.(b) hereof or if this Agreement or the services
agreement of Sainz by Ogden Spain is terminated at any time: (i) by Sainz for
Good Reason (as defined in Paragraph 9.), or (ii) by the Company or Ogden Spain,
for any reason OTHER THAN for Cause (as hereinafter defined), Ogden Spain will
be obligated to pay to Sainz a lump-sum cash payment in an amount equal to
Sainz's then existing annual remuneration plus the amount of Sainz's incentive
bonus for the twelve (12) month period ending on December 31 immediately
preceding the date of termination, (the "Severance Payment"). Termination of
this Agreement or Sainz's rendering of services with Ogden Spain on account of
Sainz's disability (in accordance with Paragraph 6. above), death or Retirement
(as hereinafter defined) will not require Ogden Spain to pay and provide any
Severance Payment. Also, no Severance Payment will be required if this
Agreement or the services agreement of Sainz by Ogden Spain is terminated for
Cause (as defined in Subparagraph (b) below) or by Sainz (other than for Good
Reason as defined in Paragraph 9.) in accordance with Paragraph 1.(b) above.
The Severance Payment provided herein is provided in order to reinforce and
encourage the continued loyalty, attention, and dedication of Sainz to the
Company's and Ogden Spain's business and affairs without the concerns which
normally arise from the possibility of a loss of employment security. As used
herein, the terms "Retirement" and "Cause" shall have the following meanings,
respectively:
(a) RETIREMENT.
Termination of this Agreement or Sainz's services with Ogden Spain on
account of "Retirement" shall mean termination on or after Sainz's normal
retirement date in accordance with the terms of the Ogden 401(k) Plan; and
(b) CAUSE.
Termination of this Agreement by the Company of Sainz's services by
Ogden Spain for "Cause" shall mean termination as a result of (i) the willful
and continued failure by Sainz to perform substantially the services
contemplated by this Agreement or the Ogden Spain Agreement (other than any such
failure resulting from Sainz's incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to Sainz by the
Company or Ogden Spain which specifically identifies
4
<PAGE>
the manner in which it is alleged that Sainz has not substantially performed
such services, or (ii) the willful engaging by Sainz in gross misconduct which
is materially and demonstrably injurious to Ogden Spain or the Company; PROVIDED
THAT, no act, or failure to act, on Sainz's part shall be considered "willful"
unless done, or omitted to be done, in bad faith and without reasonable belief
that such action or omission was in, or not opposed to, the best interests of
the Company, or (iii) Sainz violates the Company's Policy of Business Conduct
which has been provided to him upon execution of this Agreement. It is also
expressly understood that Sainz's attention to or engagement in matters not
directly related to the business of Ogden Spain shall not provide a basis for
termination for Cause if such attention or engagement is authorized by the terms
of this Agreement and the Ogden Spain Agreement.
9. TERMINATION BY SAINZ FOR GOOD REASON.
The termination by Sainz of this Agreement or his rendering of
services to Ogden Spain under the Ogden Spain Agreement for "Good Reason" shall
be deemed a justifiable termination of this Agreement and the Ogden Spain
Agreement and shall excuse Sainz from the obligation to render services as
provided in Paragraph 1(a)(i) and (ii) and Paragraph 2. hereof. As used herein,
the phrase "Good Reason" shall mean:
(a)(i) a change in Sainz's status, title or position as an officer of
the Company in the executive capacity set forth in this Agreement or as an
executive of Ogden Spain as set forth in the Ogden Spain Agreement which, in
Sainz's reasonable judgment, does not represent a promotion from or enhancement
of his status, title and position, or (ii) the assignment by the Board of
Directors of Ogden Spain or the Company to Sainz of any duties or
responsibilities which, in Sainz's reasonable judgment, are inconsistent with
such status, title or position, or (iii) any removal of Sainz from or any
failure to reappoint or reelect Sainz to such position, PROVIDED, however, a
termination by the Company of this Agreement or Sainz's services with Ogden
Spain, for Cause or on account of the disability, retirement or death of Sainz
or the termination by Sainz of this Agreement or his services with Ogden Spain
other than for Good Reason, shall not constitute a termination for Good Reason;
(b) a reduction in Sainz's annual remuneration or a failure by
Ogden Spain to pay him any installment of the annual remuneration required by
Paragraph 4.(a) hereof which failure continues for a period of twenty (20) days
after written notice thereof is given by Sainz to Ogden Spain;
(c) the failure by the Company or Ogden Spain within ten (10) days
of notice from Sainz to obtain the assumption of this Agreement and the Ogden
Spain Agreement in form and substance to the reasonable satisfaction of Sainz by
any successor (other than by merger or consolidation for which no separate
assumption is necessary) as referred to in Paragraph 12; or
(d) any refusal by the Company or Ogden Spain to allow Sainz to
attend to matters or engage in activities not directly related to the business
of the Company and Ogden Spain which is permitted by this Agreement and the
Ogden Spain Agreement.
10. NOTICE OF TERMINATION.
Any purported notice of termination of this Agreement and Sainz's
services agreement with Ogden Spain shall be communicated in writing and
delivered to the other party as provided in Paragraph 13. below (hereinafter a
"Notice of Termination").
11. CONFIDENTIALITY AND LIMITED COVENANT NOT TO COMPETE.
5
<PAGE>
In connection with the performance of Sainz's duties in a position of
trust and confidence, Sainz will develop or receive confidential, restricted or
unpublished information involving, customer-related information, vendor-related
information, copyrights, lists, data and other information, strategic planning
or operating data, computer programs, financial, pricing, operating and training
data or other confidential business techniques, processes, methods or
information which is not generally known to the public (collectively referred to
as "proprietary information"). Sainz will receive or have access to
"proprietary information" which was obtained and developed through the
investment of substantial amounts of money, time and effort by the Company or
Ogden Spain. Sainz acknowledges and agrees that disclosure by him of
"proprietary information" or its use for the benefit of any other person or
entity would be injurious to Ogden Spain and the Company. Sainz also
acknowledges and agrees that unless Sainz agrees to maintain the confidentiality
of such "proprietary information" and to limit its use solely to the Company and
Ogden Spain, Sainz would not have been offered this Agreement and had his
services requested by Ogden Spain. Regardless of the cessation of Sainz's
services for any reason, his obligation to continue to maintain the
confidentiality of the "proprietary information" shall continue for a period of
two (2) years following his Termination Date.
Sainz agrees to deliver to the Company or Ogden Spain, at its request, or
in any event, upon cessation of this Agreement or his services with Ogden Spain
(for whatever reason and at whatever time) (a) all memoranda, notes, records,
files or other documentation, whether made or compiled by Sainz alone or in
conjunction with others (regardless of whether such persons are employed by the
Company or Ogden Spain); (b) all "proprietary information" of the Company or
Ogden Spain which is in Sainz's control or possession; and (c) copies of such
information, as well as other corporate property. Regardless of cessation of
this Agreement or Sainz's rendering of services and without any fee, Sainz will
assist the Company or Ogden Spain in protecting all rights the Company and
Ogden Spain may have to such "proprietary information".
Sainz recognizes that, as a direct consequence of the materials,
information and training provided to him by Ogden Spain and the Company, the
access he is granted to "proprietary information" and the opportunities that he
will have while an Executive Vice President of the Company and contracted by
Ogden Spain to cultivate the loyalty and goodwill of customers, suppliers,
vendors and other persons, it is important that Sainz refrain from engaging in
activities which could result in damage to the business of Ogden Spain or the
Company.
Sainz further recognizes that the Company and Ogden Spain have invested
considerable time and money to train its employees, in the services provided by
Ogden Spain and the Company and to develop the special skills required to
perform such services. Therefore, Sainz will not, during the term of this
Agreement and the term of Sainz's services with Ogden Spain under the Ogden
Spain Agreement and for a period of two (2) years immediately thereafter,
solicit, entice, hire or otherwise seek to persuade, either directly or through
any other entity, any officer, employee, consultant or agent of Ogden Spain or
the Company to discontinue such relationship for any reason. During such
period, Sainz will not solicit business with any customers of Ogden Spain or the
Company, nor will Sainz seek to entice or persuade any sources of referral,
vendors or other entities, who are then doing business with Ogden Spain or the
Company to reduce, discontinue or curtail any services provided to Ogden Spain
or the Company in any respect.
To avoid the use of "proprietary information", Sainz agrees to refrain from
engaging in competing employment either directly or indirectly on his own behalf
or as an agent, consultant or employee of any partnership, corporation or other
entity, in Latin America, Spain or other parts of Europe where the Company and
Ogden Spain conducts business for a period of two (2) years after Sainz's
rendering of services with Ogden Spain ceases (regardless of the reason for
cessation of such services). Sainz further agrees with the Company and Ogden
Spain that during this same period, he will not, directly or indirectly,
6
<PAGE>
enter into or engage in the ownership, control or partnership of an entity
engaged in a competing business with Ogden Spain or the Company in Latin
America, or Europe. Sainz further agrees to notify the Company upon obtaining
and before commencing new employment during this period and to provide the
Company any reasonable information requested about his prospective employer and
prospective job duties. Sainz agrees that prior to accepting new employment, he
will disclose, in writing, with a copy to the Company, the existence and terms
of this paragraph 11 to any prospective or subsequent employer.
Sainz recognizes and agrees that ascertaining damages in the event of his
breach or violation of any covenant or undertaking contained in this Agreement
or the Ogden Spain Agreement would be difficult, if not impossible, and further
recognizes that the various rights and duties created in this Agreement or the
Ogden Spain Agreement are essential for the operation of Ogden Spain and the
Company's business operations. Consequently, irreparable injury would result
from any violation of this Agreement and the Ogden Spain Agreement by Sainz.
Since it would be difficult, if not impossible, to compensate fully the Company
or Ogden Spain by monetary damages in the event of Sainz's breach (although the
Company and Ogden Spain retain the right to commence a civil action seeking
monetary damages), Sainz agrees that the Company and Ogden Spain, in addition to
and without limiting any other remedy or right they may have, shall have the
immediate right to obtain a preliminary, and subsequently, a final injunction
against Sainz, to be issued by a court of competent jurisdiction, enjoining
Sainz from engaging in any breach or violation of this Agreement or the Ogden
Spain Agreement. An injunction shall be issued without posting a bond that
otherwise might be required. If an injunction is issued or if monetary damages
are awarded against Sainz, he will reimburse the Company and Ogden Spain for the
legal fees and court cost incurred in obtaining such relief (including all
appeals and other proceedings).
12. BINDING EFFECT.
This Agreement shall be binding upon and inure to the benefit of:
(a) Any successors or assigns of the Company or Ogden Spain,
whether by way of a merger or consolidation, or liquidation of the Company or
Ogden Spain, or by way of the Company or Ogden Spain selling all or
substantially all of the assets of the Company or Ogden Spain to a successor
entity; and
(b) Sainz's estate, his or her executors, administrators, heirs
and beneficiaries.
13. NOTICES.
Any notice or other communication required under this Agreement shall
be in writing, shall be deemed to have been given and received when delivered in
person, or, if mailed, shall be deemed to have been given when deposited in the
mail, first class, registered or certified, return receipt requested, with
proper postage prepaid, and shall be addressed as follows:
If to the Company or Ogden Spain addressed to:
Ogden Corporation
Two Pennsylvania Plaza
New York, New York 10121
Attn: President and Chief Executive Officer
7
<PAGE>
With a copy to its:
Senior Vice President and General Counsel
If to Sainz, addressed to:
Jesus Sainz
Paseo Conde de los Gaitanes, 34,
La Maraleja 28109,
Madrid Spain
or such other address as to which any party hereto may have notified the other
in writing.
14. GOVERNING LAW.
This Agreement shall be governed by and interpreted in accordance with
the laws of the State of New York, without regard to its conflict or choice of
laws provisions to preserve the parties' intent, and the enforceability of this
Agreement. Any action or proceeding brought or arising in connection with this
Agreement shall be venued in the County of New York, New York State, and the
parties hereto hereby submit to the jurisdiction of such courts regardless of
the inconvenience of such forums.
15. ENTIRE AGREEMENT.
This Agreement and the Ogden Spain Agreement contains the entire
arrangement or understanding between Sainz and the Company and Ogden Spain
relating to the Sainz's rendering of services to Ogden Spain and his retention
as Executive Vice President of the Company. No provision of the Agreement and
the Ogden Spain Agreement may be modified or amended except by an instrument in
writing by or for both parties hereto. All references to paragraphs refer to
paragraphs of this Agreement.
16. WAIVER.
Failure of either party hereto to insist upon strict compliance by the
other party with any term, covenant or condition hereof shall not be deemed a
waiver of such term, covenant or condition, nor shall any waiver or
relinquishment or failure to insist upon strict compliance of any right or power
hereunder at any one or more times be deemed a waiver or relinquishment of such
right of power at any other time or times.
17. ASSIGNMENT BY SAINZ.
The rights and benefits of Sainz under this Agreement are personal to
him and no such right or benefit shall be subject to voluntary or involuntary
alienation, assignment or transfer; provided, however, that nothing in this
Paragraph shall preclude Sainz from designating a beneficiary or beneficiaries
to receive any benefit payable on his death.
18. SEVERABILITY.
If for any reason any provision of this Agreement shall be held
invalid, such invalidity shall not affect any other provision of this Agreement
not held so invalid, and all other provisions shall to the full extent
consistent with law continue in full force and effect. If any such provision
shall be held invalid in part, such invalidity shall in no way affect the
remaining portion of such provision not held so
8
<PAGE>
invalid, and the remaining portion of such provision, together with all other
provisions of this Agreement, shall to the full extent consistent with law
continue in full force and effect. In the event that any of the provisions of
paragraph 11 shall be deemed by any court of competent jurisdiction to be
unenforceable because of its duration, scope, or area, it shall be deemed to be
and shall be amended to conform to the scope, period of time, and geographical
area which would permit it to be enforced. The court shall make such
modifications as are necessary to effectuate the intent of the parties in
entering into this Agreement.
19. HEADINGS.
The headings of paragraphs are included solely for convenience of
reference and shall not control the meaning or interpretation of any of the
provisions of this Agreement.
OGDEN CORPORATION
By:
- ----------------------------------- -------------------------------------
Jesus Sainz President, Chief Executive Officer
and Chairman of the Board
9
<PAGE>
EXHIBIT 10.8 (M)
This Service Agreement is made in Madrid, Spain on this 15th day of January,
1998 and shall be effective as of January 1, 1998.
BETWEEN
On the one hand, Mr. R. Richard Ablon, acting for and on behalf of OGDEN
SPAIN, S.A., domiciled at C/Jose Abascal, 58. 4DEG. planta Madrid, Spain. This
Company is duly recorded with the Madrid Company's Registry at Volume Section
___, Sheet ___, Page___ and its Tax Identification Number is (hereinafter, "the
Company").
On the other hand, Mr. Jesus Sainz, of legal age, Identity Card Number
__________, domiciled at Paseo Conde de los Gaitanes, 34, La Moraleja, 28109
Madrid, Spain (hereinafter, "the Manager").
The above parties appear in their respective name and interest mutually
acknowledge their legal capacity to bind themselves pursuant to the present
Services Agreement.
WHEREAS
I. The Company is a company engaged in the development of site based
entertainment opportunities in Latin America, Spain and other parts of
Europe.
II. The Company's interested in having the Manager render his services to the
Company in the conditions hereby agreed upon as per the following.
CLAUSES
1. APPOINTMENT
The Manager has been appointed, has accepted and will serve the Company as
Managing Director effective as of January 1, 1998 as per the resolutions of
the Board of Directors of the Company to this effect, having the Board of
Directors of the Company delegated in the Manager, in accordance with
article 141.2 of the Corporations Act, all powers of the Board of Directors
which may be delegated under Spanish law. Such appointment has been made
on the basis of reciprocal confidence and trust between the parties.
2. DUTIES
2.1 The Manager will devote the whole of his working time (normal
business hours of the Company and all reasonable additional hours as
his duties may require, to the business of the Company. Hours
worked shall depend upon the requirements of his assigned tasks and
upon Company operating hours.
2.2 The Manager shall report to the Board of Directors of the Company.
<PAGE>
2.3 The Manager will perform all reasonable duties expressly assigned to
him by the Board of Directors and will be entitled to exercise the
authority and powers of his position to further Company's business
in the most diligent manner.
The Manager shall perform his assigned duties as Manager in full
compliance with statutory regulations, the provisions of the
memorandum and articles of association, the Company's internal rules
of procedure and the resolutions of the shareholders and the Board.
The Manager shall carry out his duties at the Company's headquarters
located at Madrid.
The Company shall be entitled to assign the Manger other duties in
line with his skills and knowledge, taking due consideration of his
personal situation and both at his duty station or at other
locations where he may reasonably be expected to render his
services.
3. RESTRICTIVE COVENANTS
While serving as Manager of the Company, the Manager shall not transact
business for his own or for another's account in those business sectors in
which the Company is active nor shall he have any interests in any Company
which is in competition with the Company. Exempted shall be interest
holdings which grant to the holder no influence over the executive bodies
of a company and serving as a member of the Board, advisory Board or any
Committee of EDS Spain, S.A.. The performance of such business
transactions or secondary occupations, or the acceptance of supervisory
board seats or similar assignments outside of the Company shall require the
prior written approval of the Board.
The Manager shall accept duties and assignments in which the Company has
vested interest for a period to be determined in consultation with the
shareholders.
Contacts with suppliers, clients and other business partners may not be
exploited for personal gain.
4. REMUNERATION
4.1 In accordance with the corresponding resolution of the Shareholders'
Meeting of the Company, the annual fixed gross remuneration of the
Manager for his services shall be Three Hundred Twenty-Five Thousand
($325,000 U.S. Dollars) payable in equivalent Pesetas, payable in
arrears in twelve equal payments.
The amount above referred is understood as referred to a period of a
calendar year. Therefore, if the Manager joins or is terminated on
a date different from the beginning or termination of the calendar
year, he will obtain the amounts actually earned, proportional to
the period worked during the calendar year.
This remuneration will be reviewed, as the case may be, by the
Shareholders' Meeting every year.
2
<PAGE>
4.2 Moreover, the Manager shall have the opportunity of receiving an
annual discretionary incentive bonus.
4.3 The Company will also provide the Manager with a monthly automobile
allowance in the amount of $700 U.S. Dollars, payable in equivalent
Pesetas.
4.4 The Company shall withhold from the Manager any corresponding
payments for Personal Income Tax or any other tax which replaces the
latter or which becomes payable by reason of the legal provision in
force and it shall file the tax return for the corresponding
withholding and the Manager shall pay any amount for which he is
legally liable.
The Manager shall be responsible for his own registration and
contributions to the Social Security in accordance with the
applicable laws.
4.5 The amounts referred to in Section 4.1 and 4.3 above in U.S.
Dollars, shall be converted into Pesetas using the official exchange
rate of the penultimate day of the month.
5. HOLIDAYS
The Manager shall be entitled to be absent from duty during statutory, bank
and other public holidays and for a further thirty calendar days in each
calendar year to be taken at a time or times to be agreed with the Board.
6. INVENTIONS
The Manager hereby agrees that the Company is entitled to all rights
deriving from inventions, development, concepts, trademarks or other rights
worthy of protection for which the Manager is responsible during the term
of this Agreement and which are related to fields of commercial activity in
which the shareholders, or the Company are in any form active. This
provision shall apply regardless of the protectability of such inventions,
developments, concepts, trademarks or other rights and shall be deemed duly
compensated by the remuneration under Article 4 of this Agreement. The
Manger shall assist in acquiring industrial property rights for the Company
both in Spain and abroad.
The Manager shall notify the Company in writing within four weeks after
commencing the rendering of services to the Company of any inventions he
made prior to this entering into force.
7. DUTY TO OBSERVE SECRECY
7.1 The Manager undertakes not to reveal or disclose any confidential or
secret information of the Company, specifically trade and operating
secrets which may become known to him in the course of his
relationship with the Company and to observe such secrecy both
during the period of this Agreement and following its termination.
7.2 If the Company obtains confidential information from a third party
under an agreement including restriction on disclosure, the Manager
agrees with the Company that he will not
3
<PAGE>
infringe the restriction, either before or after his service as
Managing Director, without the Company's consent.
8. TERM AND TERMINATION
8.1 This Agreement and the appointment to the position of Manager will
enter into force effective as of January 1, 1998 and shall remain in
force for a period of three years, and year to year thereafter,
provided that the Agreement can be revoked in accordance with the
legal provisions and by either the Manager or the Company as of
December 31, 1998 or any subsequent December 31 by written notice
given to the other party at least sixty (60) days prior to such
termination.
8.2 When terminated for any reason, the Manager will immediately return
to the Company all documents, correspondence, drawings and other
material (including copies) belonging to the Company, which are in
his possession or under his control.
9. NON-COMPETITION
9.1 Both parties agree that the Company will have the option of
prohibiting the Manager once the services contract is terminated,
howsoever arising, and during the period below mentioned to engage
directly or indirectly as employee, officer, director, shareholder,
lender, sales representatives or otherwise with any company or
business competing directly with the Company in Spain in providing
services which are the same or similar services to those provided by
the Manager to the Company.
9.2 If the option is exercised by the Company, the non-competition
clause shall apply for a period of twenty-four (24) months as of the
termination of the present contract.
9.3 In the event of enforcement of this non-competition clause, the
Manager, as compensation for non-competition, will receive an amount
equivalent to two years remuneration and bonus. Such amount will be
paid during the months in which the non-competition clause is in
effect.
9.4 The option of enforceability of the non-competition clause, shall be
exercised by the Company in the following thirty (30) calendar days
after the termination of the present contract, howsoever arising.
9.5 In the event of enforcement of this non-competition clause, and if
the Manager fails to comply with these provisions, he shall repay to
the Company the indemnity which he received.
9.6 Notwithstanding the above, in the event of failure of the Manager in
his obligation of non-competition, he shall pay, in addition to the
amount stated in point 9.5, an additional penalty. The amount of
this penalty is equal to the amount received by the Manager under
clause 9.5 as provided for in Articles 1152 and 1152 of the Civil
Code.
4
<PAGE>
This shall not exclude any other indemnity to which the Company is
entitled to and will not liberate the Manager of his undertaking of
non-competition.
10. MISCELLANEOUS
10.1 This Agreement shall be effective as from January 1, 1998.
10.2 Any change to or waiver of any provision will not affect any others.
10.3 This Agreement will be governed by and construed in accordance with
the Spanish Corporations Act and any other applicable laws.
10.4 All modifications to this Agreement will be ineffective unless put
in writing and signed by both parties.
10.5 Should any provision in this Agreement be invalid, this shall not
affect the validity of the remaining provisions, which shall remain
in full force and effect.
IN WITNESS WHEREOF, both parties have signed this Agreement in the place
and on the date above written.
SIGNED AS FOLLOWS:
By
---------------------------------
Duly authorized for and on
Behalf of OGDEN SPAIN, S.A.
By
---------------------------------
The Manager
5
<PAGE>
Ogden Corporation and Subsidiaries
Management's Discussion and Analysis of Consolidated Operations
The following discussion and analysis should be read in conjunction with
the Corporation's Financial Statements and notes thereto.
During the past two years, Ogden disposed of most of the operations,
which were not part of its core business segments--Entertainment, Aviation,
and Energy. Ogden elected to change the reporting of its business segments
as of January 1, 1997, and restated its prior years' presentation to conform
to this revised segment reporting. Two of Ogden's core businesses formerly
reported as part of the Services segment--Entertainment and Aviation--have
been designated as separate business segments. All other operations formerly
in the Services segment, mainly the Facility Management and Technology
groups, were transferred to the Other segment except for Facility Management
operations at Ogden's waste-to-energy plants and its environmental business,
which have been transferred to the Energy segment. Noncore businesses
scheduled for disposition are included in the Other segment.
Operations: Revenues for 1997 were $1,749,725,000, which was 13.9% or
$281,400,000 lower than the comparable period of 1996. This was primarily
due to a decline of $239,900,000 in the Other segment's revenues, primarily
reflecting businesses sold during 1996 and 1997--namely, Facility Services,
W.J. Schafer Associates, and Ogden Professional Services (formerly in the
Technology group) and certain operations of Atlantic Design Company (ADC), a
contract manufacturing business. This reduction in revenues was partially
offset by the net gain on such sales as well as the gain on the 1997 sale of
the Corporation's 50% equity investment in the Universal Ogden joint venture.
The Entertainment segment's revenues increased $34,000,000, chiefly
associated with the inclusion of full- year results for Florida Leisure,
Inc., which was acquired in 1996, new accounts, and the start-up of the
American Wilderness Experience-TM- in the United States as well as operations
in Germany and Aruba. The Aviation segment's revenues were $63,500,000
lower, primarily resulting from the 1997 sales of the Miami and Spanish
in-flight catering operations and certain ground services operations, which
was partially offset by the gain on the sale of such businesses as well as
the sale of a 5% interest in the Hong Kong ground services company. The
Energy segment's revenues were $12,000,000 lower, primarily due to reduced
activity in the consulting and engineering groups and reduced construction
activity and the effect of certain favorable legal settlements in 1996. This
reduction in revenues was partially offset by increased customer activity at
several waste-to-energy facilities and the commencement of operations of the
independent power group's Edison Bataan facility and its acquisition of
Pacific Energy, Inc., in September 1997.
Consolidated operating income for 1997 was $137,714,000, which was
approximately 16.5% or $19,500,000 higher than 1996. The Entertainment
segment's income from operations was $10,300,000 higher, primarily reflecting
new accounts and increased customer activity in several domestic sports and
amphitheater venues and European operations, partially offset by development
costs associated with the American Wilderness Experience-TM- project. The
Aviation segment's income from operations increased $19,100,000, chiefly
associated with the sales of the Miami and Spanish in-flight catering
operations, a 5% interest in the Hong Kong ground services company, and
certain ground services operations in 1997 and a charge in 1996 reflecting
the decision to close a ground services location, which were partially offset
by reduced activity in catering and European customer activity. The Energy
segment's income from operations was $4,000,000 higher, primarily reflecting
increased income in the independent power group, reflecting the acquisitions
of the Edison Bataan facility in August 1996 and Pacific Energy, Inc., in
September 1997. These increases were partially offset by reduced income in
the waste-to-energy group, chiefly associated with the effect of 1996
favorable legal settlements, which more than offset increased activity at
several waste-to-energy facilities. The Other segment's income from
operations decreased $16,200,000 due to the net impact of the businesses sold
in 1996 and 1997 and the effect of the 1997 provision for the disposition of
certain operations of ADC, partially offset by the gain on the sales in 1997
of Facility Services' operations in New York City and the Corporation's 50%
equity interest in the Universal Ogden joint venture.
Selling, general, and administrative expenses for 1997 were $109,148,000,
which was approximately 8.4% or $10,000,000 lower than 1996, chiefly
associated with the sale of noncore businesses and the benefit of Ogden's
restructuring activities. Debt service charges for 1997 were $2,800,000
lower than the comparable period of 1996, primarily due to lower average debt
outstanding on various waste-to-energy facilities, partially offset by
increased project debt associated with the Edison Bataan facility. The
Energy segment has three interest rate swap agreements entered into as hedges
against interest rate exposure on three series of adjustable-rate project
debt that resulted in additional debt service costs of $300,000 and $700,000
for 1997 and 1996, respectively. The effect of these swap agreements on the
weighted-average interest rate of project debt was not significant.
Interest income for 1997 was $8,300,000 higher than 1996, chiefly
associated with interest earned on increased loans to customers and joint
ventures and notes receivable received in connection with the sale of various
operations, as well as higher cash and cash equivalents. Interest expense
was $3,500,000 higher, chiefly associated with borrowings relating to loans
to customers, partially offset by lower borrowings on revolving credit lines.
X-1
<PAGE>
Ogden has two interest rate swap agreements covering notional amounts of
$100,000,000 and $4,700,000, respectively. The first swap agreement expires
on December 16, 1998, and was entered into in order to convert Ogden's
fixed-rate $100,000,000, 9.25% debentures into variable-rate debt. The
second swap agreement expires on November 30, 2000, and was entered into in
order to convert Ogden's $4,700,000 variable-rate debt to a fixed rate.
These agreements resulted in additional interest expense in 1997 and 1996 of
$400,000 and $200,000, respectively. The effect of these swap agreements on
the weighted-average interest rate was not significant.
Equity in net income of investees and joint ventures for 1997 was
$1,600,000 lower, chiefly associated with the sale of the Corporation's 50%
equity interest in the Universal Ogden joint venture in the first quarter of
1997 and lower income in Entertainment's overseas joint ventures, partially
offset by increased earnings in Aviation's Macau joint venture as well as in
connection with Energy's acquisition of Pacific Energy, Inc., and its joint
ventures.
The effective income tax rate for 1997 was 40.6%, compared with 42.1% in
1996. This decrease of 1.5% was due to a net reduction in the net permanent
differences between book and taxable income. Note 22 to the Consolidated
Financial Statements contains a more detailed reconciliation of the variances
from the Federal statutory income tax rate.
Revenues for 1996 were $2,031,081,000, which was approximately 7.0% or
$153,900,000 lower than the comparable period of 1995. The Other segment's
revenues declined $175,800,000, primarily reflecting the sale of Facility
Services' operations outside of New York City as of June 30, 1996, and
certain Technology businesses sold in late 1995 and 1996 and a decrease in
revenues in an air range and pilot training systems company. This decline in
revenues was partially offset by increased revenues of ADC and a net gain of
$13,200,000 from the disposition of certain businesses in 1996. The Energy
segment's revenues declined $45,500,000, reflecting lower construction
revenues of $66,500,000, primarily due to the completion of the Montgomery
County (Maryland) waste-to-energy facility in August 1995 and reduced
construction at the Detroit (Michigan) facility as well as a reduction of
$24,200,000 due to the sale of its laboratory business in January 1996. This
decline was partially offset by increased waste-to-energy services revenues
of $41,300,000 reflecting a full year of commercial operations of the
Onondaga County (New York) and Montgomery County facilities, which commenced
operations in March and August 1995, respectively; increased activity and
efficiency at other facilities; and the effect of certain legal settlements.
The Aviation segment's revenues were $23,300,000 lower, chiefly associated
with the sale of ground handling service operations at John F. Kennedy
International Airport in 1996 and the sale of a Brazilian aviation unit in
1995. The revenue declines in the Other, Energy, and Aviation segments were
partially offset by increased revenues of $90,600,000 in the Entertainment
segment, primarily reflecting new contracts; increased customer activity,
primarily at sports venues; the start-up of operations in Europe and
Argentina; and the acquisition of Florida Leisure, Inc., in 1996.
Consolidated operating income for 1996 was $118,200,000 as compared with
$49,400,000 in 1995. Operating income for 1995 was reduced by charges
totaling $82,800,000, which reflected the early adoption of Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of";
restructuring initiatives; and other unusual losses and costs. These charges
in 1995 were partially offset by a gain of $13,500,000 from the sale of a
noncore business in 1995. In addition, 1996 reflects an increase of
$23,200,000 in the Entertainment segment's income from operations, primarily
due to new contracts, increased customer activity, a reduction of losses in
European operations, the start-up of operations in Argentina, and the
acquisition of Florida Leisure, Inc., in 1996. The Other segment's income
from operations was $5,800,000 lower, chiefly associated with businesses that
have been disposed of and reduced margins, higher operating costs, adjustment
to inventories and deferred charges at ADC, and lower earnings in overseas
operations, partially offset by a net gain of $13,200,000 from the
disposition of certain noncore businesses included in the Other segment,
namely, the sale of Facility Services' operations outside of New York City
and a unit of the Technology group--Ogden Professional Services--and the
discontinuance of asbestos abatement operations. The Energy segment's income
from operations was $6,700,000 lower, primarily reflecting a decrease of
$26,900,000 in construction income reflecting the completion of the
Montgomery County facility in August 1995 and reduced activity at the Detroit
facility as well as a reduction of $3,500,000 in the independent power
group's income, primarily due to increased development costs and a facility
shutdown for major boiler repairs, decreased energy rates at one facility,
and reduced profitability at several facilities. These decreases were
partially offset by an increase of $21,500,000 in waste-to-energy income,
chiefly associated with the effect of certain legal settlements in 1995 and
1996 also referred to above and the effect of restructuring costs incurred in
1995. Energy has three interest rate swap agreements entered into as hedges
against interest rate exposure on three series of adjustable-rate project
debt that resulted in additional debt service of $700,000 in 1996 and lower
debt service of $230,000 in 1995. The effect of these swap agreements on the
weighted-average interest rate of project debt was not significant.
X-2
<PAGE>
Interest income for 1996 was relatively comparable with 1995. Interest
expense for 1996 was $1,900,000 lower than 1995, chiefly associated with
lower borrowings, lower interest rates on variable-rate debt, and a reduction
of interest costs on two interest rate swap agreements covering notional
amounts of $100,000,000 and $6,300,000, respectively. The first swap
agreement expires on December 16, 1998, and was entered into in order to
convert Ogden's fixed-rate $100,000,000, 9.25% debentures into variable-rate
debt. The second swap agreement expires November 30, 2000, and was entered
into in December 1995 in order to convert Ogden's $6,300,000 variable-rate
debt to a fixed rate. These agreements resulted in additional interest
expense of $200,000 in 1996 and $600,000 in 1995. The effect of these swap
agreements on the weighted-average interest rate was not significant.
Equity in net income of investees and joint ventures for 1996 was
$3,300,000 lower, primarily reflecting reduced earnings in the independent
power group's joint ventures due to reduced energy prices.
The effective income tax rate for 1996 was 42.1%, compared with 84.5% in
1995. This decrease of 42.4% was primarily due to the effect of adopting SFAS
No. 121 in 1995, which included the write-down of goodwill for which the
Corporation did not receive tax benefits, as well as higher foreign tax rates
and certain nondeductible foreign losses in 1995, which did not recur in
1996. Note 22 to the Consolidated Financial Statements contains a more
detailed reconciliation of the variances from the Federal statutory income
tax rate.
Capital Investments and Commitments: During 1997, capital investments
amounted to $116,201,000 of which $28,500,000, inclusive of restricted funds
transferred from funds held in trust, was for Energy facilities and
$87,701,000 was for normal replacement and growth in Entertainment
($52,523,000), Aviation ($19,008,000), Energy ($11,467,000), and Corporate
and Other ($4,703,000) operations.
At December 31, 1997, future capital commitments amounted to
$158,700,000, which included $86,100,000 for normal replacement,
modernization, and growth in Entertainment ($45,200,000); Aviation
($23,200,000); Energy ($16,800,000); and Corporate and Other ($900,000)
operations. Also included was $61,200,000 for Energy's coal-fired power
project in the Philippines reflecting $41,800,000 for the remaining mandatory
equity contributions, $5,700,000 for contingent equity contributions, and
$13,700,000 for a standby letter of credit in support of debt service reserve
requirements. Funding for the remaining mandatory equity contribution is
being provided through a bank credit facility, which must be repaid in
December 2001. The Corporation also has a $11,400,000 contingent equity
contribution in an entertainment venture. In addition, compliance with
standards and guidelines under the Clean Air Act Amendments of 1990 will
require further Energy capital expenditures currently estimated at
$40,000,000 by December 2000, subject to final time schedules determined by
the individual states in which the Corporation's waste-to-energy facilities
are located.
Ogden and certain of its subsidiaries have issued or are party to
performance bonds and guarantees and related contractual obligations
undertaken mainly pursuant to agreements to construct and operate certain
waste-to-energy, entertainment, and other facilities. In the normal course
of business, they are involved in legal proceedings in which damages and
other remedies are sought. In connection with certain contractual
arrangements, Ogden has agreed to provide two vendors with specified amounts
of business over a three-and-a-half-year period. If these amounts are not
provided, the Corporation may be liable for prorated damages of approximately
$5,700,000. Management does not expect that these contractual obligations,
legal proceedings, or any other contingent obligations incurred in the normal
course of business will have a material adverse effect on Ogden's
Consolidated Financial Statements.
During 1994, a subsidiary of Ogden entered into a 30-year facility
management contract, pursuant to which it agreed to advance funds to a
customer, and if necessary, to assist the customer's refinancing of senior
secured debt incurred in connection with the construction of the facility.
During 1997, Ogden purchased the customer's senior secured debt in the amount
of $95,000,000 using borrowed funds, which senior secured debt was
subsequently sold and the borrowed funds repaid. Ogden is obligated to
repurchase such senior secured debt in the amount of $97,679,000 on December
30, 2002, if such debt is not refinanced prior to that time. Ogden's
repurchase obligation is collateralized by bank letters of credit. Ogden is
also required to repurchase the outstanding amount of certain subordinated
secured debt issued by such customer on December 30, 2002. The amount
outstanding at December 31, 1997, was $46,562,000. In February 1998, this
amount was increased to $51,624,000. During 1997, this customer purchased
certain subordinated secured debt and repaid other amounts owed to Ogden in
an aggregate amount of $38,900,000. In February 1998, this customer repaid
an additional $7,343,000 owed to Ogden. In addition, at December 31, 1997,
the Corporation had guaranteed indebtedness of $20,683,000 of an affiliate
and principal tenant of this customer, which indebtedness is due in September
1998. Ogden has also guaranteed borrowings of another customer amounting to
approximately $14,400,000 as well as $15,500,000 of borrowings of joint
ventures in which Ogden has an equity interest. Management does not expect
that these arrangements will have a material adverse effect on Ogden's
Consolidated Financial Statements.
X-3
<PAGE>
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosure about
Segments of an Enterprise and Related Information." The adoption of these
Statements, which concern disclosure standards only, will have no impact on
Ogden's consolidated results of operations, financial position, or cash
flows. The Corporation adopted American Institute of Certified Public
Accountants Statement of Position No. 96-1, "Environmental Remediation
Liabilities," at December 31, 1996. Management has concluded that it does
not have any liability or disclosure requirements as a result of adopting
this Statement of Position.
Liquidity/Cash Flow: Net cash provided by operating activities in 1997
was $66,400,000 higher than 1996, primarily due to the sales of businesses in
1996 and 1997 and the collection of receivables reflecting the settlement of
certain matters in dispute. Net cash used in investing activities increased
$101,800,000. The principal changes were a net increase of $46,200,000 in
acquisitions reflecting the purchase of Pacific Energy, Inc., Enchanted
Castle, and a 60% interest in four cogeneration plants in China; an increase
of $52,000,000 in capital expenditures primarily in the Entertainment
segment, reflecting investments in the American Wilderness Experience-TM-
project and expansion projects at several other facilities, and at Aviation's
cargo facility in the Czech Republic; lower proceeds of $29,800,000 received
from the sale of businesses; and a decrease in other receivables of
$40,500,000, primarily due to the collection of notes receivable from a
customer. Net cash used in financing activities decreased $37,500,000,
primarily due to an increase in net borrowings of $40,000,000. This decrease
was partially offset by lower use of restricted funds held in trust of
$3,000,000.
Exclusive of changes in Energy facility construction activities and the
contracts discussed herein, the Corporation's other types of contracts are
not expected to have a material effect on liquidity. Debt service associated
with project debt, which is an explicit component of a client community's
obligation under its service agreement, is paid as it is billed and
collected. Cash required for investing and financing activities is expected
to be satisfied from operating activities; available funds, including
short-term investments; proceeds from the sale of noncore businesses;
proceeds from the sale of debt or equity securities; and the Corporation's
unused credit facilities to the extent needed.
At December 31, 1997, the Corporation had $185,671,000 in cash and cash
equivalents and unused revolving credit lines of $217,000,000.
In January 1998, Ogden's Board of Directors reauthorized the purchase of
shares of the Corporation's common stock in an amount up to $100,000,000.
Fifty thousand (50,000) shares of common stock were purchased in February
1998 for $1,372,000. In addition, in January 1998, a joint venture in which
the Corporation has a 28% interest was awarded a 30-year concession contract
to develop, improve, and operate 33 airports in Argentina. Ogden has a
commitment of $28,000,000 for its equity contribution in this joint venture.
In 1996, the Corporation started a program to upgrade its principal
computer hardware and software systems. Completion of this project,
scheduled for 1998, will result in the related systems being able to process
information after the turn of the century. In connection with the Year 2000
problem, the Corporation is presently assessing the impact of this problem on
its business, including its facility systems, its operational systems, and
its overseas operations. Certain noncompliant systems are in the process of
being replaced or upgraded with packaged software that is Year 2000
compliant. The Corporation intends to request third parties with whom it
does business to ascertain whether they will be Year 2000 compliant. The
Corporation may be adversely impacted if such third parties do not adequately
address this issue. Both internal and external resources may be used in
addressing Year 2000 issues. Based on information obtained to date, costs of
addressing potential Year 2000 problems are not expected to have a material
adverse impact on Ogden's financial position, results of operations, or cash
flows.
Any statements in this communication, which may be considered to be
"forward looking statements" as that term is defined in the Private
Securities Litigation Reform Act of 1995, are subject to certain risks and
uncertainties. The factors that could cause actual results to differ
materially from those suggested by any such statements include, but are not
limited to, those discussed or identified from time to time in the
Corporation's public filings with the Securities and Exchange Commission and
more generally, general economic conditions, including changes in interest
rates and the performance of the financial markets; changes in domestic and
foreign laws, regulations, and taxes; changes in competition and pricing
environments; and regional or general changes in asset valuations.
X-4
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1997 1996 1995 1994 1993
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
(In thousands of dollars, except per-share
amounts)
Total Revenues............................. $ 1,749,725 $ 2,031,081 $ 2,184,993 $ 2,104,547 $ 2,035,860
------------ ------------ ------------ ------------ ------------
Income before cumulative effect of changes
in accounting principles................. 75,673 64,534 7,444 67,826 62,130
Cumulative effect of changes in accounting
principles............................... (1,520) (5,340)
------------ ------------ ------------ ------------ ------------
Net income................................. 75,673 64,534 7,444 66,306 56,790
------------ ------------ ------------ ------------ ------------
Basic Earnings Per Share:
Income before cumulative effect of changes
in accounting principles................. 1.51 1.30 0.15 1.55 1.43
Cumulative effect of changes in accounting
principles............................... (0.03) (0.12)
------------ ------------ ------------ ------------ ------------
Total...................................... 1.51 1.30 0.15 1.52 1.31
------------ ------------ ------------ ------------ ------------
Diluted Earnings Per Share:
Income before cumulative effect of changes
in accounting principles................. 1.49 1.28 0.15 1.51 1.39
Cumulative effect of changes in accounting
principles............................... (0.03) (0.11)
------------ ------------ ------------ ------------ ------------
Total...................................... 1.49 1.28 0.15 1.48 1.28
------------ ------------ ------------ ------------ ------------
Total Assets............................... 3,639,295 3,597,532 3,652,671 3,644,886 3,340,729
------------ ------------ ------------ ------------ ------------
Long-Term Obligations...................... 1,927,330 1,958,717 2,044,186 2,047,031 1,946,547
------------ ------------ ------------ ------------ ------------
Shareholders' Equity....................... 566,091 550,925 546,978 596,818 486,267
------------ ------------ ------------ ------------ ------------
Shareholders' Equity Per Common Share...... 11.24 11.06 11.04 12.21 11.15
------------ ------------ ------------ ------------ ------------
Cash Dividends Declared Per
Common Share............................... 1.25 1.25 1.25 1.25 1.25
------------ ------------ ------------ ------------ ------------
</TABLE>
Net income in 1995 reflects a net after-tax charge of $48.9 million, or $.98 per
share, diluted (see Notes 20 and 21 to the Consolidated Financial Statements).
Net income in 1993 was reduced by $.08 per share, diluted, reflecting the
retroactive effect of the increased Federal income tax rate that was enacted in
August 1993 on the previous years' deferred income tax balances.
X-5
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1997 1996 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Service revenues........................................... $ 1,133,108,000 $ 1,392,686,000 $ 1,563,748,000
Net sales.................................................. 582,134,000 621,830,000 551,345,000
Construction revenues...................................... 3,402,000 69,900,000
Net gain on sale of businesses............................. 34,483,000 13,163,000
---------------- ---------------- ----------------
Total revenues............................................. 1,749,725,000 2,031,081,000 2,184,993,000
---------------- ---------------- ----------------
Operating costs and expenses............................... 855,959,000 1,089,265,000 1,318,847,000
Costs of goods sold........................................ 539,640,000 592,223,000 518,457,000
Construction costs......................................... 2,196,000 41,756,000
Selling, administrative, and general expenses.............. 109,148,000 119,147,000 144,714,000
Debt service charges....................................... 107,264,000 110,055,000 111,850,000
---------------- ---------------- ----------------
Total costs and expenses................................... 1,612,011,000 1,912,886,000 2,135,624,000
---------------- ---------------- ----------------
Consolidated operating income.............................. 137,714,000 118,195,000 49,369,000
Equity in net income of investees and joint ventures....... 2,036,000 3,604,000 6,866,000
Interest income............................................ 23,476,000 15,142,000 15,126,000
Interest expense........................................... (32,077,000) (28,572,000) (30,491,000)
Other income (deductions)-net.............................. (371,000) 1,272,000 (344,000)
---------------- ---------------- ----------------
Income before income taxes and minority interests.......... 130,778,000 109,641,000 40,526,000
Income taxes............................................... (53,100,000) (46,161,000) (34,237,000)
Minority interests......................................... (2,005,000) 1,054,000 1,155,000
---------------- ---------------- ----------------
Net income................................................. $ 75,673,000 $ 64,534,000 $ 7,444,000
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Basic Earnings Per Share................................... $ 1.51 $ 1.30 $ 0.15
---------------- ---------------- ----------------
---------------- ---------------- ----------------
Diluted Earnings Per Share................................. $ 1.49 $ 1.28 $ 0.15
---------------- ---------------- ----------------
---------------- ---------------- ----------------
</TABLE>
See Notes to Consolidated Financial Statements
X-6
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------
ASSETS 1997 1996
- ------ ---------------- ----------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents.................................................... $ 185,671,000 $ 140,824,000
Restricted funds held in trust............................................... 103,882,000 101,326,000
Receivables (less allowances: 1997, $20,207,000 and 1996, $38,275,000)....... 393,185,000 503,424,000
Inventories.................................................................. 34,235,000 56,566,000
Deferred income taxes........................................................ 56,690,000 31,434,000
Other........................................................................ 58,408,000 52,598,000
---------------- ----------------
Total current assets......................................................... 832,071,000 886,172,000
Property, plant, and equipment-net........................................... 1,947,547,000 1,851,304,000
Restricted funds held in trust............................................... 206,013,000 209,485,000
Unbilled service and other receivables (less allowances: 1997, $3,000,000 and
1996, $6,000,000).......................................................... 174,962,000 218,422,000
Unamortized contract acquisition costs....................................... 136,462,000 138,777,000
Goodwill and other intangible assets......................................... 79,889,000 81,555,000
Other assets................................................................. 262,351,000 211,817,000
---------------- ----------------
Total Assets................................................................. $ 3,639,295,000 $ 3,597,532,000
---------------- ----------------
---------------- ----------------
Liabilities and Shareholders' Equity
- ------------------------------------
Liabilities:
Current Liabilities:
Current portion of long-term debt............................................ $ 19,696,000 $ 3,560,000
Current portion of project debt.............................................. 68,052,000 60,966,000
Dividends payable............................................................ 15,721,000 15,547,000
Accounts payable............................................................. 109,719,000 104,978,000
Federal and foreign income taxes payable..................................... 1,913,000 7,648,000
Accrued expenses, etc........................................................ 267,874,000 302,597,000
Deferred income.............................................................. 42,962,000 46,228,000
---------------- ----------------
Total current liabilities.................................................... 525,937,000 541,524,000
Long-term debt............................................................... 354,032,000 309,377,000
Project debt................................................................. 1,424,648,000 1,500,690,000
Deferred income taxes........................................................ 383,341,000 325,925,000
Other liabilities............................................................ 208,179,000 212,538,000
Minority interests........................................................... 28,417,000 7,903,000
Convertible subordinated debentures.......................................... 148,650,000 148,650,000
---------------- ----------------
Total Liabilities............................................................ 3,073,204,000 3,046,607,000
---------------- ----------------
Shareholders' Equity:
Serial cumulative convertible preferred stock, par value $1.00 per share;
authorized, 4,000,000 shares; shares outstanding: 44,346 in 1997 and 47,689
in 1996, net of treasury shares of 29,820 in 1997 and 1996................. 45,000 48,000
Common stock, par value $.50 per share; authorized, 80,000,000 shares; shares
outstanding: 50,295,123 in 1997 and 49,744,527 in 1996, net of treasury
shares of 3,135,123 in 1997 and 3,606,123 in 1996.......................... 25,147,000 24,872,000
Capital surplus.............................................................. 212,383,000 202,162,000
Earned surplus............................................................... 343,237,000 330,302,000
Cumulative translation adjustment-net........................................ (13,862,000) (5,768,000)
Pension liability adjustment................................................. (324,000) (565,000)
Net unrealized loss on securities available for sale......................... (535,000) (126,000)
---------------- ----------------
Total Shareholders' Equity................................................... 566,091,000 550,925,000
---------------- ----------------
Total Liabilities and Shareholders' Equity................................... $ 3,639,295,000 $ 3,597,532,000
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Consolidated Financial Statements
X-7
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------------------------------------------
1997 1996 1995
------------------------------ ---------------------------- --------------------------
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
-------------- -------------- -------------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Serial Cumulative Convertible
Preferred Stock, Par Value
$1.00 Per Share; Authorized,
4,000,000 Shares:
Balance at beginning of
year........................ 77,509 $ 78,000 79,289 $ 80,000 83,323 $ 84,000
Shares converted into common
stock....................... (3,343) (3,000) (1,780) (2,000) (4,034) (4,000)
-------------- -------------- -------------- ------------ ------------ ------------
Total......................... 74,166 75,000 77,509 78,000 79,289 80,000
Treasury shares............... (29,820) (30,000) (29,820) (30,000) (29,820) (30,000)
-------------- -------------- -------------- ------------ ------------ ------------
Balance at end of year
(aggregate involuntary
liquidation value-1997,
$894,000)................... 44,346 45,000 47,689 48,000 49,469 50,000
-------------- -------------- -------------- ------------ ------------ ------------
Common Stock, Par Value $.50
Per Share; Authorized,
80,000,000 Shares:
Balance at beginning of
year........................ 53,350,650 26,675,000 53,202,904 26,602,000 52,641,215 26,320,000
Exercise of stock options,
less common stock
utilized.................... 59,640 30,000 137,134 68,000 10,735 6,000
Shares used for pooling of
interests................... 526,869 264,000
Conversion of preferred
shares...................... 19,956 10,000 10,612 5,000 24,085 12,000
-------------- -------------- -------------- ------------ ------------ ------------
Total......................... 53,430,246 26,715,000 53,350,650 26,675,000 53,202,904 26,602,000
-------------- -------------- -------------- ------------ ------------ ------------
Treasury shares at beginning
of year..................... 3,606,123 1,803,000 3,735,123 1,868,000 3,864,123 1,932,000
Exercise of stock options..... (471,000) (235,000) (129,000) (65,000) (129,000) (64,000)
-------------- -------------- -------------- ------------ ------------ ------------
Treasury shares at end of
year........................ 3,135,123 1,568,000 3,606,123 1,803,000 3,735,123 1,868,000
-------------- -------------- -------------- ------------ ------------ ------------
Balance at end of year........ 50,295,123 25,147,000 49,744,527 24,872,000 49,467,781 24,734,000
-------------- -------------- -------------- ------------ ------------ ------------
Capital Surplus:
Balance at beginning of
year........................ 202,162,000 197,921,000 194,496,000
Exercise of stock options,
less common stock
utilized.................... 10,228,000 4,244,000 2,620,000
Arising from pooling of
interests................... 813,000
Conversion of preferred
shares...................... (7,000) (3,000) (8,000)
-------------- ------------ ------------
Balance at end of year........ 212,383,000 202,162,000 197,921,000
-------------- ------------ ------------
Earned Surplus:
Balance at beginning of
year........................ 330,302,000 328,047,000 381,864,000
Net income.................... 75,673,000 64,534,000 7,444,000
-------------- ------------ ------------
Total......................... 405,975,000 392,581,000 389,308,000
-------------- ------------ ------------
Preferred dividends-per share
1997, 1996, and 1995,
$3.35....................... 152,000 161,000 171,000
Common dividends-per share
1997, 1996, and 1995,
$1.25....................... 62,586,000 62,118,000 61,090,000
-------------- ------------ ------------
Total dividends............... 62,738,000 62,279,000 61,261,000
-------------- ------------ ------------
Balance at end of year........ 343,237,000 330,302,000 328,047,000
-------------- ------------ ------------
Cumulative Translation
Adjustment-Net.............. (13,862,000) (5,768,000) (2,657,000)
-------------- ------------ ------------
Pension Liability
Adjustment.................. (324,000) (565,000) (760,000)
-------------- ------------ ------------
Net Unrealized Loss on
Securities Available For
Sale........................ (535,000) (126,000) (357,000)
-------------- ------------ ------------
Total Shareholders' Equity.... $ 566,091,000 $550,925,000 $546,978,000
-------------- ------------ ------------
-------------- ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
X-8
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income........................................................................... $ 75,673,000 $ 64,534,000 $ 7,444,000
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Depreciation and amortization........................................................ 104,377,000 115,263,000 109,604,000
Deferred income taxes................................................................ 24,975,000 20,027,000 18,153,000
Long-lived asset write-downs......................................................... 45,260,000
Other................................................................................ (26,015,000) (20,663,000) 11,986,000
Management of Operating Assets and Liabilities:
Decrease (Increase) in Assets:
Accounts receivable.................................................................. 111,326,000 54,633,000 (43,852,000)
Inventories.......................................................................... 18,916,000 (27,392,000) (11,825,000)
Other assets......................................................................... (5,313,000) (25,231,000) (56,410,000)
Increase (Decrease) in Liabilities:
Accounts payable..................................................................... 7,892,000 (1,608,000) 8,472,000
Accrued expenses..................................................................... (46,582,000) (1,689,000) 1,920,000
Deferred income...................................................................... (3,393,000) 10,233,000 3,861,000
Other liabilities.................................................................... (19,306,000) (11,927,000) (22,369,000)
------------ ------------ ------------
Net cash provided by operating activities............................................ 242,550,000 176,180,000 72,244,000
------------ ------------ ------------
Cash Flows From Investing Activities:
Entities purchased, net of cash acquired............................................. (63,212,000) (16,968,000) (15,474,000)
Proceeds from sale of marketable securities available for sale....................... 13,970,000 13,158,000 71,364,000
Proceeds from sale of businesses..................................................... 61,164,000 90,946,000 18,000,000
Proceeds from sale of property, plant, and equipment................................. 4,865,000 6,803,000 5,402,000
Investments in Energy facilities..................................................... (28,459,000) (14,303,000) (26,827,000)
Other capital expenditures........................................................... (87,742,000) (49,888,000) (65,999,000)
Decrease (increase) in other receivables............................................. 51,046,000 10,553,000 (2,809,000)
Investments in marketable securities available for sale.............................. (13,970,000)
Distributions from investees and joint ventures...................................... 49,605,000
Increases in investments in and advances to investees and joint ventures............. (68,748,000) (19,985,000) (27,983,000)
------------ ------------ ------------
Net cash provided by (used in) investing activities.................................. (81,481,000) (20,316,000) (44,326,000)
------------ ------------ ------------
Cash Flows From Financing Activities:
Borrowings for Energy facilities..................................................... 57,358,000 124,272,000 96,822,000
Other new debt....................................................................... 102,266,000 6,552,000 40,948,000
Payment of debt...................................................................... (217,970,000) (229,206,000) (139,205,000)
Dividends paid....................................................................... (62,564,000) (62,026,000) (59,604,000)
Decrease in funds held in trust...................................................... 928,000 3,903,000 9,514,000
Proceeds from exercise of stock options.............................................. 10,493,000 4,377,000 2,691,000
Other................................................................................ (5,447,000) (289,000) 630,000
------------ ------------ ------------
Net cash used in financing activities................................................ (114,936,000) (152,417,000) (48,204,000)
------------ ------------ ------------
Effect of foreign currency exchange rate changes on cash and cash equivalents........ (1,286,000) (37,000) (291,000)
------------ ------------ ------------
Net Increase (Decrease) in Cash and Cash Equivalents................................. 44,847,000 44,042,000 (20,577,000)
Cash and Cash Equivalents at Beginning of Year....................................... 140,824,000 96,782,000 117,359,000
------------ ------------ ------------
Cash and Cash Equivalents at End of Year............................................. $185,671,000 $140,824,000 $ 96,782,000
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements
X-9
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation, Combinations, etc.: The Consolidated Financial
Statements include the accounts of Ogden Corporation and its subsidiaries
(Ogden). Companies in which Ogden has equity investments of 50% or less are
accounted for using the "Equity Method," if appropriate. All intercompany
transactions and balances have been eliminated.
In 1997, in transactions accounted for as purchases, Ogden acquired the
shares of Pacific Energy, Inc., and Enchanted Castle as well as a 60% interest
in four cogeneration plants in China for a total cost of $124,217,000. The
operations of these companies have been included in the accompanying financial
statements from dates of acquisition. If Ogden had acquired these companies at
January 1, 1996, consolidated revenues, net income, and diluted earnings per
share would have been $1,796,779,000, $84,169,000, and $1.64 for 1997 and
$2,079,398,000, $73,187,000, and $1.45 for 1996.
In December 1996, in transactions accounted for as purchases, Ogden acquired
the shares of Florida Leisure, Inc., and Edison (Bataan) Cogeneration
Corporation for a total cost of $16,968,000. The operations of these companies
have been included in the accompanying financial statements from dates of
acquisition. If Ogden had acquired these companies at January 1, 1995,
consolidated revenues, net income, and diluted earnings per share would have
been $2,033,000,000, $60,565,000, and $1.20 for 1996 and $2,210,000,000,
$2,687,000, and $.05 for 1995.
In December 1995, Ogden issued 526,869 shares of common stock in exchange
for all of the outstanding shares of Firehole Entertainment Corp. (Firehole).
This transaction was accounted for as a pooling of interests. The accompanying
financial statements for 1995 have not been restated to include the accounts of
Firehole, since the amounts did not have a significant effect on prior period
reported results or balances.
In addition, in other transactions accounted for as purchases in 1995, Ogden
acquired the shares of Applied Data Technology, Inc., an air range and pilot
training systems company, and four airline catering kitchens in the Canary and
Balearic Islands for a total cost of $15,474,000. The operations of these
companies have been included in the accompanying financial statements from dates
of acquisition. If Ogden had acquired these companies at January 1, 1995, total
revenues, net income, and diluted earnings per share would have been
$2,185,000,000, $7,346,000, and $.14 for 1995. Ogden also acquired a 50%
interest in Metropolitan Entertainment Company, Inc.; a 50% interest in IFC, an
Australian entertainment company; as well as a 50% interest in SFTA, a Turkish
airport handling company.
In connection with Ogden's restructuring plan, the Facility Services group's
operations in New York City were sold in July 1997; the Charlotte, North
Carolina, operations of Atlantic Design, a contract manufacturing company, were
sold in September 1997; and the Binghamton, New York, and Cork, Ireland,
operations of Atlantic Design were sold in January 1998. The environmental
business of Ogden Environmental and Energy Services (OEES) was transferred to
the Energy segment, formerly Projects, as of January 1, 1996. In the first
quarter of 1996, the laboratory business of OEES and W.J. Schafer Associates, a
unit of Ogden Technology Services, were sold. The Ogden Professional Services
business, another unit of Ogden Technology Services, was sold in April 1996. In
June 1996, the Facility Services group's operations outside of New York City
were sold, and the asbestos abatement operations were discontinued.
Use of Estimates: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include all cash
balances and highly liquid investments having original maturities of three
months or less.
Marketable Securities: Marketable securities are classified as available for
sale and recorded at current market value. Net unrealized gains and losses on
marketable securities available for sale are credited or charged to
Shareholders' Equity (see Note 2).
Contracts and Revenue Recognition: Service revenues primarily include only
the fees for cost-plus contracts and other types of contracts. Both the service
revenues and operating expenses exclude reimbursed expenditures of $283,900,000,
$357,698,000, and $450,696,000 for the years ended December 31, 1997, 1996, and
1995, respectively. Subsidiaries engaged in governmental contracting recognize
revenues from cost-plus-fixed-fee contracts on the basis of direct costs
incurred plus indirect expenses and the allocable portion of the fixed fee.
Revenues under time and material contracts are recorded at the contracted rates
as the labor hours and other direct costs are incurred. Revenues under
fixed-price contracts are recognized on the basis of the estimated percentage of
completion of services rendered. Service revenues also include the fees earned
under contracts to operate and maintain the waste-to-energy facilities and to
service the facilities' debt, with additional fees earned based on excess
tonnage processed and energy generation. Long-term unbilled service receivables
related to waste-to-energy operations are discounted in recognizing the present
value for services performed currently. Such unbilled receivables amounted to
$130,388,000 and $123,420,000 at December 31, 1997 and 1996, respectively.
Subsidiaries engaged in long-term construction contracting record income on the
percentage-of-completion method of accounting and recognize income as the work
progresses. Anticipated losses on contracts are recognized as soon as they
become known.
Inventories: Inventories, consisting primarily of raw materials and finished
goods, are recorded principally at the lower of first-in, first-out cost or
market.
Property, Plant, and Equipment: Property, plant, and equipment is stated at
cost. For financial reporting purposes, depreciation is provided by the
straight-line method over the estimated useful lives of the assets, which range
generally from three years for computer equipment to 50 years for waste-
to-energy facilities. Accelerated depreciation is generally used for Federal
income tax purposes. Leasehold improvements are amortized by the straight-line
method over the terms of the leases or the estimated useful lives of the
improvements as appropriate. Landfills are amortized based on the quantities
deposited into each landfill compared to the total estimated capacity of such
landfill. Property, plant, and equipment is periodically reviewed to determine
recoverability by comparing the carrying value to expected future cash flows.
X-10
<PAGE>
Contract Acquisition Costs: Costs associated with the acquisition of
specific contracts are amortized over their respective contract terms.
Bond Issuance Costs: Costs incurred in connection with the issuance of
revenue bonds are amortized over the terms of the respective debt issues.
Deferred Charges on Projects: Costs incurred in connection with certain
project development efforts are deferred until the award of the related project
is determined. Costs on awarded projects are deferred until the commencement of
construction, at which time they are either capitalized in property, plant, and
equipment for privately owned facilities or charged to construction costs for
municipally owned facilities. Costs associated with projects that are no longer
under consideration are charged to operating costs.
Restricted Funds: Restricted funds represent proceeds from the financing of
waste-to-energy facilities and the operations of a waste-to-energy facility and
a power plant. Funds are held in trust and released as expenditures are made or
upon satisfaction of conditions provided under the respective trust agreements.
Interest Rate Swap Agreements: Amounts received or paid relating to swap
agreements during the year are credited or charged to interest expense or debt
service charges, as appropriate.
Goodwill: Goodwill acquired subsequent to 1970 is being amortized by the
straight-line method over periods ranging from 15 to 40 years. Goodwill acquired
prior to 1970 is not being amortized.
Retirement Plans: The Corporation and certain subsidiaries have several
retirement plans covering substantially all of their employees. Certain
subsidiaries also contribute to multiemployer plans for unionized hourly
employees that cover, among other benefits, pensions and postemployment health
care.
Income Taxes: Ogden files a consolidated Federal income tax return, which
includes all eligible United States subsidiary companies. Foreign subsidiaries
are taxed according to regulations existing in the countries in which they do
business. Provision has not been made for United States income taxes on
distributions, which may be received from foreign subsidiaries, which are
considered to be permanently invested overseas. Investment credits are accounted
for by the "flow-through" method, and provisions for income taxes have been
reduced by the amount of investment credits earned.
Long-Lived Assets: Ogden adopted Statement of Financial Accounting Standards
(SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of," in the fourth quarter of 1995. The effect
of adopting SFAS No. 121 resulted in an after-tax charge of $34,700,000 in 1995
(see Note 20). When indications of impairment are present, Ogden evaluates the
carrying value of its long-lived assets in relation to the operating performance
and future undiscounted cash flows of the underlying businesses. Long-lived
assets to be disposed of, if any, are evaluated in relation to the net
realizable value.
Earnings per Share: Ogden adopted SFAS No. 128, "Earnings per Share," in the
fourth quarter of 1997. The Statement establishes standards for computing basic
earnings per share, which is represented by net income available to common
shareholders divided by the weighted-average number of common shares outstanding
during the period. Diluted earnings per share reflects the potential dilution
that could occur if securities or stock options were exercised or converted into
common stock during the period, if dilutive (see Note 24). Earnings per share
amounts for prior years have been restated to reflect this revised standard.
Reclassification: The accompanying financial statements have been
reclassified to conform with the 1997 presentation.
2. INVESTMENTS IN MARKETABLE SECURITIES AVAILABLE FOR SALE
At December 31, 1997 and 1996, marketable equity and debt securities held
for noncurrent uses, such as nonqualified pension liabilities and a deferred
compensation plan, are classified as long-term assets (see Note 6). Net
unrealized losses on marketable equity and debt securities held for noncurrent
uses are charged to Shareholders' Equity.
Marketable securities at December 31, 1997 and 1996 (expressed in thousands
of dollars), include the following:
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
MARKET MARKET
VALUE COST VALUE COST
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Classified as Noncurrent Assets:
Mutual and bond funds.................................................................. $ 25,543 $ 26,495 $ 21,159 $ 21,410
--------- --------- --------- ---------
Total.................................................................................. $ 25,543 $ 26,495 $ 21,159 $ 21,410
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Unrealized holding losses at December 31, 1997 and 1996, amounted to
$952,000 and $251,000, respectively. Deferred tax benefits on these losses
amounted to $417,000 and $125,000, respectively, resulting in net charges of
$535,000 and $126,000, respectively, to Shareholders' Equity.
Proceeds and realized gains and losses from the sales of securities
classified as available for sale for the years ended December 31, 1997, 1996,
and 1995, were $13,970,000, $3,444,000, and zero; $13,158,000, $1,455,000, and
$304,000; and $71,364,000, $235,000, and $1,749,000, respectively. For the
purpose of determining realized gains and losses, the cost of securities sold
was based on specific identification.
X-11
<PAGE>
3. UNBILLED SERVICE AND OTHER RECEIVABLES
Unbilled service and other receivables (expressed in thousands of dollars)
consisted of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Unbilled service receivables............................................................................... $ 130,388 $ 123,420
Notes receivable........................................................................................... 44,574 95,002
--------- ---------
Total...................................................................................................... $ 174,962 $ 218,422
--------- ---------
--------- ---------
</TABLE>
Long-term unbilled service receivables are for services, which have been
performed for municipalities, that are due by contract at a later date and are
discounted in recognizing the present value of such services. Current unbilled
service receivables, which are included in Receivables, amounted to $41,357,000
and $35,747,000 at December 31, 1997 and 1996, respectively. Long-term notes
receivable primarily represent loans made to the owners of entertainment and
sports facilities and notes received relating to the sale of noncore businesses.
4. RESTRICTED FUNDS HELD IN TRUST
Funds held by trustees include proceeds received from financing the
construction of waste-to-energy facilities; debt service reserves for payment of
principal and interest on project debt; lease reserves for lease payments under
operating leases; capitalized interest for payment of interest during the
construction period; and deposits of revenues received. Such funds are invested
principally in United States Treasury bills and notes and United States
government agencies securities.
Fund balances (expressed in thousands of dollars) were as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
CURRENT NONCURRENT CURRENT NONCURRENT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Construction funds.............................................................. $ 3,201 $ 2,888
Debt service funds.............................................................. 43,423 $ 139,961 53,960 $ 142,149
Revenue funds................................................................... 8,811 13,289
Lease reserve funds............................................................. 9,629 5,050 19,556
Other funds..................................................................... 38,818 61,002 31,189 47,780
--------- ----------- --------- -----------
Total........................................................................... $ 103,882 $ 206,013 $ 101,326 $ 209,485
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment (expressed in thousands of dollars) consisted
of the following:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Land.............................................................................................. $ 7,068 $ 6,654
Waste-to-energy facilities........................................................................ 1,720,990 1,721,670
Power plants...................................................................................... 224,120 105,738
Buildings and improvements........................................................................ 242,345 192,566
Machinery and equipment........................................................................... 312,525 305,723
Landfills......................................................................................... 17,618 14,508
Construction in progress.......................................................................... 32,523 47,329
------------- -------------
Total............................................................................................. 2,557,189 2,394,188
Less accumulated depreciation and amortization.................................................... 609,642 542,884
------------- -------------
Property, plant, and equipment-net................................................................ $ 1,947,547 $ 1,851,304
------------- -------------
------------- -------------
</TABLE>
X-12
<PAGE>
6. OTHER ASSETS
Other assets (expressed in thousands of dollars) consisted of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Investment in and advances to investees and joint ventures................................................. $ 151,435 $ 91,980
Unamortized bond issuance costs............................................................................ 31,604 35,517
Spare parts................................................................................................ 9,779 17,045
Noncurrent securities available for sale................................................................... 25,543 21,159
Deferred charges on projects............................................................................... 3,178 3,819
Insurance deposits......................................................................................... 5,388 5,388
Other...................................................................................................... 35,424 36,909
--------- ---------
Total...................................................................................................... $ 262,351 $ 211,817
--------- ---------
--------- ---------
</TABLE>
7. ACCRUED EXPENSES, ETC.
Accrued expenses, etc. (expressed in thousands of dollars), consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Debt service charges and interest.......................................................................... $ 31,416 $ 32,755
Payroll.................................................................................................... 21,834 23,196
Insurance.................................................................................................. 34,655 45,415
Operating expenses......................................................................................... 43,075 49,445
Municipalities' share of energy revenues................................................................... 28,145 25,162
Lease payments............................................................................................. 15,243 16,747
Payroll and other taxes.................................................................................... 19,794 16,983
Pension and profit sharing................................................................................. 7,383 7,727
Commissions................................................................................................ 7,972 7,983
Other...................................................................................................... 58,357 77,184
--------- ---------
Total...................................................................................................... $ 267,874 $ 302,597
--------- ---------
--------- ---------
</TABLE>
8. DEFERRED INCOME
Deferred income (expressed in thousands of dollars) consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
CURRENT NONCURRENT CURRENT NONCURRENT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sale and leaseback arrangements................................................... $ 1,523 $ 20,313 $ 1,523 $ 21,963
Advance billings to municipalities................................................ 14,662 16,505
Other............................................................................. 26,777 28,200
--------- ----------- --------- -----------
Total............................................................................. $ 42,962 $ 20,313 $ 46,228 $ 21,963
--------- ----------- --------- -----------
--------- ----------- --------- -----------
</TABLE>
The gain from sale and leaseback transactions consummated in 1986 and 1987
was deferred and is being amortized as a reduction of rental expense. Advance
billings to various customers are billed one or two months prior to performance
of service and are recognized as income in the period the service is provided.
Noncurrent deferred income is included in Other Liabilities.
9. LONG-TERM DEBT
Long-term debt (expressed in thousands of dollars) consisted of the
following:
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
Adjustable-rate revenue bonds due 2014-2024........................................................... $ 124,755 $ 124,755
9.25% debentures due 2022............................................................................. 100,000 100,000
6% notes due through 2000............................................................................. 36,186
Other long-term debt.................................................................................. 93,091 84,622
----------- -----------
Total................................................................................................. $ 354,032 $ 309,377
----------- -----------
----------- -----------
</TABLE>
The adjustable-rate revenue bonds are adjusted periodically to reflect
current market rates for similar issues, generally with an upside cap of 15%.
The average rate for this debt was 3.44% and 3.49% in 1997 and 1996,
respectively. These bonds were issued under agreements that contain various
restrictions, the most significant being the requirements to comply with certain
financial ratios and to maintain Shareholders' Equity of at least $440,000,000.
At December 31, 1997, Ogden was in compliance with all requirements and had
$126,091,000 in excess of the required amount of Shareholders' Equity.
X-13
<PAGE>
At December 31, 1997, Ogden had two long-term interest rate swap agreements
covering notional amounts of $100,000,000 and $4,700,000, respectively, which
expire December 16, 1998, and November 30, 2000, respectively. These swaps were
entered into to convert Ogden's fixed-rate $100,000,000, 9.25% debentures due in
2022 to variable-rate debt and Ogden's $4,700,000 variable-rate debt to a fixed
rate. On the $100,000,000 swap, Ogden receives a fixed rate of 5.52% per annum
paid on a semi-annual basis and pays a floating rate of three months LIBOR set
in arrears on a quarterly basis. On the $4,700,000 swap, Ogden pays a fixed rate
of 5.83% paid on a quarterly basis and receives a floating rate of three months
LIBOR on a quarterly basis. At December 31, 1997, the three-month LIBOR rate was
5.81%. The counterparties to these interest rate swaps are major financial
institutions. Management believes its credit risk associated with nonperformance
by the counterparties is not significant. Amounts paid on swap agreements
amounted to $400,000, $200,000, and $600,000 for 1997, 1996, and 1995,
respectively, and were charged to interest expense. The effect on Ogden's
weighted-average borrowing rate for 1997, 1996, and 1995 was an increase of
.09%, .04%, and .14%, respectively.
Other long-term debt includes an obligation for approximately $28,400,000,
representing the equity component of a sale and leaseback arrangement relating
to a waste-to-energy facility. This arrangement is accounted for as a financing,
has an effective interest rate of 5%, and extends through 2017. Additionally,
other long-term debt includes $22,450,000 resulting from the sale of limited
partnership interests in and related tax benefits of the Onondaga County, New
York, waste-to-energy facility, which has been accounted for as a financing for
accounting purposes. This obligation has an effective interest rate of 10% and
extends through 2015. Long-term debt also includes $24,645,000 due to financial
institutions relating to the Corporation's investment in a coal-fired power
project in the Philippines, which bears interest at the Eurodollar rate plus
.235% (8.5% at December 31, 1997) and matures in 2001. The remaining other debt
of $17,596,000 consists primarily of debt associated with entertainment
facilities in the United Kingdom and Argentina and debt acquired in the Firehole
acquisition. These loans bear various interest rates and maturity dates.
The maturities on long-term debt (expressed in thousands of dollars) at
December 31, 1997, were as follows:
<TABLE>
<S> <C>
1998.............................................................................. $ 19,696
1999.............................................................................. 25,483
2000.............................................................................. 19,007
2001.............................................................................. 24,971
2002.............................................................................. 226
Later years....................................................................... 284,345
---------
Total............................................................................. 373,728
Less current portion.............................................................. 19,696
---------
Total long-term debt.............................................................. $ 354,032
---------
---------
</TABLE>
10. PROJECT DEBT
Project debt (expressed in thousands of dollars) consisted of the following:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
<S> <C> <C>
Revenue Bonds Issued by and Prime Responsibility of Municipalities:
4.25-7.6% serial revenue bonds due through 2008................................................... $ 212,368 $ 238,908
5.4-7.75% term revenue bonds due through 2015..................................................... 745,350 764,876
Adjustable-rate revenue bonds due through 2013.................................................... 86,185 86,590
------------- -------------
Total............................................................................................. 1,043,903 1,090,374
------------- -------------
Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third
Parties:
4.95-8.9% serial revenue bonds due through 2007................................................... 53,938 62,886
7.25-7.4% term revenue bonds due 1999 through 2011................................................ 105,871 105,859
Adjustable-rate revenue bonds due through 2011.................................................... 115,428 121,723
------------- -------------
Total............................................................................................. 275,237 290,468
------------- -------------
Other project debt................................................................................ 105,508 119,848
------------- -------------
Total long-term project debt...................................................................... $ 1,424,648 $ 1,500,690
------------- -------------
------------- -------------
</TABLE>
Project debt associated with the financing of waste-to-energy facilities
is generally arranged by municipalities through the issuance of tax-exempt
and taxable revenue bonds. The category, "Revenue Bonds Issued by and Prime
Responsibility of Municipalities," includes bonds issued with respect to
which debt service is an explicit component of the client community's
obligation under the related service agreement. In the event that a
municipality is unable to satisfy its payment obligations, the bondholders'
recourse with respect to the Corporation is limited to the waste-to-energy
facilities and restricted funds pledged to secure such obligations. The
category, "Revenue Bonds Issued by Municipal Agencies with Sufficient Service
Revenues Guaranteed by Third Parties," includes bonds issued to finance three
facilities for which contractual obligations of third parties to deliver
waste ensure sufficient revenues to pay debt service, although such debt
service is not an explicit component of the third parties' service fee
obligations.
X-14
<PAGE>
Payment obligations for the project debt associated with waste-to-energy
facilities are limited recourse to the operating subsidiary and nonrecourse to
the Corporation subject to construction and operating performance guarantees and
commitments. These obligations are secured by the revenues pledged under various
indentures and are collateralized principally by a mortgage lien and a security
interest in each of the respective waste-to-energy facilities and related
assets. At December 31, 1997, such revenue bonds were collateralized by
property, plant, and equipment with a net carrying value of $1,479,743,000,
credit enhancements of approximately $161,000,000 for which Ogden has certain
reimbursement obligations, and substantially all restricted funds (see Note 4).
The interest rates on adjustable-rate revenue bonds are adjusted
periodically to reflect current market rates for similar issues, generally with
an upside cap of 15%. The average rate for such revenue bonds was 4.35% and 4.6%
in 1997 and 1996, respectively.
Other project debt includes an obligation of a special-purpose limited
partnership acquired by special-purpose subsidiaries of Ogden and represents the
lease of a geothermal power plant, which has been accounted for as a financing.
This obligation, which amounted to $77,502,000 at December 31, 1997, has an
effective interest rate of 5.3% and extends through 2008 with options to renew
for additional periods and has a fair market value purchase option at the
conclusion of the initial term. Payment obligations under this lease arrangement
are limited to assets of the limited partnership and revenues derived from a
power purchase agreement with a third party, which are expected to provide
sufficient revenues to make rental payments. Such payment obligations are
secured by all the assets, revenues, and other benefits derived from the
geothermal power plant, which had a net carrying value of approximately
$93,556,000 at December 31, 1997. Other project debt also includes $17,206,000
due to a financial institution as part of the refinancing of project debt in the
category "Revenue Bonds Issued by and Prime Responsibility of Municipalities."
The debt service associated with this loan is included as an explicit component
of the client community's obligation under the related service agreement. A
portion of the funds was retained in the Corporation's restricted funds and is
loaned to the community each month to cover the community's monthly service
fees. The Corporation's repayment for the other part of the loan is limited to
the extent repayment is received from the client community. This obligation has
an effective interest rate of 7.05% and extends through 2005. In addition, other
project debt includes $10,800,000, which is due to financial institutions and
bears interest at an adjustable rate equal to the three-month LIBOR rate plus
3.5% (9.5% at December 31, 1997). The debt extends through 2001 and is secured
by substantially all the assets of a diesel-fired power plant in the
Philippines, which had a net carrying value of approximately $47,140,000 at
December 31, 1997.
At December 31, 1997, Ogden had three interest rate swap agreements as
hedges against interest rate exposure on certain adjustable-rate revenue bonds.
The first two interest rate swap agreements expire in May 1999 and the third
swap expires in 2019 and had notional amounts at December 31, 1997, of
$91,070,000, $27,685,000, and $80,220,000, respectively, which are reduced in
accordance with the scheduled repayments of the revenue bonds. Under the first
swap agreement, Ogden pays a fixed rate of 3.95% per annum on a semi-annual
basis and receives a floating rate based on an index of tax-exempt,
variable-rate obligations. Under the second swap agreement, Ogden pays a fixed
rate of 5.25% per annum on a semi-annual basis and receives a floating rate
based on a defined commercial paper rate. Under the third swap agreement, Ogden
pays a fixed rate of 6.07% per annum on a semi-annual basis through 1998 and
thereafter a fixed rate of 5.18% per annum and receives a floating rate based on
a defined LIBOR-based rate. At December 31, 1997, the floating rates on the
three swaps were 3.72%, 5.65%, and 6.23%, respectively. These swap agreements
were entered into to convert from floating rates to fixed interest rates
$91,070,000 of tax-exempt, adjustable-rate revenue bonds and $107,905,000 of
taxable, adjustable-rate revenue bonds. The counterparties to these interest
rate swaps are major financial institutions. Management believes the credit risk
associated with nonperformance by the counterparties is not significant. Amounts
(received) or paid on these swap agreements amounted to $300,000, $700,000, and
$(230,000) for 1997, 1996, and 1995, respectively, and were charged or
(credited) to debt service charges. The effect on Ogden's weighted-average
borrowing rate was an increase (decrease) of .02%, .04%, and (.01)% for 1997,
1996, and 1995, respectively.
The maturities on long-term project debt (expressed in thousands of dollars)
at December 31, 1997, were as follows:
<TABLE>
<S> <C>
1998.................................................................. $ 68,052
1999.................................................................. 80,407
2000.................................................................. 80,736
2001.................................................................. 89,832
2002.................................................................. 116,555
Later years........................................................... 1,057,118
------------
Total................................................................. 1,492,700
Less current portion.................................................. 68,052
------------
Total long-term project debt.......................................... $ 1,424,648
------------
------------
</TABLE>
X-15
<PAGE>
11. CREDIT ARRANGEMENTS
At December 31, 1997, Ogden had unused revolving credit lines amounting to
$217,000,000, of which $200,000,000 is available under its principal revolving
credit line at various borrowing rates including prime, the Eurodollar rate plus
.225%, or certificate-of-deposit rates plus .35%. Ogden is not required to
maintain compensating balances; however, Ogden pays a facility fee of 1/8 of 1%
on its principal revolving credit line of $200,000,000, which expires July 1,
2002.
12. CONVERTIBLE SUBORDINATED DEBENTURES
Convertible subordinated debentures (expressed in thousands of dollars)
consisted of the following:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
6% debentures due June 1, 2002.......................................... $ 85,000 $ 85,000
5 3/4% debentures due October 20, 2002.................................. 63,650 63,650
--------- ---------
Total................................................................... $ 148,650 $ 148,650
--------- ---------
--------- ---------
</TABLE>
The 6% convertible subordinated debentures are convertible into Ogden common
stock at the rate of one share for each $39.077 principal amount of debentures.
These debentures are redeemable at Ogden's option at 101.2% of principal amount
during the year commencing June 1, 1997, and at decreasing prices thereafter.
The 5 3/4% convertible subordinated debentures are convertible into Ogden common
stock at the rate of one share for each $41.772 principal amount of debentures.
These debentures are redeemable at Ogden's option at 100% of face value.
13. PREFERRED STOCK
The outstanding Series A $1.875 Cumulative Convertible Preferred Stock is
convertible at any time at the rate of 5.97626 common shares for each preferred
share. Ogden may redeem the outstanding shares of preferred stock at $50 per
share, plus all accrued dividends. These preferred shares are entitled to
receive cumulative annual dividends at the rate of $1.875 per share, plus an
amount equal to 150% of the amount, if any, by which the dividend paid or any
cash distribution made on the common stock in the preceding calendar quarter
exceeded $.667 per share.
14. COMMON STOCK AND STOCK OPTIONS
In 1986, Ogden adopted a nonqualified stock option plan (the "1986 Plan").
Under this plan, options and/or stock appreciation rights were granted to key
management employees to purchase Ogden common stock at prices not less than the
fair market value at the time of grant, which became exercisable during a
five-year period from the date of grant. Options were exercisable for a period
of ten years after the date of grant. As adopted and as adjusted for stock
splits, the 1986 Plan called for up to an aggregate of 2,700,000 shares of Ogden
common stock to be available for issuance upon the exercise of options and stock
appreciation rights, which were granted over a ten-year period ending March 10,
1996. At December 31, 1997, all of the authorized shares of this plan had been
granted.
In October 1990, Ogden adopted a nonqualified stock option plan (the "1990
Plan"). Under this plan, nonqualified options, incentive stock options, and/or
stock appreciation rights and stock bonuses may be granted to key management
employees and outside directors to purchase Ogden common stock at an exercise
price to be determined by the Ogden Compensation Committee, which become
exercisable during the five-year period from the date of grant. These options
are exercisable for a period of ten years after the date of grant. Pursuant to
the 1990 Plan, which was amended in 1994 to increase the number of shares
available by 3,200,000 shares, an aggregate of 6,200,000 shares of Ogden common
stock became available for issuance upon the exercise of such options, rights,
and bonuses, which may be granted over a ten-year period ending October 11,
2000; 1,555,000 shares were available for grant at December 31, 1997.
Under the foregoing plans, Ogden issued 4,549,500 limited stock appreciation
rights in conjunction with the stock options granted. These limited rights are
exercisable only during the period commencing on the first day following the
occurrence of any of the following events and terminate 90 days after such date:
the acquisition by any person of 20% or more of the voting power of Ogden's
outstanding securities; the approval by Ogden shareholders of an agreement to
merge or to sell substantially all of its assets; or the occurrence of certain
changes in the membership of the Ogden Board of Directors. The exercise of these
limited rights entitles participants to receive an amount in cash with respect
to each share subject thereto, equal to the excess of the market value of a
share of Ogden common stock on the exercise date or the date these limited
rights became exercisable, over the related option price.
In connection with the acquisition of the minority interest of Ogden Energy
Group, Inc. (OEGI), Ogden assumed the pre-existing OEGI stock option plan then
outstanding and converted these options into options to acquire shares of Ogden
common stock. No further options will be granted under this plan.
X-16
<PAGE>
14. COMMON STOCK AND STOCK OPTIONS (CONTINUED)
The Corporation has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for these stock option plans. Had compensation cost for the
options granted in 1997, 1996, and 1995 under these plans been determined
consistent with the provisions of SFAS No. 123, using the binomial
option-pricing model with the following assumptions--dividend yield of 6.2%,
5.7% and 6.2%; volatility of 25.84%, 22.74%, and 24.77%; risk-free interest rate
of 6.43%, 5.42%, and 7.72%; and an expected life of 7.5 years--the effect on net
income and diluted earnings per share would have been $334,000 and $.01 for
1997; $214,000 and zero for 1996; and zero and zero for 1995. The
weighted-average fair value of options granted during 1997, 1996, and 1995 was
$2.56, $2.38, and $2.62, respectively.
Information regarding the Corporation's stock option plans is summarized
as follows:
<TABLE>
<CAPTION>
WEIGHTED-
OPTION AVERAGE
PRICE EXERCISE
PER SHARE OUTSTANDING EXERCISABLE PRICE
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
1986 Plan:
December 31, 1994, Balance..................... $14.98-$28.54 1,127,543 878,043 $ 18.84
Became Exercisable............................. $18.31-$28.54 157,100
Exercised...................................... $14.98 (16,618) (16,618) $ 14.98
------------ ----------- ----------- -----------
December 31, 1995, Balance..................... $14.98-$28.54 1,110,925 1,018,525 $ 18.89
Became Exercisable............................. $22.50 23,100
Exercised...................................... $14.98 (235,425) (235,425) $ 14.98
------------ ----------- ----------- -----------
December 31, 1996, Balance..................... $18.31-$28.54 875,500 806,200 $ 19.93
Became Exercisable............................. $22.50 23,100
Cancelled...................................... $28.54 (10,000) (10,000) $ 28.54
------------ ----------- ----------- -----------
December 31, 1997, Balance..................... $18.31-$28.54 865,500 819,300 $ 19.74
------------ ----------- ----------- -----------
1990 Plan:
December 31, 1994, Balance..................... $18.31-$23.56 3,585,500 1,799,800 $ 19.99
Granted........................................ $20.06-$22.69 409,000 $ 20.26
Became Exercisable............................. $18.31-$23.56 699,900
Exercised...................................... $18.31-$21.31 (129,000) (129,000) $ 18.56
Cancelled...................................... $18.31-$23.56 (184,700) (34,000) $ 20.31
------------ ----------- ----------- -----------
December 31, 1995, Balance..................... $18.31-$23.56 3,680,800 2,336,700 $ 20.06
Granted........................................ $21.00-$21.94 252,500 $ 21.83
Became Exercisable............................. $18.31-$23.56 346,800
Exercised...................................... $18.31-$21.31 (129,000) (129,000) $ 18.85
Cancelled...................................... $18.31-$23.56 (147,300) (84,300) $ 20.06
------------ ----------- ----------- -----------
December 31, 1996, Balance..................... $18.31-$23.56 3,657,000 2,470,200 $ 20.21
Granted........................................ $20.19 570,000 $ 20.19
Became Exercisable............................. $18.31-$23.56 385,400
Exercised...................................... $18.31-$21.93 (471,000) (471,000) $ 18.62
Cancelled...................................... $18.31-$23.56 (72,000) (11,000) $ 21.90
------------ ----------- ----------- -----------
December 31, 1997, Balance..................... $18.31-$23.56 3,684,000 2,373,600 $ 20.39
------------ ----------- ----------- -----------
Conversion of OEGI Plan:
December 29, 1994, Balance..................... $14.17-$29.46 266,561 266,561 $ 14.60
December 31, 1995, Balance..................... $14.17-$29.46 266,561 266,561 $ 14.60
Exercised...................................... $14.17 (19,740) (19,740) $ 14.17
Cancelled...................................... $14.17 (3,360) (3,360) $ 14.17
------------ ----------- ----------- -----------
December 31, 1996, Balance..................... $14.17-$29.46 243,461 243,461 $ 14.70
Exercised...................................... $14.17 (59,640) (59,640) $ 14.17
Cancelled...................................... $29.46 (8,400) (8,400) $ 29.46
------------ ----------- ----------- -----------
December 31, 1997, Balance..................... $14.17 175,421 175,421 $ 14.17
------------ ----------- ----------- -----------
Total December 31, 1997........................ $14.17-$28.54 4,724,921 3,368,321 $ 20.05
------------ ----------- ----------- -----------
------------ ----------- ----------- -----------
</TABLE>
X-17
<PAGE>
The following table summarizes information about stock options outstanding
at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ ------------------------------
RANGE OF NUMBER OF WEIGHTED-AVERAGE WEIGHTED-AVERAGE NUMBER OF WEIGHTED-AVERAGE
EXERCISE SHARES REMAINING EXERCISE SHARES EXERCISE
PRICES OUTSTANDING CONTRACTUAL LIFE PRICE OUTSTANDING PRICE
- ------------ ----------- ---------------- ----------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
$14.17-$18.31 2,223,921 2.74 years $ 17.99 2,223,921 $ 17.99
$20.06-$28.54 2,501,000 6.72 years $ 21.89 1,144,400 $ 22.61
- ------------ ----------- ---------------- ------ ----------- ------
$14.17-$28.54 4,724,921 4.84 years $ 20.05 3,368,321 $ 19.56
- ------------ ----------- ---------------- ------ ----------- ------
- ------------ ----------- ---------------- ------ ----------- ------
</TABLE>
The weighted-average exercise price for all exercisable options at December
31, 1997, 1996, and 1995, was $19.56, $19.10, and $18.49, respectively.
At December 31, 1997, there were 10,243,886 shares of common stock reserved
for the exercise of stock options and the conversion of preferred shares and
debentures.
In January 1998, Ogden's Board of Directors authorized the purchase of
shares of the Corporation's common stock in an amount up to $100,000,000. Fifty
thousand (50,000) shares of common stock were purchased in February 1998 for
$1,372,000.
15. PREFERRED STOCK PURCHASE RIGHTS
In 1990, the Board of Directors declared a dividend of one preferred stock
purchase right (Right) on each outstanding share of common stock. Among other
provisions, each Right may be exercised to purchase a one one-hundredth share of
a new series of cumulative participating preferred stock at an exercise price of
$80, subject to adjustment. The Rights may only be exercised after a party has
acquired 15% or more of the Corporation's common stock or commenced a tender
offer to acquire 15% or more of the Corporation's common stock. The Rights do
not have voting rights, expire October 2, 2000, and may be redeemed by the
Corporation at a price of $.01 per Right at any time prior to the acquisition of
15% of the Corporation's common stock.
In the event a party acquires 15% or more of the Corporation's outstanding
common stock in accordance with certain defined terms, each Right will then
entitle its holders (other than such party) to purchase, at the Right's
then-current exercise price, a number of the Corporation's common shares having
a market value of twice the Right's exercise price. At December 31, 1997,
50,295,123 Rights were outstanding.
16. FOREIGN EXCHANGE
Foreign exchange translation adjustments for 1997, 1996, and 1995, amounting
to $(8,094,000), $(3,111,000), and $(1,258,000), respectively, have been
credited (charged) directly to Shareholders' Equity. Foreign exchange
transaction adjustments, amounting to $(683,000), $(215,000), and $1,590,000,
have been credited (charged) directly to income for 1997, 1996, and 1995,
respectively.
17. DEBT SERVICE CHARGES
Debt service charges for Ogden's project debt (expressed in thousands of
dollars) consisted of the following:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Interest incurred on taxable and tax-exempt borrowings............................................ $ 104,890 $ 107,595 $ 112,029
Interest earned on temporary investment of borrowings during construction, etc.................... 3,992 4,256 4,908
--------- --------- ---------
Net interest incurred............................................................................. 100,898 103,339 107,121
Interest capitalized during construction in property, plant, and equipment........................ 631 485 1,512
--------- --------- ---------
Interest expense-net.............................................................................. 100,267 102,854 105,609
Amortization of bond issuance costs............................................................... 6,997 7,201 6,241
--------- --------- ---------
Debt service charges.............................................................................. $ 107,264 $ 110,055 $ 111,850
--------- --------- ---------
--------- --------- ---------
</TABLE>
18. RETIREMENT PLANS
Ogden has retirement plans that cover substantially all of its employees. A
substantial portion of hourly employees of Ogden Services Corporation
participates in defined contribution plans. Other employees participate in
defined benefit or defined contribution plans.
The defined benefit plans provide benefits based on years of service and
either employee compensation or a flat benefit amount. Ogden's funding policy
for those plans is to contribute annually an amount no less than the minimum
funding required by ERISA. Contributions are intended to provide not only
benefits attributed to service to date but also for those expected to be earned
in the future.
X-18
<PAGE>
The following table sets forth the defined benefit plans' funded status and
related amounts recognized in Ogden's Consolidated Balance Sheets (expressed in
thousands of dollars):
<TABLE>
<CAPTION>
1997 1996
---------------------------- ----------------------------
ASSETS ACCUMULATED ASSETS ACCUMULATED
EXCEED BENEFITS EXCEED BENEFITS
ACCUMULATED EXCEED ACCUMULATED EXCEED
BENEFITS ASSETS BENEFITS ASSETS
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Accumulated Benefit Obligation:
Vested.................................................................. $ 10,887 $ 10,008 $ 8,820 $ 10,480
Nonvested............................................................... 397 497 314 442
------------- ------------- ------------- -------------
Total................................................................... $ 11,284 $ 10,505 $ 9,134 $ 10,922
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Projected benefit obligation for services rendered to date.............. $ 15,795 $ 14,976 $ 12,715 $ 15,355
Plan assets at fair value............................................... 16,914 5,386 13,495 5,764
------------- ------------- ------------- -------------
Over (underfunded) projected benefits................................... $ 1,119 $ (9,590) $ 780 $ (9,591)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Source of Underfunded Status:
Unrecognized net gain (loss) from past experience different from that
assumed and effects of changes in assumptions......................... $ 1,501 $ 67 $ 588 $ (1,037)
Unrecognized net transition asset (obligation) at January 1, 1986, being
recognized over 15 years.............................................. 335 (240) 417 (320)
Pension liability costs................................................. (1,145) (7,659) (688) (5,916)
Unrecognized prior service costs........................................ 428 (1,758) 463 (2,318)
------------- ------------- ------------- -------------
Over (underfunded) projected benefits................................... $ 1,119 $ (9,590) $ 780 $ (9,591)
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
At December 31, 1997 and 1996, the accumulated benefit obligation of certain
pension plans exceeded plan assets. The Corporation's minimum liability for
those plans amounted to $911,000 and $1,463,000 at December 31, 1997 and 1996,
respectively. Such amounts were offset by intangible assets and reductions in
Shareholders' Equity, net of income taxes of $324,000 and $565,000 at December
31, 1997 and 1996, respectively.
At December 31, 1997 and 1996, the Corporation has designated $13,970,000 of
its marketable securities (Note 2) as pertaining to a nonqualified pension plan
that is underfunded by $7,050,000, which underfunding is reflected above under
plans in which accumulated benefits exceeded assets.
Pension costs for Ogden's defined benefit plans included the following
components (expressed in thousands of dollars):
<TABLE>
<CAPTION>
1997 1996 1995
------ ------- -------
<S> <C> <C> <C>
Service cost on benefits earned during the period...... $2,193 $ 2,139 $ 2,078
Interest cost on projected benefit obligation.......... 1,929 1,900 1,716
Net amortization and deferral.......................... 3,623 2,268 2,584
Actual return on plan assets........................... (4,501) (2,746) (3,260)
------ ------- -------
Net periodic pension cost.............................. $3,244 $ 3,561 $ 3,118
------ ------- -------
------ ------- -------
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations were 7% and 4 1/2% for 1997 and 7 1/2% and 4 1/2%
for 1996 and 1995. The expected long-term rate of return on plan assets was 8%
for each year.
Contributions and costs for defined contribution plans are determined by
benefit formulas based on percentage of compensation as well as discretionary
contributions and totaled $8,652,000, $7,954,000, and $10,358,000 in 1997, 1996,
and 1995, respectively. Plan assets at December 31, 1997, 1996, and 1995,
primarily consisted of common stocks, United States government securities, and
guaranteed insurance contracts.
With respect to union employees, the Corporation is required under contracts
with various unions to pay, generally based on hours worked, retirement, health,
and welfare benefits. These multiemployer defined benefit and defined
contribution plans are not controlled or administered by the Corporation. The
amount charged to expense for such plans during 1997, 1996, and 1995 was
$16,700,000, $26,600,000, and $27,900,000, respectively.
19. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In 1992, the Corporation discontinued its policy of providing postretirement
health care and life insurance benefits for all salaried employees, except those
employees who were retired or eligible for retirement at December 31, 1992, or
who were covered under certain company-sponsored union plans.
X-19
<PAGE>
For the years ended December 31, 1997, 1996, and 1995, the components of the
periodic expense for these benefits were as follows:
Recognition of Components of Net Periodic Postretirement Benefit Costs for
the Years Ended December 31:
<TABLE>
<CAPTION>
1997 1996 1995
---------- ---------- ----------
<S> <C> <C> <C>
Service costs................................................................ $ 101,204 $ 126,879 $ 131,966
Interest..................................................................... 828,446 806,016 755,944
Amortization of unrecognized net (gain) loss................................. (27,193) 18,481 (22,113)
---------- ---------- ----------
Total........................................................................ $ 902,457 $ 951,376 $ 865,797
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
As of December 31, 1997 and 1996, the actuarial recorded liabilities for
these postretirement benefits, none of which have been funded, were as
follows:
Accumulated Postretirement Benefit Obligation:
<TABLE>
<CAPTION>
<S> <C> <C>
Retirees........................................................... $ 7,087,053 $5,618,399
Eligible active participants....................................... 4,246,196 4,616,340
Other active....................................................... 1,130,645 959,853
----------- ----------
Total accumulated postretirement obligation........................ 12,463,894 11,194,592
Unrecognized net loss.............................................. 1,386,694 603,201
----------- ----------
Accrued postretirement benefit liability........................... $11,077,200 $10,591,391
----------- ----------
----------- ----------
</TABLE>
The accumulated postretirement benefit obligation was determined using
discount rates of 7% and 7 1/2% for 1997 and 1996, respectively; an estimated
increase in compensation levels of 4 1/2%; and a health care cost rate of
approximately 14 1/2%, decreasing in subsequent years until it reaches 6% in the
year 2008 and thereafter. The effect of a one percentage point increase in the
assumed health care cost trend rates for each future year on the aggregate of
the service and interest cost components of net periodic postretirement health
care benefit cost and the accumulated postretirement benefit obligation for
health care benefits would be $75,391 and $817,580, respectively.
20. IMPAIRMENT OF LONG-LIVED ASSETS
Ogden adopted the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and Long-Lived Assets to be Disposed of," in the fourth
quarter of 1995. SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles held and used by an entity, including any goodwill
related to these assets, be reviewed for impairment whenever events or changes
in circumstances indicate that the carrying value of such assets may not be
recoverable. In performing this review for recoverability, the Corporation
estimated future cash flows expected from the use of such assets and their
eventual disposition. If the sum of expected cash flows (undiscounted) was less
than the carrying value of the assets, an impairment loss was recognized. The
Statement also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying value or fair
value less the costs to sell.
The effect of recognizing SFAS No. 121 resulted in a pretax charge of
$45,300,000 and an after-tax charge of $34,700,000, or $.69 per share, diluted.
This charge included estimated losses on the disposal of noncore businesses, as
announced in the fourth quarter of 1995, of $32,800,000 and the write-down of
other long-lived assets of $12,500,000. The loss of $32,800,000 on the assets to
be disposed of was based on the Corporation's estimate of realizable or
liquidation values of the operations and bids received from prospective
purchasers. The impairment loss of $12,500,000 on other long-lived assets
represents the difference between the carrying amount of the assets and their
estimated fair values, which was determined based on operating projections and
future discounted cash flows. The remaining carrying value of these assets is
not significant. These amounts were charged to cost of goods sold ($4,500,000)
and operating expenses ($40,800,000) in the accompanying 1995 financial
statements.
21. OTHER CHARGES-1995
During 1995, the Corporation recognized unusual charges of $37,500,000,
which were reduced by a $13,500,000 gain on the sale of a noncore business in
the fourth quarter for a net pretax charge of $24,000,000 and an after-tax
charge of $14,200,000, or $.29 per share, diluted. The charge of $37,500,000
included, in the second quarter, $17,100,000 at Ogden Communications, Inc.
(OCI), for the write-off of receivables of $10,300,000 and related costs
recorded in connection with a telecommunications project at OCI, as well as a
loss on the disposal of inventory of $3,900,000 and costs related to the
curtailment of operations of $2,900,000; and in the fourth quarter, $8,200,000
for costs, principally severance pay relating to restructuring activities, and
$12,200,000 representing the write-down of deferred charges relating to a
previously awarded waste-to-energy project that is not expected to be completed;
unusual waste-to-energy repair costs; and an adjustment of inventory balances
resulting from a physical inventory. The $17,100,000 charge at OCI resulted from
a review of the activities of this unit, during which the Corporation concluded
that contracts and other documentation did not provide a basis for recovering
any of the accounts receivable related to the telecommunications project and
that the sale of inventory would not recover its full carrying value. In
addition, the Corporation decided to discontinue the business of OCI and
estimated the costs relating thereto.
X-20
<PAGE>
These amounts were charged to sales allowances ($10,300,000); operating
costs ($3,800,000); cost of goods sold ($6,000,000); and selling,
administrative, and general expenses ($3,900,000) in the accompanying 1995
financial statements. The gain on the sale of the noncore business of
$13,500,000 was included as a reduction of operating expenses. In addition, 1995
operating expenses include $3,500,000 for the settlement of litigation relating
to the discontinuance of the fixed-site hazardous waste business.
22. INCOME TAXES
The components of the provision for income taxes (expressed in thousands of
dollars) were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal.......................................................................... $ 9,806 $ 14,661 $ 6,444
State............................................................................ 12,195 9,048 5,038
Foreign.......................................................................... 6,124 2,425 4,602
--------- --------- ---------
Total current.................................................................... 28,125 26,134 16,084
--------- --------- ---------
Deferred:
Federal.......................................................................... 25,288 18,984 17,120
State............................................................................ (2,577) 1,043 1,033
Foreign.......................................................................... 2,264
--------- --------- ---------
Total deferred................................................................... 24,975 20,027 18,153
--------- --------- ---------
Total provision for income taxes................................................. $ 53,100 $ 46,161 $ 34,237
--------- --------- ---------
--------- --------- ---------
</TABLE>
The current provision for Federal income taxes results principally from the
alternative minimum tax.
The provision for income taxes (expressed in thousands of dollars) varied
from the Federal statutory income tax rate due to the following:
<TABLE>
<CAPTION>
1997 1996
------------- -------------
PERCENT PERCENT
OF INCOME OF INCOME
AMOUNT BEFORE AMOUNT BEFORE AMOUNT
OF TAX TAXES OF TAX TAXES OF TAX
--------- ------------- --------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Taxes at statutory rate................................ $ 45,772 35.0% $ 38,374 35.0% $ 14,184
State income taxes, net of
Federal tax benefit.................................... 6,252 4.8 6,559 5.9 3,946
Settlement of tax liability with former subsidiary..... (2,638) (2.4)
Taxes on foreign earnings.............................. 1,135 .9 738 .7 6,694
Amortization of goodwill............................... 866 .6 1,070 1.0 1,206
Write-down of goodwill................................. 1,750 1.3 648 .6 5,263
Pooling-related taxes and costs........................ 1,807
Benefit relating to sale of stock of former
subsidiary........................................... (3,581) (2.7)
Other-net.............................................. 906 .7 1,410 1.3 1,137
--------- --- --------- --- ---------
Provision for income taxes............................. $ 53,100 40.6% $ 46,161 42.1% $ 34,237
--------- --- --------- --- ---------
--------- --- --------- --- ---------
<CAPTION>
1995
-------------
PERCENT
OF INCOME
BEFORE
TAXES
-------------
<S> <C>
Taxes at statutory rate................................ 35.0%
State income taxes, net of
Federal tax benefit.................................... 9.7
Settlement of tax liability with former subsidiary.....
Taxes on foreign earnings.............................. 16.5
Amortization of goodwill............................... 3.0
Write-down of goodwill................................. 13.0
Pooling-related taxes and costs........................ 4.5
Benefit relating to sale of stock of former
subsidiary...........................................
Other-net.............................................. 2.8
---
Provision for income taxes............................. 84.5%
---
---
</TABLE>
The components of the net deferred income tax liability (expressed in
thousands of dollars) as of December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Deferred Tax Assets:
Deferred income....................................................... $ 4,029 $ 8,200
Accrued expenses...................................................... 79,093 62,904
Other liabilities..................................................... 28,325 24,936
Investment tax credits................................................ 20,813 24,081
Alternative minimum tax credits....................................... 47,704 46,917
Net operating loss carryforwards...................................... 58,066
---------- ----------
Total deferred tax assets............................................. 179,964 225,104
---------- ----------
Deferred Tax Liabilities:
Unbilled accounts receivable.......................................... 45,384 46,270
Property, plant, and equipment........................................ 428,185 440,293
Other................................................................. 33,046 33,032
---------- ----------
Total deferred tax liabilities........................................ 506,615 519,595
---------- ----------
Net deferred tax liability............................................ $ 326,651 $ 294,491
---------- ----------
---------- ----------
</TABLE>
X-21
<PAGE>
Deferred tax assets and liabilities (expressed in thousands of dollars) are
presented as follows in the accompanying balance sheets:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net deferred tax liability-noncurrent................................. $ 383,341 $ 325,925
Less net deferred tax asset-current................................... 56,690 31,434
---------- ----------
Net deferred tax liability............................................ $ 326,651 $ 294,491
---------- ----------
---------- ----------
</TABLE>
At December 31, 1997, for Federal income tax purposes, the Corporation
had investment and energy tax credit carryforwards of approximately
$20,813,000, which will expire in 2004 through 2008, and alternative minimum
tax credit carryforwards of approximately $47,704,000 that have no expiration
date. Deferred Federal income taxes have been reduced by these amounts.
23. LEASES
Total rental expense amounted to $100,449,000, $91,351,000, and $93,396,000
(net of sublease income of $2,113,000, $1,427,000, and $193,000) for 1997, 1996,
and 1995, respectively. Included in rental expense are amounts based on
contingent factors (principally sales) in excess of minimum rentals amounting to
$23,365,000, $20,970,000, and $21,676,000, for 1997, 1996, and 1995,
respectively. Principal leases are for leaseholds, sale and leaseback
arrangements on waste-to-energy facilities, trucks and automobiles, airplane,
and machinery and equipment. Some of these operating leases have renewal
options.
The following is a schedule (expressed in thousands of dollars), by year, of
future minimum rental payments required under operating leases that have initial
or remaining noncancelable lease terms in excess of one year as of December 31,
1997:
<TABLE>
<CAPTION>
<S> <C>
1998............................................................. $ 82,482
1999............................................................. 77,522
2000............................................................. 65,502
2001............................................................. 59,049
2002............................................................. 54,437
Later years...................................................... 303,385
---------
Total.......................................................... $ 642,377
---------
---------
</TABLE>
These future minimum rental payment obligations include $91,736,000 of
future nonrecourse rental payments that relate to a waste-to-energy facility,
which are supported by third-party commitments to provide sufficient service
revenues to meet such obligations. Also included are $64,344,000 of nonrecourse
rental payments relating to a hydroelectric power generating facility operated
by a special-purpose subsidiary, which are supported by contractual power
purchase obligations of a third party and which are expected to provide
sufficient revenues to make the rent payments. These nonrecourse rental payments
(in thousands of dollars) are due as follows:
<TABLE>
<CAPTION>
<S> <C>
1998............................................................. $ 19,492
1999............................................................. 20,797
2000............................................................. 21,402
2001............................................................. 21,402
2002............................................................. 21,411
Later years...................................................... 51,576
---------
Total............................................................ $ 156,080
---------
---------
</TABLE>
24. EARNINGS PER SHARE
Basic earnings per share was computed by dividing net income, reduced by
preferred stock dividend requirements, by the weighted average of the number of
shares of common stock outstanding during each year.
Diluted earnings per share was computed on the assumption that all
convertible debentures, convertible preferred stock, and stock options converted
or exercised during each year or outstanding at the end of each year were
converted at the beginning of each year or at the date of issuance or grant, if
dilutive. This computation provided for the elimination of related convertible
debenture interest and preferred dividends.
The reconciliation of the income and common shares included in the
computation of basic earnings per common share and diluted earnings per common
share for years ended December 31, 1997, 1996, and 1995, is as follows:
X-22
<PAGE>
<TABLE>
<CAPTION>
1997 1996
------------- -------------
INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE INCOME
(NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR)
------------ ------------- ------------- ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net income........... $75,673,000 $64,534,000 $7,444,000
Less: preferred stock
dividend........... 152,000 161,000 171,000
------------ ------------ ------------
Basic Earnings
Per Share............ 75,521,000 50,030,000 $ 1.51 64,373,000 49,663,000 $ 1.30 7,273,000
----- -----
----- -----
Effect of Dilutive
Securities:
Stock options........ 538,000 501,000
Convertible preferred
stock.............. 152,000 275,000 161,000 289,000
6% convertible
debentures......... 2,353,000 1,631,000 (A)
5 3/4% convertible
debentures......... 1,693,000 1,143,000 (A)
------------ ------------- ------------ ------------- ------------
Diluted Earnings
Per Share............ $79,719,000 53,617,000 $ 1.49 $64,534,000 50,453,000 $ 1.28 $7,273,000
------------ ------------- ----- ------------ ------------- ----- ------------
------------ ------------- ----- ------------ ------------- ----- ------------
<CAPTION>
1995
-------------
SHARES PER-SHARE
(DENOMINATOR) AMOUNT
------------- -------------
<S> <C> <C>
Net income...........
Less: preferred stock
dividend...........
Basic Earnings
Per Share............ 49,385,000 $ 0.15
-----
-----
Effect of Dilutive
Securities:
Stock options........ 605,000
Convertible preferred
stock.............. (A)
6% convertible
debentures......... (A)
5 3/4% convertible
debentures......... (A)
-------------
-------------
Diluted Earnings
Per Share............ 49,990,000 $ 0.15
------------- -----
------------- -----
</TABLE>
- ------------------------
(A) Antidilutive Outstanding stock options to purchase common stock with an
exercise price greater than the average market price of common stock were
not included in the computation of diluted earnings per share. The balance
of such options was 80,000 in 1997, 2,100,400 in 1996, and 1,443,200 in
1995. Shares of common stock to be issued, assuming conversion of
convertible preferred shares, the 6% convertible debentures, and the 5 3/4%
convertible debentures, were not included in computations of diluted
earnings per share if to do so would have been antidilutive. The common
shares excluded from the calculation were 306,000 in 1995 for convertible
preferred shares; 544,000 in 1997 and 2,175,000 in 1996 and 1995 for the 6%
convertible debentures; and 381,000 in 1997 and 1,524,000 in 1996 and 1995
for the 5 3/4% convertible debentures.
25. Commitments and Contingent Liabilities
Ogden and certain of its subsidiaries have issued or are party to
performance bonds and guarantees and related contractual obligations
undertaken mainly pursuant to agreements to construct and operate certain
waste-to-energy, entertainment, and other facilities. In the normal course of
business, they are involved in legal proceedings in which damages and other
remedies are sought. In connection with certain contractual arrangements,
Ogden has agreed to provide two vendors with specified amounts of business
over a three-and-a-half-year period. If these amounts are not provided, the
Corporation may be liable for prorated damages of approximately $5,700,000.
Management does not expect that these contractual obligations, legal
proceedings, or any other contingent obligations incurred in the normal
course of business will have a material adverse effect on Ogden's
Consolidated Financial Statements.
During 1994, a subsidiary of Ogden entered into a 30-year facility
management contract, pursuant to which it agreed to advance funds to a
customer, and if necessary, to assist the customer's refinancing of senior
secured debt incurred in connection with the construction of the facility.
During 1997, Ogden purchased the customer's senior secured debt in the amount
of $95,000,000 using borrowed funds, which senior secured debt was
subsequently sold and the borrowed funds repaid. Ogden is obligated to
repurchase such senior secured debt in the amount of $97,679,000 on December
30, 2002, if such debt is not refinanced prior to that time. Ogden's
repurchase obligation is collateralized by bank letters of credit. Ogden is
also required to repurchase the outstanding amount of certain subordinated
secured debt issued by such customer on December 30, 2002. The amount
outstanding at December 31, 1997, was $46,562,000. In February 1998, this
amount was increased to $51,624,000. During 1997, this customer purchased
certain subordinated secured debt and repaid other amounts owed to Ogden in
an aggregate amount of $38,900,000. In February 1998, this customer repaid an
additional $7,343,000 owed to Ogden. In addition, at December 31, 1997, the
Corporation had guaranteed indebtedness of $20,683,000 of an affiliate and
principal tenant of this customer, which indebtedness is due in September
1998. Ogden has also guaranteed borrowings of another customer amounting to
approximately $14,400,000 as well as $15,500,000 of borrowings of joint
ventures in which Ogden has an equity interest. Management does not expect
that these arrangements will have a material adverse effect on Ogden's
Consolidated Financial Statements.
In January 1998, a joint venture in which the Corporation has a 28% interest
was awarded a 30-year concession contract to develop, improve, and operate 33
airports in Argentina. Ogden has a commitment of $28,000,000 for its equity
contribution to this joint venture.
At December 31, 1997, capital commitments amounted to $158,700,000, which
included $86,100,000 for normal replacement, modernization, and growth in
Entertainment ($45,200,000); Aviation ($23,200,000); Energy ($16,800,000); and
Corporate and Other ($900,000) operations. Also included was $61,200,000 for
Energy's coal-fired power project in the Philippines reflecting $41,800,000 for
the remaining mandatory equity contributions, $5,700,000 for contingent equity
contributions, and $13,700,000 for a standby letter of credit in support of debt
service reserve requirements. Funding for the remaining mandatory equity
contribution is being provided through a bank credit facility, which must be
repaid in December 2001. The Corporation also has a $11,400,000 contingent
equity contribution in an entertainment venture. In addition, compliance with
standards and guidelines under the Clean Air Act Amendments of 1990 will require
further Energy capital expenditures currently estimated at $40,000,000 by
December 2000, subject to final time schedules determined by the individual
states in which the Corporation's waste-to-energy facilities are located.
X-23
<PAGE>
26. INFORMATION CONCERNING BUSINESS SEGMENTS
Ogden elected to change the reporting of its business segments as of January
1, 1997, and restated its prior years' presentation to conform to this revised
segment reporting. Two of Ogden's core businesses formerly reported as part of
the Services segment-Entertainment and Aviation-have been designated as separate
business segments. All other operations formerly in the Services segment, mainly
the Facility Management and Technology groups, were transferred to the Other
segment except the Facility Management operations at Ogden's waste-to-energy
plants and its environmental business, which have been transferred to the Energy
segment. Noncore businesses scheduled for disposition are included in the Other
segment.
In connection with Ogden's restructuring plan, in 1997 Facility Services'
New York City operations and the Charlotte, North Carolina, operations of
Atlantic Design were sold. In 1996, the environmental laboratory business of
Energy was sold, and in addition, the Other segment sold the operations of W.J.
Schafer Associates, Ogden Professional Services, and the Facility Services
group's operations outside of New York City and discontinued its asbestos
abatement operations.
The Entertainment segment consists principally of interests in themed
attractions; live theater; concerts; gaming; large-format theaters and films;
performing artist management; recorded music and video development; food,
beverage, and novelty concession operations; and facility management at arenas,
stadiums, amphitheaters, civic-convention centers, and other recreational
facilities. Most of these services are provided at a wide variety of public and
private facilities including stadiums, convention and exposition centers,
arenas, parks, amphitheaters, and fairgrounds located in the United States,
Mexico, Canada, Argentina, Germany, Australia, Spain, and the United Kingdom.
Entertainment also operates a racetrack and four off-track betting parlors in
Illinois.
The Aviation segment provides specialized support services to airlines at
locations in the United States, Canada, Europe, Latin America, and the Pacific
Rim. The specialized support services provided by this group include
comprehensive ground handling, ramp, passenger, cargo and warehouse, aviation
fueling, and in-flight catering services. These services are performed through
joint ventures, consortia, contracts with individual airlines, consolidated
agreements with several airlines, and contracts with various airport
authorities.
The operations of Ogden's Energy segment are conducted by Ogden Energy
Group, Inc., through four principal business groups-independent power, waste to
energy, water and wastewater, and environmental consulting and engineering
(collectively, "Energy").
Revenues and income from continuing operations (expressed in thousands of
dollars) for the years ended December 31, 1997, 1996, and 1995, were as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Entertainment........................................................... $ 425,922 $ 391,933 $ 301,315
Aviation................................................................ 363,264 426,746 450,046
Energy.................................................................. 712,272 724,281 769,754
Other................................................................... 248,267 488,121 663,878
------------ ------------ ------------
Total revenues.......................................................... $ 1,749,725 $ 2,031,081 $ 2,184,993
------------ ------------ ------------
------------ ------------ ------------
INCOME (LOSS) FROM OPERATIONS:
Entertainment........................................................... $ 30,545 $ 20,259 $ (9,458)
Aviation................................................................ 34,015 14,940 1,381
Energy.................................................................. 94,433 90,464 64,716
Other................................................................... 528 16,745 22,518
------------ ------------ ------------
Total income from operations............................................ 159,521 142,408 79,157
EQUITY IN NET INCOME (LOSS) OF INVESTEES AND JOINT VENTURES:
Entertainment........................................................... (3,091) (1,196) (392)
Aviation................................................................ 3,343 1,231 368
Energy.................................................................. 1,605 325 4,423
Other................................................................... 179 3,244 2,467
------------ ------------ ------------
Total................................................................... 161,557 146,012 86,023
Corporate unallocated income and expenses-net........................... (22,178) (22,941) (30,132)
Corporate interest-net.................................................. (8,601) (13,430) (15,365)
------------ ------------ ------------
CONSOLIDATED INCOME BEFORE INCOME
TAXES AND MINORITY INTEREST............................................. $ 130,778 $ 109,641 $ 40,526
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
In 1995, income from operations of Entertainment, Aviation, Energy, and
Other reflects pretax charges of $6,500,000, $10,800,000, $32,400,000, and
$19,600,000, respectively, reflecting the adoption of SFAS No. 121 and other
unusual charges (see Notes 20 and 21).
Ogden's revenues include $53,600,000, $137,600,000, and $280,846,000 from
the United States government contracts for the years ended December 31, 1997,
1996, and 1995, respectively.
Total revenues by segment reflect sales to unaffiliated customers. In
computing income from operations, none of the following have been added or
deducted: unallocated corporate expenses, nonoperating interest expense,
interest income, and income taxes.
X-24
<PAGE>
A summary (expressed in thousands of dollars) of identifiable assets,
depreciation and amortization, and capital additions of continuing operations
for the years ended December 31, 1997, 1996, and 1995, is as follows
(reportable amounts for 1995 are shown as originally reported since the
Corporation cannot practically restate these amounts):
<TABLE>
<CAPTION>
IDENTIFIABLE DEPRECIATION AND CAPITAL
ASSETS AMORTIZATION ADDITIONS
------------ ---------------- ----------
<S> <C> <C> <C>
1997
Entertainment......................................................... $ 317,313 $ 14,731 $ 52,523
Aviation.............................................................. 250,474 13,129 19,008
Energy................................................................ 2,808,571 72,835 39,967
Other................................................................. 81,512 2,423 2,131
Corporate............................................................. 181,425 1,259 2,572
------------ -------- ----------
Consolidated.......................................................... $ 3,639,295 $ 104,377 $ 116,201
------------ -------- ----------
------------ -------- ----------
1996
Entertainment......................................................... $ 294,653 $ 13,980 $ 17,618
Aviation.............................................................. 219,510 15,444 10,401
Energy................................................................ 2,681,820 77,487 28,157
Other................................................................. 203,748 6,909 6,037
Corporate............................................................. 197,801 1,443 1,978
------------ -------- ----------
Consolidated.......................................................... $ 3,597,532 $ 115,263 $ 64,191
------------ -------- ----------
------------ -------- ----------
1995
Services.............................................................. $ 813,591 $ 37,936 $ 49,940
Energy................................................................ 2,646,979 70,805 42,875
Corporate............................................................. 192,101 863 11
------------ -------- ----------
Consolidated.......................................................... $ 3,652,671 $ 109,604 $ 92,826
------------ -------- ----------
------------ -------- ----------
</TABLE>
Ogden's areas of operations are principally in the United States. Operations
outside of the United States are worldwide but primarily in Europe, South
America, and Asia. No single foreign country or geographic area is significant
to the consolidated operations. Foreign operations' revenues, income from
operations, and identifiable assets were $248,970,000, $22,513,000, and
$387,294,000, respectively, for 1997 and $238,500,000, $10,900,000, and
$275,100,000, respectively, for 1996.
27. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
(EXPRESSED IN THOUSANDS OF DOLLARS) 1997 1996 1995
- ----------------------------------------------------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
CASH PAID FOR INTEREST AND INCOME TAXES:
Interest (net of amounts capitalized)........................................ $ 145,270 $ 134,560 $ 140,878
Income taxes................................................................. 24,187 20,552 9,885
NONCASH INVESTING AND FINANCING ACTIVITIES:
Conversion of preferred shares for common shares............................. 3 2 4
Detail of Entities Acquired:
Fair value of assets acquired................................................ 152,836 38,019 32,293
Liabilities assumed.......................................................... (89,624) (21,051) (16,819)
Net cash paid for acquisitions............................................... 63,212 16,968 15,474
</TABLE>
X-25
<PAGE>
28. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial
instruments is made in accordance with the requirements of SFAS No. 107,
"Disclosures About Fair Value of Financial Instruments." The estimated
fair-value amounts have been determined using available market information
and appropriate valuation methodologies. However, considerable judgment is
necessarily required in interpreting market data to develop estimates of fair
value. Accordingly, the estimates presented herein are not necessarily
indicative of the amounts that Ogden would realize in a current market
exchange.
The estimated fair value (expressed in thousands of dollars) of financial
instruments at December 31, 1997 and 1996, is summarized as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- ----------------------
<S> <C> <C> <C> <C>
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
---------- ---------- ---------- ----------
ASSETS:
Cash and cash equivalents..................................... $ 185,671 $ 185,671 $ 140,824 $ 140,824
Receivables................................................... 568,147 571,159 721,846 725,075
Restricted funds.............................................. 309,895 309,711 310,811 310,716
Other assets.................................................. 26,659 26,659 23,799 23,799
LIABILITIES:
Debt.......................................................... 373,728 413,453 312,937 335,819
Convertible subordinated debentures........................... 148,650 143,342 148,650 142,546
Project debt.................................................. 1,492,700 1,563,877 1,561,656 1,617,690
Other liabilities............................................. 21,175 18,729 21,245 18,330
OFF BALANCE-SHEET FINANCIAL INSTRUMENTS:
Unrealized losses on interest rate swap agreements............ 3,529 1,413
Unrealized gains on interest rate swap agreements............. 201 670
</TABLE>
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
For cash and cash equivalents, the carrying value of these amounts is a
reasonable estimate of their fair value. The fair value of long-term unbilled
receivables is estimated by using a discount rate that approximates the current
rate for comparable notes. The fair value of restricted funds held in trust is
based on quoted market prices of the investments held by the trustee. The fair
value of noncurrent receivables is estimated by discounting the future cash
flows using the current rates at which similar loans would be made to such
borrowers based on the remaining maturities, consideration of credit risks, and
other business issues pertaining to such receivables. Other assets, consisting
primarily of marketable securities, insurance and escrow deposits, and other
miscellaneous financial instruments used in the ordinary course of business, are
valued based on quoted market prices or other appropriate valuation techniques.
Fair values for short-term debt and long-term debt were determined based on
interest rates that are currently available to the Corporation for issuance of
debt with similar terms and remaining maturities for debt issues that are not
traded on quoted market prices. With respect to convertible subordinated
debentures, fair values are based on quoted market prices. The fair value of
project debt is estimated based on quoted market prices for the same or similar
issues. Other liabilities are valued by discounting the future stream of
payments using the incremental borrowing rate of the Corporation. The fair value
of the Corporation's interest rate swap agreements is the estimated amount that
the Corporation would receive or pay to terminate the swap agreements at the
reporting date based on third-party quotations. The fair value of Ogden
financial guarantees provided on behalf of customers (see Note 25) would be zero
because Ogden receives no fees associated with such commitments.
The fair-value estimates presented herein are based on pertinent information
available to management as of December 31, 1997 and 1996. Although management is
not aware of any factors that would significantly affect the estimated
fair-value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date, and current estimates of
fair value may differ significantly from the amounts presented herein.
X-26
<PAGE>
INDEPENDENT AUDITORS' REPORT
<TABLE>
<S> <C>
Deloitte & Touche LLP Two World Financial Center
New York, NY 10281
</TABLE>
The Board of Directors and Shareholders of Ogden Corporation:
We have audited the accompanying consolidated balance sheets of Ogden
Corporation and subsidiaries as of December 31, 1997 and 1996, and the
related statements of shareholders' equity, consolidated income and cash
flows for each of the three years in the period ended December 31, 1997.
These financial statements are the responsibility of the Corporation's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the companies at December 31, 1997 and
1996, and the results of their operations and cash flows for each of the
three years in the period ended December 31, 1997, in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1995 the Corporation
adopted Statement of Financial Accounting Standards No. 121, relating to
long-lived assets and long-lived assets to be disposed of.
/s/ Deloitte & Touche LLP
February 27, 1998
X-27
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
REPORT OF MANAGEMENT
Ogden's management is responsible for the information and representations
contained in this annual report. Management believes that the financial
statements have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances to reflect in all material respects
the substance of events and transactions that should be included and that the
other information in the annual report is consistent with those statements. In
preparing the financial statements, management makes informed judgments and
estimates of the expected effects of events and transactions currently being
accounted for.
In meeting its responsibility for the reliability of the financial
statements, management depends on the Corporation's internal control structure.
This structure is designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with management's
authorization and recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting principles. In
designing control procedures, management recognizes that errors or
irregularities may nevertheless occur. Also, estimates and judgments are
required to assess and balance the relative cost and expected benefits of such
controls. Management believes that the Corporation's internal control structure
provides reasonable assurance that errors or irregularities that could be
material to the financial statements are prevented and would be detected within
a timely period by employees in the normal course of performing their assigned
functions.
The Board of Directors pursues its oversight role for these financial
statements through the Audit Committee, which is composed solely of
nonaffiliated directors. The Audit Committee, in this oversight role, meets
periodically with management to monitor their responsibilities. The Audit
Committee also meets periodically with the independent auditors and the
internal auditors, both of whom have free access to the Audit Committee
without management present.
The independent auditors elected by the shareholders express an opinion on
our financial statements. Their opinion is based on procedures they consider to
be sufficient to enable them to reach a conclusion as to the fairness of the
presentation of the financial statements.
<TABLE>
<S> <C>
/s/ R. Richard Ablon /s/ Philip G. Husby
- ------------------------------- -------------------------------
R. Richard Ablon Philip G. Husby
Chairman of the Board, Senior Vice President and
President, and Chief Financial Officer
Chief Executive Officer
</TABLE>
X-28
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1997 QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
(In thousands of dollars, except per-share amounts)
<S> <C> <C> <C> <C>
Total revenues................................................... $ 427,054 $ 457,914 $ 462,577 $ 402,180
---------- ---------- ---------- ----------
Gross profit..................................................... $ 78,400 $ 91,554 $ 95,128 $ 89,044
---------- ---------- ---------- ----------
Net income....................................................... $ 10,777 $ 20,009 $ 24,605 $ 20,282
---------- ---------- ---------- ----------
Basic earnings per common share.................................. $ 0.22 $ 0.40 $ 0.49 $ 0.40
---------- ---------- ---------- ----------
Diluted earnings per common share................................ $ 0.21 $ 0.39 $ 0.48 $ 0.39
---------- ---------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
1996 QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31
- ----------------------------------------------------------------- ---------- ---------- ---------- ----------
(In thousands of dollars, except per-share amounts)
<S> <C> <C> <C> <C>
Total revenues................................................... $ 520,672 $ 546,099 $ 500,641 $ 463,669
---------- ---------- ---------- ----------
Gross profit..................................................... $ 82,057 $ 89,216 $ 91,111 $ 85,013
---------- ---------- ---------- ----------
Net income....................................................... $ 9,288 $ 16,888 $ 20,388 $ 17,970
---------- ---------- ---------- ----------
Basic earnings per common share.................................. $ 0.19 $ 0.34 $ 0.41 $ 0.36
---------- ---------- ---------- ----------
Diluted earnings per common share................................ $ 0.18 $ 0.34 $ 0.40 $ 0.35
---------- ---------- ---------- ----------
</TABLE>
OGDEN CORPORATION AND SUBSIDIARIES
PRICE RANGE OF STOCK AND DIVIDEND DATA
<TABLE>
<CAPTION>
1997 1996
-------------------- --------------------
<S> <C> <C> <C> <C>
HIGH LOW HIGH LOW
--------- --------- --------- ---------
Common:
First Quarter............................ 22 5/8 18 3/8 23 7/8 19 3/8
Second Quarter........................... 22 19 20 7/8 17 7/8
Third Quarter............................ 24 5/8 20 3/8 21 5/8 18
Fourth Quarter........................... 28 7/16 23 5/8 20 5/8 17 5/8
--------- --------- --------- ---------
Preferred:
First Quarter............................ 118 118 128 128
Second Quarter........................... 114 1/2 114 1/2 121 117 1/4
Third Quarter............................ 121 121 125 1/2 125 1/2
Fourth Quarter........................... 153 153 Not Traded
--------- --------- --------- ---------
</TABLE>
Quarterly common stock dividends of $.3125 per share were paid to
shareholders of record for the four quarters of 1997 and 1996, the dividends for
the last quarters of 1997 and 1996 being paid in January of the subsequent
years. Quarterly dividends of $.8376 were paid for the four quarters of 1997 and
1996 on the $1.875 preferred stock.
X-29
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT 21
OGDEN CORPORATION - U.S. SUBSIDIARIES LIST
(See Attachment A for foreign subsidiaries list)
PPERCENT DOMESTIC
COMPANY OWNERSHIP STATE CO. ODE/E.I.N.
- ------- --------- ----- --------------
<S> <C> <C> <C>
Ogden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE. . . . 13-5549268
Ogden Management Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-2918484
OFS Equity of Babylon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 13-3543094
OFS Equity of Huntington, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 13-3543092
Ogden Services Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 141*/13-3058273
Ogden Firehole Entertainment Corp.. . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3516164
Ogden Asia Pacific Services, Inc. (See Attachment A for subsidiaries) . . . 100. . . .DE. . . . 134/13-3793247
Ogden Central and South America, Inc. (See Attachment A for subsidiaries). 100. . . .DE. . . . 135/13-3793248
Ogden International Europe Inc. (See Attachment A for subsidiaries). . . . 100. . . .DE. . . . 164/13-3688536
Ogden Entertainment, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 001/11-2145117
Doggie Diner, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 003/92-1228666
I & S Consultants, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .IL. . . . /36-3241812
The Metropolitan Entertainment Co., Inc.. . . . . . . . . . . . . . . . . 50 . . . .NJ. . . . 22-1968974
Offshore Food Service, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .LA. . . . 027/72-0535141
Gulf Coast Catering Company, Inc. . . . . . . . . . . . . . . . . . . . 100. . . .LA. . . . 028/13-3537164
Ogden American Food Services, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . .OH. . . . 008/34-4197320
Ogden Attractions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3934857
Ogden Aviation Food Services, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 080/11-2161743
Ogden Aviation Food Services (ALC), Inc . . . . . . . . . . . . . . . . 100. . . .NY. . . . 085/11-1619941
Ogden-Burtco Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .WA. . . . 042/92-0022939
Alpine Food Products, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .WA. . . . 041/91-0760148
Ogden Facility Management of Alaska, Inc. . . . . . . . . . . . . . . . 100. . . .AK. . . . 058/92-0097503
Ogden Entertainment of Florida, Inc.. . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3877904
Ogden Entertainment of New York, Inc. . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 011/13-3428320
Ogden Facility Management Corporation . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 098/13-3282969
Ogden Facility Management Corporation of Anaheim. . . . . . . . . . . . . 100. . . .CA. . . . 060/13-3526194
Ogden Facility Management Corporation of Huntington . . . . . . . . . . . 100. . . .WV. . . . 13-3852104
Ogden Facility Management Corporation of Iowa . . . . . . . . . . . . . . 100. . . .IA. . . . 007/13-3444248
Ogden Facility Management Corporation of Pensacola. . . . . . . . . . . . 100. . . .FL. . . . 006/13-3245048
Ogden Facility Management Corporation of West Virginia. . . . . . . . . . 100. . . .WV. . . . 55-0459949
Ogden Film and Theatre, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3934858
Arizona Big Frames Theatres, L.L.C. . . . . . . . . . . . . . . . . . . 50 . . . .AZ. . . . TBA
Ogden Food Service Corporation. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 023/23-0404985
Ogden Confection Corporation. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 039/36-2392940
Ogden Food Service Corporation of Indiana . . . . . . . . . . . . . . . . 40 . . . .IN. . . . 048/13-2723781
Ogden Food Service Corporation of Kansas. . . . . . . . . . . . . . . . . 100. . . .KS. . . . 0032/13-3703705
Ogden Food Service Corporation of Milwaukee . . . . . . . . . . . . . . . 100. . . .WI. . . . 063/13-2783130
Ogden Food Service Corporation of Texas . . . . . . . . . . . . . . . . . 100. . . .TX. . . . 092/74-1310443
Ogden Food Service Corporation of Wisconsin . . . . . . . . . . . . . . . 100. . . .WI. . . . 056/39-0912345
Ogden Leisure, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 54-0848368
Ogden Fairmount, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 021/37-0912053
Ogden Technology Services Corporation . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3977971
Applied Data Technology, Inc. . . . . . . . . . . . . . . . . . . . . . . 100. . . .CA. . . . 33-0297326
ADT Global Services, Inc. (formerly Ogden Range Services, Inc.) . . . . . 100. . . .DE. . . . 169/13-3712961
Logistics Operations, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .VA. . . . 164/13-3977972
Ogden Support Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 165*/13-3688521
Ogden Allied Maintenance Corporation. . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 010*/13-65939
Alantic Design Company, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 086*/13-2629642
Lenzar Electro-Optics, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 175/59-3063752
Ogden Allied Payroll Services, Inc. . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 063*/13-6160158
Ogden Cisco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 157*/13-3670141
Ogden Communications, Inc.. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 130/13-3793364
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PPERCENT DOMESTIC
COMPANY OWNERSHIP STATE CO. ODE/E.I.N.
- ------- --------- ----- --------------
Ogden Corporation
Ogden Services Corporation DE
<S> <C> <C> <C>
Ogden Aviation Services, Inc. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 015/13-3846270
Ogden Aviation Distributing Corp. . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 046*/13-1835320
Ogden Aviation Fueling Company, Inc.. . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 012*/13-5564521
Ogden Aviation Fueling Company of Atlanta, Inc. . . . . . . . . . . . . 100. . . .GA. . . . 129*/13-3054674
Ogden Aviation Fueling Company of Houston, Inc. . . . . . . . . . . . . 100. . . .TX. . . . 068*/13-2557861
Ogden Aviation Fueling Company of St. Louis, Inc. . . . . . . . . . . . 100. . . .DE. . . . 025*/13-5665586
Ogden Aviation Fueling Company of Texas, Inc. . . . . . . . . . . . . . 100. . . .TX. . . . 024*/13-5661328
Ogden Aviation Fueling Company of Virginia, Inc.. . . . . . . . . . . . 100. . . .DE. . . . 038*/13-1954027
Ogden Aviation Security Services, Inc.. . . . . . . . . . . . . . . . . 100. . . .DE. . . . 013/13-3876173
Ogden Aviation Service Company of Colorado, Inc.. . . . . . . . . . . . 100. . . .CO. . . . 104*/13-2694899
Ogden Aviation Service Company of Hawaii, Inc.. . . . . . . . . . . . . 100. . . .HI. . . . 107*/13-2706452
Ogden Aviation Service Company of Kansas City, Inc. . . . . . . . . . . 100. . . .MO. . . . 118*/13-2942892
Ogden Aviation Service Company of New Jersey, Inc.. . . . . . . . . . . 100. . . .NJ. . . . 003*/13-5565924
Ogden Aviation Service Company of New York, Inc.. . . . . . . . . . . . 100. . . .NY. . . . 007*/13-5565925
Ogden Ground Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 146*/23-1707864
ARA Sunset Airport Systems, Inc.. . . . . . . . . . . . . . . . . . 100. . . .CA. . . . 152*/95-2959114
Ogden Aviation Service Company of Pennsylvania, Inc.. . . . . . . . . . 100. . . .PA. . . . 018*/13-2749962
Ogden Aviation Service Company of Texas, Inc. . . . . . . . . . . . . . 100. . . .DE. . . . 019*/13-5649342
Ogden Aviation Service Company of Washington, Inc.. . . . . . . . . . . 100. . . .DE. . . . 011*/13-5581082
Ogden Aviation Service International Corporation. . . . . . . . . . . . 100. . . .NY. . . . 006*/13-5565926
Ogden Aviation, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 177/13-3634105
Ogden Aviation Security Services of Indiana, Inc. . . . . . . . . . . 100. . . .IN. . . . 163*/13-3606125
Ogden Aviation Terminal Services, Inc.. . . . . . . . . . . . . . . . . 100. . . .MA. . . . 005*/13-5565923
Ogden New York Ground Services, Inc.. . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3889795
Ogden New York Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 020/13-5623889
Ogden Pipeline Services Corporation . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 125*/13-2949046
Ogden Facility Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3852102
Ogden Facility Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3773192
Ogden Allied Building & Airport Services Inc. . . . . . . . . . . . . 100. . . .DE. . . . 017*/13-5618372
Ogden Allied Building Service Corporation . . . . . . . . . . . . . . 100. . . .DE. . . . 121*/13-2928817
Ogden Allied Maintenance Company of Hawaii, Inc.. . . . . . . . . . . 100. . . .HI. . . . 090*/99-0119711
Ogden Allied Maintenance Corporation of New England . . . . . . . . . 100. . . .MA. . . . 009/04-2453238
Ogden Allied Maintenance Corporation of Pennsylvania, Inc.. . . . . . 100. . . .DE. . . . 014*/13-5611594
Ogden Allied Maintenance Corporation of Texas . . . . . . . . . . . . 100. . . .TX. . . . 042*/13-1987767
Ogden Allied Service Agency Corporation . . . . . . . . . . . . . . . 100. . . .DE. . . . 016*/13-5616071
Ogden Allied Window Cleaning Company, Inc.. . . . . . . . . . . . . . 100. . . .NY. . . . 008*/13-5565941
Ogden Hawaii Company, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . .HI. . . . 062*/99-0086682
Ogden Industrial Services, Inc. . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 143*/13-3330336
Ogden Plant Maintenance Company, Inc. . . . . . . . . . . . . . . . . 100. . . .NJ. . . . 088*/13-2640359
Ogden Plant Maintenance Company of Missouri . . . . . . . . . . . . . 100. . . .MO. . . . 069*/13-2556007
Ogden Plant Maintenance Company of North Carolina . . . . . . . . . . 100. . . .NC. . . . 113*/13-2761092
Ogden Resource Recovery Support Services, Inc.. . . . . . . . . . . . . . . . 100. . . .DE. . . . 149*/13-3560729
Ogden Plant Services of New Jersey, Inc.. . . . . . . . . . . . . . . . . . 100. . . .NJ. . . . 176/13-3597547
Ogden Water Treatment Support Services, Inc.. . . . . . . . . . . . . . . . . 100. . . .DE. . . . 199*/13-3807441
Ogden Allied Abatement & Decontamination Service, Inc.. . . . . . . . . . . . 100. . . .NY. . . . 144*/13-3429112
Ogden Energy Group, Inc. (formerly known as Ogden Projects, Inc.) . . . . . . . 100. . . .DE. . . . 13-3213657
(SEE ATTACHMENT B FOR OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST)
Ogden Financial Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3057250
B D C Liquidating Corp. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-2757633
Bouldin Development Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .CA. . . . 94-1695641
Greenway Insurance Company of Vermont . . . . . . . . . . . . . . . . . . . . 100. . . .VT. . . . 13-3167991
International Terminal Operating Co., Inc.. . . . . . . . . . . . . . . . . . 50 . . . .DE . . . 13-5628741
OFS Equity of Delaware, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3495890
OFS Equity of Alexandria/Arlington, Inc.. . . . . . . . . . . . . . . . . . 100. . . .VA. . . . 13-3495889
OFS Equity of Indianapolis, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . .IN. . . . 13-3495887
OFS Equity of Stanislaus, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .CA. . . . 13-3495880
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PPERCENT DOMESTIC
COMPANY OWNERSHIP STATE CO. ODE/E.I.N.
- ------- --------- ----- --------------
Ogden Corporation
Ogden Services Corporation DE
<S> <C> <C> <C>
Ogden Allied Maintenance Securities, Inc. . . . . . . . . . . . . . . . . 100. . . .DE. . . . 004*/51-0102045
Denver Fuel Facilities Corporation. . . . . . . . . . . . . . . . . . . 100. . . .CO. . . . 105*/13-2694896
Kansas City International Fueling Facilities Corporation. . . . . . . . 100. . . .MO. . . . 080*/13-2604290
LaGuardia Fuel Facilities Corporation . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 100*/13-2660143
Lambert Field Fueling Facilities Corporation. . . . . . . . . . . . . . 100. . . .DE. . . . 057*/13-6116279
Love Field Fueling Facilities Corporation . . . . . . . . . . . . . . . 100. . . .TX. . . . 058*/13-6116341
Newark Automotive Fuel Facilities Corporation . . . . . . . . . . . . . 100. . . .NJ. . . . 114*/13-2806865
Philadelphia Fuel Facilities Corporation. . . . . . . . . . . . . . . . 100. . . .PA. . . . 097*/13-2671427
</TABLE>
* For payroll/personnel, add 200 to codes of Maintenance companies ONLY.
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT A
OGDEN CORPORATION - FOREIGN SUBSIDIARIES LIST
---------------------------------------------
PERCENT DOMESTIC CO.
COMPANY OWNERSHIP COUNTRY CODE
- ------- --------- ------- ----
<S> <C> <C> <C>
Ogden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE/U.S.A.
Ogden Services Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. . . . . . .141
Ogden Aviation Services Limited . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K.186/2176414259610
Ogden Aviation Engineering Limited. . . . . . . . . . . . . . . . . . . . 100. . . .U.K.. . . . . . . . .188
Ogden Entertainment Services (UK) Ltd.. . . . . . . . . . . . . . . . . . 100. . . .U.K.. . . . . . . . .015
Ogden Ice Hockey Limited. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K.
Ogden Cargo Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K.
SkyCare Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K.
Air Cargo Enterprises Limited . . . . . . . . . . . . . . . . . . . . . 50 . . . .U.K.
Ogden Asia Pacific Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A.
IEA of Japan Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 50 . . . .Japan
HO/Ogden Investimentos e Transportes, Limitada. . . . . . . . . . . . . . 51 . . . .Macau
MASC/Ogden Aviation Services (Macau) Limited. . . . . . . . . . . . . . . 29 . . . .Macau
Ogden Asia Pacific Holding Limited. . . . . . . . . . . . . . . . . . . . 100. . . .British Virgin Islands.
Ogden Aviation (Asia Pacific) Limited . . . . . . . . . . . . . . . . . 80.1 . . .British Virgin Islands
Ogden Aviation (Hong Kong) Limited. . . . . . . . . . . . . . . . . . 100. . . .Hong Kong
Ogden Aviation Services (NZ) Limited. . . . . . . . . . . . . . . . . . . 100. . . .New Zealand156
Ogden International Facilities Corporation (Asia Pacific) Pty Ltd.. . . . 100. . . .Australia . . . . . .172
Ogden International Facilities Corporation (Australia) Pty Ltd. . . . . 50 . . . .Australia
International Facilities Corporation (Cairns) Pty Ltd.. . . . . . . . . 100. . . .Australia
International Facilities Corporation (NZ) Pty Ltd.. . . . . . . . . . . 100. . . .New Zealand . . . . .156
International Facility Corporation (Newcastle) Ltd. . . . . . . . . . . 100
International Facility Corporation (Hong Kong) Pty Ltd. . . . . . . . . * . . . .Hong Kong
* Boscastle Ltd and Coverack Ltd are shareholders due to residency requirements.
Ogden Central and South America, Inc. . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A.
Americana Entertainment N.V.. . . . . . . . . . . . . . . . . . . . . . . 80 . . . .Aruba
Ogden Argentina, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Argentina
Ogden Aviation Services (Chile) Ltda. . . . . . . . . . . . . . . . . . . 99 . . . .Chile . . . . . . . .158
(1% held by Ogden Asia Pacific Services Inc.)
Aviation Services Leader S.A. . . . . . . . . . . . . . . . . . . . . . 80 . . . .Chile . . . . . . . .185
Ogden Aviation Services Dominicana, S.A.. . . . . . . . . . . . . . . . . 99 . . . .Dominican Rep.
Ogden Aviation Services (Panama) Corp.. . . . . . . . . . . . . . . . . . 85 . . . .Panama. . . . . . . .171
Ogden Aviation Services (Venezuela), S.A. . . . . . . . . . . . . . . . . 100. . . .Venezuela . . . . . .168
Ogden Ground Services Caracas, C.A. . . . . . . . . . . . . . . . . . . 100. . . .Venezuela . . . . . .182
Ogden do Brazil Participacoes S/C Ltda. . . . . . . . . . . . . . . . . . 100 . . .Brazil. . . . . . . .174
Ogden - Servicos de Atendimento Aeroterrestre Ltda. ("SERVAIR") . . . . 100. . . .Brazil
Ogden Alimentos Comercio e Servicoes Ltda.. . . . . . . . . . . . . . . 100 . . .Brazil
Ogden Ground Services, Inc. (St. Thomas). . . . . . . . . . . . . . . . . 100. . . .Virgin Islands. . . .155
Ogden Ground Services de Mexico, S.A. (formerly "SEITSA") . . . . . . . . 94.9 . . .Mexico. . . . . . . .150
Ogden, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . 66.67. . .Mexico
Ogden Servair Servicios Aeroportuarios, S.A.. . . . . . . . . . . . . . . 50 . . . .Mexico. . . . . . . .184
Ogden SEITSA Leasing, S.A. de C.V.. . . . . . . . . . . . . . . . . . . . 94.9 . . .Mexico. . . . . . . .183
Ogden Saint Maarten Ground Services N.V.. . . . . . . . . . . . . . . . . 100. . . .Netherlands Antilles
Ogden & Talma Aviation Services of Peru S.A.. . . . . . . . . . . . . . . 54 . . . .Peru. . . . . . . . .178
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PERCENT DOMESTIC CO.
COMPANY OWNERSHIP COUNTRY CODE
- ------- --------- ------- ----
<S> <C> <C> <C>
Ogden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE/U.S.A.
Ogden Services Corporation (cont'd) . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. . . . . . .141
Ogden International Europe Inc. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. . . . . . .164
Ogden Atlantic Design (Europe) Limited. . . . . . . . . . . . . . . . . . 100. . . .Ireland
Ogden Holdings B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Netherlands . . . . .166
Compania General de Sondeos CGS, S.A. . . . . . . . . . . . . . . . . . 100. . . .Spain . . . . . . . .191
Czech-Ogden Airhandling s.r.o.. . . . . . . . . . . . . . . . . . . . . 50 . . . .Czech. . . . . . . .162
Ogden Aviation (Schiphol) B.V.. . . . . . . . . . . . . . . . . . . . . 100. . . .Netherlands . . . . .161
Ogden Cargo B.V.. . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Netherlands
Ogden Aviation Spain S.A. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Spain159/A07568876
Ogden Entertainment Services Portugal, S.A. . . . . . . . . . . . . . . 100. . . .Portugal. . . . . . .160
Ogden Entertainment Services Spain, SA. . . . . . . . . . . . . . . . . 100. . . .Spain
Estadio Olimpico de Sevilla, S.A. . . . . . . . . . . . . . . . . . . 15.9 . . .Spain
Ogden Power Agua y Energia Torre Pacheco, S.A.. . . . . . . . . . . . . 83.3 . . .Spain
Ogden Romanian Aviation Services, S.A.. . . . . . . . . . . . . . . . . 50 . . . .Romania
Parque Isla Magica, S.A.. . . . . . . . . . . . . . . . . . . . . . . . 26.12. . .Spain
Sezai Turkes Feyzi Akkaya Ogden Hizmet Ve Isletmecilik A.S.
("STFA Ogden Maintenance and Service Co."). . . . . . . . . . . . . . 50 . . . .Turkey
Ogden Holdings (Deutschland) GmbH . . . . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .192
Ogden Allied Services GmbH. . . . . . . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .138
Ogden Aviation Services GmbH & Co. KG . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .193
Ogden Entertainment (Oberhausen) GmbH . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .194
Ogden Tegel Verwaltungs GmbH (formerly DAN AIR Services GmbH) . . . . 100. . . .Germany . . . . . . .195
Tegel Aircraft Handling GmbH. . . . . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .196
Verwaltung Ogden Aviation Services GmbH . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .197
Ogden Entertainment, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A.
Ogden Entertainment of Cape Town (Proprietary) Limited. . . . . . . . . . 78 . . . .South Africa
Ogden Entertainment Services (Canada) Inc. -
Services de Divertissements Ogden (Canada) Inc. . . . . . . . . . . . . . 100. . . .Canada. . . . . . . .012
Ogden Gaming of Ontario, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .Canada
Ogden Palladium Services (Canada) Inc.. . . . . . . . . . . . . . . . . 100. . . .Canada
Ogden Entertainment Services de Mexico, S.A. de C.V.. . . . . . . . . . . 100. . . .Mexico
Servicios de Alimentos Bebidas Especializados, S.A. de CV . . . . . . . . 100. . . .Mexico
Ogden Allied Maintenance Corporation. . . . . . . . . . . . . . . . . . . . 100. . . .NY/U.S.A.
Allied Aviation Service Company of Newfoundland, Ltd. . . . . . . . . . . 100. . . .Canada. . . . . . . .022
Atlantic Design Company, Inc. . . . . . . . . . . . . . . . . . . . . . . 100. . . .NY/U.S.A.
Datacom de Mexico, S.A. de C.V. . . . . . . . . . . . . . . . . . . . . 100. . . .Mexico
Ogden Aviation Services, Inc. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A.
Ogden Aviation Service Company of New York, Inc.. . . . . . . . . . . . 100. . . .NY/U.S.A. . . . . . .007
Ogden Ground Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. . . . . . .146
Ogden/Air Aruba Ground Services N.V. . . . . . . . . . . . . . . . 49 . . . .Aruba
Ogden Facility Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A.
Ogden Facility Services, Inc. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A.
Ogden Servicios de Seguridad, S.A.. . . . . . . . . . . . . . . . . . . 100. . . .Costa Rica
Ogden Services of Canada Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Canada. . . . . . . .054
Cafas Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Canada. . . . . . . .028
Airconsol Aviation Services Ltd.-
Les Services D'Aviation Airconsol Limitee . . . . . . . . . . . . . . . 100. . . .Canada. . . . . . . .115
Ogden Ground Services (Canada) Ltd. . . . . . . . . . . . . . . . . . 100. . . .Canada
Aircraft Services Limited . . . . . . . . . . . . . . . . . . . . . 100. . . .Canada. . . . . . . .189
Consolidated Aviation Fueling of Toronto Limited. . . . . . . . . . . . . 100. . . .Ontario . . . . . . .052
Consolidated Aviation Services of Alberta Limited . . . . . . . . . . . . 100. . . .Canada. . . . . . . .119
Ogden Allied Security Services Inc.-Services de Securite Ogden Allied Inc.100. . . .Canada. . . . . . . .190
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ATTACHMENT B
OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST
-------------------------------------------------------------
PPERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
<S> <C> <C> <C>
Ogden Energy Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3939460
Ogden Projects, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3213657
Ogden Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 22-3405522
OGDEN PHILIPPINES OPERATING, INC. . . . . . . . . . . . . . . . . . . . . 100. . . . . CAYMAN ISLANDS NA
Ogden Power Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1732981
Geothermal, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Virginia . . . . 54-1504703
Imperial Power Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . . . California . . . 95-3677245
New Martinsville Hydro-Operations Corporation . . . . . . . . . . . . . 100. . . . . West Virginia. . 31-1275468
Ogden Brandywine Operations, Inc. . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1740297
Ogden Geothermal Operations, Inc. . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1607228
Ogden Hydro Operations, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . . . Tennessee. . . . 52-1661862
Ogden Oil & Gas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1734589
Ogden Power Equity Corporation. . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1504746
Catalyst New Martinsville Hydroelectric Corporation . . . . . . . . 100. . . . . Delaware . . . . 13-3372123
ERC Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1523295
Ogden Heber Field Energy, Inc.. . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1611569
Ogden Hydro Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1606911
Ogden Power International Holdings, Inc.. . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1742808
EDISON BATAAN COGENERATION CORPORATION. . . . . . . . . . . . . . . 100. . . . . PHILIPPINE NA
HIDRO OPERACIONES DON PEDRO S.A.. . . . . . . . . . . . . . . . . . 100. . . . . COSTA RICA NA
ISLAND POWER CORPORATION. . . . . . . . . . . . . . . . . . . . . . 40**** . . . PHILIPPINE NA
LINASA COGENERACION Y ASOCIADOS, S.L. . . . . . . . . . . . . . . . 50*****. . . SPAIN. . . . . . B30556484
OGDEN ENERGY INDIA INVESTMENTS LTD.. . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA
OGDEN CHINESE INVESTMENTS LTD. . . . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA
OGDEN ENERGY CHINA (Alpha) LTD.. . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA
OGDEN ENERGY CHINA (Beta) LTD. . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA
OGDEN ENERGY CHINA (Delta) LTD . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA
OGDEN ENERGY CHINA (Gamma) LTD . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA
OGDEN ENERGY PHILIPPINE HOLDINGS, INC. . . . . . . . . . . . . . . .100 . . . . .PHILIPPINES NA
OPI Quezon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .Delaware. . . . .13-3670144
OGDEN POWER DEVELOPMENT - CAYMAN, INC. . . . . . . . . . . . . .100 . . . . .CAYMAN ISLANDS NA
(F/K/A OGDEN QUEZON POWER, INC.- OLD DVLPMNT. CO.)
QUEZON POWER, INC. (NEW DVLPMNT CO.) . . . . . . . . . . . . .39.01** . . .CAYMAN ISLANDS NA
Ogden Power Development, Inc.. . . . . . . . . . . . . . . . . . . .100 . . . . .Delaware. . . . .13-3662254
Ogden Power Development of Bolivia, Inc. . . . . . . . . . . . . .100 . . . . .Delaware. . . . .13-3852464
OPDB, LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .CAYMAN ISLANDS NA
Ogden Power Pacific, Inc. (f/k/a Pacific Energy) . . . . . . . . . . . .100 . . . . .California. . . .95-3845189
Burney Mountain Power. . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .94-3149256
Mammoth Geothermal Company . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4311279
Mammoth Power Company. . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4484066
Mt. Lassen Power . . . . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .94-3149255
Ogden Power Plant Operations . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4497795
(f/k/a Pacific Power Plant Operations)
Pacific Energy Resources Incorporated. . . . . . . . . . . . . . . .100 . . . . .California. . . .95-3499702
Pacific Geothermal Company . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-3950189
Pacific Hydropower Company . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-3734859
Pacific Oroville Power, Inc. . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-3987027
Pacific Penobscot Power Company. . . . . . . . . . . . . . . . . . .100 . . . . .Maine . . . . . .85-4055394
Pacific Recovery Corporation . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4080088
Pacific Wood Fuels Company . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4046356
Pacific Wood Services Company. . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4497794
Penstock Power Company . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4250440
8309 Tujunga Avenue Corp.. . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .95-4130759
Ogden Rosemary Operations, Inc.. . . . . . . . . . . . . . . . . . . . .100 . . . . .Delaware. . . . .22-3433655
Ogden SIGC Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .Delaware. . . . .54-1742810
AMOR 14 Corporation. . . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .Delaware. . . . .88-0243401
Ogden SIGC Energy II, Inc. . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .California. . . .54-1742553
Ogden SIGC Geothermal Operations, Inc. . . . . . . . . . . . . . . . . .100 . . . . .California. . . .54-1645557
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PPERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
Ogden Energy Group, Inc. (cont.)
Ogden Projects, Inc. (cont.)
<S> <C> <C> <C>
Ogden Energy Resource Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 63-0837475
Ogden Environmental and Energy Services Co., Inc. . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 52-1594168
Analytical Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 95-3705905
G A Technical Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Tennessee. . . . 62-1238177
Multiple Dynamics Corporation . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Michigan . . . . 38-2278155
Ogden Environmental and Energy Services Co., Inc. of Ohio . . . . . . . . . 100. . . . . Ohio . . . . . . 31-1357919
Ogden Environmental and Engineering Services Co., Inc.. . . . . . . . . . . 100. . . . . North Carolina . 56-0840101
Ogden Environmental Federal Services Co., Inc.. . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1694984
(f/k/a Ogden Environmental Services Alaska Co., Inc.)
Ogden Remediation Services Co., Inc.. . . . . . . . . . . . . . . . . . . . 100. . . . . Florida. . . . . 59-2661991
OGDEN UMWELT UND ENERGIE SYSTEME GMBH . . . . . . . . . . . . . . . . . . . 100. . . . . GERMANY NA
IEAL ENERGIE & UMWELT CONSULT, GMBH . . . . . . . . . . . . . . . . . . . 100. . . . . GERMANY NA
OLMEC INSURANCE, LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . BERMUDA NA
Ogden Waste to Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3871973
Ogden Martin Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3162629
Ogden Engineering Services, Inc.. . . . . . . . . . . . . . . . . . . . . 100. . . . . New Jersey . . . 13-3284896
Ogden Marion Land Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Oregon . . . . . 13-3369730
OGDEN WASTE TO ENERGY, LTD. (FORMERLY OGDEN MARTIN SYSTEMS, LTD). . . . . 100. . . . . ONTARIO NA
OGDEN MARTIN SYSTEMS OF NOVA SCOTIA, LTD. . . . . . . . . . . . . . . 100. . . . . NOVA SCOTIA NA
Ogden Martin Systems of Alexandria/Arlington, Inc.. . . . . . . . . . . . 100. . . . . Virginia . . . . 58-1594213
OMS Equity of Alexandria/Arlington, Inc.. . . . . . . . . . . . . . . . . 100. . . . . Virginia . . . . 13-3389573
Ogden Martin Systems of Babylon, Inc. . . . . . . . . . . . . . . . . . . 100. . . . . New York . . . . 13-3246689
Ogden Martin Systems of Bristol, Inc. . . . . . . . . . . . . . . . . . . 100. . . . . Connecticut. . . 13-3246723
Ogden Martin Systems of Clark, Inc. . . . . . . . . . . . . . . . . . . . 100. . . . . Ohio . . . . . . 11-3140377
OMSC One, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690804
OMSC Two, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690801
OMSC Three, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690806
OMSC Four, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690807
Ogden Martin Systems of Fairfax, Inc. . . . . . . . . . . . . . . . . . . 100. . . . . Virginia . . . . 13-3410434
Ogden Martin Systems of Haverhill, Inc. . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 13-3375647
Haverhill Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 04-2908628
LMI, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 04-2943947
Ogden Omega Lease, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3028120
Ogden Haverhill Properties, Inc.. . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 13-3382130
Ogden Martin Systems of Hillsborough, Inc.. . . . . . . . . . . . . . . . 100. . . . . Florida. . . . . 13-3228206
Ogden Martin Systems of Huntington, Inc.. . . . . . . . . . . . . . . . . 100. . . . . New York . . . . 13-3394817
Ogden Martin Systems of Huntington Resource Recovery One Corp.. . . . . . 100. . . . . Delaware . . . . 06-1260495
Ogden Martin Systems of Huntington Resource Recovery Two Corp.. . . . . . 100. . . . . Delaware . . . . 06-1260497
Ogden Martin Systems of Huntington Resource Recovery Three Corp.. . . . . 100. . . . . Delaware . . . . 06-1260498
Ogden Martin Systems of Huntington Resource Recovery Four Corp. . . . . . 100. . . . . Delaware . . . . 06-1260489
Ogden Martin Systems of Huntington Resource Recovery Five Corp. . . . . . 100. . . . . Delaware . . . . 06-1260492
Ogden Martin Systems of Huntington Resource Recovery Six Corp.. . . . . . 100. . . . . Delaware . . . . 13-3629151
Ogden Martin Systems of Huntington Resource Recovery Seven Corp.. . . . . 100. . . . . Delaware . . . . 13-3631168
Ogden Martin Systems of Huntsville, Inc.. . . . . . . . . . . . . . . . . 100. . . . . Alabama. . . . . 13-3456026
Ogden Martin Systems of Indianapolis, Inc.. . . . . . . . . . . . . . . . 100. . . . . Indiana. . . . . 13-3977970
Ogden Martin Systems of Kent, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . . . Michigan . . . . 13-3369158
NRG/Recovery Group, Inc. (f/k/a Ogden Martin Systems of Lake, Inc.) . . . 100. . . . . Florida. . . . . 13-3482491
Ogden Martin Systems of Lancaster, Inc. . . . . . . . . . . . . . . . . . 100. . . . . Pennsylvania . . 13-3408215
Ogden Martin Systems of Lawrence, Inc.. . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 13-3714674
Ogden Martin Systems of Lee, Inc. . . . . . . . . . . . . . . . . . . . . 100. . . . . Florida. . . . . 13-3557826
Ogden Martin Systems of Long Island, Inc. . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 11-3081090
Ogden Martin Systems of Marion, Inc.. . . . . . . . . . . . . . . . . . . 100. . . . . Oregon . . . . . 91-1246805
Ogden Martin Systems of Mercer, Inc.. . . . . . . . . . . . . . . . . . . 100. . . . . New Jersey . . . 13-3431734
Ogden Martin Systems of Montgomery, Inc.. . . . . . . . . . . . . . . . . 100. . . . . Maryland . . . . 13-3547268
Ogden Martin Systems of Onondaga, Inc.. . . . . . . . . . . . . . . . . . 100. . . . . New York . . . . 13-3528458
Ogden Martin Systems of Onondaga Two Corp.. . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690841
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PPERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
Ogden Energy Group, Inc. (cont.)
Ogden Projects, Inc. (cont.)
<S> <C> <C> <C>
Ogden Martin Systems of Onondaga Three Corp.. . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690843
Ogden Martin Systems of Onondaga Four Corp. . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690838
Ogden Martin Systems of Onondaga Five Corp. . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3684127
OMS Onondaga Operations, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3714674
Ogden Martin Systems of Pasco, Inc. . . . . . . . . . . . . . . . . . . . . 100. . . . . Florida. . . . . 13-3447536
Ogden Martin Systems of San Bernardino, Inc.. . . . . . . . . . . . . . . . 100. . . . . California . . . 13-3397879
Ogden Martin Systems of Stanislaus, Inc.. . . . . . . . . . . . . . . . . . 100. . . . . California . . . 13-3315310
OMS Equity of Stanislaus, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . . . California . . . 13-3436232
Ogden Martin Systems of Tulsa, Inc. . . . . . . . . . . . . . . . . . . . . 100. . . . . Oklahoma . . . . 13-3203172
Ogden Martin Systems of Union, Inc. . . . . . . . . . . . . . . . . . . . . 100. . . . . New Jersey . . . 13-3323867
OPI CARMONA LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . CAYMAN ISLANDS NA
OPI CARMONA ONE LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . CAYMAN ISLANDS NA
OGDEN ENERGY ASIA PACIFIC LIMITED (F/K/A OGDEN PROJECTS ASIA PACIFIC LIMITED) . 100* . . . . HONG KONG NA
Ogden Energy Engineering, Inc. (f/k/a Ogden Projects Americas, Inc.). . . . . . 100. . . . . Delaware . . . . 13-3795624
Ogden Projects Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3640508
Ogden Projects of Haverhill, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 13-3522006
Ogden Wallingford Associates, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Connecticut. . . 13-3494166
Ogden Waste Treatment Services, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3362679
Ogden Environmental Services of Houston, Inc. . . . . . . . . . . . . . . . . 100. . . . . Texas. . . . . . 13-3586015
Ogden Waste Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 22-3557169
Stockton Soil Treatment Facility, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . . . California . . . 13-3610053
Ogden Waste Treatment Services USA, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3940678
Ogden Water Holdings, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3779130
Ogden Water Systems, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3756577
Ogden Yorkshire Acquisition, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3806665
Cunningham Environmental Support, Inc.. . . . . . . . . . . . . . . . . 100. . . . . New York . . . . 16-1386872
Ogden Yorkshire Water of Bessemer, Inc. . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 22-3405521
OGDEN YORKSHIRE WATER OF CANADA, LTD. . . . . . . . . . . . . . . . . . . . 100. . . . . ONTARIO NA
Ogden Yorkshire Water of Taunton, Inc.. . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 22-3481731
OGDEN WATER SYSTEMS OF CANADA, LTD. (F/K/A OGDEN PROJECTS OF HAMILTON, LTD.) . 100. . . . . ONTARIO NA
OPW Associates, Inc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Connecticut. . . 13-3487064
OPWH, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3592054
RRS Holdings Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3697005
Michigan Waste Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 06-1331600
Oahu Waste Energy Recovery, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . . . California . . . 95-2638052
Ogden Projects of Hawaii, Inc.. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Hawaii . . . . . 99-0230284
Resource Recovery Systems of Connecticut, Inc.. . . . . . . . . . . . . . . . 100. . . . . Connecticut. . . 13-3696927
Yorkshire USA, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 51-0354748
</TABLE>
* Ogden Energy Asia Pacific Limited's stock is owned 50% by Ogden Projects, Inc.
and 50% by Ogden Power Development, Inc.
** Quezon Power, Inc (new development company) is owned 39.01% by Ogden Power
Development - Cayman, Inc., 1.30% by PMR Power, Inc. and 59.69% by Quezon
Generating Company, Ltd.
*** Yorkshire USA, Inc. was acquired by Ogden Projects, Inc. when Yorkshire
Water terminated its involvement as a direct participant in the Venture.
**** 40% of the stock of Island Power Corporation is owned by Ogden Power
International Holdings, Inc. and 60% is owned by various stockholders.
*****50% of the stock of LINASA Cogeneracion y Asociados, S.L. is owned by Ogden
Power International Holdings, Inc, and 50% is owned by Industria Jabonera Lina,
S.A.
<PAGE>
EXHIBIT 23
----------
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in Registration Statement Nos.
33-36658, 33-38489, 33-36657, 33-17558, 33-54143 and 333-19641 on Forms S-8 of
Ogden Corporation of our reports dated February 27, 1998 (which express an
unqualified opinion and include an explanatory paragraph relating to the
adoption of Statement of Financial Accounting Standards No. 121), appearing or
incorporated by reference in this Annual Report on Form 10-K of Ogden
Corporation for the year ended December 31, 1997.
Deloitte & Touche LLP
New York, New York
March 25, 1998
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 185,671
<SECURITIES> 0
<RECEIVABLES> 413,392
<ALLOWANCES> 20,207
<INVENTORY> 34,235
<CURRENT-ASSETS> 832,071
<PP&E> 2,557,189
<DEPRECIATION> 609,642
<TOTAL-ASSETS> 3,639,295
<CURRENT-LIABILITIES> 525,937
<BONDS> 1,927,330
0
45
<COMMON> 25,147
<OTHER-SE> 540,899
<TOTAL-LIABILITY-AND-EQUITY> 3,639,295
<SALES> 582,134
<TOTAL-REVENUES> 1,749,725
<CGS> 539,640
<TOTAL-COSTS> 959,738
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,485
<INTEREST-EXPENSE> 32,077
<INCOME-PRETAX> 130,778
<INCOME-TAX> 53,100
<INCOME-CONTINUING> 75,673
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 75,673
<EPS-PRIMARY> 1.51
<EPS-DILUTED> 1.49
</TABLE>
