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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, 1998
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 Identification No.)
Incorporation or Organization)
Two Pennsylvania Plaza, New York, N.Y. 10121
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code - (212) 868-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
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Common Stock, par value New York Stock Exchange
$.50 per share
$1.875 Cumulative Convertible New York Stock Exchange
Preferred Stock (Series A)
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 March
1, 1999 was as follows:
Common Stock, par value $.50 per share $1,204,689,605
$1.875 Cumulative Convertible
Preferred Stock (Series A) $6,279,900
The number of shares of the registrant's Common Stock outstanding as of March 1,
1999 was 49,048,469 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, 1998 (Parts II and IV).
(2) Portions of the Registrant's 1999 Proxy Statement to be filed with the
Securities and Exchange Commission (Part III).
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INDEX
PART I PAGE
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Item 1. Business
Entertainment 1-8
Aviation 8-11
Energy 12-29
Other 29
Recent Developments 11
Other Information 30-37
Markets, Competition and General Business Conditions 30-31
Equal Employment Opportunity 31
Year 2000 Issues 31
Employee and Labor Relations 32
Environmental Regulatory Laws 32-34
Energy and Water Regulation 35-37
Item 2. Properties 38-42
Item 3. Legal Proceeding 43-44
Item 4. Submission of Matters to a Vote of Security Holders
44
Executive Officers of Ogden 44-48
PART II
Item 5. Market For Ogden's Common Equity and Related Stockholder Matters 48
Item 6. Selected Financial Data 48
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 48
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48
Item 8. Financial Statements and Supplementary Data 49
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 49
PART III
Item 10. Directors and Executive Officers of Ogden 49
Item 11. Executive Compensation 49
Item 12. Security Ownership of Certain Beneficial Owners and Management 49
Item 13. Certain Relationships and Related Transactions 49
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 50-55
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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 23. INFORMATION CONCERNING BUSINESS SEGMENTS of Ogden's 1998 Annual
Report to Shareholders, certain specified portions of which are incorporated
herein by reference.
ENTERTAINMENT
Ogden Entertainment, Inc. ("Entertainment"), directly and through joint
ventures, is engaged in business activities related to the ownership and
providing of, services to, entertainment attractions and leisure and gaming
venues in the United States, Canada, Europe, South America and Australia.
Entertainment's business operations are divided into four categories: Themed
Attractions; Food and Beverage Concessions; Venue Management; and Specialty
Casinos. In addition, Entertainment owns a 50% interest in the Metropolitan
Entertainment Group, which is engaged in a number of activities related to the
development and exhibition of entertainment products.
Where services are performed on a cost-plus basis, the customer reimburses
Entertainment 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.
Themed Attractions
Entertainment, directly and through joint ventures, operates a variety of
themed entertainment attractions in the United States, Europe and South America.
Entertainment's themed attractions are situated on land either owned or leased
by Entertainment and are generally operated by Entertainment as principal and
not as a service provider. As owner of the entertainment "product" at such
locations, Entertainment is responsible for all aspects of the business,
including marketing and ticket sales, day-to-day operation of the attraction and
any food service or merchandising operations on the premises.
Entertainment's principal operations in the themed attraction area include:
Tinseltown(TM) Studios - Developed, owned and operated by Entertainment,
Tinseltown(TM) is an innovative, audience-participation dinner attraction
situated on a 1.25 acre parcel of land owned by Entertainment and located in
Anaheim, California. As part of the operation, Entertainment also leases from
the City of Anaheim adjacent land to accommodate 550 parking
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spaces. Tinseltown(TM) commenced operation in November, 1998 and is a specially
designed and constructed facility, which includes a 700-seat theatre, full
service kitchen and a gift shop. Tinseltown(TM) re-creates for guests the
experience of being a star, producer or other Hollywood notable attending a
major televised awards show, and arriving guests walk the "red carpet" as they
are greeted by paparazzi, autograph hounds and television interviewers. The
two-hour experience (which includes service of a three-course dinner) features a
live musical stage production. At each performance, a number of guests appear on
the theatre's two 9' x 12' video screens as part of the "televised" Tinseltown
Awards Show, and some are inserted into clips from motion pictures (such as
"Jurassic Park", "Field of Dreams", "Jaws" and "The Blues Brothers") as they
compete for Tinseltown's(TM) "Oggie", the statuette awarded for best actor and
best actress performances.
Top of the World - Entertainment operates the "Top of the World" visitor
attraction on the 107th Floor Observation Deck at the World Trade Center in New
York City. Pursuant to an eleven and one-half year lease from the Port Authority
of New York and New Jersey, Entertainment commenced these operations in 1995. In
the Fall of 1996, Entertainment undertook extensive renovations to the
attraction, including the installation of three motion simulation theatres that
take visitors on a simulated aerial sightseeing tour of New York City. The
attraction, which reopened in April, 1997, attracts over 1.8 million visitors
per year. Entertainment's lease with the Port Authority provides for the payment
of base rent plus percentage rent on revenues in excess of certain specified
levels.
Silver Springs and Wild Waters - Pursuant to a long-term lease from the
State of Florida, Entertainment operates Silver Springs, a nature-based
attraction, and Wild Waters, an adjacent water park, located in Ocala, Florida.
Silver Springs is a unique 250-acre nature preserve, which features exotic
wildlife, jungle cruise glass-bottom boat rides, jeep safari rides, animal shows
and exhibits, gift shops and eateries. Wild Waters, a six-acre water park
adjacent to Silver Springs, features water slides, wave pools, miniature golf,
and food and beverage concession areas. Silver Springs operates year-round,
while Wild Waters operates from March through Labor Day weekend.
Enchanted Castle - Owned and operated by Entertainment in a leased
facility located in Lombard, Illinois. Enchanted Castle is an indoor family
entertainment center that features a variety of mechanical and video games,
miniature golf, laser tag, motion simulators and similar attractions. Enchanted
Castle also features a full service casual restaurant and concession area, and a
large party room area for servicing corporate groups and private parties.
Enchanted Castle is operated year-round.
La Rural de Palermo - La Rural is a 28-acre fairground and exhibition
center located in Buenos Aires, Argentina. This facility is operated pursuant to
a long-term lease by a joint venture for which Entertainment serves as managing
partner and in which Entertainment owns a 50% interest. In addition to operating
the fair and exhibition business on the property, the joint venture is
developing a master plan for renovation of the fair ground and exhibition
facilities and
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development of an entertainment and retail complex on the site, including a
multi-screen theatre. Initial construction on the renovation project began in
early 1998.
Jazzland - During 1998, Entertainment commenced construction on this
100-plus acre theme and ride park located in New Orleans, Louisiana.
Entertainment holds a long-term lease on the Jazzland site that can be converted
into fee ownership at nominal cost to Entertainment. Jazzland will consist of a
number of separate areas themed around the history and cultures of New Orleans
and will feature a roller coaster and a variety of other rides and attractions,
restaurants and concession areas, and retail merchandise stores. Adjacent to
Jazzland will be an outdoor concert facility capable of hosting concerts and
other musical presentations. Jazzland is scheduled to open in the spring of
2000.
Grizzly Park - Owned and operated by Entertainment and located in Montana
at the main entrance to Yellowstone National Park. Grizzly Park is a
nature-based attraction featuring the Grizzly Discovery Center, an indoor
exhibit that showcases items of interest relating to Yellowstone and its
wildlife, outdoor natural habitats containing live grizzly bears and gray
wolves, and a variety of shops and restaurants.
Isla Magica - Entertainment owns a 28% equity interest in Parques
Tecnicultores, S.A. ("Partecsa"), which operates the Isla Magica theme park,
located on a 200-acre parcel in Seville, Spain. Originally the site of the
Seville Expo world's fair, Isla Magica was converted by Partecsa into a themed
ride park pursuant to a 30-year lease, and reopened to the public in the spring
of 1997. Isla Magica contains a number of areas themed around the history and
culture of Spain, including rides, restaurants and concession areas, and retail
merchandise stores.
Large Format Film - Entertainment is also engaged in the production and
distribution of large-format films, as well as the management and operation of
theatres exhibiting such films. In 1997, Entertainment completed production on
its first large-format IMAX(R) feature film, AMAZON. This film, which is owned
by Entertainment, has been contracted by over 45 theatres both domestically and
internationally and was nominated for an Academy Award(R) in 1998 in the
category of "Best Documentary (Short Subject)". In 1998, Entertainment
co-produced, with Sony Corporation of America, its second large-format film
(produced in both 2D and 3D versions), MARK TWAIN'S AMERICA. Entertainment owns
a 50% interest in this film, which is distributed by Sony under the terms of the
co-production agreement between Sony and Entertainment.
Food and Beverage Concessions - Entertainment's food and beverage operations
consist of Concessions and Restaurants.
Concessions - Entertainment is a leading provider of food and beverage
concession services at a wide variety of public assembly facilities, including
arenas, stadiums, amphitheaters, convention and exhibition centers, parks,
fairgrounds and zoos. At some client locations, Entertainment also operates
concessions for the sale of souvenir merchandise. The contractual arrangements
governing these operations are individually negotiated, and vary widely as to
terms and duration. These arrangements often require Entertainment to make an
initial investment in
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food service equipment and leasehold improvements, a cash payment to the client
facility or both. In most cases, the contracts provide for a payment by
Entertainment of ongoing commissions or rentals based on a percentage of gross
sales or net profits, sometimes with a minimum rental or payment. Where minimum
payments are required the contracts generally protect Entertainment against
"force majeure" events over which Entertainment has no control, such as player
strikes or lockouts, and weather or natural disaster-related disruptions in
operations.
Entertainment's concession service locations at client facilities
currently number approximately 125, including those listed in the following
table:
Name Location
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Edison International Field 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
General Motors Place Vancouver, British Columbia, Canada
Mile High Stadium Denver, Colorado
Victory Field Indianapolis, Indiana
MCI Center Washington, D. C.
Alameda County Coliseum Complex Oakland, California
In addition, Entertainment has been awarded concession contracts at three
new facilities scheduled to open in 2000: (i) the 20,000-seat Staples Center in
California, the new home of the National Hockey League ("NHL") Los Angeles Kings
and the National Basketball Association ("NBA") Los Angeles Lakers and Los
Angeles Clippers; (ii) the 66,000-seat Paul Brown Stadium (football) in
Cincinnati, Ohio; and the 20,000 seat Pepsi Center Arena in Denver, Colorado,
the new home of the NBA's Denver Nuggets and the NHL's Colorado Avalanche.
During 1998 Entertainment sold their food and beverage concession
agreements at several amphitheaters to SFX Entertainment, Inc. ("SFX"). In
December 1998 Entertainment and SFX entered into a new master food and beverage
concessions agreement at the amphitheaters controlled by SFX whereby
Entertainment was granted the right to operate the food and beverage
concessions, for a ten-year term, at the Blockbuster Amphitheater in Charlotte,
North Carolina; Starwood Amphitheater in Nashville, Tennessee; Desert Sky
Amphitheater in Phoenix, Arizona; and Coral Sky Amphitheater in West Palm Beach,
Florida. In addition, SFX granted to Entertainment the exclusive right to sell
food and beverages at any 10,000-seat (or larger) amphitheater that SFX acquires
within the next ten years.
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Entertainment provides food and beverage concession services at
amphitheaters throughout the United States, including those listed in the
following table:
Name Location
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PNC Bank Arts Center Holmdel, New Jersey
Starlake Amphitheatre Pittsburgh, Pennsylvania
Fiddlers Green Amphitheatre Englewood, Colorado
Sandstone Amphitheatre Kansas City, Missouri
Cynthia Woods Mitchell Pavilion Woodlands, Texas
Meadows Music Theatre Hartford, Connecticut
Camden Amphitheatre Camden, New Jersey
Polaris Amphitheatre Columbus, Ohio
Nissan Amphitheatre Manassas, Virginia
Molson Amphitheatre Toronto, Canada
Virginia Beach Amphitheatre Virginia Beach, Virginia
Entertainment also develops and operates food courts in shopping malls.
Under a typical arrangement, Entertainment and the mall owner will enter into a
long-term master lease giving Entertainment exclusive use of the food court
area. Entertainment then enters into franchise agreements covering the
individual locations within the food court with national and regional food
concept owners (Burger King, Sbarro's, Nathan's, etc.). While Entertainment
generally seeks to act as franchisee of such concepts, in some cases
Entertainment will sublease individual locations in the food court to a third
party or will itself operate such locations as one or more of Entertainment's
own, in-house "branded" concepts. Entertainment currently master leases food
courts at the Arizona Mills mega mall in Tempe, Arizona and the Wonderland Mall
in Livonia, Michigan.
Restaurants - Entertainment developed and operates two new free-standing
restaurant concepts: "The Wilderness Grill" at the Ontario Mills mega mall in
Ontario, California and "The Wilderness Grill - Paradise Down Under" at the
Sunset Place Mall in Miami, Florida. In addition, at The Block at Orange,
located in Orange, California, Entertainment recently opened its first "Ron
Jon's Surf Grill" restaurant, developed by Entertainment under a license
agreement with Ron Jon's Surf Shop. Under the terms of such license agreement,
Entertainment has the exclusive right to develop additional Ron Jon Surf Grill
units in the United States during the term of the agreement.
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Venue Management
Entertainment is a leading provider of full facility management services
at arenas and other sports and Entertainment facilities in the United States,
Canada, Europe and Australia. Such services generally cover all aspects of the
operation, including events booking, food and beverage concessions, crowd
control, parking, set-up and tear-down for events, facility maintenance and
repairs, etc. Entertainment's facility management venues currently include the
following:
Name Location
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Arrowhead Pond of Anaheim Anaheim, California
Corel Centre Ottawa, Canada
Pensacola Civic Center Pensacola, Florida
Sullivan Arena Anchorage, Alaska
Egan Convention Center Anchorage, Alaska
Target Center Minneapolis, Minnesota
The Great Western Forum Los Angeles, California
Newcastle Arena Newcastle, England
Manchester Evening News Arena Manchester, England
Bridgewater Hall Manchester, England
Stadium Australia Sydney, Australia
Arena Oberhausen Oberhausen, Germany
Providence Civic Center Providence, Rhode Island
Bakersfield Arena Bakersfield, California
Blue Cross Arena Rochester, New York
Temple University Arena Philadelphia, Pennsylvania
In addition, Entertainment has been awarded venue management contracts at
the 100,000 square foot Charleston Area Convention and Performing Arts Center in
South Carolina scheduled to open in the spring of 1999 and the Northeast
Pennsylvania Arena scheduled to open in November 1999.
The Corel Center, a 19,000-seat multi-purpose indoor arena in Ottawa,
Canada, opened in January of 1996. Pursuant to a 30-year agreement entered into
in January 1996 between Entertainment and the arena's owner (the "Owner")
Entertainment provides complete facility management and concession services at
this arena, which is the home of the Ottawa Senators of the National Hockey
League. Under the terms of the agreement, 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 cover cash
shortfalls. The Owner is a party 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 30-year management agreement entered into in June 1993
between the City of Anaheim, California and a wholly-owned subsidiary of
Entertainment, Entertainment manages
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and operates the Arrowhead Pond, a facility owned by and located within the City
of Anaheim. Entertainment has agreed that the Arrowhead Pond, under
Entertainment's management, will generate a minimum amount of revenues computed
in accordance with the terms of the management agreement. 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 entered
into in June 1993 with The Walt Disney Company (which own the NHL Anaheim Mighty
Ducks) pursuant to which the team plays its home games at the arena.
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 Stadium Australia in
Sydney, Australia.
Entertainment also manages and operates movie theatres. In 1997,
Entertainment entered into a 15-year agreement with the County of San
Bernardino, California to manage and operate the Ultra Screen(R) theatre owned
by the County and located at the Ontario Mills mega mall in Ontario, California.
In 1998, Entertainment entered into a 10-year agreement with the British Film
Institute to manage and operate the BFI London IMAX(R) Cinema in London,
England. Also, during 1998 Entertainment and Imax Corporation opened a jointly
owned IMAX(R) theater at the Arizona Mills Mall in Tempe, Arizona. Entertainment
is currently pursuing additional opportunities in this area.
Specialty Casinos
In 1998, Entertainment purchased Iguazu Grand Hotel Resort & Casino, which
is located in Argentina at the intersection of the borders of Brazil and
Paraguay. Situated on 14.8 acres, this resort property features a five-star,
60-room hotel, conference center, business center, premier restaurant and
casino. The casino enjoys an exclusive gaming license in the Province of
Misiones in Argentina.
Entertainment is currently exploring additional activities in the casino
and leisure area, with an emphasis on special situations which, in management's
view, represent unusual opportunities not being pursued by the major gaming
companies. Of special interest are opportunities to develop or acquire casino
operations that enjoy an exclusive license to operate in their geographic area,
or which otherwise operate in areas of limited competition.
In a related area, Entertainment also leases and operates the Fairmount
Park thoroughbred and harness racetrack in Collinsville, Illinois and four
off-track betting parlors in Illinois that receive telecast races from Fairmount
Park, and other racing facilities. Entertainment also operates restaurants and
other food and beverage services at the racetrack and the off-track parlor
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locations. A large portion of Fairmount Park's revenue is derived from its share
of the pari-mutuel pool, which can be adjusted by state legislation. Other
revenue is derived from admission charges, parking, program sales and
concessions.
Metropolitan Entertainment Group
The Metropolitan Entertainment Group, in which Entertainment owns a 50%
interest, is a leading concert promoter in New York, New Jersey, Connecticut,
and part of Massachusetts. Metropolitan conducts concert promotion activities,
operates amphitheaters in the eastern United States, and concentrates on
national and global music tours, artist management, Broadway and television
productions, recording, and music publishing. Through a long-term lease,
Metropolitan operates the 20,000, capacity Darien Lake Performing Arts Center
located in Darien Lake, New York. Metropolitan has also established its own
record label, Hybrid Recordings.
AVIATION
Aviation provides specialized support services to airlines and designs,
finances, builds and operates major airport facilities and other aviation
infrastructure projects throughout the world. Specialized support services
include airport development and management; ground handling and passenger
services; cargo facility development and operations; and fueling and fuel
facility management. These diversified services are performed through joint
ventures, consortiums, contracts with individual airlines, consolidated
agreements with several airlines, and contracts with various airport
authorities. As of February 1999, Aviation was present at 116 airports in 24
countries and serves more than 350 airlines.
Some customers of Aviation are billed on a cost-plus or fixed-price basis.
Where services are performed on a cost-plus basis, the customer reimburses
Aviation for all acceptable reimbursable expenditures made in connection with
the job. Many Aviation contracts may 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.
During January 1998, Aeropuertos Argentina 2000, a consortium among
Aviation, which has a 20% interest, and its Italian and Argentine partners, was
awarded an exclusive 30-year license by the Government of Argentina to provide
management services, improvements, and operations at 33 airports in Argentina.
The consortium will finance and implement capital improvements and manage,
operate, and commercially develop these airports. Consortium revenues will be
earned from aircraft landing fees, ground handling, cargo operations, parking,
advertising, terminal retail sales, and passenger departure fees.
The consortium will 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. An 18-month phase-in schedule commenced the end of May
1998 with the takeover of the international and domestic airports in Buenos
Aires - Ezeiza International Airport and Aeroparque Jorge Newbery. Substantial
improvements are planned and groundbreaking for essential infrastructure
development projects are anticipated to commence by May 1999.
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During 1998, a consortium in which Aviation has a 19.9% interest, opened a
second runway at the Eldorado International Airport in Bogata, Colombia. The
consortium maintains both runways at Eldorado and retains all landing fees until
the year 2015. During 1998, an Aviation-led consortia submitted proposals and
prequalification documents necessary to participate in airport privatizations in
Central America, South America and the West Indies.
Aviation's ground handling services include diversified ramp operations
such as aircraft loading and unloading, aircraft cleaning, aircraft maintenance,
flight planning, de-icing, interline baggage transfer, push-back and towing, and
passenger-related services such as terminal check-in and ticketing, VIP
passenger handling, the operation of passenger lounges, and other miscellaneous
services. While these services are principally conducted in the United States,
global expansion by the Aviation group has resulted in providing comprehensive
ground handling and passenger services at many international gateways throughout
Europe, South America, the Caribbean, and Asia-Pacific. Major foreign airports
where Aviation currently conducts both ground handling and passenger services
include:
Airport Location
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Reina Beatrix International Airport Aruba, Netherlands Antilles
Galaeo International Airport Rio de Janeiro, Brazil
Arturo Marino Benitez Airport Santiago, Chile
Praha Ruzyne Airport Prague, Czech Republic
Hong Kong International Airport Lantau, Hong Kong
Macau International Airport Taipa, Macau
Mexico City International Airport Mexico City, Mexico
Amsterdam Airport Schiphol Amsterdam, Netherlands
Auckland International Airport Auckland, New Zealand
Jorge Chavez International Airport Lima, Peru
Bucharest-Otopeni Airport Bucharest, Romania
Princess Juliana International Airport St. Maarten, Netherlands Antilles
Simon Bolivar Airport Caracas, Venezuela
During 1998, Aviation continued the expansion of its operations into
several new markets throughout Asia, Europe, and South America. On July 6, 1998,
Aviation began performing ground handling and passenger services at the new Hong
Kong International Airport. Aviation's Hong Kong operation is part of a joint
venture agreement between Aviation and Dresdner Kleinwort Benson ("DKB"), which
owns a 20% interest in the joint venture. Aviation retains a majority interest
and operating control of the joint venture whose operations geographically
extends from India into mid-Asia and the Pacific Rim, excluding Aviation's Macau
operations. Aviation is one of three license holders at the new airport for
aircraft ramp services and provides ground handling, passenger services, cargo
handling, loading and unloading of mail and baggage, and other related services.
This operation positions Aviation for targeted growth not only in China but
throughout Asia-Pacific as well.
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Aviation increased its presence in Eastern Europe with the commencement of
ground handling operations at Bucharest-Otopeni Airport in Romania. Present at
this airport since late 1997, Aviation began full ground handling operations
with the scheduled opening of the new terminal in July 1998. In 1998, three
airports in Mexico - Puebla, Tampico, and Veracruz - were added to the group's
ground handling client base. Aviation also performs passenger handling and/or
other related aviation services at 15 airports throughout Mexico, 11 airports
across the United States, seven airports in Germany, and four in Canada.
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 are provided at the Guarulhos International
Airport in Sao Paulo, Brazil; Pearson International Airport in Toronto, Canada;
and Gregorio Luperon International Airport in Puerto Plata, Dominican Republic.
In 1995, a consortium comprised of Aviation, Macau Aviation Services
Corporation, EVA Airways, Air Macau, and several local companies and prominent
businessmen, entered into a 19-year agreement, with 16 years of exclusive
control, to provide ramp and cargo handling, passenger services, and aircraft
line maintenance at the Macau International Airport. The consortium, of which
Aviation is the managing partner with a 29% participation, provides all
necessary passenger and ramp equipment and constructed a cargo warehouse and
engineering facilities, an aircraft hangar, and state-of-the-art training center
at the airport. The consortium's investment in infrastructure developments and
ancillary equipment at Macau International Airport is approximately $40 million.
Through a 75% interest in a Prague-based airport handling company,
Aviation opened a new $20 million, 10,000-square meter cargo terminal in
September 1998 at Praha Ruzyne Airport in Prague, Czech Republic. The Prague
cargo facility is expected to position the airport as a major cargo hub within
Europe. In March 1998, Aviation acquired a 50% interest in the Talma cargo
operations at the Jorge Chavez International Airport and at C.F. Secada Airport,
located in Lima and Iquitos, Peru, respectively. Talma is Peru's leading
provider of airport handling and services for international and domestic air
freight. This acquisition expands Aviation's existing operation at Jorge Chavez
International to include import and export, cargo handling, and warehousing
through facilities totaling 33,000 square meters. Through a joint venture with
Aldeasa S.A. of Spain, Aviation provides cargo handling and warehousing services
in Spain at airports located in Barcelona and Madrid.
Aviation provides into-plane fueling at twenty-six (26) installations and
operates fueling facilities, including storage and hydrant fueling systems for
the fueling of aircraft. This operation assists airlines and airports in
designing, arranging financing, and installing underground and above-ground
fueling systems. Fueling operations are performed primarily in North America,
including the maintenance and operation of a new fuel farm located at San Diego
International Airport. Aviation provides into-plane fueling at major airports in
Canada (Montreal and Toronto), the United States (Dallas/Fort Worth; Houston;
Kansas City; New York's John F. Kennedy International and LaGuardia Airport;
Newark; Philadelphia; and Ronald Reagan
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Washington National Airport in Washington, D.C.), as well as Panama (Panama
City) and in Puerto Rico (San Juan).
Consistent with Aviation's long-term objectives, Aviation finalized the
sale of its in-flight catering business in July 1998. The sale of the in-flight
catering business was based on management's decision that its projected
long-term growth would not provide the required levels of return.
ENTERTAINMENT AND AVIATION
Recent Developments
During March 1999 Entertainment entered into definitive agreements to
acquire the following water parks:
(i) Wet 'N Wild(R), Inc. a leading water amusement park company with
operations in the United States and Latin America. International
franchise agreements also exist for several locations in Mexico and
Brazil.
(ii) Emerald Point Water Park located in Greensboro, North Carolina.
Emerald Point is situated on approximately 35 acres and offers 34
rides and attractions including a large wave pool, a Skycoaster(R)
ride and an artificial outdoor climbing wall.
(iii) San Jose Raging Waters park, a 24-acre water park located in San
Dimas, California.
During the first quarter of 1999, Aviation acquired 100% of the operations
of Flight Services Group, Inc. ("FSG"), a Connecticut - based company that
provides corporate aircraft maintenance and management, aircraft charter,
aircraft fueling, and aircraft sales brokerage services. FSG has on-site
locations at Teterboro, New Jersey; Stratford, Connecticut; Norwich, New York;
and West Palm Beach, Florida.
During the first quarter of 1999 a consortium, of which Aviation owns a
32% interest, was awarded a 20-year concession to design, finance, and construct
capital improvements at four major international airports in the Dominican
Republic; Las Americas (serving the capital city of Santo Domingo); Gregorio
Luperon (Puerto Plata); Arroyo Barril (Samana); and Maria Montez (Barahona). The
consortium will establish a local operating company that will collect and retain
airport revenues from aircraft landing and parking fees; "port" fees from
service providers (ground handling, cargo operations, in-flight catering, and
fueling); passenger facility charges; and all commercial revenues, rents and
utility fees.
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ENERGY
Ogden's Energy segment seeks to develop, own or operate energy
generating facilities in the United States and abroad that utilize a variety of
fuels, as well as water and wastewater facilities that will similarly serve
communities on a long-term basis. The operations of Ogden's Energy segment are
conducted by Ogden Energy Group, Inc. and subsidiaries through four principal
business areas: independent power; waste-to-energy; water and wastewater; and
environmental consulting, engineering and construction (collectively, together
with its subsidiaries, the "Energy Group"). Since the early 1980's, the Energy
Group has 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, the Energy Group has been engaged in
developing, owning and/or operating independent power production projects. The
Energy Group's involvement in the operation of water and wastewater facilities
began in 1994.
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.
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. Similarly, for water and wastewater-related services, the
Energy Group seeks to operate under long-term contracts with governmental units
or market concessions.
The Energy Group generally looks to finance its projects using
equity or capital commitments provided by it or other investors, combined with
non-recourse debt for which the lender's source of payment is project revenues
and assets. Consequently, the ability of the Energy Group 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. In some
project situations, limited support by the Energy Group or Ogden has been
provided and in the future 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.
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The Energy Group presently has interests in projects with an
aggregate generating capacity in excess of 2700 MW (gross) either operating or
under construction in the United States, Central and South America, and Asia. 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; Sao Paulo, Brazil; and
Calcutta, India.
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., non-utility) 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 the revenue
components of such contracts correspond, as effectively as possible, to the
projects' cost structure (including changes therein due to inflation and
currency fluctuations) of building, financing, operating and maintaining the
projects.
On many of its projects, 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.
(a) Facilities Under Construction.
o Quezon, the Philippines.
A consortium, of which the Energy Group is a 26% member, has a 500 MW (gross)
coal-fired electric generating facility in the Republic of the Philippines (the
"Quezon Project"). Construction is expected to be completed during the third
quarter, 1999. The other members of the consortium are affiliates of
International Generating Company, an affiliate of Bechtel Enterprises, Inc., an
affiliate of General Electric Capital Corporation, 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 a long-term agreement, Meralco is obligated 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.
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The turnkey contractors are affiliates of Bechtel Enterprises,
Inc. The Energy Group will operate the Quezon Project on behalf of the
consortium under a long-term contract. 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.
o Haripur, Bangladesh.
In 1998, the Energy Group 982122879acquired an equity interest
in a barge-mounted 122 MW diesel/natural gas fired facility located near
Haripur, Republic of Bangladesh. This project is under construction, and
commercial operation is expected in June, 1999. The project will be operated by
the Energy Group. The Energy Group will own approximately 45% of the project
company equity if it exercises its options to acquire the project company's
982123084stock. An affiliate of El Paso Energy Corporation will own 50% of such
equity, and the remaining interests will be held by Wartsila NSD North America,
Inc. and/or the local developer. The electrical output of the project will be
sold to the Bangladesh Power Development Board (the BPDB) pursuant to a
long-term agreement. That agreement also obligates the BPDB to supply all of the
natural gas requirements of the project. The BPDB's obligations under agreement
are guaranteed by the Government of Bangladesh.
(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.
o Domestic Projects
o Geothermal Energy.
The Energy Group has interests in two geothermal facilities in
Southern California, the Heber and SIGC facilities, with a combined gross
generating capacity of 100 MW. These facilities are both leaseholds, with the
Energy Group as the sole lessee of the SIGC project and holding a 50%
partnership interest in the Heber project lessee. The Energy Group operates
these facilities. The Energy Group also owns a 50% partnership interest in a
geothermal resource, which is adjacent to and supplies fluid to both geothermal
facilities. The electricity from both projects is sold under long-term contracts
with Southern California Edison.
The Energy Group also owns a 50% partnership interest in
Mammoth-Pacific, L.P., which owns three geothermal power plants with a gross
capacity of 40 MW, located on the eastern slopes of the Sierra Nevada Mountains
at Casa Diablo Hot Springs, California. 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.
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<PAGE>
o Hydroelectric.
The Energy Group owns 50% equity interests in three run-of-river
hydroelectric projects which generate a total of 30 MW: Bangor Pacific
Hydroelectric Project ("Bangor"), Koma Kulshan Hydroelectric Project ("Koma
Kulshan") and Weeks Falls Hydroelectric Project ("Weeks Falls"). The Bangor
facility is in Maine; the other two, in Washington State. 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 under long-term contracts. The Energy Group is seeking a buyer for the
Bangor project; any such sale is not expected to be material to the Energy
Group's business.
The Catalyst New Martinsville, West Virginia project, is a 40 MW
run-of-river project which is operated through a subsidiary. The Energy Group is
the lessee. The output is sold under a long-term contract with Monongahela Power
Company.
o Waste Wood.
The Energy Group owns 100% interests in three waste wood fired
electric power plants in California: Burney Mountain Power Station, Mount Lassen
Power Station and Pacific Oroville Power Station. A fourth, Pacific Ultrapower
Chinese Station Power Station, is owned by a partnership in which the Energy
Group holds a 50% interest. Generally, fuel supply is procured from local
sources through a variety of short-term waste wood supply agreements. The four
projects have a gross capacity of 67 MW. All four projects sell electricity to
Pacific Gas & Electric Company under long-term contracts.
o Landfill Gas.
The Energy Group 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.
o Natural Gas.
The Energy Group's domestic natural gas project is the operation by
the Energy Group of the Brandywine, Maryland facility, a 240 MW facility whose
output is sold to Potomac Electric Power Company. This project is owned by an
affiliate of Panda Energy, and the Energy Group's contract for operations will
expire in the fourth quarter of 1999, unless renewed by Panda Energy at that
time.
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<PAGE>
o International Projects
o Hydroelectric.
The Energy Group has ownership interests in the Don Pedro project
and the Rio Volcan project in Costa Rica through an equity investment in Energia
Global, Inc. ("EGI"). Don Pedro and Rio Volcan are leased by EGI and operated by
the Energy Group under long-term contracts. The electric output from both of
these facilities is sold to Instituto Costarricense de Electricidad, a local
utility.
o Coal.
The Energy Group has majority equity interests in four 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 projects. 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,
both pursuant to long-term power and steam sales agreements.
o Natural Gas.
The Energy Group owns 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. The Energy Group also participates in a joint venture that
supplies EVH with management services support.
The Energy Group executed definitive agreements to acquire ownership
interests in two 122 MW gas-fired combined cycle facilities in Thailand: the
Sahacogen facility and the Rojana Power facility. Both facilities, which are
expected to commence operations in the second quarter of 1999, will sell power
under long-term contracts to adjacent industrial parks, and the excess will be
sold into the national power grid. The Energy Group will acquire a 74% ownership
interest in the Sahacogen facility, and a 25% ownership interest the Rojana
Power facility. Both facilities will be operated under the supervision of the
Energy Group. As part of these agreements, the Energy Group also will acquire an
operating company which currently operates a third gas-fired facility in
Thailand, the Gulf Co-Generation facility. This facility has a gross capacity of
110 MW, and sells its output to an adjacent industrial park and into the
national power grid.
o Diesel.
The Energy Group has ownership interests in three diesel fuel
facilities in the Philippines. The Bataan Cogeneration project is a 65 MW
facility that has a long-term contract to sell its electrical output to the
National Power Corporation (with which it also has entered into a
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<PAGE>
fuel management agreement for fuel supply) and the Bataan Export Processing Zone
Authority. The Island Power project is a 7 MW facility that has a long-term
power contract with the Occidental Mindoro Electric Cooperative. Both projects
are operated by the Energy Group.
In 1998, the Energy Group executed definitive agreements for the
acquisition of 100% of the stock of a Philippine company that owns and operates
a 65 MW diesel fired electric generating facility located in the province of
Cavite, the Philippines. This project sells a portion of its energy and capacity
to the National Power Corporation and a portion to the Cavite Export Processing
Zone Authority pursuant to long-term power purchase agreements. This acquisition
was completed in February, 1999.
c) Project Summaries. Certain information with respect to the Energy Group's IPP
projects as of March 1, 1999 is summarized in the following table:
IPP PROJECTS
Date of
Acquisition/
Commencement
In Operation Location Size Nature of Interest of Operations
- ------------ -------- ---- ------------------ -------------
A. Hydroelectric
1. New Martinsville West Virginia 40MW Lessee/Operator 1991
2. Rio Volcan Costa Rica 16MW Part Owner/Operator 1997
3. Don Pedro Costa Rica 16MW Part Owner/Operator 1996
4. Bangor(1) Maine 13MW Part Owner/Operator 1997
5. Koma Kulshan(1) Washington 12MW Part Owner 1997
6. Weeks Falls(1) Washington 5MW Part Owner 1997
B. Geothermal
1. Heber (2)(3) California 52MW Lessee/Operator 1989
2. SIGC (3) California 48MW Lessee/Operator 1994
3. Mammoth G1(1) California 10MW Part Owner/Operator 1997
4. Mammoth G2(1) California 15MW Part Owner/Operator 1997
5. Mammoth G3(1) California 15MW Part Owner/Operator 1997
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C. Natural Gas
1. Empresa Valle Bolivia 215MW Part Owner/ 1995
Hermoso (4) Operations Mgmt.
2. Brandywine Maryland 240MW Operator 1996
3. Sahacogen Thailand 122MW Owner 1999
4. Rojana Thailand 122MW Owner 1999
5. Gulf Co. Generation Thailand 110MW Operator 1999
D. Coal
1. Lin'an(5) China 24MW Part Owner 1997
2. Huantai(5) China 24MW Part Owner 1997
3. Taixing(5) China 24MW Part Owner 1997
4. Yanjiang(5) China 24MW Part Owner 1997
E. Diesel
1. Island Power Philippines 7MW Part Owner/ 1996
Corporation(6) Operator
2. Bataan Philippines 65MW Owner/Operator 1996
Cogeneration
3. Magellan Philippines 65MW Owner/Operator 1998
F. Waste Wood
1. Burney California 11.4MW Owner/Operator 1997
2. Chinese(1) California 25.6MW Part Owner 1997
3. Mount Lassen California 11.4MW Owner/Operator 1997
4. Oroville California 18.7MW Owner/Operator 1997
G. Landfill Gas
1. Gude Maryland 3MW Owner/Operator 1997
2. Otay California 3.7MW Owner/Operator 1997
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3. Oxnard California 5.6MW Owner/Operator 1997
4. Penrose California 10MW Owner/Operator 1997
5. Salinas California 1.5MW Owner/Operator 1997
6. Santa Clara California 1.5MW Owner/Operator 1997
7. Stockton California 0.8MW Owner/Operator 1997
8. Toyon California 10MW Owner/Operator 1997
Under Construction:
1. Quezon (7) Philippines 500MW Part Owner/Operator 1999(est.)
2. Haripur (8) Bangladesh 122MW Part Owner/Operator 1999(est.)
--------
Total 2015.4MW
========
Notes
(1) The Energy Group has a 50% ownership interest in the project.
(2) The Energy Group 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 option of the Energy Group and its
joint venture partner.
(3) The Energy Group 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.
(4) The Energy Group owns an approximate 24% interest in a consortium that
purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by
Bolivian pension funds.
(5) The Energy Group has a 60% ownership interest in this project.
(6) The Energy Group has an approximately 40% ownership interest in this
project.
(7) The Energy Group has an approximately 26% ownership interest in the
project.
(8) The Energy Group has a 23% ownership interest in this project, which may
increase to an approximately 45% interest, depending upon the exercise of
certain options by the Energy Group and other project owners. In addition,
this project is capable of operating through combustion of diesel oil in
addition to natural gas.
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(d) Other Development Efforts. The Energy Group is actively pursuing a number of
projects, some of which have achieved significant development milestones such as
executed power purchase agreements, or receipt of key governmental approvals.
Included in this category is the development of a 500 MW gas combined cycle
merchant plant to be located at the same site as the Energy Group's existing
Burney facility in Shasta County, California. 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 are managed through 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 27 waste-to-energy
projects at 26 locations. OWTE's subsidiaries are the owners or lessees of 17 of
its waste-to-energy projects. The Energy Group 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, the Energy Group provides waste-to-energy services
pursuant to long-term service contracts ("Service Agreements") with local
governmental units 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:
o The Energy Group designs the facility, helps to arrange for
financing, and then constructs and equips the facility on a
fixed price and schedule basis.
o The Energy Group operates the facility and generally
guarantees it will meet minimum processing capacity and
efficiency standards, energy production levels, and
environmental standards. The Energy Group'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 or, if the breach is substantial, continuing and
unremedied, the termination of the Service Agreement. In the
case of such Service Agreement termination,
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the Energy Group may be obligated to discharge project
indebtedness.
o 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 other costs, such as insurance, taxes, and transportation
of the residue to the disposal site. If the facility is owned
by the Energy Group, 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. Generally,
expenses resulting from the delivery of unacceptable and
hazardous waste on the site are also borne by the Client
Community. In addition, the contracts generally require that
the Client Community pay increased expenses and capital costs
resulting from Unforeseen Circumstances, subject to limits
which may be specified in the Service Agreement.
o 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.
(b) Other Arrangements for Providing Waste-to-Energy Services. The Energy Group
owns one facility that is not operated pursuant to a Service Agreement with a
Client Community. The Energy Group may undertake additional such projects in the
future. In such projects, the Energy Group generally assumes the project debt
and risks relating to waste availability and pricing, risks relating to the
continued performance of the electricity purchaser, as well as risks associated
with Unforeseen Circumstances. In these projects, the Energy Group 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.
In addition, the Energy Group has recently undertaken, together with
two Client Communities, restructuring of its waste-to-energy projects in
response to the demise of certain local laws permitting municipalities to
require delivery of waste to specific facilities. One of these restructurings,
in Union County, New Jersey, is final. The other, in Warren County, New Jersey,
is in progress. In Union County, the facility has been leased to the Energy
Group, and the Client Community has agreed to deliver approximately 50% of the
facility's capacity on a put-or-pay basis. The balance of facility capacity will
be marketed by the Energy Group, at its risk. The Company provided limited
credit support in the form of an operating performance guaranty, as well as a
rent guaranty supporting one series of subordinated bonds.
In Warren County, the Energy Group has agreed to market the
facility's capacity, at its risk, in a restructuring plan that includes State
assistance with debt retirement. The Warren
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County restructuring is subject to several conditions precedent, some of which
are beyond the control of the Energy Group, notably the securing of State funds.
While some funds are currently available to the State that could be used in
connection with the Warren restructuring, state legislation has been introduced
that would create a source of additional funding for payment of project debt.
There can be no assurance, however, that an acceptable contractual and
legislative resolution will be achieved. If such a resolution cannot be
achieved, the Warren County Client Community may be forced to default on its
obligations, including obligations to bondholders, in which case a restructuring
would need to be addressed between the Energy Group and the project's lenders
and credit enhancement providers. The State of New Jersey continues to publicly
state that it will not allow a bond default to occur. The Energy Group may
consider additional such restructuring in the future.
(c) Project Financing. Financing for the Energy Group's domestic projects is
generally accomplished through the issuance 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 to pay for facility construction, 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.
(d) OWTE Projects. Certain information with respect to projects as of March 1,
1999 is summarized in the following table:
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<PAGE>
WASTE-TO-ENERGY PROJECTS
Boiler Commencement
Units Tons per Day Units of Operations
- ----- ------------ ----- -------------
Tulsa, OK (I) (1) 750 2 1986
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 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, HI (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 32,607
======
- ----------
(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.
(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 operates only the boiler and turbine
for this facility.
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<PAGE>
(8) Operating contracts where acquired after completion. Facility uses a
refuse-derived fuel technology and does not employ the Martin Technology.
In addition, during 1998 the Energy Group closed down one non-Martin
waste-to-energy facility. This facility was not material to the Energy Group's
business.
(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 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's 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, Lurgi, and
Detroit Stoker. Martin and other vendors seek to implement improvements and
modifications to its technology in order to maintain their competitive position
with non-mass burn technologies. The Energy Group believes that the Martin
technology is a proven and reliable mass burn technology, and that its
association with Martin has created significant name recognition and value for
the Energy Group's domestic waste-to-energy business. The Energy Group's efforts
internationally have not been technology-specific.
(f) The Cooperation Agreement. Under an agreement between Martin and an Ogden
affiliate (the "Cooperation Agreement"), the Energy Group 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 the
Energy Group in installing, operating, and maintaining facilities incorporating
the Martin Technology. The 15 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 of notice. The
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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.
Termination would not affect the rights of the Energy Group 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.
(g) Other Development Efforts. The Energy Group has no commitments in its
waste-to-energy backlog as of December 31, 1998.
Water And Wastewater
The Energy Group's water and wastewater business is conducted
through Ogden Water Systems, Inc. ("OWS"). OWS'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, the Middle East, Latin America and elsewhere. OWS is an outgrowth of
Ogden Yorkshire Water Company ("OYWC"), which was a joint venture between the
Energy Group and 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.
In the United States, the Energy Group 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. In addition, Energy Group currently has contracts with four
communities in New York State for the operation of facilities in which it has no
ownership or long-term leasehold interest.
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 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
some 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. In circumstances where the
creditworthiness of a sponsoring municipality is adequate to support a limited
recourse financing, the Energy Group may provide services to and collect fees
from municipal entities or other governmental agencies.
Under contractual arrangements, the Energy Group 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 Energy Group may be
required to guarantee the performance of OWS. OWS seeks not to take
responsibility for conditions that are beyond its control.
(a) Water and Wastewater Projects. The Energy Group operates and
maintains wastewater treatment facilities for four small municipalities in New
York State. Such facilities together process approximately 12.8 million gallons
per day ("mgd").
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(b) Projects Under Construction. The Energy Group entered into a
Water Facilities Services Agreement with The Governmental Utility Services
Corporation (the "GUSC") of the City of Bessemer, Alabama in 1997. The Agreement
provides that the Energy Group 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. The Energy Group 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. GUSC closed on its financing in 1998, and the Energy
Group commenced design and construction shortly thereafter. Construction
completion is expected during the second quarter of 2000.
(c) Other Development Efforts. 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 treatment and collection facilities in Muscat, as well as
the construction and operation of new wastewater infrastructure. The
infrastructure capital program would be phased in over several years, with the
first phase projected to require approximately $250 million in new construction.
The Energy Group'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 $15 million, would be required of the Energy Group. The
implementation of the Muscat project remains subject to several conditions
precedent, many of which are beyond the control of the Energy Group. The Energy
Group is targeting other similar projects internationally, all of which are in
preliminary stages of negotiation or competitive procurement.
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, regulatory assistance and remedial
construction as well as concrete and civil construction projects 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, 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.
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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 provide consulting and design services
nationally to the U.S. Navy, Air Force, National Guard Bureau and U.S. Army
Corps of Engineers on a wide variety of projects.
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, Calcutta 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.
The development, construction, ownership and operation of facilities
in foreign countries entails significant political and financial uncertainties
and other structuring issues that typically are not involved in such activities
in the United States. These risks include unexpected changes in electricity
tariffs, conditions in financial markets, currency exchange rate fluctuations,
currency repatriation restrictions, currency inconvertibility, unexpected
changes in laws and regulations, political, economic or military instability,
civil unrest and expropriation. Such risks have the potential to cause
substantial delays or material impairment to the value of the project being
developed or business being operated.
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 the extent practicable, 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.
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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 the extent practicable, 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 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 economic changes in 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.
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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 local or national 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 boarder with McAllen, Texas.
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.
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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.
The Energy Group'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 the Energy Group'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. 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, and low alternative disposal costs. Another
factor adversely affecting the demand for new waste-to-energy projects, as well
as having an impact on existing 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. The
invalidation of such laws has created pressure on Client Communities as well as
the Energy Group to lower costs or restructure contractual arrangements in order
to continue to attract waste supplies and ensure that revenues are sufficient to
pay for all project costs. See Waste to Energy, "Other Arrangements for
Providing Waste-to-Energy Services".
Foreign demand for waste to energy projects is expected to exist
only in unique circumstances where other disposal options are unavailable or
unusually costly.
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,
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but not limited to, domestic and foreign government regulations, fewer airline
flights 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 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.
YEAR 2000 ISSUES
See discussion on Ogden's Year 2000 issues set forth on page 23 of
Management's Discussion and Analysis of Consolidated Operations of Ogden's 1998
Annual Report to Shareholders, certain specified portions of which are
incorporated herein by reference.
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EMPLOYEE AND LABOR RELATIONS
As of March 1, 1999, Ogden and its subsidiaries had approximately 21,970
U.S. and foreign employees.
Certain employees of Ogden are employed pursuant to collective bargaining
agreements with various unions. During 1998 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 1999.
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.
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
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or prohibiting operation. Ogden's Aviation 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 originally was December 19, 1996. However, the
requirement that all states submit implementing regulations became the subject
of protracted litigation and appeals, and most states suspended preparation of
their implementation plans as a result. Following rulings by the courts, EPA
issued a final rule which slightly revised the emission limits for NOX, CO, SO2,
HCl, dioxin, cadmium, and lead, tightening all but the NOX limit. While the
compliance deadline for the 1995 NSPS and EG remains December 19, 2000, the
deadline for these seven revised limits is August 26, 2002. 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 $54 million during 1999 and 2000 (including amounts which would be
required if certain Service Agreement amendments are
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finalized). Only moderate additional costs are likely to be incurred during 2001
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 OWS
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, OWS 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 OWS'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.
(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.
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ENERGY AND WATER REGULATIONS
The Energy Group'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 power 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 certain 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
other facilities making use of non-fossil fuel power sources, including
waste-to-energy facilities. The exemptions afforded by PURPA to qualifying
facilities from regulation under 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.
Except with respect to waste to energy facilities with a net power
production capacity in excess of thirty megawatts (where rates are set by FERC),
state public utility commissions must approve the rates, and in some instances
other contract terms, by which public utilities purchase electric power from
QFs. 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 expressly
require public utilities to enter into long-term contracts.
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 deemed
to be 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 is not
and will not be required to register with the SEC.
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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. Various
bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both
independents and vertically integrated utilities to acquire electric assets
throughout the United States that are geographically widespread, eliminating the
current requirement that the utility's electric assets 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 have implemented or are considering a series 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. As the
trend toward increased competition continues, the utilities contend that they
are entitled to 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, and have rejected attempts by some utilities to abrogate
these contracts. At the same time, regulatory agencies have encouraged
renegotiations of power contracts where rate payer savings can be achieved as a
result. The Energy Group anticipates that the regulatory impetus to restructure
"above market" power purchase agreements will continue in many of the
jurisdictions where it owns or operates generating facilities. 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. 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.
OWS'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
36
<PAGE>
of water supply and wastewater facilities. Whether such laws apply depends upon
the local regulatory scheme as well as the manner in which OWS 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.
37
<PAGE>
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
The executive offices for the Entertainment group are located at Two
Pennsylvania Plaza, New York, New York. The Entertainment group owns and leases
buildings in various areas in the United States and several foreign countries,
that house office and warehousing operations. The leases range from a
month-to-month term to as long as five years.
Entertainment also leases or owns the following facilities:
Nature of
Location Site Use Size Interest
- -------- -------- ---- --------
Collinsville, IL Fairmount Race Track 150 - acres Lease (1)
East St. Louis, IL Fairmount 148 - acres Owns
West Yellowstone, Montana Grizzly Park 25 - acres Owns
Ocala, Florida Silver Springs 256 - acres Lease (2)
Lombard, IL Enchanted Castle 42,500 sq. ft. Lease (3)
Anaheim, CA Tinseltown(TM) Studios 1.25 - acres Owns
New York, NY Observation Deck, 107th Floor Lease (4)
World Trade Center
New Orleans, LA Jazzland 160 - acres Lease (5)
Buenos Aires, Argentina La Rural 28 - acres Lease (6)
Province of Missions, Iguazu Grand Hotel
Argentina Resort & Casino 15 - acres Owns
(1) Expires in 2017.
(2) Expires in 2008.
(3) Expires in 2006.
(4) Expires in 2009.
(5) A 99 year lease convertible into fee ownership at Entertainment's option.
(6) Expires 2026.
(b) Aviation
The executive offices for the Aviation group are located at Two
Pennsylvania Plaza, New York, New York. Aviation manages its global ground
handling business from leased space at
38
<PAGE>
four regional offices: Hong Kong (Asia-Pacific); Miami, Florida (Central & South
America/Mexico/Caribbean); Amsterdam/Schiphol, Netherlands (Europe); and Irving,
Texas (United States & Canada).
To conduct its ground handling, passenger services, and cargo operations,
Aviation leases office, terminal, and ramp space at the many airports around the
globe where Aviation provides these services, and owns several minor storage and
maintenance facilities located in Santiago, Chile; Auckland, New Zealand; and at
St. Maarten in the Netherlands Antilles. Aviation's fueling business leases
fueling installations located at various airports in the United States and
Canada.
Through a joint venture company, Aviation owns a newly constructed,
state-of-the-art air cargo terminal at Praha Ruzyne Airport in Prague, Czech
Republic. With a design capacity to handle 100,000 metric tons of air cargo per
year, the warehouse encompasses 10,000 square meters of operational and storage
space. At Newark Airport in New Jersey, Aviation owns a building and land that
was previously used in support of its in-flight catering food service operation.
Aviation's recently acquired Flight Services Group, Inc. leases corporate
office space in Stratford, CT. This operations also leases office and hangar
space at the Palm Beach International Airport, West Palm Beach, FL, Lt. Warren
E. Eaton Airport, Norwich, NY and the Teterboro Airport in Teterboro, NJ, and
owns an 11,000 square foot hangar at the Sikorsky Memorial Airport in Stratford,
CT.
(c) 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, 1999.
<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
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Approximate
Site Size
Location in Acres Site Use Nature of Interest(1)
- -------- -------- -------- ---------------------
<S> <C> <C> <C>
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 (closed) 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
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.
</TABLE>
40
<PAGE>
<TABLE>
<CAPTION>
Approximate
Site Size
Location in Acres Site Use Nature of Interest(1)
- -------- -------- -------- ---------------------
<S> <C> <C> <C>
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, 1,510 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
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%)
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
Approximate
Site Size
Location in Acres Site Use Nature of Interest(1)
- -------- -------- -------- ---------------------
<S> <C> <C> <C>
45. Weeks Falls, Washington N/A Hydroelectric Project Lease
46. Haripur, Bangladesh 4.6 Gas/Diesel Project Lease
47. Cavite, Philippines 13,122 Diesel Lease
sq. meters
48. Chonburi, Thailand 5.92 Gas Project Own
49. Ayutthya, Thailand 6.95 Gas Project Own
</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, 12, 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.
42
<PAGE>
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 position or
results of operations.
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.
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,
43
<PAGE>
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 position or results of operations.
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 1998.
EXECUTIVE OFFICERS OF OGDEN
Set forth below are the names, ages, positions and offices held and
years appointed, of all "executive officers" (as defined by Rule 3b-7 of the
Securities Exchange Act of 1934) of Ogden as of March 1, 1999:
<TABLE>
<CAPTION>
CONTINUALLY AN OGDEN
POSITION AND OFFICE EXECUTIVE OFFICER
NAME HELD AGE AS OF 3/1/99 SINCE
---- ---- ---------------- -----
<S> <C> <C> <C>
R. Richard Ablon Chairman of the 49 1987
Board, President &
Chief Executive
Officer
Scott G. Mackin Executive Vice 42 1992
President
Jesus Sainz Executive Vice 55 1998
President
Raymond E. Senior Vice 44 1998
Dombrowski, Jr. President and Chief
Financial Officer
Lynde H. Coit Senior Vice 44 1991
President and
General Counsel
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
CONTINUALLY AN OGDEN
POSITION AND OFFICE EXECUTIVE OFFICER
NAME HELD AGE AS OF 3/1/99 SINCE
---- ---- ---------------- -----
<S> <C> <C> <C>
Rodrigo Arboleda Senior Vice 58 1995
President, Business
Development, Latin
America
David L. Hahn Senior Vice 47 1995
President, Aviation
Quintin G. Marshall Senior Vice 37 1995
President, Corporate
Development
Gary D. Perusse Senior Vice 50 1996
President, Risk
Management
Peter Allen Senior Vice President 62 1998
Bruce W. Stone Executive Vice 51 1997
President for
Waste-to-Energy
Operations and
Managing
Director-Ogden
Energy Group, Inc.
B. Kent Burton Vice President, 47 1997
Policy and
Communications
Alane G. Baranello Vice President, 39 1998
Human Resources
</TABLE>
45
<PAGE>
<TABLE>
<CAPTION>
CONTINUALLY AN OGDEN
POSITION AND OFFICE EXECUTIVE OFFICER
NAME HELD AGE AS OF 3/1/99 SINCE
---- ---- ---------------- -----
<S> <C> <C> <C>
Peter Cain Vice President, 41 1997
Finance and Treasurer
Robert M. DiGia Vice President, 74 1965
Controller and Chief
Accounting Officer
Kathleen Ritch Vice President and 56 1981
Secretary
</TABLE>
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.
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
for more than the last five years and Chairman of the Board since May,
1996.
Scott G. Mackin, has served as Executive Vice President of Ogden since
1997 and for more than the last five years has served as President and
Chief Operating Officer of Ogden Energy Group, Inc.
Jesus Sainz served as an Ogden director from 1994 until January 1, 1998.
On January 15, 1998 he was appointed Executive Vice President of Ogden.
For more than five years prior to 1997, Mr. Sainz served as Executive Vice
Chairman of a private Spanish company which he created in 1984 which holds
interests in companies operating in such fields as foreign trade, fast
food and real estate.
46
<PAGE>
Raymond E. Dombrowski, Jr. was appointed Senior Vice President and Chief
Financial Officer of Ogden on September 17, 1998. From 1997 until he
joined Ogden he served as General Attorney, Finance, Bell Atlantic
Headquarters, responsible for all domestic and international finance
transactions. Between 1994 and 1997 Mr. Dombrowski served as Counsel,
Treasury and Finance, Bell Atlantic Headquarters, with responsibilities in
the area of structuring, negotiating and documenting sensitive financing
structures.
Lynde H. Coit has been a Senior Vice President and General Counsel of
Ogden for more than the last five years.
Rodrigo Arboleda was appointed Senior Vice President of Ogden in January
1995. For more than the last five years he served as Ogden's Senior Vice
President-Business Development-Latin America operations.
David L. Hahn was appointed Senior Vice President, Business Development,
Asia in January 1995 and since 1997 he has served as Ogden's Senior Vice
President, Aviation and Chief Operating Officer of Ogden's Aviation
segment. Prior to 1995 he served as Vice President-Marketing of Ogden
Services Corporation.
Quintin G. Marshall was appointed 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.
Gary D. Perusse was appointed Senior Vice President - Risk Management in
September, 1996. Prior thereto he had served as Director - Risk Management
of Ogden for more than five years.
Peter Allen has served as a Senior Vice President of Ogden since January
1998 and as Senior Vice President and General Counsel of Ogden Services
segment for more than the last five years.
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 Vice President - Policy and Communications of
Ogden since May 1997 and for more than the last five years as Senior Vice
President of the Ogden Energy Group, Inc. in political affairs and
lobbying activities.
47
<PAGE>
Alane G. Baranello was appointed Vice President, Human Resources of Ogden
on May 20, 1998. Between 1993 and May 1998 she served as Ogden's Director,
Human Resources.
Peter Cain has served in various financial capacities as a senior officer
of many of Ogden's major subsidiaries for more than the last five years.
He served as Ogden's Vice President of Finance since 1997 and was
appointed Ogden's Treasurer in 1998.
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, 1999, the approximate number of record holders of Ogden
common stock was 6,614. Pursuant to General Instruction G (2), the information
called for by this item is hereby incorporated by reference from Page 48 of
Ogden's 1998 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 25 of Ogden's 1998
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 20 through 24 of
Ogden's 1998 Annual Report to Shareholders.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to General Instruction (G)2, the information called for
by this item is hereby incorporated by reference from page 23 of Ogden's 1998
Annual Report to Shareholders.
48
<PAGE>
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 45 and Page
48 of Ogden's 1998 Annual Report to Shareholders.
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 1999 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 1999 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 1999 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 1999 Proxy statement
to be filed with the Securities and Exchange Commission.
49
<PAGE>
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 26 through 45 and the
Independent Auditors' Report on page 46 of Ogden's 1998 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, 1998, 1997 and 1996.
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 through April 8, 1998.*
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
50
<PAGE>
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 Bank of New York, Trustee, relating to Ogden's $100
million debt offering.*
10.0 Material Contracts
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.*
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.*
10.2 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.*
10.3 Executive Compensation Plans and Agreements.
(a) Ogden Corporation 1990 Stock Option Plan.*
(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.*
(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.*
51
<PAGE>
(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.*
(j) Ogden Projects Profit Sharing Plan.*
(k) Ogden Projects Supplemental Pension and Profit Sharing Plans.*
(l) Ogden Projects Core Executive Benefit Program.*
(m) 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.*
(ii) Form of Amended Ogden Projects, Inc. Pension Plan,
effective as of January 1, 1994.*
(n) Ogden Corporation Amended and Restated CEO Formula Bonus Plan.
Transmitted herewith as Exhibit 10.3(n).
52
<PAGE>
(o) Ogden Key Management Incentive Plan.*
10.4 Employment Agreements
(a) Employment Agreement between Ogden and Lynde H. Coit dated
March 1, 1999. Transmitted herewith as Exhibit 10.4(a).
(b) Employment Agreement between Ogden and R.Richard Ablon dated
as of January 1, 1998.*
(c) Termination Agreement between Ogden and Philip G. Husby,
Senior Vice President and CFO, dated as of September 17,
1998.*
(d) Employment Agreement between Ogden and Ogden's Chief
Accounting Officer dated as of December 18, 1991.*
(e) Employment Agreement between Scott G. Mackin, Executive Vice
President and Ogden Corporation dated as of October 1, 1998.*
(f) Employment Agreement between David L. Hahn and Ogden
Corporation, dated December 1, 1995.*
i. Letter Amendment to Employment Agreement between Ogden
Corporation and David L. Hahn, Senior Vice President,
Aviation, effective as of October 1, 1998.*
(g) Employment Agreement between Ogden Services Corporation and
Rodrigo Arboleda dated January 1, 1997.*
i. Letter Amendment to Employment Agreement between Ogden
and Rodrigo Arboleda, Senior Vice President, effective
as of October 1, 1998.*
(h) 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.*
i. Letter Amendment to Employment Agreement between Ogden
and Quintin G. Marshall, Senior Vice President-Corporate
Development, effective as of October 1, 1998.*
53
<PAGE>
(j) Employment Agreement between Ogden Corporation and Jesus
Sainz, effective as of January 1, 1998.*
i. Letter Amendment to Employment Agreement between Ogden
and Jesus Sainz, Executive Vice President, effective
October 1, 1998.*
(k) Employment Agreement between Alane Baranello, Vice
President-Human Resources and Ogden dated October 28, 1996.*
i. Letter Amendment to Employment Agreement between Ogden
and Alane Baranello, Vice President-Human Resources
dated October 13, 1998.*
(l) Employment Agreement between Peter Allen, Senior Vice
President and Ogden, dated July 1, 1998.*
(m) Employment Agreement between Ogden and Raymond E. Dombrowski,
Jr., Senior Vice President and Chief Financial Officer, dated
as of September 21, 1998. Transmitted herewith as Exhibit
10.4(m).
10.5 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.*
10.6 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, 1998, 1997 and 1996.*
13 Those portions of the Annual Report to Stockholders for the
year ended December 31, 1998, 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).
54
<PAGE>
* 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 1998. A Form 8-K Report was filed on March 12, 1999
and is incorporated herein by reference.
55
<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 11, 1999
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 President, Chief Executive Officer,
- ------------------------------------ Chairman of the Board and Director
R. RICHARD ABLON
/s/ Raymond E. Dombrowski, Jr. Senior Vice President and Chief
- ------------------------------------ Financial Officer
RAYMOND E. DOMBROWSKI, JR.
/s/ Robert M. DiGia Vice President, Controller and Chief
- ------------------------------------ Accounting Officer
ROBERT M. DIGIA
Director
- ------------------------------------
DAVID M. ABSHIRE
/s/ Anthony J. Bolland Director
- ------------------------------------
ANTHONY J. BOLLAND
<PAGE>
/s/ George L. Farr Director
- ------------------------------------
GEORGE L. FARR
/s/ Norman G. Einspruch Director
- ------------------------------------
NORMAN G. EINSPRUCH
/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/ Robert E. Smith Director
- ------------------------------------
ROBERT E. SMITH
/s/ Helmut F.O. Volcker Director
- ------------------------------------
HELMUT F.O. VOLCKER
<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, 1998 and 1997, and for each of the three
years in the period ended December 31, 1998, and have issued our report
thereon dated February 9, 1999; such consolidated financial statements and
report are included in your 1998 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of Ogden Corporation and subsidiaries, listed in Item 14.
This 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 financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all materials respects the information set forth therein.
/s/ Deloitte & Touche LLP
New York, New York
February 9, 1999
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE II
OGDEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
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 $20,207,000 $ 9,490,000 $6,786,000 (E) $ 3,688,000 (A) $30,595,000
2,200,000 (C)
Doubtful receivables -- noncurrent 3,000,000 3,000,000 (A) 0
Deferred charges on projects 10,741,000 2,609,000 280,000 (D) 13,070,000
------------------------------------------------------------------------------
TOTAL $33,948,000 $ 12,099,000 $6,786,000 $ 9,168,000 $43,665,000
==============================================================================
Allowances not deducted:
Estimated cost of disposal of assets $ 296,000 $ 296,000 (B) $ --
Provision for restructuring 1,141,000 867,000 (B) 274,000
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 2,700,000 (C) 300,000
Other 5,052,000 $ 100,000 1,864,000 (B) 2,282,000
1,006,000 (C)
------------------------------------------------------------------------------
TOTAL $ 9,489,000 $ 100,000 $ 6,733,000 $ 2,856,000
==============================================================================
</TABLE>
NOTES:
(A) Write-offs of receivables considered uncollectible.
(B) Payments charged to allowances.
(C) Reversal of provisions no longer required.
(D) Write off of deferred charges.
(E) Provision of Company purchased during 1998.
<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 benef its 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>
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 benef its 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 ofL
(B) Write-offs of receivables considered uncollectible.
(C) Payments charged to allowances.
(D) Reversal to operating costs of provisions no longer required.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
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 Ogde's Form
of October 31, 1989, among Ogden, ERCI S-4 Registration Statement File No.
Acquisition Corporation and ERC 33-32155, and incorporated herein
International Inc. by reference.
2.2 Agreement and Plan of Merger among Filed as Exhibit (10)(x) to Ogden's
Ogden Corporation, ERC International Form 10-K for the fiscal year ended
Inc., ERC Acquisition Corporation and December 31, 1990 and incorporated
ERC Environmental and Energy Services herein by reference.
Co., Inc. dated as of January 17, 1991.
2.3 Amended and Restated Agreement and Filed as Exhibit 2 to Ogden's Form
Plan of Merger among Ogden S-4 Registration Statement File No.
Corporation, OPI Acquisition 33-56181 and incorporated herein by
Corporation sub. and Ogden Projects, reference.
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
Incorporation as amended. Form 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 March 31, 1998 and
incorporated herein by reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
4 Instruments Defining Rights of
Security Holders.
4.1 Fiscal Agency Agreement between Ogden Filed as Exhibits (C)(3) and (C)(4)
and Bankers Trust Company, dated as of to Ogden's Form 8-K filed with the
June 1, 1987 and Offering Memorandum Securities and Exchange Commission
dated June 12, 1987, relating to U.S. on July 7, 1987 and incorporated
$85 million Ogden 6% Convertible herein by reference.
Subordinated Debentures, Due 2002.
4.2 Fiscal Agency Agreement between Ogden Filed as Exhibit (4) to Ogden's
and Bankers Trust Company, dated as of Form S-3 Registration Statement
October 15, 1987, and Offering filed with the Securities and
Memorandum, dated October 15, 1987, Exchange Commission on December 4,
relating to U.S.$75 million Ogden 5 3/4% 1987, Registration No. 33-18875,
Convertible Subordinated Debentures, and incorporated herein by
Due 2002. reference.
4.3 Indenture dated as of March 1, 1992 Filed as Exhibit (4)(C) to Ogden's
from Ogden Corporation to The Bank of Form 10-K for fiscal year ended
New York, Trustee, relating to Ogden's December 31, 1991, and incorporated
$100 million debt offering. herein by reference.
10 Material Contracts
10.1(a) U.S. $95 million Term Loan and Letter Filed as Exhibit 10.6 to Ogden's
of Credit and Reimbursement Agreement Form 10-Q for the quarterly period
among Ogden, the Deutsche Bank AG, New ended March 31, 1997 and
York Branch and the signatory Banks incorporated herein by reference.
thereto, dated March 26, 1997.
10.1(b) $200 million Credit Agreement among Filed as Exhibit 10.1(i) to Ogden's
Ogden, The Bank of New York as Agent Form 10-Q for the quarterly period
and the signatory Lenders thereto, ended June 30, 1997 and
dated as of June 30, 1997. incorporated herein by reference.
10.2 Rights Agreement between Ogden Filed as Exhibit (10)(h) to Ogden's
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Corporation and Manufacturers Hanover Form 10-K for the fiscal year ended
Trust Company, dated as of September December 31, 1990 and incorporated
20, 1990 and amended August 15, 1995 herein by reference.
to provide The Bank of New York as
successor agent.
10.3 Executive Compensation Plans.
(a) Ogden Corporation 1990 Stock Filed as Exhibit (10)(j) to Ogden
Option Plan. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(i) Ogden Corporation 1990 Filed as Exhibit 10.6(b)(i) to
Stock Option Plan as Ogden's Form 10-Q for the quarterly
Amended and Restated as period ended September 30, 1994 and
of January 19, 1994. incorporated herein by reference.
(ii) Amendment adopted and Filed as Exhibit 10.7(a)(ii) to
effective as of Ogden's Form 10-K for the fiscal
September 18, 1997. year ended December 31, 1997 and
incorporated herein by reference.
(b) Ogden Services Corporation Filed as Exhibit (10)(k) to Ogden's
Executive Pension Plan. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(c) Ogden Services Corporation Filed as Exhibit (10)(l) to Ogden
Select Savings Plan. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(i) Ogden Services Filed as Exhibit 10.7(d)(I) to
Corporation Select Ogden's Form 10-K for the fiscal
Savings Plan Amendment year ended December 31, 1994 and
and Restatement as of incorporated herein by reference.
January 1, 1995.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(ii) Amendment Number One Filed as Exhibit 10.7(c)(ii) to
to the Ogden Services Ogden's Form 10-K for the fiscal
Corporation Select year ended December 31, 1997 and
Savings Plan as Amended incorporated herein by reference.
and Restated January 1,
1995, effective January
1, 1998.
(d) Ogden Services Corporation Filed as Exhibit (10)(m) to Ogden's
Select Savings Plan Trust. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(i) Ogden Services Filed as Exhibit 10.7(e)(i) to
Corporation Select Ogden's Form 10-K for the fiscal
Savings Plan Trust year ended December 31, 1994 and
Amendment and incorporated herein by reference.
Restatement as of
January 1, 1995.
(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.
(f) Changes effected to the Ogden Filed as Exhibit (10)(o) to Ogden's
Profit Sharing Plan effective Form 10-K for the fiscal year ended
January 1, 1990. December 31, 1990 and incorporated
herein by reference.
(g) Ogden Corporation Profit Filed as Exhibit 10.8(p) to Ogden's
Sharing Plan. Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(i) Ogden Profit Sharing Filed as Exhibit 10.8(p)(i) to
Plan as amended and Ogden's Form 10-K for fiscal year
restated January 1, ended December 31, 1993 and incorporated
1991
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
and as in effect herein by reference.
through January 1, 1993.
(ii) Ogden Profit Sharing Filed as Exhibit 10.7(p)(ii) to
Plan as amended and Ogden's Form 10-K for fiscal year
restated effective as ended December 31, 1994 and
of January 1, 1995. incorporated herein by reference.
(h) Ogden Corporation Core Filed as Exhibit 10.8(q) to Ogden's
Executive Benefit Program. Form 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 Filed as Exhibit 10.8(s) to Ogden's
Plan. Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(k) Ogden Projects Supplemental Filed as Exhibit 10.8(t) to Ogden's
Pension and Profit Sharing Form 10-K for fiscal year ended
Plans. December 31, 1992 and incorporated
herein by reference.
(l) Ogden Projects Core Executive Filed as Exhibit 10.8(v) to Ogden's
Benefit Program. Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(m) Form of amendments to the Filed as Exhibit 10.8(w) to Ogden's
Ogden Projects, Inc. Pension Form 10-K for fiscal year ended
Plan and Profit Sharing Plans December 31, 1993 and incorporated
effective as of January 1, herein by reference.
1994.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(i) Form of amended Ogden Filed as Exhibit 10.7(w)(i) to
Projects Profit Sharing Ogden's Form 10-K for fiscal year
Plan effective as of ended December 31, 1994 and
January 1, 1994. incorporated herein by reference.
(ii) Form of amended Ogden Filed as Exhibit 10.7(w)(ii) to
Projects Pension Plan, Ogden's Form 10-K for fiscal year
effective as of January ended December 31, 1994 and
1, 1994. incorporated herein by reference.
(n) Ogden Corporation Amended and Transmitted herewith as Exhibit
Restated CEO Formula Bonus Plan. 10.3(n).
(o) Ogden Key Management
Incentive Plan. Filed as Exhibit 10.7(p) to Ogden's
Form 10-K for fiscal year ended
December 31, 1997 and incorporated
herein by reference.
10.4 Employment Agreements
(a) Employment Agreement between Transmitted herewith as Exhibit
Ogden and Lynde H. Coit dated 10.4(a).
March 1, 1999.
(b) Employment Agreement between Filed as Exhibit 10.3(h) to Ogden's
R. Richard Ablon and Ogden Form 10-Q for the quarterly period
dated as of January 1, 1998. ended June 30, 1998 and
incorporated herein by reference.
(c) Termination Agreement between Filed as Exhibit 10.8(c) to Ogden's
Ogden and Philip G. Husby, Form 10-Q for the quarterly period
Senior Vice President and CFO ended September 30, 1998 and
dated as of September 17, 1998. incorporated herein by reference.
(d) Employment Agreement between Filed as Exhibit 10.2(q) to Ogden's
Ogden Corporation and Ogden's Form 10-K for fiscal year ended
Chief Accounting Officer dated December 31, 1991 and incorporated
as of December 18, 1991. herein by reference.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
(e) Employment Agreement between Filed as Exhibit 10.8(e) to Ogden's
Scott G. Mackin, Executive Form 10-Q for quarterly period
Vice President and Ogden ended September 30, 1998 and
Corporation, dated as of incorporated herein by reference.
October 1, 1998.
(f) Employment Agreement between Filed as Exhibit 10.8(i) to Ogden's
Ogden Corporation and David L. Form 10-K for fiscal year ended
Hahn, dated December 1, 1995. December 31, 1995 and incorporated
herein by reference.
i Letter Amendment to Filed as Exhibit 10.8(f)i. to
Employment Agreement Ogden's Form 10-Q for quarterly
between Ogden period ended September 30, 1998 and
Corporation and David incorporated herein by reference.
L. Hahn, Senior Vice
President, dated as of
October 1, 1998.
(g) Employment Agreement between Filed as Exhibit 10.8(j) to Ogden's
Ogden Corporation and Rodrigo Form 10-K for fiscal year ended
Arboleda, dated January 1, December 31, 1996 and incorporated
1997. herein by reference.
i. Letter Amendment Filed as Exhibit 10.8(g)(i) to
to Employment Agreement Ogden's Form 10-Q for quarterly
between Ogden period ended September 30, 1998 and
and Rodrigo Arboleda, incorporated herein by reference.
Senior Vice President,
effective as of October
1, 1998.
(h) Employment Agreement Filed as Exhibit 10.8(k) to Ogden's
between Ogden Projects, Inc. Form 10-K for fiscal year ended
and Bruce W. Stone, dated June December 31, 1996 and incorporated
1, 1990. herein by reference.
(i) Employment Agreement Filed as Exhibit 10.8(l) to Ogden's
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
between Ogden Corporation and Form 10-K for fiscal year ended
Quintin G. Marshall, dated December 31, 1996 and incorporated
October 30, 1996. herein by reference.
i. Letter Amendment to Filed as Exhibit 10.8(i)i. to
Employment Agreement Ogden's Form 10-Q for the quarter
between Ogden ended September 30, 1998 and
and Quintin G. incorporated herein by reference.
Marshall, Senior Vice
President, Corporate
Development, effective
as of October 1, 1998.
(j) Employment Agreements between Filed as Exhibit 10.8(m) to Ogden's
Ogden and Jesus Sainz, Form 10-K for the fiscal year ended
effective as of January 1, 1998. December 31, 1997 and incorporated
herein by reference.
i. Letter Amendment to Filed as Exhibit 10.8(j)i. to
Employment Agreement Ogden's Form 10-Q for the quarter
between Ogden and Jesus ended September 30, 1998 and
Sainz, Executive Vice incorporated herein by reference.
President, effective as
of October 1, 1998.
(k) Employment Agreement between Filed as Exhibit 10.3(m) to Ogden's
Alane Baranello, Vice President Form 10-Q for the quarterly period
- Human Resources and Ogden ended June 30, 1998 and
dated October 28, 1996. incorporated herein by reference.
i. Letter Amendment to Filed as Exhibit 10.8(k)i. to
Employment Agreement Ogden's Form 10-Q for the quarterly
between Ogden period ended September 30, 1998.
and Alane Baranello,
Vice President-Human
Resources, dated
October 13, 1998.
(l) Employment Agreement Filed as Exhibit 10.3(l) to Ogden's
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
between Ogden and Peter Allen, Form 10-Q for the quarterly period
Senior Vice President, dated ended June 30, 1998.
July 1, 1998.
(m) Employment Agreement between Transmitted herewith as Exhibit
Ogden and Raymond E. 10.4(m).
Dombrowski, Jr., Senior Vice
President and CFO, dated as of
September 21, 1998.
10.5 First Amended and Restated Ogden Filed as Exhibit 10.3(b)(i) to
Corporation Guaranty Agreement Ogden's Form 10-K for fiscal
made as of January 30, 1992 by year ended December 31, 1991
Ogden Corporation for the benefit and incorporated herein by
of Mission Funding Zeta and reference.
Pitney Bowes Credit.
10.6 Ogden Corporation Guaranty Filed as Exhibit 10.3(b)(iii)
Agreement made as of January to Ogden's Form 10-K for
30,1992 by Ogden Corporation for fiscal year ended December 31,
the benefit of Allstate Insurance 1991 and incorporated herein
Company and Ogden Martin Systems by reference.
of Huntington Resource Recovery
Nine Corp.
11 Ogden Corporation and Filed as part of Ogden's
Subsidiaries Detail of Annual Report to Shareholders
Computation of Earnings on page 42 thereof which is
Applicable to Common Stock for filed as Exhibit 13 to Ogden's
the years ended December 31, Form 10-K for fiscal year
1998, 1997 and 1996. ended December 31, 1998 and
incorporated herein by
reference.
13 Those portions of the Annual Transmitted herewith as
Report to Stockholders for the Exhibit 13.
year ended December 31, 1998,
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 10.3(n)
AMENDED AND RESTATED CEO FORMULA BONUS PLAN
1. PURPOSE: The purpose of the CEO Formula Bonus Plan (the "Plan") is to
provide the CEO with an additional incentive to enhance and improve the
performance of the Company as well as to meet the requirements of
qualified performance-based compensation under Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"), and Regulation
162(m) of the Code and preserve the deduction for compensation in excess
of $1.0 million paid to the CEO.
2. DEFINITIONS:
(a) "Bonus" shall be in the amount approved by the Committee and payable
to the CEO in accordance with the Plan, which amount shall not
exceed the Maximum Bonus for each Measurement Year.
(b) "Maximum Bonus" shall mean $4,000,000.
(c) "CEO" means the Chief Executive Officer of Ogden Corporation
("Ogden").
(d) "Committee" means the Compensation Committee of the Ogden Board of
Directors comprised of "outside directors" within the meaning of
Section 162(m) of the Code.
(e) "Company" means Ogden and its subsidiaries.
(f) "Designated Beneficiary" means the Participant's spouse who shall
receive any payments due to the Participant under the Plan upon the
Participant's death. If the spouse is not living, the Designated
Beneficiary shall be the Participant's estate.
(g) "Disability" is defined as a condition entitling the Participant to
benefits under the Company's long-term disability plan or policy
applicable to the CEO.
(h) "Effective Date" shall be January 1, 1999.
(i) "Measurement Year" means each calendar year period over which the
Company's ROE Performance is measured.
(j) "Participant" means the CEO who is eligible to receive a Bonus under
the Plan.
(k) "Pre-Tax Income" for any Measurement Year is the amount of
consolidated income from continuing operations before income taxes
and minority interest as of the December 31 occurring in such
Measurement Year as reported in the Company's Statements of
Consolidated Income.
<PAGE>
(l) "Pre-Tax ROE Performance Level" for any Measurement Year means the
Company's Pre-Tax Income achieved in any such Measurement Year
divided by the Company's Shareholders' Equity for such Measurement
Year.
(m) "Shareholders' Equity" for any Measurement Year is equal to the
total shareholders equity as of the December 31 occurring in the
immediately preceding calendar year, as reported in the Company's
Statement of Shareholders' Equity.
(n) "Target Bonus" for any Measurement Year shall be equal to the
Participant's base salary as determined by the Committee prior to
the Measurement Year and which becomes effective as of March 1 of
the Measurement Year.
3. ELIGIBILITY: Participation in the Plan will be limited to the CEO.
4. BONUS FORMULA: The Participant will be eligible for an annual cash Bonus
with respect to each Measurement Year based upon the Company's Pre-Tax ROE
Performance Level attained in such Measurement Year. The amount of each
Bonus shall be equal to a portion of the Target Bonus which amount cannot
exceed the Maximum Bonus. For each Pre-Tax ROE Performance Level, the
amount of any Bonus payable, not to exceed the Maximum Bonus, is
designated in the following table:
================================================================================
Pre-Tax ROE
Performance Level % of Target Bonus
- --------------------------------------------------------------------------------
< 13% 0
13% to under 17% 75%
17% to under 21% 100%
21% to under 25% 125%
25% or greater 150%
================================================================================
3. AWARD DETERMINATION: The annual Bonus amount to be awarded under the Plan
will be determined by the Committee based on the actual Pre-Tax ROE
Performance Level in the Measurement Year. Following December 31 of each
Measurement Year, the Committee will certify in writing to the Pre-Tax ROE
Performance Level achieved after the completion and audit of the Company's
annual financial statements. Such certification shall be included in the
minutes of the Committee.
4. MODIFICATION OF AWARDS BASED ON INDIVIDUAL PERFORMANCE: The Participant's
Bonus award as determined by the Pre-Tax ROE Performance Level may be
reduced based on the Committee's evaluation of other factors related to
the Participant's and Company's overall performance.
<PAGE>
5. TIMING AND PAYMENT OF AWARDS: Payment of any Bonus under the Plan will be
made after completion of each Measurement Year as soon as practical
following Certification by the Committee of the Company's Pre-Tax ROE
Performance Level and final approval of the Bonus by the Committee.
6. DISABILITY OR DEATH: In the event of the Participant's Disability or Death
during a Measurement Year, the full Bonus earned for the Measurement Year
and approved by the Committee will be paid to the Participant or
Designated Beneficiary, as the case may be, as if the Participant had
remained active throughout the Measurement Year. In the event of the
Participant's death after the death of a Measurement Year but prior to the
payment of any Bonus earned for such Measurement year such Bonus shall be
paid to the Participant's Designated Beneficiary.
7. TERMINATION OF EMPLOYMENT: In the event the Participant's employment is
terminated by Ogden during a Measurement Year for any reason other than
for cause, as determined by the Committee or if the Participant has an
employment agreement with Ogden, as set forth in such employment
agreement, the full Bonus earned for the Measurement Year and approved by
the Committee will be paid as if the Participant had remained employed
throughout the Measurement Year.
8. ADMINISTRATION: The Plan will be administered by the Committee. The
Committee retains the discretion to change the Pre-Tax ROE Performance
Levels under the Bonus Formula, as set forth in the table in Paragraph 4.
above, prior to the start of any Measurement Year and while the outcome is
still uncertain. The Committee may reduce the Bonus payable under the Plan
in any Measurement Year. The Committee reserves the right to terminate the
Plan at any time or to amend the Plan in any respect; provided that no
amendment shall be made which would cause payments pursuant to this Plan
to fail to qualify for the exemption from the limitations of Section
162(m) and Regulation 162(m) of the Code provided by Section 162(m)(4)(C)
of the Code. No Plan amendment or termination will alter the Participant's
right to a Bonus for a Measurement Year already in progress with the
exception of the 1999 Measurement Year. The Plan shall terminate and
become null and void if it is not approved by the Ogden shareholders at
the 1999 Annual Meeting in accordance with the requirements of Section
162(m)(4)(C) and Regulation 162(m)of the Code.
9. MISCELLANEOUS:
(a) The right of the Participant to any payment hereunder shall not be
assigned, transferred, pledged or encumbered.
(b) This Plan and all rights hereunder shall be subject to any and all
governmental laws, regulations and approvals that may exist from
time to time and shall be interpreted in accordance with the laws of
the state of New York.
(c) All payments required to be paid hereunder shall be subject to any
required Federal, state, local and other applicable withholdings or
deductions.
(d) Nothing contained in the Plan shall confer upon the Participant any
right with respect to the continuation of the Participant's
employment by the Company or interfere in any way with the right of
the Company at any time to terminate such employment or to increase
or decrease the base salary of the Participant from the rate in
effect at the commencement of a Measurement Year, except that at no
time shall the Bonus be greater than the Maximum Bonus.
<PAGE>
EXHIBIT 10.4(a)
EMPLOYMENT AGREEMENT
OGDEN CORPORATION (the "Company") and LYNDE H. COIT ("Executive") agree to enter
into this EMPLOYMENT AGREEMENT dated as of March 1, 1999, as follows:
1. Employment.
The Executive is currently employed by the Company pursuant to a letter
employment agreement dated January 30, 1990 which the Company and Executive
hereby terminate and enter into this new agreement on such terms and conditions
as set forth herein.
The Company hereby agrees to employ Executive, and Executive hereby agrees to be
employed by the Company, upon the terms and subject to the conditions set forth
in this Agreement.
2. Employment Term.
The period of Executive's employment under this Agreement shall begin as of
March 1, 1999 (the "Effective Date") and shall continue until terminated in
accordance with Section 5 below (the "Employment Term").
3. Duties and Responsibilities.
(a) The Company will employ Executive as its Senior Vice President and General
Counsel. In such capacity, Executive shall perform the customary duties
and have the customary responsibilities of such position and such other
duties as may be assigned to Executive from time to time by the Company's
President and Chief Executive Officer or by the Company's Board of
Directors (the "Board").
(b) Executive agrees to faithfully serve the Company, devote his full working
time, attention and energies to the business of the Company its
subsidiaries and affiliated entities, and perform the duties under this
Agreement to the best of his abilities. Executive may perform services
without direct compensation therefor in connection with the management of
personal investments, or in connection with charitable or civic
organizations. The Executive shall be excused from rendering his service
during reasonable vacation periods and during other reasonable temporary
absences as may be authorized by the Board of Directors of the Company.
(c) Executive agrees (i) to comply with all applicable laws, rules and
regulations, and all requirements of all applicable regulatory,
self-regulatory, and administrative bodies; (ii) to comply with the
Company's Policy of Business Conduct; and (iii) not to engage in any other
business or employment without the written consent of the Company except
as otherwise specifically provided herein.
<PAGE>
4. Compensation and Benefits.
(a) Base Salary. During the Employment Term, the Company shall pay Executive a
base salary at the annual rate of $290,000 per year or such higher rate as
may be determined from time to time by the Board ("Base Salary"). Such
Base Salary shall be paid in accordance with the Company's standard
payroll practice for senior executives.
(b) Annual Incentive Bonus. During the Employment Term, the Executive will be
eligible for an annual incentive bonus in such amount as may be determined
by the Board.
(c) Expense Reimbursement. The Company shall promptly reimburse Executive for
the ordinary and necessary business expenses incurred by Executive in the
performance of the duties under this Agreement in accordance with the
Company's customary practices applicable to senior executives, provided
that such expenses are incurred and accounted for in accordance with the
Company's policy.
(d) Other Benefit Plans, Fringe Benefits and Vacations. Executive shall be
eligible to participate in or receive benefits under any pension plan,
profit sharing plan, 401(k) plan, non-qualified deferred compensation
plan, medical and dental benefits plan, life insurance plan, short-term
and long-term disability plans, incentive compensation plans, vacations,
or any other fringe benefit plan, generally made available by the Company
to senior executives. Except as otherwise provided in this Agreement, any
such participation shall be in accordance with the provisions of such
plans and nothing contained in this Agreement is intended to, or shall be
deemed to, affect adversely any of Executive's rights as a participant
under any such plans. Nothing herein shall prevent the Board from
modifying or discontinuing any benefit plan on a consistent and
non-discriminatory basis applicable to all such executives.
5. Termination of Employment.
Executive's employment under this Agreement may be terminated under the
following circumstances:
(a) Death. Executive's employment shall terminate upon Executive's death.
(b) Total Disability. The Company may terminate Executive's employment upon
his becoming "Totally Disabled". For purposes of this Agreement, Executive
shall be "Totally Disabled" if he is physically or mentally incapacitated
so as to render him incapable of performing his usual and customary duties
under this Agreement. Executive's receipt of disability benefits under the
Company's long-term disability plan or receipt of Social Security
disability benefits shall be deemed conclusive evidence of Total
Disability for purpose of this Agreement.
(c) Termination by the Company for Cause. The Company may terminate
Executive's employment for "Cause". Such termination shall be effective as
of the date specified in the written Notice of Termination provided to
Executive.
Termination of employment by the Company for Cause shall be deemed
to have occurred only if such termination directly results from: (A)
an act or acts of dishonesty on Executive's part constituting a
felony; (B) Executive's willful and continued failure to devote the
time, attention, and effort necessary to substantially perform his
duties as an executive officer of the Company in a manner consistent
with Executive's past performance (other than any such failure
resulting from Executive's
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incapacity due to physical or mental illness or total disability),
after a demand for substantial performance is delivered to Executive
by the Board which specifically identifies the manner in which the
Board believes that Executive has not substantially performed his
duties and Executive is given a reasonable time after such demand
substantially to perform his duties; (C) gross misconduct or gross
negligence in connection with the business of the Company or an
affiliate which has a material adverse effect on the Company and its
subsidiaries, taken as a whole; or (D) a material breach of any of
the covenants set forth in Section 7 hereof.
(d) Termination by the Company without Cause. The Company may terminate
Executive's employment under this Agreement without Cause thirty (30) days
after providing Notice of Termination to Executive.
(e) Termination by Executive. Executive may terminate his employment under
this Agreement at any time after providing Notice of Termination to the
Company. Such Notice shall state whether the Executive's termination is
for "Good Reason". Termination of employment by Executive for Good Reason
shall be deemed to have occurred, if Executive provides the Notice of
Termination within 60 days after the occurrence of any of the following:
(i) A change in Executive's responsibilities, status, title, or
position, which, in Executive's reasonable judgment, represents a
diminution of Executive's responsibilities, status, title, or
position offices, or any removal of Executive from, or any failure
to re-elect Executive to, any of such titles, offices, or positions,
provided that this clause shall not apply if Executive's employment
is terminated as a result of: (A) Executive's death, (B) Executive's
Total Disability in accordance with Section 5(b), (C) Cause in
accordance with Section 5(c), or (D) Executive's voluntary
termination in accordance with this Section 5(e) other than for Good
Reason.
(ii) A reduction by the Company in Executive's Base Salary.
(iii) The failure by the Company to pay any material amount of current
compensation owing to Executive, or any material amount of
compensation deferred under any plan, agreement or arrangement of or
with the Company owing to Executive, within 20 days after the
Executive makes written demand for such amount.
(iv) The failure by the Company to obtain an assumption (in form and
substance reasonably satisfactory to the Executive, except in the
case of a merger or consolidation which does not constitute a Change
in Control for which no separate assumption is necessary) of the
obligations of the Company under this Agreement by any successor to
the Company.
(v) Any "Change in Control" of the Company as defined in Appendix A to
this Agreement.
(f) Notice of Termination. Any termination of Executive's employment by the
Company or by Executive (other by reason of Executive's death) shall be
communicated by written Notice of Termination to the other party in
accordance with Section 16 below. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice in writing which shall
indicate the specific termination provision in this Agreement relied upon
to terminate Executive's
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employment and shall set forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(g) Termination Date. Termination Date means (i) if Executive's employment is
terminated because of his death, the date of death, or (ii) if employment
is terminated for any other reason, the date specified in the Notice of
Termination.
6. Compensation Following Termination of Employment.
(a) Termination by Reason of Death. In the event that Executive's employment
is terminated by reason of Executive's death, the Company shall pay the
following amounts to Executive's beneficiary or estate:
(i) Earned But Unpaid Compensation. Any accrued but unpaid Base
Salary for services rendered to the date of death, any accrued but
unpaid expenses required to be reimbursed under this Agreement and
any vacation accrued to the date of death.
(ii) Lump Sum Payment. An amount equal to the Base Salary (at the
rate in effect as of the date of Executive's death) which would have
been payable to Executive if Executive had continued in employment
until the last day of the month in which Executive's death occurs.
Such amount shall be paid in a single lump sum cash payment within
30 days after Executive's death.
(iii) Other Benefits. Any benefits to which Executive may be
entitled pursuant to the plans, policies and arrangements referred
to in Section 4(d) hereof as determined and paid in accordance with
the terms of such plans, policies and arrangements.
(b) Termination by Reason of Total Disability. In the event that Executive's
employment is terminated by reason of Executive's Total Disability prior
to the last day of the Employment Term as determined in accordance with
Section 5(b), the Company shall pay the following amounts to Executive:
(i) Earned But Unpaid Compensation. Any accrued but unpaid Base
Salary for services rendered to Executive's Termination Date, any
accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the Termination Date.
(ii) Continuation of Base Salary. An amount equal to (A) the Base
Salary (at the rate in effect as of the date of Executive's Total
Disability) which would have been payable to Executive if Executive
had continued in active employment until the end of the 12-month
period following Executive's Termination Date, or such longer period
as may be determined by the Board, (B) reduced by amount of
disability insurance benefits payable to Executive during such
period under any employer-paid disability insurance plan. Payment
shall be made at the same time and in the same manner as such
compensation would have been paid if Executive had remained in
active employment until the end of such period.
(iii) Other Benefits. Any benefits to which Executive may be
entitled pursuant to the plans, policies and arrangements referred
to in Section 4(d) hereof shall be
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determined and paid in accordance with the terms of such plans,
policies and arrangements.
(c) Termination for Cause or Termination By Executive for Other Than Good
Reason. In the event that Executive's employment is terminated by the
Company for Cause pursuant to Section 5(c), or by Executive pursuant to
Section 5(e) for other than Good Reason, the Company shall pay the
following amounts to Executive:
(i) Earned But Unpaid Compensation. Any accrued but unpaid Base
Salary for services rendered to Executive's Termination Date, any
accrued but unpaid expenses required to be reimbursed under this
Agreement and any vacation accrued to Executive's Termination Date.
(ii) Other Benefits. Any benefits to which Executive may be entitled
pursuant to the plans, policies and arrangements referred to in
Section 4(d) hereof shall be determined and paid in accordance with
the terms of such plans, policies and arrangements.
(d) Termination By the Company Without Cause or Termination by Executive for
Good Reason. Executive shall be entitled to the benefits described in this
Section 6(d) in the event that Executive's employment is terminated (i) by
the Company pursuant to Section 5(d) for reasons other than death, Total
Disability, or Cause, or (ii) by Executive for Good Reason pursuant to
Section 5(e).
(i) Earned But Unpaid Compensation. The Company shall pay Executive
any accrued but unpaid Base Salary for services rendered to
Executive's Termination Date, any accrued but unpaid expenses
required to be reimbursed under this Agreement and any vacation
accrued to Executive's Termination Date.
(ii) Lump Sum Payment. The Company shall pay Executive an amount
equal to the product of five times the sum of (A) and (B) below:
(A) Executive's annualized Base Salary at the highest
annual rate in effect at any time prior to the Termination
Date; and
(B) the highest amount of annual bonus payable to
Executive at any time prior to the Executive's Termination
Date.
This amount will be paid to Executive in a single lump sum
within 30 business days after the Termination Date.
(iii) Other Benefits. Any benefits to which Executive may be
entitled pursuant to the plans, policies and arrangements referred
to in Section 4(d) hereof shall be determined and paid in accordance
with the terms of such plans, policies and arrangements.
(iv) No Mitigation Required. Executive shall not be required to
mitigate the amount of any compensation provided for under this
Section 6(d) by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this
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Agreement be reduced by any compensation earned by the Employee as
the result of employment with another employer after the Termination
Date or by any other compensation.
(v) Non-Competition Covenant Does Not Apply. The restrictive
covenant prohibiting competitive activity set forth in Section 7(b)
below shall not be applicable to Executive and shall be null and
void.
(e) No Other Benefits or Compensation. Except as may be provided under this
Agreement, under the terms of any incentive compensation, employee
benefit, or fringe benefit plan, applicable to Executive at the time of
Executive's termination or resignation of employment, Executive shall have
no right to receive any other compensation, or to participate in any other
plan, arrangement or benefit, with respect to future periods after such
termination or resignation.
7. Restrictive Covenants.
(a) Protected Information. Executive recognizes and acknowledges that he will
have access to various confidential or proprietary information concerning
the Company and entities affiliated with the Company of a special and
unique value which may include, without limitation, (i) books and records
relating to operations, finance, accounting, sales, personnel and
management, (ii) policies and matters relating particularly to operations
such as customer service requirements, costs of providing service and
equipment, operating costs and pricing matters, and (iii) various trade or
business secrets, including business opportunities, marketing or business
diversification plans, business development and bidding techniques,
methods and processes, financial data and the like (collectively, the
"Protected Information"). Executive therefore covenants and agrees that he
will not at any time, either while employed by the Company or afterwards,
knowingly make any independent use of, or knowingly disclose to any other
person or organization (except as authorized by the Company) any of the
Protected Information.
(b) Competitive Activity. Executive covenants and agrees that at all times
during his period of employment with the Company, and for a period of two
(2) years after the date of termination of his employment by reason of (i)
termination by the Company for Cause in accordance with Section 5(c)
above, or (ii) termination by the Executive in accordance with Section
5(e) above for other than Good Reason, he will not, directly or
indirectly, engage in, assist, or have any active interest or involvement
whether as an employee, agent, consultant, creditor, advisor, officer,
director, stockholder (excluding holding of less than 1% of the stock of a
public company), partner, proprietor or any type of principal whatsoever,
in any person, firm, or business entity which is engaged in the same
business as that conducted and principally carried on by the Company on
the Date of Termination and continued thereafter, without the Company's
specific written consent to do so.
(c) Return of Documents and Other Materials. Executive shall promptly deliver
to the Company, upon termination of his employment, or at any other time
as the Company may so request, all customer lists, leads and refunds, data
processing programs and documentation, employee information, memoranda,
notes, records, reports, tapes, manuals, drawings, blueprints, programs,
and any other documents and other materials (and all copies thereof)
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relating to the Company's business or that of its customers, and all
property associated therewith, which Executive may then possess or have
under his control.
8. Enforcement of Covenants.
(a) Right to Injunction. Executive acknowledges that a breach of the covenants
set forth in Section 7 hereof will cause irreparable damage to the Company
with respect to which the Company's remedy at law for damages will be
inadequate. Therefore, in the event of breach or anticipatory breach of
the covenants set forth in this section by Executive, Executive and the
Company agree that the Company shall be entitled to the following
particular forms of relief, in addition to remedies otherwise available to
it at law or equity, injunctions, both preliminary and permanent,
enjoining or retraining such breach or anticipatory breach and Executive
hereby consents to the issuance thereof forthwith and without bond by any
court of competent jurisdiction.
(b) Separability of Covenants. The covenants contained in Section 7 hereof
constitute a series of separate covenants, one for each applicable State
in the United States and the District of Columbia, and one for each
applicable foreign country. If in any judicial proceeding, a court shall
hold that any of the covenants set forth in Section 7 exceed the time,
geographic, or occupational limitations permitted by applicable laws,
Executive and the Company agree that such provisions shall and are hereby
reformed to the maximum time, geographic, or occupational limitations
permitted by such laws. Further, in the event a court shall hold
unenforceable any of the separate covenants deemed included herein, then
such unenforceable covenant or covenants shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced
in such proceeding. Executive and the Company further agree that the
covenants in Section 7 shall each be construed as a separate agreement
independent of any other provisions of this Agreement, and the existence
of any claim or cause of action by Executive against the Company whether
predicated on this Agreement or otherwise, shall not constitute a defense
to the enforcement by the Company of any of the covenants of Section 7.
9. Certain Proprietary Rights.
Executive agrees to and hereby does assign to the Company all his right, title
and interest in and to all inventions, whether or not patentable, which are made
or conceived solely or jointly by him:
(a) at any time during the term of his employment by the Company in an
executive, managerial, or planning capacity (including development and
sales); or
(b) during the course of or in connection with his duties during the
Employment Term; or
(c) with the use of time or materials of the Company.
Executive agrees to communicate to the Company or its representatives all facts
known to him concerning such inventions, to sign all rightful papers, make all
rightful oaths and generally to do everything possible to aid the Company in
obtaining and enforcing proper patent protection for all such inventions in all
countries and in vesting title to such inventions in all countries and in
vesting title to such inventions and patents in the Company. For the purpose of
this Agreement, the subject matter of any application for patent naming Employee
as a sole or joint inventor filed during the course of
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employment or within one year subsequent to the termination thereof shall be
deemed to be an invention made or conceived by him during the course of his
employment by the Company and assignable to the Company hereunder, unless
Executive establishes by a preponderance of the evidence that such invention was
made or conceived by him subsequent to termination of his employment hereunder.
At the Company's request (during or after the term of this Agreement) and
expense, Executive will promptly execute a specific assignment of title to the
Company, and perform any other acts reasonably necessary to implement the
foregoing assignment.
10. Withholding of Taxes.
The Company shall withhold from any compensation and benefits payable under this
Agreement all applicable federal, state, local, or other taxes.
11. Source of Payments.
All payments provided under this Agreement, other than payments made pursuant to
a plan which provides otherwise, shall be paid from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. Executive shall have no right,
title or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations under this Agreement. To the
extent that any person acquires a right to receive payments from the Company
under this Agreement, such right shall be no greater than the right of an
unsecured creditor of the Company and its affiliates.
12. Successor and Binding Agreement.
(a) Company Successor. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to Executive, expressly to assume and
agree to perform this Agreement in the same manner and to the same extent
as the Company would be required to perform it if no such succession had
taken place. Failure of the Company to obtain such agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle Executive to compensation from the Company in the same
amount and on the same terms as Executive would be entitled to under this
Agreement if Executive had given Notice of Termination for Good Reason as
of the day immediately before such succession became effective and had
specified that day in the notice of termination. As used in this
Agreement, "Company" shall mean the Company as defined in the first
sentence of this Agreement and any successor to all or substantially all
its business or assets or which otherwise becomes bound by all the terms
and provisions of this Agreement, whether by the terms hereof, by
operation of law or otherwise.
(b) Executive's Successor. This Agreement shall inure to the benefit of and be
enforceable by Executive and his personal or legal representatives and
successors in interest under this Agreement.
(c) Facility of Payment. In the event of Executive's legal incapacity, the
Company may make any payments due under this Agreement to his legal
representative. In the event of Executive's death, the Company may make
any payment due under this Agreement to his surviving spouse or, if none,
to Executive's estate. Any payment made in accordance with this provision
fully discharges the obligation of the Company therefor.
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13. Assignment by Executive.
The rights and benefits of Executive 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
Section 13 shall preclude Executive from designating a beneficiary or
beneficiaries to receive any benefit payable on his death. In the event of a
dispute arising under this Agreement, the Company agrees to pay any and all
reasonable legal fees incurred by Executive in connection therewith.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York applicable to agreements made and to be performed in that
State, without regard to its conflict of laws provisions.
15. Notices.
Any notice, consent, request or other communication made or given in connection
with this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by registered or certified mail, return receipt
requested, or by facsimile or by hand delivery, to those listed below at their
following respective addresses or at such other address as each may specify by
notice to the others:
To the Company:
Ogden Corporation
Two Pennsylvania Plaza
New York, New York 10121
Attention: President and Chief Executive Officer
To Executive:
Lynde H. Coit
66 Winthrop Drive
Riverside, CT 06878
16. Miscellaneous.
(a) Waiver. The failure of a party to insist upon strict adherence to any term
of this Agreement on any occasion shall not be considered a waiver thereof
or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(b) Separability. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot
be modified to be enforceable, such term or provision shall immediately
become null and void, leaving the remainder of this Agreement in full
force and effect.
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(c) Headings. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this Agreement.
(d) Rules of Construction. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
and such counterparts will together constitute but one Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year set forth below.
OGDEN CORPORATION EXECUTIVE
By /s/ R. Richard Ablon By /s/ Lynde H. Coit
------------------------------- -------------------------
R. Richard Ablon, Lynde H. Coit
President, Chief Executive
Officer and Chairman of
the Board
Date: March 9 , 1999 Date: March 9, 1999
------------------------------- -------------------
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APPENDIX A
DEFINITION OF CHANGE IN CONTROL
The following definition of "Change in Control" shall apply for purposes of
Paragraph 5(e)(v) of the Employment Agreement between Ogden Corporation and
Lynde H. Coit.
Change in Control. A "Change in Control" of the Company shall be deemed to have
occurred as of the first day any one or more of the following conditions shall
have been satisfied:
(a) Any person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned
directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company), becomes
the beneficial owner, directly or indirectly, of securities of the
Company, representing more than twenty-five percent (25%) of the combined
voting power of the Company's then outstanding securities;
(b) Individuals who, as of May 20, 1998, constitute the Board of Directors of
the Company (the " Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to May 20, 1998, whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's assets; or (iii) a
merger, consolidation, or reorganization of the Company with or involving
any other corporation, limited liability entity or similar person, other
than a merger, consolidation, or reorganization that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least
seventy-five percent (75%) of the combined voting power of the voting
securities of the Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or reorganization.
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EXHIBIT 10.4(m)
EMPLOYMENT AGREEMENT
OGDEN CORPORATION (the "Company") and RAYMOND E. DOMBROWSKI, JR. ("Executive")
agree to enter into this EMPLOYMENT AGREEMENT dated as of September 21, 1998, as
follows:
1. Employment.
The Company hereby agrees to employ Executive, and Executive hereby agrees to be
employed by the Company, upon the terms and subject to the conditions set forth
in this Agreement.
2. Employment Term.
The period of Executive's employment under this Agreement shall begin as of
September 21, 1998 (the "Effective Date") and shall continue until terminated in
accordance with Section 5 below (the "Employment Term").
3. Duties and Responsibilities.
(a) The Company will employ Executive as its Senior Vice President and Chief
Financial Officer. In such capacity, Executive shall perform the customary
duties and have the customary responsibilities of such position and such
other duties as may be assigned to Executive from time to time by the
Company's Chief Executive Officer or by the Company's Board of Directors
(the "Board").
(b) Executive agrees to faithfully serve the Company, devote his full working
time, attention and energies to the business of the Company its
subsidiaries and affiliated entities, and perform the duties under this
Agreement to the best of his abilities. Executive may perform services
without direct compensation therefor in connection with the management of
personal investments, legal services for family and friends which do not
detract from the performance of duties hereunder or in connection with
charitable or civic organizations. The Executive shall be excused from
rendering his service during reasonable vacation periods and during other
reasonable temporary absences as may be authorized by the Board of
Directors of the Company.
(c) Executive agrees (i) to comply with all applicable laws, rules and
regulations, and all requirements of all applicable regulatory,
self-regulatory, and administrative bodies; (ii) to comply with the
Company's Policy of Business Conduct; and (iii) not to engage in any other
business or employment without the written consent of the Company except
as otherwise specifically provided herein.
4. Compensation and Benefits.
(a) Signing Bonus. The Company shall pay the Executive a signing bonus
("Signing Bonus") in the amount of $50,000 as soon as practicable
following the execution of this Agreement, but in no event sooner than
thirty (30) days thereafter. In the event that the Executive's employment
<PAGE>
with the Company is either terminated by the Company for Cause pursuant to
Section 5(c) or by the Executive pursuant to Section 5(e) for other than
Good Reason prior to September 21, 1999, the Signing Bonus shall be repaid
by the Executive to the Company.
(b) Base Salary. During the Employment Term, the Company shall pay Executive a
base salary at the annual rate of $300,000 per year or such higher rate as
may be determined from time to time by the Board ("Base Salary"). Such
Base Salary shall be paid in accordance with the Company's standard
payroll practice for senior executives.
(c) Annual Incentive Bonus. During the Employment Term, the Executive will be
eligible for an annual incentive bonus in such amount as may be determined
by the Board, provided that Executive's target incentive bonus for 1998
will be $220,000 and the minimum bonus payable to Executive for 1998 will
be at least $110,000. The actual amount of the bonus will be calculated
based on the Company's financial performance and Executive's achievement
of pre-determined goals.
(d) Initial Stock Option Grant. Executive will be granted options to purchase
50,000 shares of Ogden common stock pursuant to the Ogden Stock Option
Plan. During the Employment Term, Executive also will be considered for
the grant of additional stock options from year-to-year as determined by
the Board.
(e) Expense Reimbursement. The Company shall promptly reimburse Executive for
the ordinary and necessary business expenses incurred by Executive in the
performance of the duties under this Agreement in accordance with the
Company's customary practices applicable to senior executives, provided
that such expenses are incurred and accounted for in accordance with the
Company's policy.
(f) Other Benefit Plans, Fringe Benefits and Vacations. Executive shall be
eligible to participate in or receive benefits under any pension plan,
profit sharing plan, 401(k) plan, non-qualified deferred compensation
plan, supplemental executive retirement plan, medical and dental benefits
plan, life insurance plan, short-term and long-term disability plans,
incentive compensation plans, vacations, or any other fringe benefit plan,
generally made available by the Company to senior executives. Except as
otherwise provided in this Agreement, any such participation shall be in
accordance with the provisions of such plans and nothing contained in this
Agreement is intended to, or shall be deemed to, affect adversely any of
Executive's rights as a participant under any such plans. Nothing herein
shall prevent the Board from (i) paying a bonus to Executive under any
incentive plan which it adopts and in which the other executives
participate or (ii) modifying or discontinuing any benefit plan on a
consistent and non-discriminatory basis applicable to all such executives.
(g) New York City Apartment. The Company will provide Executive (on an
after-tax basis) with access to a company-provided apartment located near
the Company's principal place of business in New York City selected by
mutual agreement of the parties during the Employment Term.
5. Termination of Employment.
Executive's employment under this Agreement may be terminated under the
following circumstances:
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(a) Death. Executive's employment shall terminate upon Executive's death.
(b) Total Disability. The Company may terminate Executive's employment upon
his becoming "Totally Disabled". For purposes of this Agreement, Executive
shall be "Totally Disabled" if he is physically or mentally incapacitated
so as to render him incapable of performing his usual and customary duties
under this Agreement. Executive's receipt of disability benefits under the
Company's long-term disability plan or receipt of Social Security
disability benefits shall be deemed conclusive evidence of Total
Disability for purpose of this Agreement.
(c) Termination by the Company for Cause. The Company may terminate
Executive's employment for "Cause". Such termination shall be effective as
of the date specified in the written Notice of Termination provided to
Executive.
(i) Termination of employment by the Company for Cause shall be deemed
to have occurred only if such termination directly results from: (A)
an act or acts of dishonesty on Executive's part constituting a
felony; (B) Executive's willful and continued failure to devote the
time, attention, and effort necessary to substantially perform his
duties as an executive officer of the Company in a manner consistent
with Executive's past performance (other than any such failure
resulting from Executive's incapacity due to physical or mental
illness or total disability), after a demand for substantial
performance is delivered to Executive by the Board which
specifically identifies the manner in which the Board believes that
Executive has not substantially performed his duties and Executive
is given a reasonable time after such demand substantially to
perform his duties; (C) gross misconduct or gross negligence in
connection with the business of the Company or an affiliate which
has a material adverse effect on the Company and its subsidiaries,
taken as a whole; or (D) a material breach of any of the covenants
set forth in Section 7 hereof.
(ii) Executive's employment shall in no event be considered to have been
terminated by the Company for Cause if the act or failure to act
upon which such termination is based: (A) was done or omitted to be
done as a result of bad judgment or negligence on Executive's part,
or without intent of gaining therefrom directly or indirectly a
profit to which Executive was not legally entitled, or as a result
of Executive's good faith belief that such act or failure to act,
was, and is, not opposed to the interests of the Company; or (B) is
an act or failure to act in respect of which Executive meets the
applicable standard of conduct prescribed for indemnification or
reimbursement or payment of expenses under the By-laws of the
Company or the laws of the state of its incorporation or the
liability insurance covering directors and officers of the Company,
in each case as in effect at the time of such act or failure to act.
(d) Termination by the Company without Cause. The Company may terminate
Executive's employment under this Agreement without Cause thirty (30) days
after providing Notice of Termination to Executive.
(e) Termination by Executive. Executive may terminate his employment under
this Agreement at any time after providing Notice of Termination to the
Company. Such Notice shall state whether the Executive's termination is
for "Good Reason". Termination of employment by Executive for Good Reason
shall be deemed to have occurred, if Executive provides the Notice of
Termination within 60 days after the occurrence of any of the following:
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(i) A change in Executive's responsibilities, status, title, or
position, which, in Executive's reasonable judgment, represents a
diminution of Executive's responsibilities, status, title, or
position offices, or any removal of Executive from, or any failure
to re-elect Executive to, any of such titles, offices, or positions,
provided that this clause shall not apply if Executive's employment
is terminated as a result of: (A) Executive's death, (B) Executive's
Total Disability in accordance with Section 5(b), (C) Cause in
accordance with Section 5(c), or (D) Executive's voluntary
termination in accordance with this Section 5(e) other than for Good
Reason.
(ii) A reduction by the Company in Executive's Base Salary.
(iii) The failure of the Company substantially to maintain and to continue
Executive's participation in the Company's benefit plans (other than
those plans or improvements that have expired thereafter in
accordance with their original terms), or the taking of any action
which would materially reduce Executive's benefits under any of such
plans or deprive Executive of any material fringe benefit enjoyed by
him.
(iv) The failure by the Company to pay any material amount of
current compensation owing to Executive, or any material amount of
compensation deferred under any plan, agreement or arrangement of or
with the Company owing to Executive, within 20 days after the
Executive makes written demand for such amount.
(v) The failure by the Company to obtain an assumption (in form and
substance reasonably satisfactory to the Executive, except in the
case of a merger or consolidation which does not constitute a Change
in Control for which no separate assumption is necessary) of the
obligations of the Company under this Agreement by any successor to
the Company.
(vi) Any purported termination of Executive's employment which is
not effected pursuant to a Notice of Termination, and for purposes
of this Agreement, no such purported termination shall be effective.
(vii) Any "Change in Control" of the Company as defined in Appendix
A to this Agreement.
(f) Notice of Termination. Any termination of Executive's employment by the
Company or by Executive (other by reason of Executive's death) shall be
communicated by written Notice of Termination to the other party in
accordance with Section 16 below. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice in writing which shall
indicate the specific termination provision in this Agreement relied upon
to terminate Executive's employment and shall set forth in reasonable
detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(g) Termination Date. Termination Date means (i) if Executive's employment is
terminated because of his death, the date of death, or (ii) if employment
is terminated for any other reason, the date specified in the Notice of
Termination.
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6. Compensation Following Termination of Employment.
(a) Termination by Reason of Death. In the event that Executive's employment
is terminated by reason of Executive's death, the Company shall pay the
following amounts to Executive's beneficiary or estate:
(i) Earned But Unpaid Compensation. Any accrued but unpaid Base
Salary for services rendered to the date of death, any accrued but
unpaid expenses required to be reimbursed under this Agreement and
any vacation accrued to the date of death.
(ii) Lump Sum Payment. An amount equal to the Base Salary (at the
rate in effect as of the date of Executive's death) which would have
been payable to Executive if Executive had continued in employment
until the last day of the month in which Executive's death occurs.
Such amount shall be paid in a single lump sum cash payment within
30 days after Executive's death.
(iii) Other Benefits. Any benefits to which Executive may be
entitled pursuant to the plans, policies and arrangements referred
to in Section 4(f) hereof as determined and paid in accordance with
the terms of such plans, policies and arrangements.
(b) Termination by Reason of Total Disability. In the event that Executive's
employment is terminated by reason of Executive's Total Disability prior
to the last day of the Employment Term as determined in accordance with
Section 5(b), the Company shall pay the following amounts to Executive:
(i) Earned But Unpaid Compensation. Any accrued but unpaid Base
Salary for services rendered to Executive's Termination Date, any
accrued but unpaid expenses required to be reimbursed under this
Agreement, any vacation accrued to the Termination Date.
(ii) Continuation of Base Salary. An amount equal to (A) the Base
Salary (at the rate in effect as of the date of Executive's Total
Disability) which would have been payable to Executive if Executive
had continued in active employment until the end of the 12-month
period following Executive's Termination Date, or such longer period
as may be determined by the Board, (B) reduced by amount of
disability insurance benefits payable to Executive during such
period under any employer-paid disability insurance plan. Payment
shall be made at the same time and in the same manner as such
compensation would have been paid if Executive had remained in
active employment until the end of such period.
(iii) Other Benefits. Any benefits to which Executive may be
entitled pursuant to the plans, policies and arrangements referred
to in Section 4(f) hereof shall be determined and paid in accordance
with the terms of such plans, policies and arrangements.
(c) Termination for Cause or Termination By Executive for Other Than Good
Reason. In the event that Executive's employment is terminated by the
Company for Cause pursuant to Section 5(c), or by Executive pursuant to
Section 5(e) for other than Good Reason, the Company shall pay the
following amounts to Executive:
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(i) Earned But Unpaid Compensation. Any accrued but unpaid Base
Salary for services rendered to Executive's Termination Date, any
accrued but unpaid expenses required to be reimbursed under this
Agreement and any vacation accrued to Executive's Termination Date.
(ii) Other Benefits. Any benefits to which Executive may be entitled
pursuant to the plans, policies and arrangements referred to in
Section 4(f) hereof shall be determined and paid in accordance with
the terms of such plans, policies and arrangements.
(d) Termination By the Company Without Cause or Termination by Executive for
Good Reason. Executive shall be entitled to the benefits described in this
Section 6(d) in the event that Executive's employment is terminated (i) by
the Company pursuant to Section 5(d) for reasons other than death, Total
Disability, or Cause, or (ii) by Executive for Good Reason pursuant to
Section 5(e).
(i) Earned But Unpaid Compensation. The Company shall pay Executive
any accrued but unpaid Base Salary for services rendered to
Executive's Termination Date, any accrued but unpaid expenses
required to be reimbursed under this Agreement and any vacation
accrued to Executive's Termination Date.
(ii) Lump Sum Payment. The Company shall pay Executive an amount
equal to the product of five times the sum of (A) and (B) below:
(A) Executive's annualized Base Salary at the highest
annual rate in effect at any time prior to the Termination
Date; and
(B) the amount of annual bonus payable to Executive for
the calendar year ending immediately prior to the calendar
year in which the Termination Date occurs.
This amount will be paid to Executive in a single lump sum
within 30 business days after the Termination Date.
(iii) Gross-Up Payment. In the event that any portion of the
benefits payable under this Section 6(d) and any other payments and
benefits under any other agreement with or plan of the Company (in
the aggregate, "Total Payments") constitute an "excess parachute
payment" within the meaning of Section 280G of the Internal Revenue
Code (the "Code"), then the Company shall pay Executive as promptly
as practicable following such determination an additional amount
(the "Gross-up Payment") calculated as described below to reimburse
Executive on an after tax basis for any excise tax imposed on such
payments under Section 4999 of the Code. The Gross-up Payment shall
equal the amount, if any, needed to ensure that the net parachute
payments (including the Gross-up Payment) actually received by
Executive after the imposition of federal and state income and
excise taxes (including any interest or penalties imposed by the
Internal Revenue Service), is equal to the amount that Executive
would have netted after the imposition of federal and state income
taxes had the Total Payments not been subject to the taxes imposed
by Section 4999. For purposes of this calculation, it shall be
assumed that Executive's tax rate will be the
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maximum marginal federal and state income tax rate on earned income,
with such maximum federal rate to be computed with regard to Section
1(a) of the Code.
In the event that Executive and the Company are unable to
agree as to the amount of the Gross-up Payment, if any, Executive
shall select a law firm or accounting firm from among those
regularly consulted (during the 12-month period immediately prior to
the Termination Date) by the Company regarding federal income tax
matters and such law firm or accounting firm shall determine the
amount of Gross-up Payment and such determination shall be final and
binding upon Executive and the Company.
(iv) Other Benefits. Any benefits to which Executive may be entitled
pursuant to the plans, policies and arrangements referred to in
Section 4(f) hereof shall be determined and paid in accordance with
the terms of such plans, policies and arrangements.
(v) No Mitigation Required. Executive shall not be required to
mitigate the amount of any compensation provided for under this
Section 6(d) by seeking other employment or otherwise, nor shall the
amount of any payment provided for under this Agreement be reduced
by any compensation earned by the Employee as the result of
employment with another employer after the Termination Date or by
any other compensation.
(vi) Non-Competition Covenant Does Not Apply. The restrictive
covenant prohibiting competitive activity set forth in Section 7(b)
below shall not be applicable to Executive and shall be null and
void.
(e) No Other Benefits or Compensation. Except as may be provided under this
Agreement, under the terms of any incentive compensation, employee
benefit, or fringe benefit plan, applicable to Executive at the time of
Executive's termination or resignation of employment, Executive shall have
no right to receive any other compensation, or to participate in any other
plan, arrangement or benefit, with respect to future periods after such
termination or resignation.
7. Restrictive Covenants.
(a) Protected Information. Executive recognizes and acknowledges that he will
have access to various confidential or proprietary information concerning
the Company and entities affiliated with the Company of a special and
unique value which may include, without limitation, (i) books and records
relating to operations, finance, accounting, sales, personnel and
management, (ii) policies and matters relating particularly to operations
such as customer service requirements, costs of providing service and
equipment, operating costs and pricing matters, and (iii) various trade or
business secrets, including business opportunities, marketing or business
diversification plans, business development and bidding techniques,
methods and processes, financial data and the like (collectively, the
"Protected Information"). Executive therefore covenants and agrees that he
will not at any time, either while employed by the Company or afterwards,
knowingly make any independent use of, or knowingly disclose to any
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other person or organization (except as authorized by the Company) any of
the Protected Information.
(b) Competitive Activity. Executive covenants and agrees that at all times
during his period of employment with the Company, and for a period of two
(2) years after the date of termination of his employment by reason of (i)
termination by the Company for Cause in accordance with Section 5(c)
above, or (ii) termination by the Executive in accordance with Section
5(e) above for other than Good Reason, he will not, directly or
indirectly, engage in, assist, or have any active interest or involvement
whether as an employee, agent, consultant, creditor, advisor, officer,
director, stockholder (excluding holding of less than 1% of the stock of a
public company), partner, proprietor or any type of principal whatsoever,
in any person, firm, or business entity which is engaged in the same
business as that conducted and principally carried on by the Company on
the Date of Termination and continued thereafter, without the Company's
specific written consent to do so.
(c) Return of Documents and Other Materials. Executive shall promptly deliver
to the Company, upon termination of his employment, or at any other time
as the Company may so request, all customer lists, leads and refunds, data
processing programs and documentation, employee information, memoranda,
notes, records, reports, tapes, manuals, drawings, blueprints, programs,
and any other documents and other materials (and all copies thereof)
relating to the Company's business or that of its customers, and all
property associated therewith, which Executive may then possess or have
under his control.
8. Enforcement of Covenants.
(a) Right to Injunction. Executive acknowledges that a breach of the covenants
set forth in Section 7 hereof will cause irreparable damage to the Company
with respect to which the Company's remedy at law for damages will be
inadequate. Therefore, in the event of breach or anticipatory breach of
the covenants set forth in this section by Executive, Executive and the
Company agree that the Company shall be entitled to the following
particular forms of relief, in addition to remedies otherwise available to
it at law or equity, injunctions, both preliminary and permanent,
enjoining or retraining such breach or anticipatory breach and Executive
hereby consents to the issuance thereof forthwith and without bond by any
court of competent jurisdiction.
(b) Separability of Covenants. The covenants contained in Section 7 hereof
constitute a series of separate covenants, one for each applicable State
in the United States and the District of Columbia, and one for each
applicable foreign country. If in any judicial proceeding, a court shall
hold that any of the covenants set forth in Section 7 exceed the time,
geographic, or occupational limitations permitted by applicable laws,
Executive and the Company agree that such provisions shall and are hereby
reformed to the maximum time, geographic, or occupational limitations
permitted by such laws. Further, in the event a court shall hold
unenforceable any of the separate covenants deemed included herein, then
such unenforceable covenant or covenants shall be deemed eliminated from
the provisions of this Agreement for the purpose of such proceeding to the
extent necessary to permit the remaining separate covenants to be enforced
in such proceeding. Executive and the Company further agree that the
covenants in Section 7 shall each be construed as a separate agreement
independent of any other provisions of this Agreement, and the existence
of any claim or cause of action by
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Executive against the Company whether predicated on this Agreement or
otherwise, shall not constitute a defense to the enforcement by the
Company of any of the covenants of Section 7.
9. Certain Proprietary Rights.
Executive agrees to and hereby does assign to the Company all his right, title
and interest in and to all inventions, whether or not patentable, which are made
or conceived solely or jointly by him:
(a) at any time during the term of his employment by the Company in an
executive, managerial, or planning capacity (including development and
sales); or
(b) during the course of or in connection with his duties during the
Employment Term; or
(c) with the use of time or materials of the Company.
Executive agrees to communicate to the Company or its representatives all facts
known to him concerning such inventions, to sign all rightful papers, make all
rightful oaths and generally to do everything possible to aid the Company in
obtaining and enforcing proper patent protection for all such inventions in all
countries and in vesting title to such inventions in all countries and in
vesting title to such inventions and patents in the Company. For the purpose of
this Agreement, the subject matter of any application for patent naming Employee
as a sole or joint inventor filed during the course of employment or within one
year subsequent to the termination thereof shall be deemed to be an invention
made or conceived by him during the course of his employment by the Company and
assignable to the Company hereunder, unless Executive establishes by a
preponderance of the evidence that such invention was made or conceived by him
subsequent to termination of his employment hereunder. At the Company's request
(during or after the term of this Agreement) and expense, Executive will
promptly execute a specific assignment of title to the Company, and perform any
other acts reasonably necessary to implement the foregoing assignment.
10. Withholding of Taxes.
The Company shall withhold from any compensation and benefits payable under this
Agreement all applicable federal, state, local, or other taxes.
11. Source of Payments.
All payments provided under this Agreement, other than payments made pursuant to
a plan which provides otherwise, shall be paid from the general funds of the
Company, and no special or separate fund shall be established, and no other
segregation of assets made, to assure payment. Executive shall have no right,
title or interest whatever in or to any investments which the Company may make
to aid the Company in meeting its obligations under this Agreement. To the
extent that any person acquires a right to receive payments from the Company
under this Agreement, such right shall be no greater than the right of an
unsecured creditor of the Company and its affiliates.
12. Successor and Binding Agreement.
(a) Company Successor. The Company shall require any successor (whether direct
or indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to Executive,
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<PAGE>
expressly to assume and agree to perform this Agreement in the same manner
and to the same extent as the Company would be required to perform it if
no such succession had taken place. Failure of the Company to obtain such
agreement prior to the effectiveness of any such succession shall be a
breach of this Agreement and shall entitle Executive to compensation from
the Company in the same amount and on the same terms as Executive would be
entitled to under this Agreement if Executive had given Notice of
Termination for Good Reason as of the day immediately before such
succession became effective and had specified that day in the notice of
termination. As used in this Agreement, "Company" shall mean the Company
as defined in the first sentence of this Agreement and any successor to
all or substantially all its business or assets or which otherwise becomes
bound by all the terms and provisions of this Agreement, whether by the
terms hereof, by operation of law or otherwise.
(b) Executive's Successor. This Agreement shall inure to the benefit of and be
enforceable by Executive and his personal or legal representatives and
successors in interest under this Agreement.
(c) Facility of Payment. In the event of Executive's legal incapacity, the
Company may make any payments due under this Agreement to his legal
representative. In the event of Executive's death, the Company may make
any payment due under this Agreement to his surviving spouse or, if none,
to Executive's estate. Any payment made in accordance with this provision
fully discharges the obligation of the Company therefor.
13. Assignment by Executive.
The rights and benefits of Executive 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
Section 13 shall preclude Executive from designating a beneficiary or
beneficiaries to receive any benefit payable on his death. In the event of a
dispute arising under this Agreement, the Company agrees to pay any and all
reasonable legal fees incurred by Executive in connection therewith.
14. Governing Law.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York applicable to agreements made and to be performed in that
State, without regard to its conflict of laws provisions.
15. Notices.
Any notice, consent, request or other communication made or given in connection
with this Agreement shall be in writing and shall be deemed to have been duly
given when delivered or mailed by registered or certified mail, return receipt
requested, or by facsimile or by hand delivery, to those listed below at their
following respective addresses or at such other address as each may specify by
notice to the others:
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To the Company:
Ogden Corporation
Two Pennsylvania Plaza
New York, New York 10121
Attention: General Counsel
To Executive:
Raymond E. Dombrowski, Jr.
120 Glenwood Road
Haddonfield, New Jersey 08033
16. Miscellaneous.
(a) Waiver. The failure of a party to insist upon strict adherence to any term
of this Agreement on any occasion shall not be considered a waiver thereof
or deprive that party of the right thereafter to insist upon strict
adherence to that term or any other term of this Agreement.
(b) Separability. If any term or provision of this Agreement is declared
illegal or unenforceable by any court of competent jurisdiction and cannot
be modified to be enforceable, such term or provision shall immediately
become null and void, leaving the remainder of this Agreement in full
force and effect.
(c) Headings. Section headings are used herein for convenience of reference
only and shall not affect the meaning of any provision of this Agreement.
(d) Rules of Construction. Whenever the context so requires, the use of the
singular shall be deemed to include the plural and vice versa.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original,
and such counterparts will together constitute but one Agreement.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the day and year set forth below.
OGDEN CORPORATION EXECUTIVE
By: /s/ Alane G. Baranello /s/ Raymond E. Dombrowski, Jr.
------------------------------- -----------------------------------
Alane G. Baranello Raymond E. Dombrowski, Jr.
Vice President
Human Resources
Date: August 28, 1998 Date: August 28, 1998
--------------- ---------------
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APPENDIX A
DEFINITION OF CHANGE IN CONTROL
The following definition of "Change in Control" shall apply for purposes of
Paragraph 5(e)(vii) of the Employment Agreement:
Change in Control. A "Change in Control" of the Company shall be deemed to have
occurred as of the first day any one or more of the following conditions shall
have been satisfied:
(a) Any person (other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Company, or a corporation owned
directly or indirectly by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company), becomes
the beneficial owner, directly or indirectly, of securities of the
Company, representing more than twenty-five percent (25%) of the combined
voting power of the Company's then outstanding securities;
(b) Individuals who, as of May 20, 1998, constitute the Board of Directors of
the Company (the " Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to May 20, 1998, whose election, or
nomination for election by the Company's shareholders, was approved by a
vote of at least a majority of the directors then comprising the Incumbent
Board shall be considered as though such individual were a member of the
Incumbent Board, but excluding, for this purpose, any such individual
whose initial assumption of office occurs as a result of an actual or
threatened election contest with respect to the election or removal of
directors or other actual or threatened solicitation of proxies or
consents by or on behalf of a person other than the Board; or
(c) The stockholders of the Company approve: (i) a plan of complete
liquidation of the Company; or (ii) an agreement for the sale or
disposition of all or substantially all the Company's assets; or (iii) a
merger, consolidation, or reorganization of the Company with or involving
any other corporation, limited liability entity or similar person, other
than a merger, consolidation, or reorganization that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least
seventy-five percent (75%) of the combined voting power of the voting
securities of the Company (or such surviving entity) outstanding
immediately after such merger, consolidation, or reorganization.
<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.
OPERATIONS: Revenues for 1998 were $1,692,375,000, which was 3.3% or
$57,350,000 lower than the comparable period of 1997. This was primarily due to
a decline of $155,814,000 in the Other segment's revenues, chiefly associated
with the sales of Facility Services' New York operations in July 1997 and
certain operations of Atlantic Design Company (ADC), a contract manufacturing
business, in late 1997 and early 1998. The Entertainment segment's revenues were
$59,633,000 higher, primarily reflecting increased activity at certain sports,
amphitheatre, and convention venues and the World Trade Center, as well as the
acquisition of the Enchanted Castle in late 1997 and the start-up of
TinseltownTM operations in late 1998. The Aviation segment's revenues were
$52,940,000 lower, primarily reflecting the sale of the domestic catering
operations in the second quarter of 1998 as well as the sale of the Miami and
Spanish in-flight catering businesses and certain ground handling operations in
1997. These decreases in the Aviation segment's revenues were partially offset
by the gain on the sale of a 10% interest in the Hong Kong ground services
company. The Energy segment's revenues were $91,771,000 higher, primarily due to
the acquisition in late 1997 of Pacific Energy, Inc., and a 60% interest in four
cogeneration plants in China; increased production at the Edison Bataan
facility; the buyout of a waste-to-energy power sales contract; increased
construction revenues associated with retrofit activity at several facilities;
and an increase in Environmental consulting, engineering, and construction
activity.
Consolidated operating income for 1998 was $149,216,000, which was
approximately 4.1% higher than the comparable period of 1997. The Entertainment
segment's income from operations was $535,000 higher, primarily reflecting
increased activity at the World Trade Center, convention centers, and South
American operations, as well as the sale of certain contracts. These increases
in Entertainment's income from operations were partially offset by the effects
of the NBA lockout, start-up expenses at the TinseltownTM operation, and lower
results at our Florida theme park and Aruba gaming operations. The Aviation
segment's income from operations was $19,852,000 higher, primarily reflecting
the gain on the sale of the domestic in-flight catering operations in June 1998
and the sale of a 10% interest in the Hong Kong ground services company. These
increases in Aviation's income from operations were offset in part by reduced
European operations, including the relocation of its headquarters, severance
payments, and certain legal claims in 1998, and in part by the sale in 1997 of
the Miami and Spanish in-flight catering businesses and certain ground services
operations. The Energy segment's income from operations was $432,000 higher,
chiefly associated with the acquisition in late 1997 of Pacific Energy, Inc.,
and a 60% interest in four cogeneration plants in China; increased activity at
the Edison Bataan facility; the gain on the buyout of a power sales agreement
and a contract termination agreement; as well as an increase in construction
income, primarily related to increased retrofit activity. These increases were
partially offset by increased development costs; reduced income at several
waste-to-energy facilities, primarily due to increased maintenance costs; the
amortization of the prepayment of a power sales agreement; legal settlements;
and a decrease in environmental income from operations chiefly associated with
the write-off of uncollectible notes receivable. The Other segment's income from
operations was $3,248,000 lower, chiefly associated with the sale of certain
noncore businesses and an investment in the Universal Ogden joint venture in
1997.
Selling, general, and administrative expenses were $113,260,000, which was
approximately 3.8% or $4,112,000 higher than 1997, primarily due to increased
development costs; international office expansion; amortization of new data
processing systems; as well as the settlement of certain litigation and
proxy-related charges, partially offset by the sale of noncore businesses in
1997 and 1998. Debt service charges for 1998 were $1,295,000 lower than the
comparable period of 1997, primarily due to lower debt outstanding. The Energy
segment had 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 $800,000 and $300,000 in 1998 and
1997, respectively. The 1998 amounts include $211,000 representing the net cost
to close two of the three interest rate swap agreements that related to the
refinancing of debt. The effect of these swap agreements on the weighted-average
interest rate of project debt was not significant.
Interest income for 1998 was $5,522,000 lower than 1997, primarily
reflecting the repayment of debt by customers. Interest expense was $3,825,000
lower, chiefly associated with reduced borrowings and repayments on outstanding
debt, partially offset by increased interest on notes issued in connection with
the acquisition of Pacific Energy, Inc., and overseas operations. Ogden had two
interest rate swap agreements covering notional amounts of $100,000,000 and
$3,200,000, respectively. The first swap agreement expired 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 to convert Ogden's $3,200,000 variable-rate debt
to a fixed rate. These agreements
20
<PAGE>
resulted in additional interest expense in 1998 and 1997 of $100,000 and
$400,000, respectively. The effect of these swap agreements on the
weighted-average interest rate was not significant.
Equity in income of investees and joint ventures for 1998 was $16,861,000
higher than the comparable period of 1997, chiefly associated with the results
of Pacific Energy, Inc., joint ventures, which included the buyout of an energy
sales agreement with respect to a 50% joint venture, and increased activity at
several Entertainment and Aviation joint ventures. These increases were
partially offset by start-up costs of Aviation's Bogota, Colombia, joint venture
operations and lower activity at Entertainment's Spanish theme park joint
venture.
The effective income tax rate for 1998 was 40.4%, compared with 40.6% in
1997. Note 19 to the Consolidated Financial Statements contains a detailed
reconciliation of the variances from the Federal statutory income tax rate.
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 revenues of
businesses sold during 1996 and 1997--namely Facility Services, W.J. Schafer
Associates, Ogden Professional Services (formerly in the Technology group), and
certain operations of ADC. 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 operations 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 service operations, which were 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, 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, the
commencement of operations of the Independent Power group's Edison Bataan
facility, and the acquisition of Pacific Energy, Inc., in September 1997.
Consolidated operating income for 1997 was $143,362,000, which was
approximately 16.9% or $20,700,000 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 amphitheatre
venues and in 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 service
location, which were partially offset by reduced activity in catering and
European customer activity. The Energy segment's income from operations was
$5,100,000 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 a 1996 favorable legal settlement, 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 administration 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 $4,600,000 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 had 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 $4,700,000
21
<PAGE>
higher, chiefly associated with borrowings relating to loans to customers,
partially offset by lower borrowings on revolving credit lines. Ogden had two
interest rate swap agreements covering notional amounts of $100,000,000 and
$4,700,000, respectively. The first swap agreement expired 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 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 19 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 1998, capital investments
amounted to $141,200,000, of which $19,000,000, inclusive of restricted funds
transferred from funds held in trust, was for Energy facilities and $122,200,000
was for normal replacement and growth in Entertainment ($73,400,000), Aviation
($31,000,000), Energy ($13,200,000), Other ($2,200,000), and Corporate
($2,400,000) operations.
At December 31, 1998, capital commitments amounted to $224,735,000, which
included $148,035,000 for normal replacement, modernization, and growth in
Entertainment ($125,503,000), Aviation ($7,221,000), Energy ($15,200,000), and
Corporate ($111,000) operations. Energy also has a commitment to pay, in 2008,
$10,600,000 for a service contract extension at a waste-to-energy facility. Also
included was $66,100,000 for Energy's coal-fired power project in the
Philippines, a natural gas-fired power plant in Bangladesh, and an investment in
a joint venture, reflecting $44,400,000 for the remaining mandatory equity
contributions, $5,700,000 for contingent equity contributions, and $16,000,000
for a standby letter of credit in support of debt service reserve requirements.
Funding for the remaining mandatory equity contributions is being provided
through bank credit facilities, which must be repaid in June 2000 through
December 2001. The Corporation also has a $24,400,000 contingent equity
contribution in Entertainment ($11,400,000) and Aviation ($13,000,000) joint
ventures. In addition, compliance with the standards and guidelines under the
Clean Air Act Amendments of 1990 may require further Energy capital expenditures
of approximately $54,000,000, including amounts that would be required if
certain service agreement amendments are finalized through December 2000,
subject to the 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 a
vendor with specified amounts of business over a three-year period. If these
amounts are not provided, the Corporation may be liable for prorated damages of
up to approximately $3,000,000. 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. Ogden is obligated
to purchase such senior secured debt in the amount of $97,685,000 on December
30, 2002, if the debt is not refinanced prior to that time. Ogden is also
required to repurchase the outstanding amount of certain subordinated secured
debt of such customer on December 30, 2002. At December 31, 1998, the amount
outstanding was $51,625,000. In addition, on December 31, 1998, the Corporation
had guaranteed indebtedness of $19,363,000 of an affiliate and principal tenant
of this customer. Subsequent to December 31, 1998, such tenant repaid $8,637,000
of indebtedness owed to Ogden, and Ogden's previous guarantees of the tenant's
indebtedness were released and replaced by a guarantee of $3,284,000 of the
tenant's senior secured term debt and a guarantee of up to $7,882,000 of the
tenant's secured revolving debt. In addition, Ogden is obligated to purchase
$19,704,000 of the tenant's secured subordinated indebtedness on January 29,
2004, if such indebtedness has not been repaid or refinanced prior to that time.
22
<PAGE>
Ogden has guaranteed borrowings of another customer amounting to approximately
$12,900,000 as well as $8,800,000 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.
The Corporation is exposed to various market risks including changes in
interest rates and foreign currency exchange rates. Since approximately 85% of
the Corporation's debt is at fixed interest rates, the Corporation's exposure to
interest-rate fluctuations is not material to the Consolidated Financial
Statements. The Corporation has entered into financial instruments on several
occasions to reduce the impact of changes in interest rates. At December 31,
1998, Ogden had two interest rate swap agreements, which are described above and
in the Long-Term and Project Debt notes to the Consolidated Financial
Statements. Ogden is also exposed to foreign currency risks due to changes in
exchange rates. The Corporation primarily operates in Latin America, Europe,
Asia, and Canada. Since the Corporation does not plan to repatriate foreign
assets and considers foreign earnings to be permanently invested overseas, the
exposure to changes in foreign currency exchange rates is primarily limited to
cumulative translation adjustments, which have been charged to Other
Comprehensive Income. Ogden does not enter into derivatives or other financial
instruments for trading or speculative purposes.
LIQUIDITY/CASH FLOW: Net cash provided from operating activities was
$65,276,000 higher than the comparable period of 1997, primarily reflecting an
increase of $198,400,000 in deferred income chiefly associated with the
prepayment of a power sales agreement for a waste-to-energy facility, partially
offset by the collection in 1997 of $41,700,000 relating to certain legal
settlements as well as the collection of receivables relating to businesses
sold. Net cash used in investing activities increased $72,708,000, primarily
reflecting an increase in marketable securities available for sale of
$46,169,000, reduced collections of loans to customers of $36,200,000, lower
distributions from investees and joint ventures of $37,500,000, and increased
capital expenditures of $24,974,000. These increases were partially offset by
increased proceeds from the sale of businesses of $22,700,000 and a decrease of
$42,495,000 in amounts expended for the purchase of business. Net cash used in
financing activities was $37,045,000 lower, chiefly associated with a net
increase in debt of $48,149,000 primarily reflecting refinancing of certain
project debt and debt associated with foreign operations, a decrease of
$39,487,000 in restricted funds held in trust, and a $6,242,000 increase in
proceeds from the exercise of stock options. These decreases in net cash used in
financing activities were partially offset by the purchase of treasury shares
amounting to $56,381,000.
At December 31, 1998, the Corporation had $261,119,000 in cash and cash
equivalents and unused revolving credit lines of $200,000,000. In 1998, Ogden's
Board of Directors increased the authorization to purchase shares of the
Corporation's common stock up to a total of $200,000,000. Through January 1999,
2,182,800 shares of common stock were purchased for a total cost of $57,884,000.
YEAR 2000 ISSUES: Background -- The term "Year 2000 issue" generally refers
to the problems that may occur from the improper processing of date-sensitive
calculations, date comparisons, and leap-year determination by computers and
other machinery containing computer chips (i.e., "embedded systems"). In an
effort to save expensive memory and processing time, most of the world's
computer hardware and software historically used only two digits to identify the
year in a date. If not corrected or replaced, many systems will fail to
distinguish between the years 2000 and 1900 and will incorrectly process related
date information.
STATE OF READINESS -- Ogden has established a Year 2000 project plan that is
actively addressing its Year 2000 issues. The project is comprised of four
phases: awareness, assessment, action, and anticipation. The awareness phase
included the education of the Corporation's Board of Directors, management, and
staff regarding the Year 2000 issue and Ogden's strategy to address the issues.
The awareness phase of the project is completed. The objective of the project's
assessment phase is to inventory and assess the Year 2000 compliance of Ogden's
internal information technology and embedded systems, as well as to ascertain
the compliance of the products and services provided to Ogden by third parties.
Ogden's internal assessment was largely completed in 1998. The assessment of
third parties on which the Corporation relies for key services and products is
in progress. The assessment phase is expected to be completed by the end of the
first quarter of 1999, which is slightly behind the original schedule. Ogden's
action phase includes the prioritization, remediation, and testing of Year 2000
solutions. The Corporation has begun the remediation of all its mission-critical
systems through a series of projects with completion dates between January 1997
and October 1999. Additional corrective efforts will be initiated as assessments
are finalized and the related issues prioritized. The fourth phase of Ogden's
Year 2000 project, the anticipation phase, includes the development and
implementation of contingency plans for key business functions that are in
jeopardy of not being thoroughly tested or Year 2000 compliant on a timely
basis. The anticipation phase of the project is scheduled to commence in the
first quarter of 1999 and is expected to continue throughout 1999.
23
<PAGE>
Ogden has made considerable progress toward Year 2000 compliance as a result of
its initiative to improve access to business information through the
implementation of common, integrated computing systems across the operations of
the Corporation. This initiative commenced in 1996 with the replacement of
Ogden's domestic administrative systems with PeopleSoft systems and the upgrade
of associated infrastructure. The implementations of these Year 2000 compliant
systems are 90% completed, with all expected to be achieved by the first quarter
of 1999. Additionally, efforts are in progress to replace or upgrade the
international administrative systems and a variety of key operating systems.
Ogden has not deferred any specific information technology project as a result
of the implementation of the Year 2000 project.
COSTS -- The total costs associated with resolving the Corporation's Year
2000 issues are not expected to be material to Ogden's financial condition.
Based on the assessments completed to date, the estimated costs of the Year 2000
project are $11,200,000, the majority of which will be incurred in 1999. The
estimated costs will be refined as remedial plans are executed and contingency
plans developed. Ogden is implementing or upgrading a number of systems (e.g.,
PeopleSoft), as part of its initiative to improve access to key business
information. The costs of implementing those systems are not included in these
estimates.
RISKS -- Ogden believes that the diversity of its business and the
implementation of its Year 2000 project will significantly reduce the
possibility of interruptions of normal operations. Ogden believes that by the
end of the first quarter of 1999, it will be able to fully determine its most
reasonably likely worst-case scenarios. Based on the assessment efforts to date,
Ogden does not believe that the Year 2000 issue will have a material adverse
effect on the Corporation's financial condition. However, failing to resolve
Year 2000 issues on a timely basis could have a material adverse effect on the
Corporation's operations, although it is not possible at this time to quantify
the amount of business that may be lost or the costs that may be incurred.
CONTINGENCY PLANS -- Ogden's Year 2000 project strategy includes the
development of contingency plans for any business functions determined to be at
risk of being unable to remediate or properly test Year 2000 issues on a timely
basis. While Ogden is not presently aware of any significant exposure that its
systems will not be properly remediated on a timely basis, there can be no
assurances that all Year 2000 remediation processes will be completed and
properly tested before the year 2000 or that contingency plans will sufficiently
mitigate the risk of a Year 2000 compliance problem. Ogden expects to develop
and implement contingency plans starting in the first quarter of 1999. The
contingency planning process is an ongoing one that will continue through 1999
as Ogden obtains relevant Year 2000 compliance information resulting from its
internal remediation and testing efforts as well as from third parties.
Any statements in this communication, including but not limited to the "Year
2000 Issue" discussion, 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 risk 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.
24
<PAGE>
Ogden Corporation and Subsidiaries
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
December 31, 1998 1997 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
(In thousands of dollars, except per-share amounts)
<S> <C> <C> <C> <C> <C>
TOTAL REVENUES ............................... $ 1,692,375 $ 1,749,725 $ 2,031,081 $ 2,184,993 $ 2,104,547
------------- ------------- ------------- ------------- -------------
Income before cumulative effect of
changes in accounting principles ............. 86,970 75,673 64,534 7,444 67,826
Cumulative effect of changes in
accounting principles ........................ (1,520)
------------- ------------- ------------- ------------- -------------
Net income ................................... 86,970 75,673 64,534 7,444 66,306
------------- ------------- ------------- ------------- -------------
BASIC EARNINGS PER SHARE:
Income before cumulative effect of
changes in accounting principles ............. 1.74 1.51 1.30 0.15 1.55
Cumulative effect of changes in
accounting principles ........................ (0.03)
------------- ------------- ------------- ------------- -------------
Total ........................................ 1.74 1.51 1.30 0.15 1.52
------------- ------------- ------------- ------------- -------------
DILUTED EARNINGS PER SHARE:
Income before cumulative effect of
changes in accounting principles ............. 1.70 1.49 1.28 0.15 1.51
Cumulative effect of changes in
accounting principles ........................ (0.03)
------------- ------------- ------------- ------------- -------------
Total ........................................ 1.70 1.49 1.28 0.15 1.48
------------- ------------- ------------- ------------- -------------
Total Assets ................................. 3,922,843 3,639,295 3,597,532 3,652,671 3,644,886
------------- ------------- ------------- ------------- -------------
Long-Term Obligations ........................ 1,907,465 1,927,330 1,958,717 2,044,186 2,047,031
------------- ------------- ------------- ------------- -------------
Shareholders' Equity ......................... 549,100 566,091 550,925 546,978 596,818
------------- ------------- ------------- ------------- -------------
Shareholders' Equity Per Common Share ........ 11.20 11.24 11.06 11.04 12.21
------------- ------------- ------------- ------------- -------------
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, REFLECTING THE IMPAIRMENT OF ASSETS AND OTHER CHARGES.
25
<PAGE>
Ogden Corporation and Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service revenues .............................................. $ 1,089,208,000 $ 1,133,108,000 $ 1,392,686,000
Net sales ..................................................... 512,958,000 582,134,000 621,830,000
Construction revenues ......................................... 41,025,000 3,402,000
Net gain on sale of businesses ................................ 49,184,000 34,483,000 13,163,000
--------------- --------------- ---------------
Total revenues ................................................ 1,692,375,000 1,749,725,000 2,031,081,000
--------------- --------------- ---------------
Operating costs and expenses .................................. 860,985,000 855,917,000 1,088,546,000
Costs of goods sold ........................................... 432,438,000 539,640,000 592,223,000
Construction costs ............................................ 36,113,000 2,196,000
Selling, administrative, and general expenses ................. 113,260,000 109,148,000 119,147,000
Debt service charges .......................................... 100,363,000 101,658,000 106,306,000
--------------- --------------- ---------------
Total costs and expenses ...................................... 1,543,159,000 1,606,363,000 1,908,418,000
--------------- --------------- ---------------
Consolidated operating income ................................. 149,216,000 143,362,000 122,663,000
Equity in income of investees and joint ventures .............. 18,897,000 2,036,000 3,604,000
Interest income ............................................... 17,953,000 23,476,000 15,142,000
Interest expense .............................................. (33,900,000) (37,725,000) (33,040,000)
Other income (deductions) -net ................................ 864,000 (371,000) 1,272,000
--------------- --------------- ---------------
Income before income taxes and minority interests ............. 153,030,000 130,778,000 109,641,000
Income taxes .................................................. (61,797,000) (53,100,000) (46,161,000)
Minority interests ............................................ (4,263,000) (2,005,000) 1,054,000
--------------- --------------- ---------------
NET INCOME .................................................... 86,970,000 75,673,000 64,534,000
--------------- --------------- ---------------
Other Comprehensive Income, Net of Tax:
Foreign currency translation adjustments ...................... (2,170,000) (8,094,000) (3,111,000)
Unrealized Gains on Securities:
Unrealized holding gains arising during period ................ 470,000 1,637,000 1,074,000
Less: reclassification adjustment for gains
included in net income ........................................ (2,046,000) (843,000)
Minimum pension liability adjustment .......................... (392,000) 241,000 195,000
--------------- --------------- ---------------
Other comprehensive income .................................... (2,092,000) (8,262,000) (2,685,000)
--------------- --------------- ---------------
Comprehensive income .......................................... $ 84,878,000 $ 67,411,000 $ 61,849,000
--------------- --------------- ---------------
--------------- --------------- ---------------
Basic Earnings Per Share ...................................... $ 1.74 $ 1.51 $ 1.30
--------------- --------------- ---------------
--------------- --------------- ---------------
Diluted Earnings Per Share .................................... $ 1.70 $ 1.49 $ 1.28
--------------- --------------- ---------------
--------------- --------------- ---------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
26
<PAGE>
Ogden Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
Assets December 31, 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents ................................................................ $ 261,119,000 $ 185,671,000
Marketable securities available for sale ................................................. 44,685,000
Restricted funds held in trust ........................................................... 110,553,000 103,882,000
Receivables (less allowances: 1998, $30,595,000 and 1997, $20,207,000) ................... 394,923,000 393,185,000
Inventories .............................................................................. 31,100,000 34,235,000
Deferred income taxes .................................................................... 49,327,000 56,690,000
Other .................................................................................... 62,742,000 59,211,000
-------------- --------------
Total current assets ..................................................................... 954,449,000 832,874,000
Property, plant, and equipment--net ...................................................... 1,987,643,000 1,947,547,000
Restricted funds held in trust ........................................................... 180,922,000 206,013,000
Unbilled service and other receivables (less allowances: 1997, $3,000,000) ............... 173,630,000 174,962,000
Unamortized contract acquisition costs ................................................... 132,818,000 141,281,000
Goodwill and other intangible assets ..................................................... 130,031,000 93,847,000
Investments in and advances to investees and joint ventures .............................. 205,702,000 137,323,000
Other assets ............................................................................. 157,648,000 105,448,000
-------------- --------------
TOTAL ASSETS ............................................................................. $3,922,843,000 $3,639,295,000
-------------- --------------
-------------- --------------
- -----------------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- -----------------------------------------------------------------------------------------------------------------------------------
LIABILITIES:
Current Liabilities:
Notes payable ............................................................. $ 45,600,000 $
Current portion of long-term debt ......................................... 30,232,000 19,696,000
Current portion of project debt ........................................... 63,201,000 68,052,000
Dividends payable ......................................................... 15,403,000 15,721,000
Accounts payable .......................................................... 94,629,000 109,719,000
Federal and foreign income taxes payable .................................. 21,776,000 1,913,000
Accrued expenses, etc ..................................................... 305,942,000 267,874,000
Deferred income ........................................................... 47,991,000 42,962,000
-------------- --------------
Total current liabilities ................................................. 624,774,000 525,937,000
Long-term debt ............................................................ 391,287,000 354,032,000
Project debt .............................................................. 1,367,528,000 1,424,648,000
Deferred income taxes ..................................................... 396,648,000 383,341,000
Deferred income ........................................................... 201,563,000 20,313,000
Other liabilities ......................................................... 215,119,000 187,866,000
Minority interests ........................................................ 28,174,000 28,417,000
Convertible subordinated debentures ....................................... 148,650,000 148,650,000
-------------- --------------
TOTAL LIABILITIES ......................................................... 3,373,743,000 3,073,204,000
-------------- --------------
-------------- --------------
SHAREHOLDERS' EQUITY:
Serial cumulative convertible preferred stock, par value $1.00 per share;
authorized, 4,000,000 shares; shares outstanding: 42,218 in 1998 and 44,346
in 1997, net of treasury shares of 29,820 in 1998 and 1997 ................ 43,000 45,000
Common stock, par value $.50 per share; authorized, 80,000,000 shares;
shares outstanding: 48,945,989 in 1998 and 50,295,123 in 1997, net of
treasury shares of 4,561,963 in 1998 and 3,135,123 in 1997 ................ 24,473,000 25,147,000
Capital surplus ........................................................... 173,413,000 212,383,000
Earned surplus ............................................................ 367,984,000 343,237,000
Accumulated other comprehensive income .................................... (16,813,000) (14,721,000)
-------------- --------------
Total Shareholders' Equity ................................................ 549,100,000 566,091,000
-------------- --------------
Total Liabilities and Shareholders' Equity ................................ $3,922,843,000 $3,639,295,000
-------------- --------------
-------------- --------------
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
27
<PAGE>
Ogden Corporation and Subsidiaries
STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
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 ........... 74,166 $ 75,000 77,509 $ 78,000 79,289 $ 80,000
Shares converted into common stock ..... (2,128) (2,000) (3,343) (3,000) (1,780) (2,000)
------------- ------------- ------------- ------------- ------------- -------------
Total .................................. 72,038 73,000 74,166 75,000 77,509 78,000
Treasury shares ........................ (29,820) (30,000) (29,820) (30,000) (29,820) (30,000)
------------- ------------- ------------- ------------- ------------- -------------
Balance at end of year (aggregate
involuntary liquidation value--1998,
$851,000) .............................. 42,218 43,000 44,346 45,000 47,689 48,000
------------- ------------- ------------- ------------- ------------- -------------
Common Stock, Par Value $.50 Per Share;
Authorized, 80,000,000 Shares:
Balance at beginning of year ........... 53,430,246 26,715,000 53,350,650 26,675,000 53,202,904 26,602,000
Exercise of stock options, less
common stock utilized .................. 65,000 33,000 59,640 30,000 137,134 68,000
Conversion of preferred shares ......... 12,706 6,000 19,956 10,000 10,612 5,000
------------- ------------- ------------- ------------- ------------- -------------
Total .................................. 53,507,952 26,754,000 53,430,246 26,715,000 53,350,650 26,675,000
------------- ------------- ------------- ------------- ------------- -------------
Treasury shares at beginning of year ... 3,135,123 1,568,000 3,606,123 1,803,000 3,735,123 1,868,000
Purchase of treasury shares ............ 2,121,100 1,060,000
Exercise of stock options .............. (694,260) (347,000) (471,000) (235,000) (129,000) (65,000)
------------- ------------- ------------- ------------- ------------- -------------
Treasury shares at end of year ......... 4,561,963 2,281,000 3,135,123 1,568,000 3,606,123 1,803,000
------------- ------------- ------------- ------------- ------------- -------------
Balance at end of year ................. 48,945,989 24,473,000 50,295,123 25,147,000 49,744,527 24,872,000
------------- ------------- ------------- ------------- ------------- -------------
Capital Surplus:
Balance at beginning of year ........... 212,383,000 202,162,000 197,921,000
Exercise of stock options,
less common stock utilized ............. 16,355,000 10,228,000 4,244,000
Purchase of treasury shares ............ (55,321,000)
Conversion of preferred shares ......... (4,000) (7,000) (3,000)
------------- ------------- -------------
Balance at end of year ................. 173,413,000 212,383,000 202,162,000
------------- ------------- -------------
Earned Surplus:
Balance at beginning of year ........... 343,237,000 330,302,000 328,047,000
Net income ............................. 86,970,000 75,673,000 64,534,000
------------- ------------- -------------
Total .................................. 430,207,000 405,975,000 392,581,000
------------- ------------- -------------
Preferred dividends--per share 1998,
1997, and 1996, $3.35 .................. 144,000 152,000 161,000
Common dividends--per share 1998, 1997,
and 1996, $1.25 ........................ 62,079,000 62,586,000 62,118,000
------------- ------------- -------------
Total dividends ........................ 62,223,000 62,738,000 62,279,000
------------- ------------- -------------
Balance at end of year ................. 367,984,000 343,237,000 330,302,000
------------- ------------- -------------
Cumulative Translation Adjustment--Net . (16,032,000) (13,862,000) (5,768,000)
------------- ------------- -------------
Minimum Pension Liability Adjustment ... (716,000) (324,000) (565,000)
------------- ------------- -------------
Net Unrealized Loss on Securities
Available For Sale ..................... (65,000) (535,000) (126,000)
------------- ------------- -------------
Total Shareholders' Equity ............. $ 549,100,000 $ 566,091,000 $ 550,925,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
28
<PAGE>
Ogden Corporation and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................... $ 86,970,000 $ 75,673,000 $ 64,534,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and amortization ................................... 114,334,000 104,377,000 115,263,000
Deferred income taxes ........................................... 18,696,000 24,975,000 20,027,000
Other ........................................................... (51,278,000) (26,015,000) (20,663,000)
Management of Operating Assets and Liabilities:
Decrease (Increase) in Assets:
Accounts receivable ............................................. (10,475,000) 111,326,000 54,633,000
Inventories ..................................................... 2,137,000 18,916,000 (27,392,000)
Other assets .................................................... (26,348,000) (5,313,000) (25,231,000)
Increase (Decrease) in Liabilities:
Accounts payable ................................................ (29,861,000) 7,892,000 (1,608,000)
Accrued expenses ................................................ (19,401,000) (46,582,000) (1,689,000)
Deferred income ................................................. 195,038,000 (3,393,000) 10,233,000
Other liabilities ............................................... 28,014,000 (19,306,000) (11,927,000)
------------- ------------- -------------
Net cash provided by operating activities ....................... 307,826,000 242,550,000 176,180,000
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Entities purchased, net of cash acquired ........................ (20,717,000) (63,212,000) (16,968,000)
Proceeds from sale of marketable securities available for sale .. 14,232,000 13,970,000 13,158,000
Proceeds from sale of businesses ................................ 83,817,000 61,164,000 90,946,000
Proceeds from sale of property, plant, and equipment ............ 7,074,000 4,865,000 6,803,000
Investments in Energy facilities ................................ (18,847,000) (28,459,000) (14,303,000)
Other capital expenditures ...................................... (122,328,000) (87,742,000) (49,888,000)
Decrease in other receivables ................................... 14,827,000 51,046,000 10,553,000
Investments in marketable securities available for sale ......... (60,139,000) (13,970,000)
Distributions from investees and joint ventures ................. 12,102,000 49,605,000
Increases in investments in and advances to investees
and joint ventures .............................................. (46,500,000) (68,748,000) (19,985,000)
Other ........................................................... (17,710,000)
------------- ------------- -------------
Net cash provided by (used in) investing activities ............. (154,189,000) (81,481,000) 20,316,000
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings for Energy facilities ................................ 506,518,000 57,358,000 124,272,000
Other new debt .................................................. 90,806,000 102,266,000 6,552,000
Payment of debt ................................................. (607,521,000) (217,970,000) (229,206,000)
Dividends paid .................................................. (62,541,000) (62,564,000) (62,026,000)
Purchase of treasury stock ...................................... (56,381,000)
Decrease in funds held in trust ................................. 40,415,000 928,000 3,903,000
Proceeds from exercise of stock options ......................... 16,735,000 10,493,000 4,377,000
Other ........................................................... (5,922,000) (5,447,000) (289,000)
------------- ------------- -------------
Net cash used in financing activities ........................... (77,891,000) (114,936,000) (152,417,000)
------------- ------------- -------------
Effect of foreign currency exchange rate changes
on cash and cash equivalents .................................... (298,000) (1,286,000) (37,000)
------------- ------------- -------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ....................... 75,448,000 44,847,000 44,042,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................. 185,671,000 140,824,000 96,782,000
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ........................ $ 261,119,000 $ 185,671,000 $ 140,824,000
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
29
<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 and
has the ability to exercise significant influence are accounted for using
the "Equity Method." All intercompany transactions and balances have been
eliminated.
In 1998, in transactions accounted for as purchases, Ogden acquired the
shares of Casino Iguazu in Argentina and an environmental related
construction company for a total cost of $45,500,000. 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, 1997, consolidated revenues, net income, and diluted earnings per share
would have been $1,727,900,000, $81,605,000, and $1.60 for 1998 and
$1,794,140,000, $80,508,000, and $1.58 for 1997.
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,
1996, consolidated revenues, net income, and diluted earnings per share
would have been $2,033,000,000, $60,565,000, and $1.20 for 1996.
In connection with Ogden's restructuring plan, the Binghamton, New York,
and Cork, Ireland, operations of Atlantic Design Company (ADC), a contract
manufacturing company, were sold in January 1998, and the Aviation segment's
domestic in-flight catering operations were sold in June 1998; the Facility
Services group's operations in New York City were sold in July 1997; and the
Charlotte, North Carolina, operations of ADC were sold in September 1997.
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 as well
as 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 Other
Comprehensive Income (see Note 2).
CONTRACTS AND REVENUE RECOGNITION: Service revenues include the fees for
cost-plus contracts and other types of contracts. Both the service revenues
and operating expenses exclude reimbursed expenditures of $135,444,000,
$283,900,000, and $357,698,000 for the years ended December 31, 1998, 1997,
and 1996, 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
$150,389,000 and $130,388,000 at December 31, 1998 and 1997, 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, work in
progress, 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.
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.
30
<PAGE>
RESTRICTED FUNDS: Restricted funds represent proceeds from the financing and
operation of waste-to-energy facilities 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 is amortized by the straight-line method over periods
ranging from 15 to 40 years.
RETIREMENT PLANS: Ogden 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 that may be received from foreign subsidiaries, which
are considered to be permanently invested overseas.
LONG-LIVED ASSETS: Ogden accounts for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed of by evaluating the carrying value
of its long-lived assets in relation to the operating performance and future
undiscounted cash flows of the underlying businesses when indications of
impairment are present. Long-lived assets to be disposed of, if any, are
evaluated in relation to the net realizable value.
EARNINGS PER SHARE: "Earnings per Share" 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 21).
REPORTING ON COSTS OF START-UP ACTIVITIES: The American Institute of
Certified Public Accountants (AICPA) issued Statement of Position (SOP)
98-5, "Reporting on the Costs of Start-Up Activities," in April 1998, which
is effective for years beginning after December 15, 1998. This SOP
establishes accounting standards for these costs and requires that they
generally be expensed as incurred. The effect of the initial application of
this SOP will be reported as a cumulative effect of a change in accounting
principles. This SOP will be implemented as of January 1, 1999, and is not
expected to have a significant effect on Ogden's future operations or
financial position.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS: The Financial Accounting Standards
Board issued SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," in June 1998, which is effective for fiscal years
beginning after June 1999. This Statement establishes accounting and
reporting standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and hedging activities. At this
time, management has not determined the effect, if any, that the
implementation of this Statement will have on Ogden's financial position and
results of operations.
COMPREHENSIVE INCOME: The Financial Accounting Standards Board issued SFAS
No. 130, "Reporting Comprehensive Income," in June 1997, which was effective
for years beginning after December 31, 1997. This Statement established
standards for reporting and display of comprehensive income and its
components in financial statements. Ogden adopted SFAS 130 as of January 1,
1998, and has restated prior years' presentations in the accompanying
financial statements.
RECLASSIFICATION: The accompanying financial statements have been
reclassified to conform with the 1998 presentation.
2. INVESTMENTS IN MARKETABLE SECURITIES AVAILABLE FOR SALE
At December 31, 1998 and 1997, marketable equity and debt securities held
for current and noncurrent uses, such as nonqualified pension liabilities
and a deferred compensation plan, are classified as current assets and
long-term assets (see Note 6), respectively. Accumulated net unrealized
losses on marketable equity and debt securities held for current and
noncurrent uses are charged to Other Comprehensive Income.
Marketable securities at December 31, 1998 and 1997 (expressed in thousands
of dollars), include the following:
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------------------------
Market Market
Value Cost Value Cost
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Classified as Current Assets:
Mutual and bond funds ................. $44,685 $44,714
------- -------
Total Classified as Current Assets .... $44,685 $44,714
------- -------
------- -------
Classified as Noncurrent Assets:
Mutual and bond funds ................. $27,451 $27,673 $25,543 $26,495
------- ------- ------- -------
Total Classified as Noncurrent Assets.. $27,451 $27,673 $25,543 $26,495
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
At December 31, 1998 and 1997, unrealized losses were $251,000 and
$952,000, respectively. The deferred tax benefits on these losses at
December 31, 1998 and 1997, were $186,000 and $417,000, respectively,
resulting in net charges of $65,000 and $535,000, respectively, to Other
Comprehensive Income.
31
<PAGE>
Proceeds, realized gains, and realized losses from the sales of
securities classified as available for sale for the years ended December 31,
1998, 1997, and 1996, were $14,232,000, zero, and zero; $13,970,000,
$3,444,000, and zero; and $13,158,000, $1,455,000, and $304,000,
respectively. For the purpose of determining realized gains and losses, the
cost of securities sold was based on specific identification.
3. UNBILLED SERVICE AND OTHER RECEIVABLES
Unbilled service and other receivables (expressed in thousands of dollars)
consisted of the following:
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------------------------
<S> <C> <C>
Unbilled service receivables ....................... $150,389 $130,388
Notes receivable ................................... 23,241 44,574
-------- --------
Total .............................................. $173,630 $174,962
-------- --------
-------- --------
</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
$41,822,000 and $41,357,000 at December 31, 1998 and 1997, 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>
1998 1997
-------------------------------------------------------------------
Current Noncurrent Current Noncurrent
-------------------------------------------------------------------
<S> <C> <C> <C> <C>
Construction funds ... $ 14,604 $ 3,201
Debt service funds ... 24,871 $131,873 43,423 $139,961
Revenue funds ........ 13,626 8,811
Lease reserve funds .. 10,075 14,488 9,629 5,050
Other funds .......... 47,377 34,561 38,818 61,002
-------- -------- -------- --------
Total ................ $110,553 $180,922 $103,882 $206,013
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
5. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment (expressed in thousands of dollars) consisted
of the following:
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------------------------------------
<S> <C> <C>
Land ............................................. $ 10,219 $ 7,068
Waste-to-energy facilities ....................... 1,721,018 1,720,990
Power plants ..................................... 227,311 224,120
Buildings and improvements ....................... 248,568 242,345
Machinery and equipment .......................... 354,975 312,525
Landfills ........................................ 17,959 17,618
Construction in progress ......................... 52,972 32,523
---------- ----------
Total ............................................ 2,633,022 2,557,189
Less accumulated depreciation and amortization ... 645,379 609,642
---------- ----------
Property, plant, and equipment--net .............. $1,987,643 $1,947,547
---------- ----------
---------- ----------
</TABLE>
6. OTHER ASSETS
Other assets (expressed in thousands of dollars) consisted of the following:
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------------------------------------
<S> <C> <C>
Unamortized bond issuance costs .................. $ 43,420 $ 35,761
Noncurrent securities available for sale ......... 27,451 25,543
Investment at cost ............................... 17,710
Deposits on potential acquisitions ............... 13,478
Deferred financing costs ......................... 12,292 4,475
Insurance deposits ............................... 5,388
Other ............................................ 43,297 34,281
---------- ----------
Total ............................................ $ 157,648 $ 105,448
---------- ----------
---------- ----------
</TABLE>
32
<PAGE>
7. ACCRUED EXPENSES, ETC.
Accrued expenses, etc. (expressed in thousands of dollars), consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------------------------------------
<S> <C> <C>
Operating expenses ............................... $ 62,173 $ 51,827
Insurance ........................................ 30,046 39,489
Debt service charges and interest ................ 24,655 31,416
Municipalities' share of energy revenues ......... 36,300 28,145
Payroll .......................................... 26,016 21,834
Payroll and other taxes .......................... 22,412 19,794
Lease payments ................................... 16,038 15,243
Commissions ...................................... 8,736 7,972
Pension and profit sharing ....................... 11,960 7,383
Other ............................................ 67,606 44,771
---------- ----------
Total ............................................ $ 305,942 $ 267,874
---------- ----------
---------- ----------
</TABLE>
8. DEFERRED INCOME
Deferred income (expressed in thousands of dollars) consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
---------------------------------------------------------------------------------------
Current Noncurrent Current Noncurrent
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Power sales agreement prepayment .... $ 9,001 $ 174,328
Sale and leaseback arrangements ..... 1,523 18,876 $ 1,523 $ 20,313
Advance billings to municipalities .. 11,523 14,662
Other ............................... 25,944 8,359 26,777
--------- --------- --------- ---------
Total ............................... $ 47,991 $ 201,563 $ 42,962 $ 20,313
--------- --------- --------- ---------
--------- --------- --------- ---------
</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 municipalities are billed one or two months prior to
performance of service and are recognized as income in the period the
service is provided. In 1998, Ogden received a prepayment for future energy
deliveries required under a power sales agreement. This prepayment is being
amortized over the life of the agreement.
9. LONG-TERM DEBT
Long-term debt (expressed in thousands of dollars) consisted of the
following:
<TABLE>
<CAPTION>
1998 1997
------------------------------------------------------------------------------
<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 16,699 36,186
9.96% notes due through 2008 21,827
Other long-term debt 128,006 93,091
---------- ----------
Total $ 391,287 $ 354,032
---------- ----------
---------- ----------
</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 rates for this debt were 3.38% and 3.44% in 1998 and 1997,
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, 1998, Ogden was in compliance with all
requirements and had $109,100,000 in excess of the required amount of
Shareholders' Equity.
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 a 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
$50,155,000 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% (5.5% at December 31, 1998) and
matures in 2001. The remaining other debt of $27,001,000 consists primarily
of debt associated with overseas entertainment and aviation facilities as
well as debt acquired in the Firehole acquisition. These loans bear various
interest rates and maturity dates.
33
<PAGE>
At December 31, 1998, Ogden had one long-term interest rate swap
agreement covering a notional amount of $3,200,000, which expires November
30, 2000. This swap was entered into to convert Ogden's $3,200,000
variable-rate debt to a fixed rate. 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, 1998, the three-month LIBOR rate was 5.07%.
The counterparty to this interest rate swap is a major financial
institution. Management believes its credit risk associated with
nonperformance by the counterparty is not significant. Ogden also had a swap
agreement to convert its fixed-rate $100,000,000, 9.25% debentures into
variable-rate debt, which expired December 16, 1998. Amounts paid on swap
agreements amounted to $100,000, $400,000, and $200,000, for 1998, 1997, and
1996, respectively, and were charged to interest expense. The effect on
Ogden's weighted-average borrowing rate for 1998, 1997, and 1996 was an
increase of .04%, .09%, and .04%, respectively.
The maturities on long-term debt (expressed in thousands of dollars) at
December 31, 1998, were as follows:
<TABLE>
<S> <C>
1999 ........................................................... $ 30,232
2000 ........................................................... 22,132
2001 ........................................................... 59,711
2002 ........................................................... 6,058
2003 ........................................................... 5,711
Later years .................................................... 297,675
--------
Total .......................................................... 421,519
Less current portion ........................................... 30,232
--------
Total long-term debt ........................................... $391,287
========
</TABLE>
10. PROJECT DEBT
Project debt (expressed in thousands of dollars) consisted of the following:
<TABLE>
<CAPTION>
1998 1997
-----------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenue Bonds Issued by and Prime Responsibility of Municipalities:
3.3--7.3% serial revenue bonds due through 2011 ................................. $ 341,284 $ 212,368
4.25--7.625% term revenue bonds due through 2015 ................................ 557,595 745,350
Adjustable-rate revenue bonds due through 2013 .................................. 80,220 86,185
---------- ----------
Total ........................................................................... 979,099 1,043,903
---------- ----------
Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues
Guaranteed by Third Parties:
4.0--6.6% serial revenue bonds due through 2008 ................................. 98,091 53,938
7.25--7.4% term revenue bonds ................................................... 105,871
Adjustable-rate revenue bonds ................................................... 115,428
---------- ----------
Total ........................................................................... 98,091 275,237
---------- ----------
Other Revenue Bonds:
4.35--5.5% serial revenue bonds due through 2015 ................................ 104,414
5.5--5.6% term revenue bonds due 2019 ........................................... 58,020
----------
Total ........................................................................... 162,434
----------
Other project debt .............................................................. 127,904 105,508
---------- ----------
Total long-term project debt .................................................... $1,367,528 $1,424,648
========== ==========
</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 two 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.
The category, "Other Revenue Bonds," includes bonds issued to finance
one facility for which current contractual obligations of third parties to
deliver waste provide sufficient revenues to pay debt service related to
that facility through 2011, although such debt service is not an explicit
component of the third parties' service fee obligations. The Corporation
anticipates renewing such contracts prior to 2011.
34
<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, 1998, such
revenue bonds were collateralized by property, plant, and equipment, with a
net carrying value of $1,439,768,000, a credit enhancement of approximately
$7,868,000 for which Ogden has certain reimbursement obligations, and
restricted funds held in trust of approximately $246,020,000 (see Note 4).
The interest rates on adjustable-rate revenue bonds are adjusted
periodically to reflect current market rates. The average adjustable rate
for such revenue bonds was 5.4% and 4.35% in 1998 and 1997, 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 $67,211,000 at December 31,
1998, 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 sales 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 $88,148,000 at December 31, 1998. Other project debt
also includes $15,493,000 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 $7,200,000, which is due to financial
institutions and bears interest at an adjustable rate equal to the
three-month LIBOR rate plus 3.5% (8.56% at December 31, 1998). 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 $50,702,000 at December 31, 1998.
Other project debt includes $38,000,000 due to financial institutions,
which bears interest at an adjustable rate that was the three-month LIBOR
rate plus 1.2% (6.27% at December 31, 1998). The debt extends through 2005
and is secured by substantially all the assets of a subsidiary that owns
various power plants in the United States, which had a carrying value of
approximately $92,931,000 at December 31, 1998, and a credit enhancement of
$10,000,000.
At December 31, 1998, the Corporation had one interest rate swap
agreement as a hedge against interest rate exposure on certain
adjustable-rate revenue bonds. The swap agreement was entered into in
September 1995 and expires in January 2019. This swap agreement relates to
adjustable-rate revenue bonds in the category, "Revenue Bonds Issued by and
Prime Responsibility of Municipalities," and any payments made or received
under the swap agreement are therefore included as an explicit component of
the client community's obligation under the related service agreement. Under
the swap agreement, the Corporation pays a fixed rate of 5.18% per annum on
a semi-annual basis and receives a floating rate based on a defined
LIBOR-based rate. At December 31, 1998, the floating rate on the swap was
2.75%. The notional amount of the swap at December 31, 1998, was $80,220,000
and is reduced in accordance with the scheduled repayments of the applicable
revenue bonds. In addition, the Corporation terminated two other interest
rate swap agreements during 1998. The swap agreements resulted in increased
debt service expense of $824,000, including $211,000 paid to terminate two
swap agreements, for the year ended December 31, 1998. The effect on Ogden's
weighted-average borrowing rate was an increase of .06%, .02%, and .04% for
1998, 1997, and 1996, respectively. The counterparty to the remaining swap
is a major financial institution. The Corporation believes the credit risk
associated with nonperformance by the counterparty is not significant.
The maturities on long-term project debt (expressed in thousands of
dollars) at December 31, 1998, were as follows:
<TABLE>
<CAPTION>
<S> <C>
1999 ........................................................ $ 63,201
2000 ........................................................ 78,121
2001 ........................................................ 97,692
2002 ........................................................ 95,630
2003 ........................................................ 96,874
Later years ................................................. 999,211
-----------
Total ....................................................... 1,430,729
Less current portion ........................................ 63,201
-----------
Total long-term project debt ................................ $ 1,367,528
===========
</TABLE>
35
<PAGE>
11. CREDIT ARRANGEMENTS
At December 31, 1998, Ogden had unused revolving credit lines amounting to
$200,000,000 under its principal revolving credit line at various borrowing
rates including prime, the Eurodollar rate plus .225%, and
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, which expires July 1, 2002.
12. CONVERTIBLE SUBORDINATED DEBENTURES
Convertible subordinated debentures (expressed in thousands of dollars)
consisted of the following:
<TABLE>
<CAPTION>
1998 1997
----------------------------------------------------------------------------
<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 100.6% of
principal amount during the year commencing June 1, 1998, 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, 1998, 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 and 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; 667,000 shares were available for
grant at December 31, 1998.
Under the foregoing plans, Ogden issued 4,681,100 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.
36
<PAGE>
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 1998, 1997, and 1996 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 4.8%, 6.2%, and 5.7%; volatility of 27.22%, 25.84%, and 22.74%;
risk-free interest rate of 5.42%, 6.43%, and 5.42%; and an expected life of
7.5 years--the effect on net income and diluted earnings per share would
have been $626,000 and $0.01 for 1998, $334,000 and $0.01 for 1997, and
$214,000 and zero for 1996. The weighted-average fair value of options
granted during 1998, 1997, and 1996 was $3.17, $2.56, and $2.38,
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, 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
Became exercisable ............... $22.50 19,100
Exercised ........................ $18.32-$26.40 (217,000) (217,000) $18.92
Cancelled ........................ $22.50-$28.24 (28,000) (20,000) $27.32
------------- ----------- ----------- -----------
December 31, 1998, balance ....... $18.31-$28.54 620,500 601,400 $19.69
------------- ----------- ----------- -----------
1990 PLAN:
December 31, 1995, balance ....... $18.31-$23.56 3,680,800 2,336,700 $20.06
Granted .......................... $21.00-$31.50 252,500 $21.83
Became exercisable ............... $18.31-$31.50 346,800
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-$31.50 3,657,000 2,470,200 $20.21
Granted .......................... $20.19 570,000 $20.19
Became exercisable ............... $18.31-$31.50 385,400
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-$31.50 3,684,000 2,373,600 $20.39
Granted .......................... $25.97-$29.38 923,000 $26.29
Became exercisable ............... $20.06-$31.50 460,900
Exercised ........................ $18.31-$23.56 (538,900) (538,900) $19.05
Cancelled ........................ $20.06-$20.31 (7,500) (2,000) $20.17
------------- ----------- ----------- -----------
December 31, 1998 ................ $18.31-$31.50 4,060,600 2,293,600 $20.56
------------- ----------- ----------- -----------
CONVERSION OF OEGI PLAN:
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
Exercised ........................ $14.17 (3,360) (3,360) $14.17
------------- ----------- ----------- -----------
December 31, 1998, balance ....... $14.17 172,061 172,061 $14.17
------------- ----------- ----------- -----------
Total December 31, 1998 .......... $14.17-$31.50 4,853,161 3,067,061 $20.04
============= =========== =========== ===========
</TABLE>
37
<PAGE>
The following table summarizes information about stock options
outstanding at December 31, 1998:
<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-$20.31 2,315,661 3.4 years $18.55 1,840,061 $18.14
$21.19-$31.50 2,537,500 6.6 years $24.08 1,227,000 $22.90
------------- --------- --------- ------ --------- ------
$14.17-$31.50 4,853,161 5.0 years $21.43 3,067,061 $20.04
------------- --------- --------- ------ --------- ------
------------- --------- --------- ------ --------- ------
</TABLE>
The weighted-average exercise price for all exercisable options at
December 31, 1998, 1997, and 1996, was $20.04, $19.56, and $19.10,
respectively.
At December 31, 1998, there were 9,453,968 shares of common stock
reserved for the exercise of stock options and the conversion of preferred
shares and debentures.
In 1998, Ogden's Board of Directors authorized the purchase of shares of
the Corporation's common stock in an amount up to $200,000,000. Through
January 1999, 2,182,800 shares of common stock were purchased at a total
cost of $57,884,000.
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 be
exercised only 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, 1998, 48,945,989 Rights were outstanding.
16. FOREIGN EXCHANGE
Foreign exchange translation adjustments for 1998, 1997, and 1996, amounting
to $2,170,000, $8,094,000, and $3,111,000, respectively, have been charged
directly to Other Comprehensive Income. Foreign exchange transaction
adjustments, amounting to $750,000, $683,000, and $215,000, have been
charged directly to income for 1998, 1997, and 1996, respectively.
17. DEBT SERVICE CHARGES
Debt service charges for Ogden's project debt (expressed in thousands of
dollars) consisted of the following:
<TABLE>
<CAPTION>
1998 1997 1996
-----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Interest incurred on taxable and tax-exempt borrowings .. $ 96,939 $ 99,284 $ 103,846
Interest earned on temporary investment
of borrowings during construction, etc. ................. 4,192 3,992 4,256
--------- --------- ---------
Net interest incurred ................................... 92,747 95,292 99,590
Interest capitalized during construction in property,
plant, and equipment .................................... 631 485
--------- --------- ---------
Interest expense--net ................................... 92,747 94,661 99,105
Amortization of bond issuance costs ..................... 7,616 6,997 7,201
--------- --------- ---------
Debt service charges .................................... $ 100,363 $ 101,658 $ 106,306
--------- --------- ---------
--------- --------- ---------
</TABLE>
18. PENSION AND OTHER POSTRETIREMENT BENEFITS
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.
38
<PAGE>
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.
The following table sets forth the details of Ogden's defined benefit
plans' and other postretirement benefit plans' funded status and related
amounts recognized in Ogden's Consolidated Balance Sheets in accordance with
Statement of Financial Accounting Standards No. 132 (expressed in thousands
of dollars):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
- --------------------------------------------------------------------------------------------
1998 1997 1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year ...... $ 30,771 $ 27,987 $ 12,464 $ 11,195
Service cost ................................. 2,721 2,192 70 101
Interest cost ................................ 2,197 1,924 607 828
Plan amendments .............................. 382
Actuarial (gain) loss ........................ 1,048 1,038 (3,210) 756
Benefits paid ................................ (1,576) (2,370) (465) (417)
-------- -------- -------- --------
Benefit obligation at end of year ............ 35,543 30,771 9,466 12,463
-------- -------- -------- --------
Change in Plan Assets:
Plan assets at fair value at beginning of year 22,300 19,162
Actual return on plan assets ................. 2,183 4,448
Company contributions ........................ 1,773 1,060 465 417
Benefits paid ................................ (1,576) (2,370) (465) (417)
-------- -------- -------- --------
Plan assets at fair value at end of year ..... 24,680 22,300
-------- -------- -------- --------
Reconciliation of Prepaid (Accrued) and
Total Recognized:
Funded status of the plan .................... (10,863) (8,471) (9,466) (12,464)
Unrecognized:
Net transition (asset) obligation ............ (92) (95)
Prior service cost ........................... 1,150 1,331
Net (gain) loss .............................. (1,130) (1,568) (1,619) 1,387
-------- -------- -------- --------
Net amount recognized ........................ $(10,935) $ (8,803) $(11,085) $(11,077)
======== ======== ======== ========
Amounts Recognized in the Statement of
Financial Position Consist of:
Accrued benefit liability .................... $(12,362) $ (9,714) $(11,085) $(11,077)
Intangible asset ............................. 332 478
Accumulated other comprehensive income ....... 1,095 433
-------- -------- -------- --------
Net amount recognized ........................ $(10,935) $ (8,803) $(11,085) $(11,077)
======== ======== ======== ========
Weighted Average Assumptions as of
December 31:
Discount rate ................................ 6.75% 7.00% 6.75% 7.00%
Expected return on plan assets ............... 8.00% 8.00%
Rate of compensation increase ................ 4.00% 4.50% 4.00% 4.50%
</TABLE>
For management purposes, 9% and 8% annual rates of increase in the per
capita cost of health care benefits were assumed for 1998 for covered
employees under age 65 and over age 65, respectively. The rates were assumed
to decrease gradually to 5.5% and 5% for employees under age 65 and over age
65, respectively, in 2005 and remain at those levels.
The accumulated benefit obligation, projected benefit obligation, and
fair value of plan assets for the pension plans with accumulated benefit
obligations in excess of plan assets were $13,208,000, $17,259,000, and
$5,757,000, respectively, as of December 31, 1998, and $10,505,000,
$14,976,000, and $5,386,000, respectively, as of December 31, 1997.
Contributions and costs for defined contribution plans are determined by
benefit formulas based on percentage of compensation as well as
discretionary contributions and totaled $8,257,000, $8,652,000, and
$7,954,000 in 1998, 1997, and 1996, respectively. Plan assets at December
31, 1998, 1997, and 1996, 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 1998,
1997, and 1996 was $4,777,000, $16,700,000, and $26,600,000, respectively.
At December 31, 1998, the Corporation has designated $15,359,000 of its
marketable securities as pertaining to a nonqualified pension plan that is
underfunded by $7,979,000.
39
<PAGE>
Pension costs for Ogden's defined benefit plans and other postretirement
benefit plans included the following components (expressed in thousands of
dollars):
<TABLE>
<CAPTION>
Pension Benefits Other Benefits
1998 1997 1996 1998 1997 1996
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
Components on Net Periodic Benefit Cost:
Service cost $ 2,721 $ 2,192 $ 2,068 $ 70 $ 101 $127
Interest cost 2,197 1,924 1,738 607 828 806
Expected return on plan assets (1,759) (1,486) (2,580)
Amortization of unrecognized:
Net transition (asset) obligation 5 3 27
Prior service cost 563 525 596
Net (gain) loss 54 (45) 1,636 (204) (27) 18
------- ------- ------- ----- ----- ----
Net periodic benefit cost $ 3,781 $ 3,113 $ 3,485 $ 473 $ 902 $951
======= ======= ======= ===== ===== ====
</TABLE>
Assumed health care cost trend rates have a significant effect on the
amounts reported for the health care plan. A one percentage point change in
assumed health care trend rate would have the following effects:
<TABLE>
<CAPTION>
One Percentage One Percentage
Point Increase Point Decrease
- --------------------------------------------------------------------------------
<S> <C> <C>
Effect on total service and interest
cost computations $ 27,094 $ (23,768)
Effect on postretirement benefit obligation $ 300,153 $(274,143)
</TABLE>
19. INCOME TAXES
The components of the provision for income taxes (expressed in thousands of
dollars) were as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal ................................ $ 25,901 $ 9,806 $14,661
State .................................. 9,424 12,195 9,048
Foreign ................................ 7,776 6,124 2,425
-------- -------- -------
Total current .......................... 43,101 28,125 26,134
-------- -------- -------
Deferred:
Federal ................................ 17,665 25,288 18,984
State .................................. 1,321 (2,577) 1,043
Foreign ................................ (290) 2,264
-------- -------- -------
Total deferred ......................... 18,696 24,975 20,027
-------- -------- -------
Total provision for income taxes ....... $ 61,797 $ 53,100 $46,161
======== ======== =======
</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>
- ---------------------------------------------------------------------------------------------
1998 1997 1996
Percent Percent Percent
of Income of Income of Income
Amount Before Amount Before Amount Before
of Tax Taxes of Tax Taxes of Tax Taxes
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Taxes at statutory rate ......... $ 53,561 35.0% $45,772 35.0% $38,374 35.0%
State income taxes, net of
Federal tax benefit ............. 6,984 4.6 6,252 4.8 6,559 5.9
Settlement of tax liability
with former subsidiary .......... (2,638) (2.4)
Taxes on foreign earnings ....... 835 .5 1,135 .9 738 .7
Amortization of goodwill ........ 841 .5 866 .6 1,070 1.0
Write-down of goodwill .......... 945 .6 1,750 1.3 648 .6
Benefit relating to sale of stock
of former subsidiary ............ (3,581) (2.7)
Energy credits .................. (2,511) (1.6)
Other--net ...................... 1,142 .8 906 .7 1,410 1.3
-------- ---- ------- ---- ------- ----
Provision for
income taxes .................... $ 61,797 40.4% $53,100 40.6% $46,161 42.1%
======== ==== ======= ==== ======= ====
</TABLE>
40
<PAGE>
The components of the net deferred income tax liability (expressed in
thousands of dollars) as of December 31, 1998 and 1997, were as follows:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Deferred Tax Assets:
Deferred income ................................ $ 999 $ 4,029
Accrued expenses ............................... 81,742 79,093
Other liabilities .............................. 34,271 28,325
Investment tax credits ......................... 20,813
Alternative minimum tax credits ................ 45,032 47,704
-------- --------
Total deferred tax assets ...................... 162,044 179,964
-------- --------
Deferred Tax Liabilities:
Unbilled accounts receivable ................... 46,174 45,384
Property, plant, and equipment ................. 428,858 428,185
Other .......................................... 34,333 33,046
-------- --------
Total deferred tax liabilities ................. 509,365 506,615
-------- --------
Net deferred tax liability ..................... $347,321 $326,651
======== ========
</TABLE>
Deferred tax assets and liabilities (expressed in thousands of dollars)
are presented as follows in the accompanying balance sheets:
<TABLE>
<CAPTION>
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net deferred tax liability--noncurrent ............. $396,648 $383,341
Less net deferred tax asset--current ............... 49,327 56,690
-------- --------
Net deferred tax liability ......................... $347,321 $326,651
-------- --------
-------- --------
</TABLE>
At December 31, 1998, for Federal income tax purposes, the Corporation
had alternative minimum tax credit carryforwards of approximately
$45,032,000 that have no expiration date. Deferred Federal income taxes have
been reduced by these amounts.
20. LEASES
Total rental expense amounted to $115,402,000, $100,449,000, and $91,351,000
(net of sublease income of $4,032,000, $2,113,000, and $1,427,000) for 1998,
1997, and 1996, respectively. Included in rental expense are amounts based
on contingent factors (principally sales) in excess of minimum rentals
amounting to $23,419,000, $23,365,000, and $20,970,000, for 1998, 1997, and
1996, respectively. Principal leases are for one waste-to-energy facility,
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, 1998:
<TABLE>
<S> <C>
1999 ............................................................... $ 95,769
2000 ............................................................... 87,183
2001 ............................................................... 83,829
2002 ............................................................... 79,997
2003 ............................................................... 78,315
Later years ........................................................ 667,381
----------
Total .............................................................. $1,092,474
==========
</TABLE>
These future minimum rental payment obligations include $453,184,000 of
future nonrecourse rental payments that relate to waste-to-energy
facilities, of which $310,562,000 is supported by third-party commitments to
provide sufficient service revenues to meet such obligations. The remaining
$142,622,000 relates to a waste-to-energy facility of which the Corporation
serves as operator and directly markets one half of the facility's waste
disposal capacity. This facility presently generates sufficient revenues
from short- and medium-term contracts to meet rental payments. The
Corporation anticipates renewing the short- and medium-term contracts or
entering into new contracts to generate sufficient revenues to meet those
remaining future rental payments. Also included is $53,620,000 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 rental payments. These
nonrecourse rental payments (in thousands of dollars) are due as follows:
<TABLE>
<S> <C>
1999 ................................................................. $ 33,273
2000 ................................................................. 34,554
2001 ................................................................. 36,006
2002 ................................................................. 36,488
2003 ................................................................. 36,664
Later years .......................................................... 329,819
--------
Total ................................................................ $506,804
========
</TABLE>
41
<PAGE>
21. 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, 1998, 1997, and 1996, is as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
Income Shares Per-Share Income Shares Per-Share Income Shares Per-Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net income ....... $86,970,000 $75,673,000 $64,534,000
Less: preferred
stock dividend ... 144,000 152,000 161,000
----------- ----------- -----------
Basic Earnings
Per Share ........ 86,826,000 49,836,000 $ 1.74 75,521,000 50,030,000 $ 1.51 64,373,000 49,663,000 $ 1.30
========= ======== =======
Effect of Dilutive
Securities:
Stock options .... 807,000 538,000 501,000
Convertible
preferred
stock ............ 144,000 257,000 152,000 275,000 161,000 289,000
6% convertible
debentures ....... 2,329,000 1,631,000 2,353,000 1,631,000 (A)
5 3/4%
convertible
debentures ....... 1,701,000 1,143,000 1,693,000 1,143,000 (A)
----------- ---------- ----------- ---------- ----------- ---------- -------
Diluted Earnings
Per Share ........ $91,000,000 53,674,000 $ 1.70 $79,719,000 53,617,000 $ 1.49 $64,534,000 50,453,000 $ 1.28
=========== ========== ========= =========== ========== ======== =========== ========== =======
</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 75,000 in 1998, 80,000 in 1997, and 2,100,400 in 1996.
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 544,000 in 1998 and 1997 and 2,175,000 in 1996 for the
6% convertible debentures and 381,000 in 1998 and 1997 and 1,524,000 in 1996
for the 5 3/4% convertible debentures.
22. COMMITMENTS AND CONTINGENT LIABILITIES
Ogden and certain of its subsidiaries have issued or are party to
performance bonds, 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 a vendor with specified amounts of
business over a three-year period. If these amounts are not provided, the
Corporation may be liable for prorated damages of up to approximately
$3,000,000. 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 $97,685,000 on December
30, 2002, if such debt is not refinanced prior to that time. 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, 1998, was $51,625,000.
In addition, at December 31, 1998, the Corporation had guaranteed
indebtedness of $19,363,000 of an affiliate and principal tenant of this
customer. Subsequent to December 31, 1998, such tenant repaid $8,637,000 of
indebtedness owed to Ogden, and Ogden's previous guarantees of the tenant's
indebtedness were released and replaced by a guarantee of $3,284,000 of the
tenant's senior secured term debt and a guarantee of up to $7,882,000 of the
tenant's
42
<PAGE>
secured revolving debt. In addition, Ogden is obligated to purchase
$19,704,000 of the tenant's secured subordinated indebtedness on January 29,
2004, if such indebtedness has not been repaid or refinanced prior to that
time. Ogden has guaranteed borrowings of another customer amounting to
approximately $12,900,000 as well as $8,800,000 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.
At December 31, 1998, capital commitments amounted to $224,735,000,
which included $148,035,000 for normal replacement, modernization, and
growth in Entertainment ($125,503,000); Aviation ($7,221,000); Energy
($15,200,000); and Corporate ($111,000) operations. Also included was
$66,100,000 for Energy's coal-fired power project in the Philippines, a
natural gas-fired power plant in Bangladesh, and an investment in a joint
venture, reflecting $44,400,000 for the remaining mandatory equity
contributions, $5,700,000 for contingent equity contributions, and
$16,000,000 for a standby letter of credit in support of debt service
reserve requirements. Funding for the remaining mandatory equity
contributions is being provided through bank credit facilities, which must
be repaid in June 2000 through December 2001. Energy also has a commitment
to pay, in 2008, $10,600,000 for a service contract extension at a
waste-to-energy facility. The Corporation also has contingent equity
contributions of $24,400,000 in Entertainment ($11,400,000) and Aviation
($13,000,000) joint ventures. In addition, compliance with the standards and
guidelines under the Clean Air Act Amendments of 1990 may require further
Energy capital expenditures of approximately $54,000,000 including amounts
that would be required if certain service agreement amendments are finalized
through December 2000, subject to the final time schedules determined by the
individual states in which the Corporation's waste-to-energy facilities are
located.
23. INFORMATION CONCERNING BUSINESS SEGMENTS
The Entertainment segment consists principally of interests in themed
attractions; live theatre; concerts; gaming; large-format theatres and
films; performing artist management; recorded music and video development;
food, beverage, and novelty concession operations; and facility management
at arenas, stadiums, amphitheatres, 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, amphitheatres, 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, and
aviation fueling 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").
The Financial Accounting Standards Board issued SFAS No. 131,
"Disclosures About Segments of an Enterprise and Related Information," in
June 1997, which is effective for years beginning after December 15, 1997.
This Statement establishes standards for the way in which public business
enterprises report information about operating segments in annual financial
statements.
Revenues and income from continuing operations (expressed in thousands
of dollars) for the years ended December 31, 1998, 1997, and 1996, were as
follows:
<TABLE>
<CAPTION>
1998 1997 1996
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
Entertainment .............................................. $ 485,555 $ 425,922 $ 391,933
Aviation ................................................... 310,324 363,264 426,746
Energy ..................................................... 804,043 712,272 724,281
Other ...................................................... 92,453 248,267 488,121
----------- ----------- -----------
Total revenues ............................................. $ 1,692,375 $ 1,749,725 $ 2,031,081
=========== =========== ===========
Income (Loss) from Operations:
Entertainment .............................................. $ 31,080 $ 30,545 $ 20,259
Aviation ................................................... 53,867 34,015 14,940
Energy ..................................................... 100,513 100,081 94,932
Other ...................................................... (2,720) 528 16,745
----------- ----------- -----------
Total income from operations ............................... 182,740 165,169 146,876
Equity in Net Income (Loss) of Investees and Joint Ventures:
Entertainment .............................................. (3,388) (3,091) (1,196)
Aviation ................................................... 2,945 3,343 1,231
Energy ..................................................... 19,251 1,605 325
Other ...................................................... 89 179 3,244
----------- ----------- -----------
Total ...................................................... 201,637 167,205 150,480
Corporate unallocated income and expenses--net ............. (32,660) (22,178) (22,941)
Corporate interest--net .................................... (15,947) (14,249) (17,898)
----------- ----------- -----------
Consolidated Income Before Income
Taxes and Minority Interest ................................ $ 153,030 $ 130,778 $ 109,641
=========== =========== ===========
</TABLE>
43
<PAGE>
Ogden's revenues include $62,148,000, $53,600,000, and $137,600,000 from
United States government contracts for the years ended December 31, 1998,
1997, and 1996, respectively.
Total revenues by segment reflect sales to unaffiliated customers. In
computing income from operations, none of the following has been added or
deducted: unallocated corporate expenses, nonoperating interest expense,
interest income, and income taxes.
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, 1998, 1997, and 1996, is as
follows:
<TABLE>
<CAPTION>
Identifiable Depreciation and Capital
Assets Amortization Additions
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
1998
Entertainment ................ $ 489,995 $ 22,197 $ 73,344
Aviation ..................... 235,214 11,402 31,055
Energy ....................... 2,858,816 75,809 32,237
Other ........................ 69,621 2,242 2,167
Corporate .................... 269,197 2,684 2,372
---------- -------- --------
Consolidated ................. $3,922,843 $114,334 $141,175
========== ======== ========
1997
Entertainment ................ $ 332,915 $ 14,731 $ 52,523
Aviation ..................... 191,710 13,129 19,008
Energy ....................... 2,808,571 72,835 39,967
Other ........................ 114,068 2,423 2,131
Corporate .................... 192,031 1,259 2,572
---------- -------- --------
Consolidated ................. $3,639,295 $104,377 $116,201
========== ======== ========
1996
Entertainment ................ $ 300,899 $ 13,980 $ 17,618
Aviation ..................... 213,264 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
========== ======== ========
</TABLE>
Ogden's areas of operations are principally in the United States.
Operations outside of the United States are worldwide but primarily in
Europe, Latin America, Asia, and Canada. No single foreign country or
geographic area is significant to the consolidated operations.
A summary of revenues and identifiable assets by geographic area for the
years ended December 31, 1998, 1997, and 1996 (expressed in thousands of
dollars), is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Revenues:
United States .................. $1,420,526 $1,500,755 $1,792,564
Europe ......................... 107,107 125,512 139,857
Latin America .................. 84,403 75,696 58,214
Asia ........................... 58,136 19,717 5,479
Canada ......................... 22,203 28,045 34,967
---------- ---------- ----------
Total .......................... $1,692,375 $1,749,725 $2,031,081
========== ========== ==========
Identifiable Assets:
United States .................. $3,348,609 $3,252,001 $3,322,455
Europe ......................... 123,820 113,936 140,327
Latin America .................. 170,306 68,688 53,875
Asia ........................... 233,039 160,209 28,564
Canada ......................... 39,341 43,433 52,311
Other .......................... 7,727 1,028
---------- ---------- ----------
Total .......................... $3,922,842 $3,639,295 $3,597,532
========== ========== ==========
</TABLE>
44
<PAGE>
24. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
<TABLE>
<CAPTION>
(Expressed in thousands of dollars) 1998 1997 1996
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Paid for Interest and Income Taxes:
Interest (net of amounts capitalized) .......... $ 134,604 $ 145,270 $ 134,560
Income taxes ................................... 14,419 24,187 20,552
Noncash Investing and Financing Activities:
Conversion of preferred shares for common shares 2 3 2
Detail of Entities Acquired:
Fair value of assets acquired .................. 72,039 152,836 38,019
Liabilities assumed ............................ (51,322) (89,624) (21,051)
Net cash paid for acquisitions ................. 20,717 63,212 16,968
</TABLE>
25. 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, 1998 and 1997, is summarized as
follows:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
1998 1997
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Assets:
Cash and cash equivalents ........................ $ 261,119 $ 261,119 $ 185,671 $ 185,671
Marketable securities ............................ 72,136 72,136 25,543 25,543
Receivables ...................................... 568,553 565,119 568,147 571,159
Restricted funds ................................. 291,475 290,141 309,895 309,711
Other assets ..................................... 641 641 1,116 1,116
Liabilities:
Notes payable .................................... 45,600 45,600
Debt ............................................. 421,519 469,093 373,728 413,453
Convertible subordinated debentures .............. 148,650 142,581 148,650 143,342
Project debt ..................................... 1,430,729 1,539,765 1,492,700 1,563,877
Other liabilities ................................ 17,699 14,098 21,175 18,729
Off Balance-Sheet Financial Instruments:
Unrealized losses on interest rate swap agreements 14,542 3,529
Unrealized gains on interest rate swap agreements 201
Guarantees ....................................... 9,190
</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, cash equivalents, and marketable securities, 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 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. The fair
value of restricted funds held in trust is based on quoted market prices of
the investments held by the trustee. Other assets, consisting primarily of
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 notes payable and 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. Ogden
financial guarantees provided on behalf of customers for which Ogden
receives fees are valued by discounting the future stream of payments using
the incremental borrowing rate of the Corporation.
The fair-value estimates presented herein are based on pertinent
information available to management as of December 31, 1998 and 1997.
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.
45
<PAGE>
INDEPENDENT AUDITORS' REPORT
Deloitte & Touche LLP Two World Financial Center
New York, NY 10281
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, 1998 and 1997, and the related
statements of shareholders' equity, consolidated income and comprehensive
income, and cash flows for each of the three years in the period ended December
31, 1998. 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, 1998 and 1997,
and the results of their operations and cash flows for each of the three years
in the period ended December 31, 1998, in conformity with generally accepted
accounting principles.
/s/ Deloitte & Touche LLP
February 9, 1999
46
<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.
/s/ R. Richard Ablon /s/ Raymond E. Dombrowski, Jr.
R. Richard Ablon Raymond E. Dombrowski, Jr.
Chairman of the Board, Senior Vice President and
President, and Chief Financial Officer
Chief Executive Officer
47
<PAGE>
Ogden Corporation and Subsidiaries
QUARTERLY RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
1998 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 .................................... $384,875 $472,455 $441,113 $393,932
-------- -------- -------- --------
Gross profit ...................................... $ 77,411 $102,098 $ 98,378 $ 84,952
-------- -------- -------- --------
Net income ........................................ $ 11,700 $ 27,060 $ 28,155 $ 20,055
-------- -------- -------- --------
Basic earnings per common share ................... $ 0.23 $ 0.54 $ 0.57 $ 0.41
-------- -------- -------- --------
Diluted earnings per common share ................. $ 0.23 $ 0.52 $ 0.55 $ 0.40
-------- -------- -------- --------
</TABLE>
<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 $ 91,551 $ 95,156 $ 89,061
-------- -------- -------- --------
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>
Ogden Corporation and Subsidiaries
PRICE RANGE OF STOCK AND DIVIDEND DATA
<TABLE>
<CAPTION>
1998 1997
- ----------------------------------------------------------------
High Low High Low
<S> <C> <C> <C> <C>
Common:
First Quarter ........ 29 3/4 24 1/2 22 5/8 18 3/8
Second Quarter ....... 32 1/2 26 15/16 22 19
Third Quarter ........ 28 7/8 23 24 5/8 20 3/8
Fourth Quarter ....... 28 7/16 23 5/8 28 7/16 23 5/8
----------------------------------------
Preferred:
First Quarter ........ 170 170 118 118
Second Quarter ....... 180 177 114 1/2 114 1/2
Third Quarter ........ 158 150 121 121
Fourth Quarter ....... 165 145 153 153
----------------------------------------
</TABLE>
Quarterly common stock dividends of $.3125 per share were paid to shareholders
of record for the four quarters of 1998 and 1997, the dividends for the last
quarters of 1998 and 1997 being paid in January of the subsequent years.
Quarterly dividends of $.8376 were paid for the four quarters of 1998 and 1997
on the $1.875 preferred stock.
48
<PAGE>
EXHIBIT 21
OGDEN CORPORATION - U.S. SUBSIDIARIES LIST
(See Attachment A for foreign subsidiaries list)
<TABLE>
<CAPTION>
Domestic Co. Code/
Company % Ownership State E.I.N.
- ------- ----------- ----- ------
<S> <C> <C> <C>
Ogden Corporation ...................................................................................DE............13-5549268
Ogden Energy Group, Inc. (f/k/a 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
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
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 Allied Abatement & Decontamination Service, Inc.............................100.........NY............144*/13-3429112
Ogden Allied Maintenance Corporation..............................................100.........NY............010*/13-65939
Datacom Custom Manufacturing, Inc..............................................100.........NY............086*/13-2629642
(f/k/a Atlantic Design Company, Inc.)
Lenzar Electro-Optics, Inc.....................................................100.........DE............175/59-3063752
Ogden Allied Payroll Services, Inc.............................................100.........NY............063*/13-6160158
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Domestic Co. Code/
Company % Ownership State E.I.N.
- ------- ----------- ----- ------
<S> <C> <C> <C>
Ogden Corporation (cont'd)
Ogden Services Corporation (cont'd)
Ogden Allied Maintenance Corporation (cont'd)
Ogden Aviation Services, Inc. (cont'd)
Ogden New York Services, Inc..............................................100.........NY............020/13-5623889
Ogden Pipeline Services Corporation.......................................100.........DE............125*/13-2949046
Ogden Cisco, Inc...............................................................100.........DE............157*/13-3670141
Ogden Communications, Inc......................................................100.........DE............130/13-3793364
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 Asia Pacific Services, Inc..................................................100.........DE............134/13-3793247
(See Attachment A for foreign subsidiaries)
Ogden Central and South America, Inc..............................................100.........DE............135/13-3793248
(See Attachment A for foreign subsidiaries)
OCSA Financing Services, Inc...................................................100.........DE............PENDING
Ogden Entertainment, Inc..........................................................100.........DE............001/11-2145117
Doggie Diner, Inc..............................................................100.........DE............003/92-1228666
I & S Consultants, Inc.........................................................100.........IL............/36-3241812
Jazzland, Inc..................................................................100.........DE............52-2096960
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-MEI, L.L.C............................................................... 50.........DE............13-4022873
Ogden American Food Services, Inc..............................................100.........OH............008/34-4197320
Ogden Attractions, Inc.........................................................100.........DE............/13-3934857
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 Event Security Services, 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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Domestic Co. Code/
Company % Ownership State E.I.N.
- ------- ----------- ----- ------
<S> <C> <C> <C>
Ogden Corporation (cont'd)
Ogden Services Corporation (cont'd)
Ogden Entertainment, Inc. (cont'd)
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 Fairmount Racing, Inc............................................100.........DE............PENDING
Shoreline Operating Company, Inc. 100.........CA............77-0484063
Ogden Firehole Entertainment Corp.................................................100.........DE............/13-3516164
Ogden International Europe Inc. ..................................................100.........DE............164/13-88536
(See Attachment A for foreign subsidiaries)
Ogden Resource Recovery Support Services, Inc.....................................100.........DE............149*/13-3560729
Ogden Plant Services of New Jersey, Inc........................................100.........NJ............176/13-3597547
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 Water Treatment Support Services, Inc.......................................100.........DE............199*/13-3807441
</TABLE>
* For payroll/personnel, add 200 to codes of Maintenance companies only.
<PAGE>
ATTACHMENT A
OGDEN CORPORATION - FOREIGN SUBSIDIARIES LIST
<TABLE>
<CAPTION>
Domestic Co. Code/
Company % Ownership State/Country E.I.N.
- ------- ----------- ------------- ------
<S> <C> <C> <C>
Ogden Corporation .......................................................................................DE/U.S.A.
Aeropuertos Argentina 2000 S.A........................................................28.............Argentina
Compania de Desarrollo Aeropuerto Eldorado, S.A. (CODAD, S.A.)........................19.............Columbia
Ogden Services Corporation...........................................................100.............DE/U.S.A..........141
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
Ogden Asia Pacific Services, Inc..................................................100.............DE/U.S.A.
HO/Ogden Investimentos e Transportes, Limitada................................. 51.............Macau
IEA of Japan Company Ltd....................................................... 50.............Japan
MASC/Ogden Aviation Services (Macau) Limited................................... 29.............Macau
Ogden Asia Pacific Holding Limited.............................................100.............British Virgin Islands.
Ogden Aviation (Asia Pacific) Limited....................................90.1.............British Virgin Islands
Ogden Aviation (Hong Kong) Limited.....................................100.............Hong Kong
Ogden Aviation Services (NZ) Limited...........................................100.............New Zealand.......156
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
Ogden Aviation Services Limited...................................................100.............U.K.186/2176414259610
Ogden Aviation Engineering Limited.............................................100.............U.K...............188
Ogden Cargo Limited............................................................100.............U.K.
Air Cargo Enterprises Limited............................................. 50.............U.K.
SkyCare Limited...........................................................100.............U.K.
Ogden Entertainment Services (UK) Ltd..........................................100.............U.K...............015
Ogden Ice Hockey Limited..................................................100.............U.K.
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
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Domestic Co. Code/
Company % Ownership State/Country E.I.N.
- ------- ----------- ------------- ------
<S> <C> <C> <C>
Ogden Corporation (cont'd)
Ogden Services Corporation (cont'd)
Ogden Central and South America, Inc. (cont'd.)
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 Peru, S.R.L..............................................................100.............Peru
Ogden & Talma Aviation Services of Peru, S.A. .............................50.............Peru
Ogden Saint Maarten Ground Services N.V........................................100.............Netherlands Antilles
Ogden SEITSA Leasing, S.A. de C.V.............................................94.9.............Mexico............183
Compania Legir S.A.............................................................100.............100...............Uruguay
Irodel, S.A....................................................................100.............100...............Uruguay
Menezul, S.A...................................................................100.............100...............Uruguay
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 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 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 Holdings (Deutschland) GmbH.........................................100.............Germany...........192
Ogden Rhino Management Company Limited....................................100.............U.K...............
Graecor Beteiligungsverwaltungs GmbH......................................100.............Austria
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 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
</TABLE>
<PAGE>
ATTACHMENT B
OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
<S> <C> <C> <C>
Ogden Energy Group, Inc........................................................100...................Delaware..... 13-3939460
Ogden Energy Group do Brasil Ltda...........................................100(f)................Brazil.......02.310.557/0001-54
Ogden Projects, Inc.........................................................100...................Delaware.......13-3213657
Ogden Energy, Inc...........................................................100...................Delaware.......22-3405522
Ogden Madhya Pradesh Operating Private Limited...........................100...................India.......... NA
Ogden Philippines Operating, Inc.........................................100...................Cayman Islands. NA
. . . . . . .Ogden Energy West, Inc............................................100...................Delaware....... NA
. . . . . . . . . Ogden Energy Sao Jeronimo, Inc...............................100...................Delaware....... NA
. . . . . . . . . . . . .Mecaril S.A...........................................100...................Uruguay........ NA
. . . . . . . . . . . . Cladox International S.A...............................100...................Uruguay........ 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(d)................Philippine..... NA
Hungarian-American Geothermal Limited Liability Company.......37.5(g)...............Hungary........ NA
LINASA Cogeneracion y Asociados, S.L.......................... 50(e) .............Spain..........B30556484
Ogden Energy India Investments Ltd............................100...................Mauritius...... NA
. . . . . .Ogden Chinese Investments Ltd........................100...................Mauritius......98-0183946
. . . . . . . . Ogden Energy China (Alpha) Ltd..................100...................Mauritius......98-0183947
. . . . . . . . Ogden Energy China (Beta) Ltd...................100...................Mauritius......98-0183949
. . . . . . . . Ogden Energy China (Delta) Ltd..................100...................Mauritius......98-0183951
. . . . . . . . Ogden Energy China (Gamma) Ltd..................100...................Mauritius......98-0183952
. . .Ogden Energy of Bongaigaon Private Limited..............100...................India.......... N/A
. . ........Ogden Energy India (CBM) Limited........................100...................Mauritius...... NA
. . . . . .Ogden Taiwan Investments Limited.....................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
Quezon Power, Inc. (new dvlpmnt co.).................... 27.5(b)..............Cayman Islands. NA
(f/k/a Ogden Quezon Power, Inc.- old dvlpmnt. co.)
. . . 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 Energy Asia Pacific Limited..........................100(a)................Hong Kong...... NA
(f/k/a Ogden Projects Asia Pacific Limited)
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
</TABLE>
Page 1 OEG Foreign subsidiaries are highlighted in bold.
<PAGE>
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
<S> <C> <C> <C>
Ogden Energy Group, Inc. (cont.)
Ogden Projects, Inc. (cont.)
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
Three Mountain Power, LLC........................................100...................Delawaare......22-3604711
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 Engineering and Construction, Inc..................................100...................Florida........59-2661991
(f/k/a Ogden Remediation Services Co., Inc.)
Ogden umwelt und energie systeme GmbH....................................100...................Germany........ NA
IEAL energie & umwelt consult, GmbH..................................100...................Germany........ NA
Olmec Insurance, Ltd.....................................................100...................Bermuda ....... NA
Ogden Martin Operations of Union, LLC.......................................100(i)................New Jersey.....22-3596572
Ogden Waste to Energy, Inc..................................................100...................Delaware ......13-3871973
Ogden Energy Resource Corp...............................................100...................Delaware.......63-0837475
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 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
</TABLE>
Page 2 OEG Foreign subsidiaries are highlighted in bold.
<PAGE>
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
<S> <C> <C> <C>
Ogden Energy Group, Inc. (cont.)
Ogden Projects, Inc. (cont.)
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
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 Tampa, Inc....................................100..................Florida.........22-3603324
Ogden Martin Systems of Tulsa, Inc....................................100..................Oklahoma........13-3203172
Ogden Martin Systems of Union, Inc....................................100..................New Jersey......13-3323867
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 Projects of Haverhill, Inc.........................................100..................Massachusetts...13-3522006
Ogden Wallingford Associates, Inc........................................100..................Connecticut.....13-3494166
Ogden Waste to Energy Asia Investments...................................100..................Mauritius....... NA
Ogden Waste to Energy of Italy, Inc......................................100..................Delaware........22-3564096
Ambiente 2000 S.r.l...................................................40(h)................Italy........... NA
Ogden Waste Treatment Services, Inc......................................100..................Delaware........13-3362679
Ogden Waste Solutions, Inc............................................100..................Delaware........22-3557169
Ogden Waste Treatment Services USA, Inc..................................100..................Delaware........13-3940678
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
OPI Carmona Limited......................................................100..................Cayman Islands.. NA
OPI Carmona One Limited..................................................100..................Cayman Islands.. 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 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
Yorkshire USA, Inc..........................................................100(c) .............Delaware........51-0354748
</TABLE>
Page 3 OEG Foreign subsidiaries are highlighted in bold.
<PAGE>
(a) Ogden Energy Asia Pacific Limited's stock is owned 50% by Ogden Projects,
Inc. and 50% by Ogden Power Development, Inc.
(b) Quezon Power, Inc (new development company) is owned 27.5% by Ogden Power
Development - Cayman, Inc., and 72.5% by Quezon Generating Company, Ltd.
(c) Yorkshire USA, Inc. was acquired by Ogden Projects, Inc. when Yorkshire
Water terminated its involvement as a direct participant in the Venture.
(d) 40% of the stock of Island Power Corporation is owned by Ogden Power
International Holdings, Inc. and 60% is owned by various stockholders.
(e) 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.
(f) 50% of the stock of Ogden Energy Group do Brasil Ltda is owned by Ogden
Energy Group, Inc. and 50% by Ogden Projects, Inc. Ogden Energy Group, Inc. is
the Management Company.
(g) 37.5% of the stock of Hungarian-American Geothermal Limited Liability
Company is owned by Ogden Power International Holdings, Inc., 37.5 % is owned by
Davenport Power, L.L.C. and 25% is owned by MOL Magyar Olau-es G_zipari Rt.
(h) 40% of the stock of Ambiente 2000 S.r.l. is owned by Ogden Waste to Energy
of Italy, Inc. and 60% is owned by Ecosesto S.p.A.
(i) 99% of the stock of Ogden Martin Operations of Union LLC is owned by Ogden
Projects, Inc. and 1% is owned by Ogden Waste to Energy, Inc.
<PAGE>
ATTACHMENT B
OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST
<TABLE>
<CAPTION>
COMPANY
- -------
<S> <C> <C> <C>
Ogden Energy Group, Inc.
Ogden Energy Group do Brasil Ltda.
Ogden Projects, Inc.
Ogden Energy, Inc.
Ogden Madhya Pradesh Operating Private Limited
Ogden Philippines Operating, Inc.
Ogden Energy West, Inc.
.. . . . . .Ogden Energy Sao Jeronimo, Inc.
.. . . . . . . . . . . . . Mecaril S.A.
.. . . . . .Ogden Power Corporation
Geothermal, Inc.
Imperial Power Services, Inc.
New Martinsville Hydro-Operations Corporation
Ogden Brandywine Operations, Inc.
Ogden Geothermal Operations, Inc.
Ogden Hydro Operations, Inc.
Ogden Oil & Gas, Inc.
Ogden Power Equity Corporation
Catalyst New Martinsville Hydroelectric Corporation
ERC Energy, Inc.
Ogden Heber Field Energy, Inc.
Ogden Hydro Energy, Inc.
Ogden Power International Holdings, Inc.
Edison Bataan Cogeneration Corporation
Hidro Operaciones Don Pedro S.A.
Island Power Corporation
Hungarian-American Geothermal Limited Liability Company
LINASA Cogeneracion y Asociados, S.L.
Ogden Energy India Investments Ltd.
. . . .Ogden Chinese Investments Ltd.
. . . . . . . . Ogden Energy China (Alpha) Ltd.
. . . . . . . . Ogden Energy China (Beta) Ltd.
. . . . . . . . Ogden Energy China (Delta) Ltd
. . . . . . . . Ogden Energy China (Gamma) Ltd
Ogden Energy of Bongaigaon Private Limited
Ogden Energy India (CBM) Limited
Ogden Taiwan Investments Limited
Ogden Energy Philippine Holdings, Inc.
OPI Quezon, Inc.
Ogden Power Development - Cayman, Inc.
Quezon Power, Inc. (new dvlpmnt co.)
Ogden Power Development, Inc.
Ogden Power Development of Bolivia, Inc.
</TABLE>
Page 1 OEG Foreign subsidiaries are highlighted in bold.
<PAGE>
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
<S> <C> <C> <C>
Ogden Energy Group, Inc. (cont.)
Ogden Projects, Inc. (cont.)
. . . OPDB, Ltd.
Ogden Energy Asia Pacific Limited
Ogden Power Pacific, Inc. (f/k/a Pacific Energy)
Burney Mountain Power
Mammoth Geothermal Company
Mammoth Power Company
Mt. Lassen Power
Ogden Power Plant Operations
Pacific Energy Resources Incorporated
Pacific Geothermal Company
Pacific Hydropower Company
Pacific Oroville Power, Inc.
Pacific Penobscot Power Company
Pacific Recovery Corporation
Pacific Wood Fuels Company
Pacific Wood Services Company
Penstock Power Company
8309 Tujunga Avenue Corp.
Ogden Rosemary Operations, Inc.
Ogden SIGC Energy, Inc.
AMOR 14 Corporation
Ogden SIGC Energy II, Inc.
Ogden SIGC Geothermal Operations, Inc.
Three Mountain Power, LLC
Ogden Environmental and Energy Services Co., Inc.
Analytical Technologies, Inc.
G A Technical Services, Inc.
Multiple Dynamics Corporation
Ogden Environmental and Energy Services Co., Inc. of Ohio
Ogden Environmental and Engineering Services Co., Inc.
Ogden Environmental Federal Services Co., Inc.
Ogden Engineering and Construction, Inc.
Ogden umwelt und energie systeme GmbH
IEAL energie & umwelt consult, GmbH
Olmec Insurance, Ltd.
Ogden Martin Operations of Union, LLC
Ogden Waste to Energy, Inc.
Ogden Energy Resource Corp.
Ogden Martin Systems, Inc.
Ogden Engineering Services, Inc.
Ogden Marion Land Corp.
Ogden Martin Systems of Alexandria/Arlington, Inc.
</TABLE>
Page 2 OEG Foreign subsidiaries are highlighted in bold.
<PAGE>
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
<S> <C> <C> <C>
Ogden Energy Group, Inc. (cont.)
Ogden Projects, Inc. (cont.)
OMS Equity of Alexandria/Arlington, Inc.
Ogden Martin Systems of Babylon, Inc.
Ogden Martin Systems of Bristol, Inc.
Ogden Martin Systems of Clark, Inc.
OMSC One, Inc.
OMSC Two, Inc.
OMSC Three, Inc.
OMSC Four, Inc.
Ogden Martin Systems of Fairfax, Inc.
Ogden Martin Systems of Haverhill, Inc.
Haverhill Power, Inc.
LMI, Inc.
Ogden Omega Lease, Inc.
Ogden Haverhill Properties, Inc.
Ogden Martin Systems of Hillsborough, Inc.
Ogden Martin Systems of Huntington, Inc.
Ogden Martin Systems of Huntington Resource Recovery One Corp.
Ogden Martin Systems of Huntington Resource Recovery Two Corp.
Ogden Martin Systems of Huntington Resource Recovery Three Corp.
Ogden Martin Systems of Huntington Resource Recovery Four Corp.
Ogden Martin Systems of Huntington Resource Recovery Five Corp.
Ogden Martin Systems of Huntington Resource Recovery Six Corp.
Ogden Martin Systems of Huntington Resource Recovery Seven Corp.
Ogden Martin Systems of Huntsville, Inc.
Ogden Martin Systems of Indianapolis, Inc.
Ogden Martin Systems of Kent, Inc.
NRG/Recovery Group, Inc. (f/k/a Ogden Martin Systems of Lake, Inc.)
Ogden Martin Systems of Lancaster, Inc.
Ogden Martin Systems of Lawrence, Inc.
Ogden Martin Systems of Lee, Inc.
Ogden Martin Systems of Long Island, Inc.
Ogden Martin Systems of Marion, Inc.
Ogden Martin Systems of Mercer, Inc.
Ogden Martin Systems of Montgomery, Inc.
Ogden Martin Systems of Onondaga, Inc.
Ogden Martin Systems of Onondaga Two Corp.
Ogden Martin Systems of Onondaga Three Corp.
Ogden Martin Systems of Onondaga Four Corp.
Ogden Martin Systems of Onondaga Five Corp.
OMS Onondaga Operations, Inc.
Ogden Martin Systems of Pasco, Inc.
Ogden Martin Systems of San Bernardino, Inc.
</TABLE>
Page 3 OEG Foreign subsidiaries are highlighted in bold.
<PAGE>
<TABLE>
<CAPTION>
PERCENT
COMPANY OWNERSHIP INCORP. E.I.N.
- ------- --------- ------- ------
<S> <C> <C> <C>
Ogden Energy Group, Inc. (cont.)
Ogden Projects, Inc. (cont.)
Ogden Martin Systems of Stanislaus, Inc.
OMS Equity of Stanislaus, Inc.
Ogden Martin Systems of Tampa, Inc.
Ogden Martin Systems of Tulsa, Inc.
Ogden Martin Systems of Union, Inc.
Ogden Waste to Energy, Ltd. (formerly Ogden Martin Systems, Ltd)
Ogden Martin Systems of Nova Scotia, Ltd.
Ogden Projects of Haverhill, Inc.
Ogden Wallingford Associates, Inc.
Ogden Waste to Energy Asia Investments
Ogden Waste to Energy of Italy, Inc.
Ambiente 2000 S.r.l.
Ogden Waste Treatment Services, Inc.
Ogden Waste Solutions, Inc.
Ogden Waste Treatment Services USA, Inc.
OPW Associates, Inc
OPWH, Inc. .................
RRS Holdings Inc.
Michigan Waste Energy, Inc.
Oahu Waste Energy Recovery, Inc.
Ogden Projects of Hawaii, Inc.
Resource Recovery Systems of Connecticut, Inc.
OPI Carmona Limited
OPI Carmona One Limited
Ogden Energy Engineering, Inc.
Ogden Projects Holdings, Inc.
Ogden Water Holdings, Inc.
Ogden Water Systems, Inc.
Ogden Yorkshire Acquisition, Inc.
Cunningham Environmental Support, Inc.
Ogden Yorkshire Water of Bessemer, Inc.
Ogden Yorkshire Water of Canada, Ltd.
Ogden Yorkshire Water of Taunton, Inc.
Ogden Water Systems of Canada, Ltd.
Yorkshire USA, Inc.
</TABLE>
<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 of Ogden
Corporation on Forms S-8 of our report dated February 9, 1999, appearing or
incorporated by reference in the Annual Report on Form 10-K of Ogden
Corporation for the year ended December 31, 1998.
/s/ Deloitte & Touche LLP
New York, New York
March 29, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 261,119
<SECURITIES> 44,685
<RECEIVABLES> 425,518
<ALLOWANCES> 30,595
<INVENTORY> 31,100
<CURRENT-ASSETS> 954,449
<PP&E> 2,633,022
<DEPRECIATION> 645,379
<TOTAL-ASSETS> 3,922,843
<CURRENT-LIABILITIES> 624,774
<BONDS> 1,907,465
0
43
<COMMON> 24,473
<OTHER-SE> 524,584
<TOTAL-LIABILITY-AND-EQUITY> 3,922,843
<SALES> 512,958
<TOTAL-REVENUES> 1,692,175
<CGS> 432,438
<TOTAL-COSTS> 987,971
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,490
<INTEREST-EXPENSE> 33,900
<INCOME-PRETAX> 150,030
<INCOME-TAX> 61,797
<INCOME-CONTINUING> 86,970
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 86,970
<EPS-PRIMARY> 1.74
<EPS-DILUTED> 1.70
</TABLE>
