<PAGE>
FORM 10-Q
---------
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
----------------------
(MARK ONE)
----------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
----------------------------------------------------------------------
EXCHANGE ACT OF 1934
--------------------
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2000
--------------------------------------------------------------------------------
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. Employer Identification
incorporation or organization) Number)
TWO PENNSYLVANIA PLAZA, NEW YORK, NEW YORK 10121
-------------------------------------------------
(Address or principal executive office) (Zip Code)
(212)-868-6100
-------------------------------------------------
(Registrant's telephone number including
area code)
NOT APPLICABLE
-------------------------------------------------
(Former name, former address and former
fiscal year, if changed since last report)
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
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's classes of common
stock, as of June 30, 2000; 49,621,946 shares of Common Stock, $.50 par value
per share.
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE THREE MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
--------- --------- -------- ---------
(In Thousands of Dollars, Except per Share Data)
<S> <C> <C> <C> <C>
Service revenues $ 435,498 $ 387,622 $ 231,333 $ 204,794
Net sales 19,950 26,538 10,321 13,507
Construction revenues 41,727 67,870 18,881 33,769
Net (loss) gain on disposition of
businesses (634) 4,864
--------- --------- --------- ---------
Total revenues 496,541 486,894 260,535 252,070
--------- --------- --------- ---------
Operating costs and expenses 323,190 266,425 165,668 130,866
Costs of goods sold 18,123 29,139 7,895 15,833
Construction costs 44,269 65,209 22,911 32,934
Selling, administrative and
general expenses 49,428 43,062 28,091 23,757
Debt service charges 46,373 46,699 22,879 23,936
--------- --------- --------- ---------
Total costs and expenses 481,383 450,534 247,444 227,326
--------- --------- --------- ---------
Consolidated operating income 15,158 36,360 13,091 24,744
Equity in net income of
investees and joint ventures 7,457 5,944 4,447 2,474
Interest income 2,676 2,797 1,703 702
Interest expense (20,892) (16,373) (11,434) (8,405)
Other income (deductions)-net (17,404) 5,174 (17,359) 5,108
--------- --------- --------- ---------
Income (loss) from continuing operations
before income taxes, minority
interests, and the cumulative effect of
change in accounting principle (13,005) 33,902 (9,552) 24,623
Income taxes 581 (11,033) (22) (8,029)
Minority interests (2,164) (2,542) (840) (326)
--------- --------- --------- ---------
Income (loss) from continuing operations (14,588) 20,327 (10,414) 16,268
--------- --------- --------- ---------
Discontinued operations:
Income (loss) from operations of
discontinued Aviation and Entertainment
segments (net of income taxes YTD, 2000,
($11,544); 1999,$12,425;
QTR, 2000, ($ 3,867); 1999,$ 7,783) (26,662) 15,186 (1,352) 8,724
Loss on disposal of Aviation and
Entertainment segments, including provision of
$8,500 for operating losses through
disposition, (less applicable income
taxes of ($1,210)) (65,137) (65,137)
--------- --------- --------- ---------
Income (loss) from discontinued operations (91,799) 15,186 (66,489) 8,724
--------- --------- --------- ---------
Cumulative effect of change in accounting
principle (net of income taxes of $1,313) (3,820)
--------- --------- --------- ---------
Net Income (Loss) (106,387) 31,693 (76,903) 24,992
--------- --------- --------- ---------
Other Comprehensive Income, Net of Tax:
Foreign currency translation adjustments (7,700) (7,357) (2,826) (1,152)
Unrealized holding losses arising
during period (17) (549) (429)
--------- --------- --------- ---------
Other comprehensive income (7,717) (7,906) (2,826) (1,581)
--------- --------- --------- ---------
Comprehensive income (loss) $(114,104) $ 23,787 $ (79,729) $ 23,411
========= ========= ========= =========
BASIC EARNINGS PER SHARE:
Income (loss) from continuing
operations $ (0.30) $ 0.41 $ (0.21) $ 0.33
Income (loss) from discontinued operations (1.85) 0.31 (1.34) 0.18
Cumulative effect of change
in accounting principle (0.08)
--------- --------- --------- ---------
Net Income (loss) $ (2.15) $ 0.64 $ (1.55) $ 0.51
========= ========= ========= =========
DILUTED EARNINGS PER SHARE:
Income (loss) from continuing
operations $ (0.30) $ 0.41 $ (0.21) $ 0.33
Income (loss) from discontinued operations (1.85) 0.31 (1.34) 0.17
Cumulative effect of change in
accounting principle (0.08)
--------- --------- --------- ---------
Net Income (Loss) $ (2.15) $ 0.64 $ (1.55) $ 0.50
========= ========= ========= =========
</TABLE>
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
2000 1999
----------- ------------
(In Thousands of Dollars)
ASSETS
------
Current Assets:
Cash and cash equivalents $ 119,553 $ 101,020
Restricted cash - intended to repay debt 177,548
Restricted funds held in trust 102,701 103,662
Receivables (less allowances: 2000,
$25,666 and 1999, $17,942) 272,746 294,051
Inventories 10,504 10,767
Deferred income taxes 36,939 36,189
Other 84,827 79,052
Net assets of discontinued operations 221,939 568,146
----------- -----------
Total current assets 1,026,757 1,192,887
Property, plant and equipment-net 1,817,050 1,841,811
Restricted funds held in trust 150,372 166,784
Unbilled service and other receivables 160,512 159,457
Unamortized contract acquisition costs 94,576 94,998
Goodwill and other intangible assets 15,445 12,520
Investments in and advances to investees and
joint ventures 201,744 180,523
Other assets 69,971 78,168
----------- -----------
Total Assets $ 3,536,427 $ 3,727,148
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Liabilities:
Current Liabilities:
Current portion of long-term debt $ 114,425 $ 113,815
Current portion of project debt 124,039 80,383
Accounts payable 56,099 75,169
Accrued expenses, etc 332,032 360,155
Deferred income 36,518 45,806
----------- -----------
Total current liabilities 663,113 675,328
Long-term debt 340,809 344,945
Project debt 1,317,023 1,390,832
Deferred income taxes 382,468 380,812
Deferred income 177,342 182,663
Other liabilities 142,909 127,559
Minority interests 33,569 33,309
Convertible subordinated debentures 148,650 148,650
----------- -----------
Total Liabilities 3,205,883 3,284,098
----------- -----------
Shareholders' Equity:
Serial cumulative convertible preferred stock,
par value $1.00 per share; authorized 4,000,000
shares; shares outstanding: 36,742 in 2000, and
39,246 in 1999, net of treasury shares of 29,820
in 2000 and 1999 37 39
Common stock, par value $.50 per share; authorized,
80,000,000 shares; shares outstanding: 49,621,946
in 2000 and 49,468,195 in 1999, net of treasury
shares of 4,281,697 and 4,405,103 in 2000 and 1999,
respectively 24,811 24,734
Capital surplus 185,472 183,915
Earned surplus 148,761 255,182
Accumulated other comprehensive income (28,537) (20,820)
----------- -----------
Total Shareholders' Equity 330,544 443,050
----------- -----------
Total Liabilities and Shareholders' Equity $ 3,536,427 $ 3,727,148
=========== ===========
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 2000 December 31, 1999
Shares Amounts Shares Amounts
------------------- -----------------------
(In Thousands of Dollars, Except Per Share Amounts)
<S> <C> <C> <C> <C>
Serial Cumulative Convertible Preferred
Stock, Par Value $1.00 Per Share;
authorized 4,000,000 Shares:
Balance at beginning of period 69,066 $ 69 72,038 $ 73
Shares converted into common stock (2,504) (2) (2,972) (4)
----------- ------------ ------------ ------------
Total 66,562 67 69,066 69
Treasury shares (29,820) (30) (29,820) (30)
----------- ------------ ------------ ------------
Balance at end of period (aggregate
involuntary liquidation value - 2000,
$740) 36,742 37 39,246 39
----------- ------------ ------------ ------------
Common Stock, Par Value $.50 Per Share;
Authorized, 80,000,000 shares:
Balance at beginning of period 53,873,298 26,937 53,507,952 26,754
Exercise of stock options 155,801 78
Shares issued for acquisition 15,390 8 191,800 96
Conversion of preferred shares 14,955 7 17,745 9
----------- ------------ ------------ ------------
Total 53,903,643 26,952 53,873,298 26,937
----------- ------------ ------------ ------------
Treasury shares at beginning of period 4,405,103 2,203 4,561,963 2,281
Purchase of treasury shares 102,000 51
Issuance of restricted stock (123,406) (62)
Exercise of stock options (258,860) (129)
----------- ------------ ------------ ------------
Treasury shares at end of period 4,281,697 2,141 4,405,103 2,203
----------- ------------ ------------ ------------
Balance at end of period 49,621,946 24,811 49,468,195 24,734
----------- ------------ ------------ ------------
Capital Surplus:
Balance at beginning of period 183,915 173,413
Exercise of stock options 8,061
Issuance of restricted stock 1,390
Shares issued for acquisition 172 4,904
Purchase of treasury shares (2,458)
Conversion of preferred shares (5) (5)
------------ ------------
Balance at end of period 185,472 183,915
------------ ------------
Earned Surplus:
Balance at beginning of period 255,182 367,984
Net Loss (106,387) (81,961)
------------ ------------
Total 148,795 286,023
------------ ------------
Preferred dividends-per share 2000,
$.9375 and 1999,$3.35 34 137
Common dividends-per share 1999, $.625 30,704
------------ ------------
Total dividends 34 30,841
------------ ------------
Balance at end of period 148,761 255,182
------------ ------------
Cumulative Translation Adjustment-Net (28,363) (20,663)
------------ ------------
Minimum Pension Liability Adjustment (307) (307)
------------ ------------
Net Unrealized Gain on Securities
Available For Sale 133 150
------------ ------------
CONSOLIDATED SHAREHOLDERS' EQUITY $ 330,544 $ 443,050
============ ============
</TABLE>
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
JUNE 30,
2000 1999
----------- ---------
(In Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $(106,387) $ 31,693
Adjustments to Reconcile Net Income (Loss)
to Net Cash Provided by (Used in) Operating
Activities of Continuing Operations:
Loss (income) from discontinued operations 91,799 (15,186)
Depreciation and amortization 51,294 42,568
Deferred income taxes (1,188) 14,632
Cumulative effect of change in accounting principle 3,820
Other 8,176 (14,720)
Management of Operating Assets and Liabilities:
Decrease (Increase) in Assets:
Receivables (5,628) (4,804)
Inventories 110 3,482
Other assets (1,183) 3,302
Increase (Decrease) in Liabilities:
Accounts payable (17,399) 22,398
Accrued expenses (37,397) (23,639)
Deferred income (10,138) (609)
Other liabilities 11,885 (45,199)
--------- ---------
Net cash provided by (used in) operating
activities of continuing operations (16,056) 17,738
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business and other 4,848 9,760
Proceeds from sale of property, plant and equipment 3,626 345
Proceeds from sale of marketable securities
available for sale 3,692 44,685
Entities purchased, net of cash acquired (69,494)
Investments in facilities (17,908) (21,480)
Other capital expenditures (9,645) (7,914)
Decrease in other receivables 3,501 338
Distributions from investees and joint ventures 5,828 7,600
Increase in investments in and advances to
investees and joint ventures (19,740) (20,992)
--------- ---------
Net cash used in investing activities of
continuing operations (25,798) (57,152)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings for facilities 61,605 3,816
New debt 1,755 65,318
Decrease (increase) in funds held in trust 17,369 (7,421)
Increase in restricted cash (177,548)
Payment of debt (95,444) (23,501)
Dividends paid (34) (30,762)
Purchase of treasury shares (2,509)
Proceeds from exercise of stock options 3,412
Other (1,904) (3,324)
--------- ---------
Net cash provided by (used in) financing
activities of continuing operations (194,201) 5,029
--------- ---------
Net cash provided by (used in)
discontinued operations 254,588 (85,851)
--------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 18,533 (120,236)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 101,020 181,169
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 119,553 $ 60,933
========= =========
<PAGE>
OGDEN CORPORATION AND SUBSIDIARIES
JUNE 30, 2000
ITEM 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. However, in the opinion of Management, all
adjustments consisting of normal recurring accruals necessary for a fair
presentation of the operating results have been included in the statements.
On January 1, 1999 Ogden Corporation (hereinafter together with its consolidated
subsidiaries referred to as "Ogden" or the "Company") adopted the American
Institute of Certified Public Accountants Statement of Position (SOP) 98-5
"Reporting on the Costs of Start-Up Activities". This SOP established accounting
standards for these costs and requires they generally be expensed as incurred.
The effect of the adoption of this SOP was a charge of $3,820,000 net of income
taxes of $1,313,000 recorded as a cumulative effect of change in accounting
principle in the accompanying financial statements.
The accompanying financial statements for the prior periods have been
reclassified as to certain amounts to conform with the 2000 presentation.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 established accounting and
reporting standards for derivative instruments and for hedging activities. The
Company will adopt SFAS No. 133 on January 1, 2001 and is in the process of
determining the impact that adoption of this SFAS will have on the Company's
financial position and results of operations.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This SAB provides guidance on the recognition, presentation, and
disclosure of revenue, and will be implemented by the Company in the quarter
ending December 31, 2000. The Company continues to study the SAB, however, it is
anticipated that its adoption will
1
<PAGE>
not materially affect the Company's consolidated financial position and results
of operations.
DISCONTINUED OPERATIONS:
On September 29, 1999, the Board of Directors of the Company approved a plan
to dispose of all of the operations of the Entertainment and Aviation
segments and to report the results of operations from those segments
prospectively as Discontinued Operations. Information for two segments
previously reflected under the segment headings "Energy" and "Other" are now
reported as Continuing Operations and will continue to be reported under
those headings. At June 30, 2000, the Company had approximately $222,000,000
in net assets associated with its discontinued operations. In addition, the
Company had associated debt with respect to the discontinued operations of
approximately $39,000,000. Since September 29, 1999 the Company has retained
financial advisors to assist it in determining how best to group the assets
to maximize sales proceeds. As part of that process, in the second quarter of
2000, the Company closed transactions for the sales of its Themed Parks and
Attractions, including its Jazzland theme park, its Food and Beverage/Venue
Management business and its airport privatization business in Argentina.
Further, the Company announced the sale of its Aviation Ground Service
business and expects to close that sale transaction within the next sixty
days. The Company is currently in various phases of negotiations with respect
to the disposition of the remaining Aviation and Entertainment businesses.
Finally, certain aspects of the businesses will require the Company to pay
monies to terminate leases or cancel other contractual commitments. As a
result of the final negotiations on the above-mentioned transactions and
contract, and the progress made on the sale of the other Aviation and
Entertainment businesses, the Company revised the net realized value of these
segments and reported a net charge of $65,100,000 which includes $7,300,000
representing estimated after tax operating losses of the discontinued
operations from July 1, 2000 through their respective anticipated dates of
disposal. This, combined with net losses of $1,400,000 from those segments'
operations, resulted in a loss from discontinued operations of $66,500,000
for the three months ended June 30, 2000.
2
<PAGE>
Net sales and income (loss) from discontinued operations are as follows:
Six Months Ended Three Months Ended
JUNE 30, JUNE 30,
----------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
(In Thousands of Dollars)
Revenues $303,049 $370,470 $147,444 $208,748
======== ======== ======== ========
(Loss) on Disposition of
Discontinued Businesses (66,347) (66,347)
-------- --------
Income (Loss) Before
Income Taxes and Minority
Interest (104,466) 27,824 (71,433) 16,983
Provision (Benefit) for
Income Taxes (12,754) 12,425 (5,077) 7,783
Minority Interests 87 213 133 476
-------- -------- -------- --------
Income (Loss) from Dis-
continued Operations $(91,799) $ 15,186 $(66,489) $ 8,724
======== ======== ======== ========
Net assets of discontinued operations were as follows:
JUNE 30, 2000 DECEMBER 31, 1999
------------- -----------------
(In Thousands of Dollars)
Current Assets $ 118,698 $ 221,200
Property, Plant and Equipment - Net 81,695 375,211
Other Assets 206,939 336,700
Notes Payable, and Current Portion of
Long-Term Debt (35,305) (51,081)
Other Current Liabilities (110,772) (142,327)
Long-Term Debt (3,335) (108,681)
Other Liabilities (35,981) (62,876)
--------- ---------
Net Assets of Discontinued Operations $ 221,939 $ 568,146
========= ==========
SPECIAL CHARGES:
As a result of the Company's Board of Directors' plan to dispose of its
Aviation and Entertainment businesses and close its New York City
headquarters, and its plan to exit other non-core businesses, the Company
incurred various expenses in 1999 which were recognized in its continuing and
discontinued operations. Of those charges, certain cash charges related to
severance costs, mainly for New York City-based employees, and contract
termination costs of its former Chairman and Chief Executive Officer, were to
be paid over time. The following is a summary of those costs and related
payments during the three months ended June 30, 2000 (expressed in thousands
of dollars):
3
<PAGE>
Additional
Provisions Amounts Paid
During Three During Three
Balance at Months Ended Months Ended Balance at
March 31, 2000 June 30, 2000 June 30, 2000 June 30, 2000
-------------- ------------- ------------- -------------
Severance for
approximately
230 employees $37,500 $2,400 $2,900 $37,000
Contract Termination 14,400 - 6,200 8,200
------- ------ ------ -------
$51,900 $2,400 $9,100 $45,200
======= ====== ====== =======
The additional provisions for severance during the three months ended
June 30, 2000 were comprised of $1,200,000 for continuing operations
(principally Corporate employees) and $1,200,000 for discontinued
operations (Aviation and Entertainment employees).
4
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATIONS:
Revenues and income (loss) from continuing operations (expressed in thousands of
dollars) by segment for the six months and the three months ended June 30, 2000
and 1999 were as follows:
Information Concerning Six Months Ended Three Months Ended
Business Segments June 30, June 30,
---------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
(In Thousands of Dollars)
--------------------------------------------------------------------------------
Revenues:
Energy $472,381 $449,453 $250,213 $232,385
Other 24,160 37,441 10,322 19,685
-------- -------- -------- --------
Total Revenues 496,541 486,894 260,535 252,070
-------- -------- -------- --------
Income (Loss) from
Continuing Operations:
Energy 41,500 48,057 31,282 31,243
Other (11,435) (2,571) (8,824) (1,296)
-------- -------- -------- --------
Total Income (Loss) from
Continuing Operations 30,065 45,486 22,458 29,947
-------- -------- -------- --------
Equity in Net Income of
Investees and Joint
Ventures:
Energy 7,457 5,944 4,447 2,474
-------- -------- --------- --------
Total 37,522 51,430 26,905 32,421
Corporate Unallocated Income
and Expenses - net (32,311) (3,952) (26,726) (95)
Interest - net (18,216) (13,576) (9,731) (7,703)
-------- -------- -------- --------
Income (Loss) from
Continuing Operations Before
Income Taxes, Minority
Interests and the Cumulative
Effect of Change in
Accounting Principle $(13,005) $33,902 $ (9,552) $ 24,623
======== ======= ======== ========
5
<PAGE>
REVENUES FROM CONTINUING OPERATIONS
Revenues for the quarter ended June 30, 2000 were $8,500,000 higher than the
comparable period of 1999. This increase primarily related to an increase in
the Energy segment of approximately $17,900,000. The Energy increase was
mainly attributable to revenues of $8,100,000 associated with new plants in
Thailand and The Philippines that began operations in 1999, an increase of
$1,700,000 from the acquisition in June 1999 of an additional 50% interest in
a power plant in California, an insurance settlement of $12,200,000 relating
to the Lawrence, Massachusetts facility, and net increases at various other
facilities of $10,700,000 due to increased production, higher energy pricing
and contractual annual escalation adjustments. These increases were partially
offset by a reduction in construction revenues of $14,800,000 due mainly to a
decrease in waste-to-energy retrofit activity ($8,800,000) and a decrease in
civil construction activity ($6,200,000) due to the completion of some
projects in 1999 and the first half of 2000. Management anticipates that the
remaining civil construction projects will be completed during 2000, with the
exception of one project that is expected to continue into 2001. Therefore,
the Company anticipates a continued decline in civil construction activity
during 2000 as projects are completed. In addition, retrofit construction
activity will also decline, as facilities attain compliance with the Clean
Air Act Amendments of 1990 which is mandated by the end of 2000. These
increases in the Energy segment's revenues were offset by lower revenues of
$9,400,000 in the Other segment primarily due to the sale of Applied Data
Technology, Inc. ("ADTI") at the end of March 2000, and reduced activity in
Datacom's operations chiefly associated with the Chapter XI bankruptcy filing
in March 2000 of Genicom Corporation ("Genicom"), its major customer.
The $9,600,000 million increase in revenues for the six months ended June 30,
2000 compared to the same period in 1999 was principally attributable to the
Energy segment, which increased by approximately $23,000,000. That increase
is primarily attributable to revenues of $21,000,000 associated with new
plants in Thailand and The Philippines that began operations in 1999, an
increase of $6,000,000 from the acquisition of an additional 50% interest in
a power plant in California, an insurance settlement of $12,200,000 relating
to the Lawrence facility, an increase at the Tulsa facility of $2,200,000
reflecting higher energy pricing and a renegotiated service agreement that
became effective April 1999, and increases at various other facilities of
$12,600,000 due to
6
<PAGE>
increased production, higher energy pricing and contractual annual escalation
adjustments. These increases were partially offset by a gain in the comparable
period of 1999 of $4,900,000 on the sale of the Company's interest in a joint
venture, as well as reduced construction revenues of $26,100,000 which includes
a decrease in retrofit activity ($12,800,000), a decrease in civil construction
activity ($14,800,000) and an increase in water and wastewater construction
($1,500,000). These increases in the Energy segment's revenues were offset by
lower revenues of $13,300,000 in the Other segment mainly due to reduced
activity in Datacom's operations and the sale of ADTI at the end of March 2000.
CONSOLIDATED OPERATING INCOME FROM CONTINUING OPERATIONS
Consolidated operating income from continuing operations for the three months
ended June 30, 2000 decreased by approximately $11,700,000 from the
comparable quarter of 1999. The Energy segment's income from operations for
the three months ended June 30, 2000 was approximately the same as compared
to the three months ended June 30, 1999. Energy's income from operations in
the 2000 period included the $12,200,000 insurance settlement relating to the
Lawrence facility, increases totaling $11,200,000 at several projects
including new plants that became operational during 1999, and a decrease in
income from construction of $5,100,000 due to reductions in civil
construction and retrofit activity. The 1999 period included the receipt of
$9,300,000 as payment for the termination and restructuring of a
waste-to-energy facility operating contract, and adjustments of $9,000,000
associated with the favorable resolution of matters related to the Heber
facility in California. Income from operations in the Other segment decreased
$7,500,000 primarily due to lower activity at Datacom, and a $6,500,000
provision against receivables relating to Genicom's Chapter XI bankruptcy
proceeding. On August 3, 2000, the Company reached agreement with Genicom
whereby the Company paid $10,000 in exchange for a waiver of all preference
exposure. As a result, the Company has recorded the $6,500,000 charge
representing the difference between the total of its prepetition claims and
the amount of the reserve it had previously established. The Company has
reached agreement with the purchaser of Genicom regarding the terms under
which it will continue to supply product to Genicom. With the resolution of
the Genicom bankruptcy, the Company now intends to seek alternatives for the
disposition of Datacom.
Selling, administrative and general expenses were $4,300,000 higher than the
comparable three-month period in 1999. This increase was primarily attributable
to an increase in corporate
7
<PAGE>
overhead comprised mainly of professional fees, corporate severance, a charge
for post-retirement life insurance benefits, and a loss on the termination of
the corporate aircraft lease, offset by a decrease of $300,000 in the Energy
segment primarily due to a decrease in costs in the civil construction unit
resulting from management's plan to discontinue this business. Debt service
charges decreased $1,000,000 for the three months ended June 30, 2000
compared to the same period in 1999 due mainly to lower project debt
outstanding caused by redemption and maturity of project debt and certain
refinancings. The Energy segment has one interest rate swap agreement entered
into as a hedge against interest rate exposure on adjustable-rate project
debt that resulted in additional debt service expense of $180,000 and
$440,000 for the three months ended June 30, 2000 and 1999, respectively.
Consolidated operating income for the six months ended June 30, 2000
decreased by $21,200,000 as compared to the six months ended June 30, 1999.
The Energy segment's income from operations for the six months ended June 30,
2000 decreased $6,600,000 as compared to the six months ended June 30, 1999.
The 2000 period included increases of $13,300,000 at several projects
including new plants that became operational during 1999, the $12,200,000
insurance settlement relating to the Lawrence facility, increased overhead
and development expenses of $1,400,000 primarily related to the continued
growth in the independent power business, and a decrease in income from
construction of $5,500,000 due mainly to reductions in civil construction and
retrofit activity. Also, in connection with the Clean Air Act Amendments, the
Company has shortened the estimated useful lives of certain air pollution
control equipment resulting in additional depreciation expense of $2,000,000.
The 1999 period included the receipt of $9,300,000 for the termination and
restructuring of a waste-to-energy facility operating contract, adjustments
of $9,000,000 associated with the favorable resolution of matters related to
the Heber facility, and a $4,900,000 gain on the sale of a joint venture
interest. Income from operations of the Other segment decreased $8,900,000
for the six months ended June 30, 2000 primarily due to lower activity at
Datacom and the $6,500,000 provision against receivables relating to
Genicom's Chapter XI bankruptcy proceeding.
Selling, administrative and general expenses increased $6,400,000 for the
six-month period compared to the 1999 period mainly due to an increase in
corporate severance, a loss on termination of the corporate aircraft lease, and
an increase in other overhead costs. Debt service charges relating to
non-recourse project debt decreased $300,000 for the six months ended June 30,
2000, compared with the same period in 1999 due
8
<PAGE>
mainly to lower project debt outstanding on various facilities caused by
redemption and maturity of project debt and certain refinancings. The Energy
segment's interest rate swap agreement resulted in additional debt service
expense of $580,000 and $1,140,000 for the six-month periods ended June 30, 2000
and 1999, respectively.
INTEREST INCOME AND EXPENSE
Interest income from continuing operations increased $1,000,000 for the three
months ended June 30, 2000 compared to the same period in 1999, due mainly to
increased interest earned on overnight deposits.
Interest income from continuing operations decreased $100,000 for the six months
ended June 30, 2000 compared with the same period in 1999, due primarily to
interest income earned in the first three months of 1999 on proceeds from an
energy contract prepayment partially offset by an increase in interest earned in
the three months ended June 30, 2000 on overnight deposits.
Interest expense from continuing operations increased $3,000,000 and
$4,500,000 for the three-month and six-month periods ended June 30, 2000,
respectively, compared to the same periods in 1999. These increases were due
mainly to increased borrowings on the Company's revolving line of credit,
higher interest rates on adjustable rate debt, and an increase in the Energy
segment's interest expense due to an increase in debt related to newly
acquired or newly operational plants. In addition, the Company had one
interest rate swap agreement covering a notional amount of $1,200,000 which
converted the Entertainment segment's $1,200,000 variable rate-debt to a
fixed rate, and expires in November 2000. The Company also had two interest
rate swap agreements covering a total notional amount of approximately
$4,600,000 which converted the Aviation segment's $4,600,000 variable
rate-debt to a fixed rate, and expire July 2001. Additional interest expense
relating to these swap agreements was $57,000 and $27,000 for the three-month
and six-month periods ended June 30, 2000, respectively.
EQUITY IN INCOME OF INVESTEES AND JOINT VENTURES
Equity in net income of investees and joint ventures increased by $2,000,000
compared to the three months ended June 30, 1999 due mainly to $1,500,000 from
new projects or projects that were not owned during the entire 1999 period, and
increased generation on existing projects.
Equity in net income of investees and joint ventures increased by $1,500,000
compared to the six months ended June 30, 1999 due to earnings of $1,700,000
from new projects or projects not owned during the entire 1999 period and
earnings of $1,400,000
9
<PAGE>
from increased generation on existing projects, offset by the receipt of
$1,600,000 pursuant to a settlement with a customer in the six months ended June
30, 1999.
OTHER INCOME (DEDUCTIONS) - NET
Other (deductions) - net was ($17,400,000) for both the three-month and
six-month periods ended June 30, 2000 compared to other income of $5,200,000 and
$5,100,000 for the three-month and six-month periods ended June 30, 1999,
respectively. These decreases in income are primarily due to a charge of
$11,300,000 in the three months ended June 30, 2000 representing fees and
expenses incurred in connection with the waiver by certain creditors of certain
covenants, and the extension of credit through July, 2000. Also in the second
quarter 2000, the Company recorded $5,500,000 of charges representing other fees
and expenses incurred in connection with financing efforts to support its
proposed balance sheet recapitalization plan. Also, the 1999 period included a
$5,100,000 gain on the sale of an investment.
INCOME TAXES
The effective income tax rates for continuing operations were (0.2%) and 4.5%
for the three-month and six-month periods ended June 30, 2000 as compared to
32.6% and 32.5% for the comparable periods in 1999. These decreases are mainly
attributable to higher foreign income taxed at rates lower than the Federal
statutory rate.
DISCONTINUED OPERATIONS
Loss from discontinued operations for the three months ended June 30, 2000
was $66,500,000, a decrease in earnings of $75,200,000 from the comparable
period of 1999. Loss before interest and taxes from discontinued
operations was ($70,200,000) in the quarter ended June 30, 2000 compared to
earnings before interest and taxes of $17,100,000 in the same period of 1999.
This $87,300,000 decrease in earnings was chiefly associated with a decrease
of $66,300,000 in income reflecting both accrued losses on the disposal of
discontinued businesses, and a provision for additional estimated pretax net
operating losses from July 1, 2000 through the anticipated dates of sales of
the remaining businesses. Also, Entertainment's pretax net operating losses
in the three months ended June 30, 2000 exceeded the accrual of $18,000,000
established in March 2000 for estimated future losses through date of
disposition by $2,100,000, primarily due to lower than expected results at
water parks and food and beverage operations due mainly to the sales of those
businesses, and increased legal, accounting and
10
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consulting expenses, additional depreciation expense in connection with
shortened estimated useful lives of management information systems ("MIS") as
well as overhead costs in connection with the discontinuance of the
businesses. Aviation's earnings before interest and taxes was $13,100,000
lower primarily reflecting the adjusted gain of $3,500,000 on the sale of the
inflight catering operations recognized in the 1999 period, a decrease in
European operations of $2,000,000, lower fueling and ground service income of
$4,100,000, and increased legal, accounting, consulting and overhead costs of
$3,000,000 in connection with the discontinuance of the business.
Loss from discontinued operations for the six months ended June 30, 2000 was
$91,800,000, a decrease in earnings of $107,000,000. Loss before interest
and taxes from discontinued operations was ($102,100,000) in the first half
of 2000 compared to $28,700,000 in the first half of 1999. This $130,800,000
decrease in earnings was chiefly associated with a decrease of $66,300,000
reflecting both accrued losses on the disposal of discontinued businesses,
and a provision for additional estimated pretax net operating losses from
July 1, 2000 through the anticipated dates of sales of the remaining
businesses. In addition, the decrease in Entertainment's operations were due
to decreases in its food and beverage business of $10,000,000 due mainly to
decreases at certain amphitheaters and the sale of the business, a decrease
in its Parks operations of $8,200,000 mainly due to the sale of that
business, a decrease in venue management operations due mainly to a gain of
$6,000,000 recorded in 1999 relating to the Anaheim Pond location, and
increased legal, accounting, consulting and overhead costs, and additional
depreciation on MIS equipment totaling $8,200,000. Aviation's earnings before
interest and taxes was $24,400,000 lower than the first half of 1999
primarily reflecting the adjusted gain of $3,500,000 in the 1999 period on
the sale of the inflight catering operations, the gain of $4,000,000 in 1999
on the sale of an interest in the Hong Kong airport operations, a decrease in
activity in fueling and ground service operations of $6,700,000, increased
legal, accounting, consulting and overhead costs of $7,100,000 in connection
with the discontinuance of the business, and a reduction in European
operations of $2,600,000.
CAPITAL INVESTMENTS AND COMMITMENTS: For the six months ended June 30, 2000,
capital investments for continuing operations amounted to $27,600,000, of which
$27,300,000 was for Energy operations and $300,000 was for Other operations.
At June 30, 2000, capital commitments for continuing operations amounted to
$12,000,000 for normal replacement and maintenance
11
<PAGE>
in Energy. Other capital commitments for Energy as of June 30, 2000 amounted to
approximately $57,800,000. This amount includes a commitment to pay, in 2008,
$10,600,000 for a service contract extension at an energy facility. In addition,
this amount includes $19,400,000 and $9,600,000, respectively, for two oil-fired
projects in India; $3,200,000 for additional equity commitments related to a
coal-fired power project in the Philippines; $1,200,000 for a mass-burn
waste-to-energy facility in Italy; and $13,800,000 for standby letters of credit
in support of debt service reserve requirements. Funding for the additional
mandatory equity contributions to the coal-fired power project in the
Philippines is being provided through bank credit facilities, which are due to
be repaid in 2000. In addition, compliance with the standards and guidelines
under the Clean Air Act Amendments of 1990 will require further Energy capital
expenditures of approximately $15,000,000 through December 2000, subject to the
final time schedules determined by the individual states in which the Company's
waste-to-energy facilities are located.
Commitments for discontinued operations amounted to $6,650,000 for normal
replacement and growth in Aviation ($750,000) and Entertainment ($5,900,000)
operations, the latter relating to Entertainment's Jazzland Theme Park in New
Orleans, Louisiana. As part of its agreement to sell its themed attractions, the
Company agreed to pay to complete the construction of the Jazzland Theme Park.
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.
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.
The Company did not include its interests in either the Arrowhead Pond in
Anaheim, California or the Corel Centre near Ottawa, Canada as part of the sale
of its Venue Management business announced in March 2000. The Company manages
the Arrowhead Pond under a long-term contract. As part of this contract, the
Company is a party, along with the City of Anaheim, to a reimbursement agreement
in connection with a
12
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letter of credit in the amount of approximately $120,000,000. Under the
reimbursement agreement, the Company is responsible for draws, if any, under the
letter of credit caused by the Company's failure to perform its duties under its
management contract at that venue. The Company is exploring alternatives for
disposing of the Arrowhead Pond and Corel Centre, discussed below, along with
the related obligations.
During 1994, a subsidiary of Ogden entered into a 30-year facility management
contract at the Corel Centre 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 secured debt in the amount of $91,500,000 on
December 23, 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 23, 2002. At June 30, 2000, the amount
outstanding was $48,500,000. In addition, as of June 30, 2000, the Company had
guaranteed $3,400,000 of senior secured term debt of an affiliate and principal
tenant (the NHL Ottawa Senators) of this customer and had guaranteed up to
$3,400,000 of the tenant's secured revolving debt. Further, Ogden is obligated
to purchase $20,200,000 of the tenant's secured subordinated indebtedness on
January 29, 2004, if such indebtedness has not been repaid or refinanced prior
to that time. In October 1999, Ogden also agreed to advance a secured loan to
that tenant of up to approximately $8,400,000 if certain events occur, of which
$2,000,000 had been advanced at June 30, 2000. Separately, Ogden has guaranteed
approximately $3,600,000 of borrowings of a customer of Metropolitan
Entertainment Group, an Entertainment joint venture in which Ogden has an equity
interest. The Company expects this guarantee to be assumed by the ultimate
purchaser of this interest. Management does not expect that these arrangements
will have a material adverse effect on Ogden's Consolidated Financial
Statements.
LIQUIDITY/CASH FLOW: Net cash provided by operating activities of continuing
operations was $33,800,000 lower than the comparable period of 1999 primarily
reflecting a decrease in income from continuing operations of $34,900,000, a
decrease in accounts payable and accrued expenses of $53,600,000, and a decrease
in deferred income taxes of $15,800,000. These decreases were partially offset
by an increase in other liabilities of $57,100,000, and an increase in
depreciation and amortization of $8,700,000. Net cash used in investing
activities was $31,400,000 lower primarily relating to a decrease in entities
purchased of $69,500,000 partially offset
13
<PAGE>
by a decrease in proceeds from sale of marketable securities available for sale
of $41,000,000. Net cash used in financing activities was $199,200,000 higher
principally due to an increase in restricted cash of $177,500,000, representing
a portion of the proceeds from the sales of businesses, and higher net debt
payments of $77,700,000, partially offset by lower dividends paid of $30,700,000
and a decrease of $24,800,000 in the use of funds held in trust. Net cash
provided by discontinued operations increased $340,400,000 primarily due to
proceeds from the sales of businesses and decreases in capital expenditures and
acquisitions in Aviation and Entertainment.
At June 30, 2000, the Company had approximately $316,000,000 in cash and cash
equivalents; $297,000,000 related to continuing operations of which $177,500,000
was restricted and intended for debt repayment. In addition, the Company has a
revolving credit facility on which the Company had drawn $50,000,000 at June 30,
2000. The Company has further agreed not to incur any indebtedness other than
that incurred under the revolving credit facility. In order to make additional
Energy investments other than certain specified permitted investments, the
Company will require a substantial majority of its Credit Providers to consent
to such investments.
The Company's current facility with its principal credit providers was scheduled
to expire on July 31, 2000. The Company has agreed with these credit providers
to extend the facility from July 31, 2000 through September 30, 2000 while the
parties continue to negotiate the terms of a new facility that is expected to
continue through May 31, 2002 (the "Proposed New Facility"). Through September
30, 2000, the Company may use an additional $70,000,000 of cash proceeds from
asset sales from the cash amounts reflected on the June 30, 2000 balance sheet
as "Restricted Cash - Intended to Repay Debt". In addition, the $50 million
revolving credit facility provided as part of the original extension has also
been extended through September 30, 2000. Certain of the Company's credit
providers have indicated that it is their intent to provide credit support as
part of the Proposed New Facility for certain springing letters of credit
(discussed below) that may be required in the event that the Company's long term
debt rating is downgraded below investment grade. Certain obligations of the
Company come due by their terms in the period from July 31, 2000 to September
30, 2000. The Company will need to extend these obligations as part of its
overall debt refinancing. Failure to obtain the extensions could give rise to
defaults pursuant to the terms of the underlying agreements. The Company
believes that it has adequate liquidity to fund its operations and make certain
investments in new
14
<PAGE>
projects through this period. Further, the Company believes that the Proposed
New Facility will be sufficient to allow the Company to fund its operations and
make certain new investments.
In the second quarter of 2000, the Company closed its transactions for the sales
of its Theme Parks and Attractions, its Jazzland Theme Park, its Food and
Beverage/Venue Management business and its airport privatization business in
Argentina. Further, the Company expects to close the sale of it Aviation Ground
Services business within the next 60 days. The Company is currently in various
phases of negotiations for the remaining Aviation businesses and most other
assets included within discontinued operations.
The Company has also determined to sell all of the operations currently
reflected in the Other segment and decided to sell its domestic Environmental
Consulting business and its Spanish subsidiary, and to wind down the operations
of its civil construction business, which are reported in its Energy segment. To
that end, the Company closed the sale transaction of its ADTI unit at the end of
March 2000 and is in various phases of the disposition process for the other
operations mentioned above. Accordingly, the Company expects to have sufficient
proceeds to fund normal operations (including certain permitted energy
investments). The Company continues to explore possible new credit facilities
and/or obtaining equity for such purposes, including discussions with its
existing Credit Providers.
Under certain agreements entered into by the Company, if the Company's
outstanding debt securities are no longer rated investment grade, the Company
may be required to post additional collateral or letters of credit. The failure
to post such letters could result in a forfeiture of certain contracts or could
result in a default under the agreements requiring the posting of such letters.
Such a default would also be a default under the Company's credit facilities.
With the consent of its Credit Providers, the Company could cash collateralize
these obligations or potentially utilize sales proceeds for such purpose;
alternatively, the Credit Providers could provide such letters directly. The
Credit Providers have agreed to work with the Company to explore solutions to
this issue should it arise.
The Company believes its recent agreement with its Credit Providers is
consistent with its prior stated intention of using the proceeds from the sales
of the Entertainment and Aviation businesses to pay down existing debt.
ANY STATEMENTS IN THIS COMMUNICATION WHICH MAY BE CONSIDERED TO BE "FORWARD
LOOKING STATEMENTS," AS THAT TERM IS DEFINED IN THE
15
<PAGE>
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 COMPANY'S
PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISION AND MORE GENERALLY,
GENERAL ECONOMIC CONDITIONS, INCLUDING CHANGES IN INTERST 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.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. 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 is a party or to which any of its property is
subject, the outcome of which would have a material adverse effect on the
Company's consolidated position or results of operation.
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's 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, 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 any litigation, including
environmental remediation, is uncertain, the Company believes that the following
proceedings will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
(a) Environmental Matters
(i) In an ongoing criminal investigation by the U.S. Department of
Justice Ogden has contested that the Company has criminal liability under the
Federal Clean Water Act as a result of a spill of aviation fuel from a holding
tank in October 1996 at a former tank farm operated by Ogden at Dulles
International Airport in Washington, D.C. The Department of Justice Attorney
offered to resolve this matter by means of a guilty plea to a misdemeanor under
the Clean Water Act. Ogden rejected that offer by letter dated December 16, 1999
and is cooperating with the government to seek a fair and reasonable solution.
(ii) In 1999, Ogden Aviation Fueling Company of Virginia, Inc.
and Ogden Aviation Services, Inc. were served with a lawsuit entitled
"AIRFRANCE, ET. AL. V. OGDEN AVIATION FUELING COMPANY OF VIRGINIA, INC. AND
OGDEN AVIATION SERVICES, INC." (Circuit Ct., Fairfax Co., Index No. 183590) in
which certain of the airlines seek recovery of cleanup costs arising from a
spill of aviation fuel from a holding tank in October 1996 at the former tank
farm operated by Ogden at Dulles International Airport for which they reimbursed
Ogden. The plaintiffs include United Air Lines, Inc., the largest carrier that
operated out of Dulles in 1996, as well as nine other airlines Air France,
America West Airlines, Inc., Austrian Airlines, British Airways PLC, Continental
Airlines, Inc., Lufthansa A.G., Northwest Airlines, Inc., United Parcel Service
Co., and Virgin Atlantic Airways, Ltd.
The suit claims damages in the amount of at least $731,149.76, plus
interest. This dollar amount reflects the portion of the spill cleanup paid by
the named plaintiffs. The suit alleges damages on two theories: (1) breach of
contract in that Ogden was not authorized under the contract to charge the
airlines spill related costs; and (2) equitable relief in that Ogden has been
unjustly enriched at the expense of the airlines.
Ogden Aviation Services, Inc. filed a motion to dismiss the complaint on
the grounds that it was never a party to the fuel service agreements. Ogden
Aviation Fueling Company of Virginia, Inc. filed a motion to dismiss the unjust
enrichment claim and answered the claim arising under the contract. Both motions
to dismiss were denied
<PAGE>
and the litigation will proceed. Ogden takes the position that fuel spill clean
up costs were properly charged back to the plaintiff airlines pursuant to the
terms of the controlling agreements and will defend its position in this
litigation.
(iii) On January 4, 2000 and January 21, 2000, United Air Lines, Inc.
("United") and American Airlines, Inc. ("American) named Ogden New York
Services, Inc. ("Ogden New York"), in two separate lawsuits filed in the Supreme
Court of the State of New York. The lawsuits seek judgment declaring that Ogden
New York is responsible for petroleum contamination at airport terminals
formerly or currently leased by United and American. Ogden New York moved to
consolidate the two lawsuits on April 27, 2000.
Both United and American allege that Ogden negligently caused discharges
of petroleum at the airport and that Ogden is obligated to indemnify the
airlines pursuant to the Fuel Services Agreements between Ogden and the
respective airline. United and American further allege that Ogden is liable
under New York's Navigation Law which imposes liability on persons responsible
for discharges of petroleum and under common law theories of indemnity and
contribution.
The United complaint is asserted against Ogden, American, Delta,
Northwest and American Eagle. United is seeking $1,540,000 in technical
contractor costs and $432,000 in legal expenses related to the investigation and
remediation of contamination at the airport, as well as a declaration that Ogden
and the airline defendants are responsible for all or a portion of future costs
that United may incur.
The American complaint, which is asserted against both Ogden and United,
sets forth essentially the same legal basis for liability as the United
complaint. American is seeking reimbursement of all or a portion of $4,600,000
allegedly expended in cleanup costs and legal fees it expects to incur to
complete an investigation and cleanup that it is conducting under an
administrative order with the State Department of Environmental Conservation.
The estimate of those sums alleged in the complaint is $70,000,000.
Ogden disputes the allegations and believes that the damages sought are
excessive in view of the Airlines' responsibility for the contamination under
their respective leases and permits with the Port Authority. On May 1, 2000
Ogden filed a motion to dismiss the complaints on the ground that the
controlling agreements limit the Airlines' recovery against Ogden to the
coverage afforded under Ogden's insurance policies.
(iv) On December 23, 1999 Allied Services, Inc. was named as a third
party defendant in an action filed in the Superior Court of the State of New
Jersey. The third-party complaint alleges that Allied generated hazardous
substances to a reclamation facility known as the Swope Oil and Chemical Company
Site, and that contamination migrated from the Swope Oil Site to the Pennsauken
Landfill and surrounding areas.
Third-party plaintiffs seek contribution and indemnification from Allied
and over 90 other third-party defendants for costs incurred and to be incurred
to cleanup the Pennsauken landfill and surrounding areas.
As a result of uncertainties regarding the source and scope of
contamination, the large number of potentially responsible parties and the
varying degrees of responsibility among various classes of potentially
responsible parties, the Company's share of liability, if any, cannot be
determined at this time.
(v) On January 12, 1998, the Province of Newfoundland filed an
Information Against Airconsol Aviation Services Limited ("Airconsol") alleging
that Airconsol violated provincial environmental laws in connection with a fuel
spill on or about January 14, 1997 at Airconsol's fuel facility at the Deer
Lake, Canada Airport. Airconsol contested the allegations and prevailed. The
Court voided the Information. The Crown has appealed the Court's decision. The
Company will continue to contest its alleged liability on appeal.
(vi) The Company and/or certain subsidiaries have been advised by
various authorities that they are responsible for investigation, remediation
and/or corrective action in connection with fueling operations at various
airports. Although the Company and/or its subsidiaries do not acknowledge any
legal obligation to do so, the Company and/or its subsidiaries are cooperating
with the government agencies in each matter to seek fair and reasonable
solutions. In addition, the cost to the Company and/or its subsidiaries to
comply with applicable environmental laws and regulations is generally
reimbursed to the Company and/or its subsidiaries through the airlines.
(b) Shareholder Litigation
On September 22, October 1, and October 12, 1999, complaints (the
"Complaints") denominated as class actions (the "Actions") were filed in the
United States District Court for the Southern District of New York against the
Company, the Company's former Chairman and Chief Executive, R. Richard Ablon,
and Robert M.
<PAGE>
DiGia (incorrectly identified in the Complaints as the Chief Financial Officer
and Senior Vice President of the Company). The Complaints, which are largely
identical to one another, are brought by alleged shareholders of the Company and
purport to assert claims under the federal securities laws. In general, the
Complaints allege that the Company and the individual defendants disseminated
false and misleading information during the period of March 11, 1999 through
September 17, 1999 (the "Class Period") with respect to the Company's intended
reorganization plans and its financial condition. The Complaints seek the
certification of a class of all purchasers of Ogden Corporation common stock
during the Class Period. By order dated December 22, 1999, the Actions have been
consolidated for all purposes and lead plaintiffs and lead counsel have been
appointed. On February 28, 2000 plaintiffs filed a consolidated amended
compliant (the "Amended Compliant"). The Amended Complaint repeats the
allegations made in the original complaints and adds new allegations with
respect to the timing of the reporting of certain losses experienced by Ogden.
In the Amended Complaint, Plaintiffs have added Raymond E. Dombrowski, Jr.,
Ogden's Senior Vice President and Chief Financial Officer, as a defendant. There
has been no discovery in the Actions. While the Actions are at a very early
stage, the Company believes it has meritorious defenses to the allegations made
in the Complaints and intends to defend the Actions vigorously. On April 28,
2000 all defendants filed motion to dismiss the Actions, with prejudice.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Shareholders of Ogden Corporation was held on
June 14, 2000.
(b) NAME OF EACH DIRECTOR ELECTED NAME OF EACH OTHER DIRECTOR WHOSE
TERM OF OFFICE CONTINUED
Norman G. Einspruch Anthony J. Bolland (2001)
Homer A. Neal Scott G. Mackin (2001)
Joseph A. Tato Judith D. Moyers (2001)
Robert R. Womack Robert E. Smith (2001)
George L. Farr (2002)
Jeffrey F. Friedman (2002)
Helmut Volcker (2002)
(c) (i) Proposal 1: Election of four directors for a three year term.
NAME VOTES FOR VOTES WITHHELD
---- --------- --------------
Norman G. Einspruch 35,478,884 7,411,075
Homer A. Neal 35,533,761 7,356,198
Joseph A. Tato 35,531,866 7,358,093
Robert R. Womack 35,685,443 7,204,516
(ii) Proposal 2: Proposal to approve the adoption of an Executive
Performance Incentive Plan.
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
37,989,992 3,618,675 1,294,623 - 0 -
(iii) Proposal 3: Proposal to amend the Ogden Corporation 1999 Stock
Incentive Plan.
<PAGE>
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
33,065,660 8,496,646 1,340,850 - 0 -
(iv) Proposal 4: Proposal submitted by a shareholder urging the Board
of Directors to arrange for the prompt sale of Ogden Corporation
to the highest bidder.
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
2,906,309 20,965,411 7,484,210 11,532,476
(v) Proposal 5: Ratification of the selection of Deloitte & Touche
LLP as independent public accountants of the corporation and its
subsidiaries for the year 2000.
FOR AGAINST ABSTAIN BROKER NON-VOTES
--- ------- ------- ----------------
42,109,727 566,723 226,311 - 0 -
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3 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 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 principal amount of 6%
Convertible Subordinated Debentures Due 2002.*
4.2 Fiscal Agency Agreement between Ogden and Bankers Trust Company,
dated as of October 15, 1987, and Offering Memorandum dated
October 15, 1987 relating to U.S. $75 million principal amount of
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
principal amount of 9-1/4% Debentures due 2022.*
10 MATERIAL CONTRACTS
10.1 (a) U.S. $95 million Term Loan and Letter of Credit and
Reimbursement Agreement among Ogden, Deutsche Bank AG, New
York Branch, and the signatory Banks thereto, dated March
26, 1997.*
(b) Credit Agreement by and among Ogden, The Bank of New York,
as Agent, and the signatory Lenders thereto dated as of June
30, 1997.*
(i) Amendment No. 1 and Waiver No. 1 under Credit
Agreement, effective as of August 18, 1999.
(ii) Amendment No. 2 to Credit Agreement, effective as of
December 20, 1999.
(iii) Amendment No. 3 to Credit Agreement, effective as of
March 31, 2000.
10.2 Rights Agreement between Ogden Corporation and
Manufacturers Hanover Trust Company, dated as of September 20,
1990.*
10.3 Executive Compensation Plans and Agreements.
<PAGE>
(a) Ogden Corporation 1990 Stock Option Plan Amended and
Restated as of January 19, 1994.*
(i) Amendment adopted and effective as of September 18,
1997.*
(b) Ogden Corporation 1999 Stock Incentive Plan Amended and
Restated as of January 1, 2000.*
(c) Ogden Services Corporation Select Savings Plan Trust
Amendment and Restatement as of January 1, 1995.*
(i) Amendment Number One to the Ogden Services
Corporation Select Savings Plan, effective January 1,
1998.*
(d) Ogden Corporation Restricted Stock Plan and Restricted
Stock Agreement.*
(e) Ogden Corporation Restricted Stock Plan for
Non-Employee Directors and Restricted Stock Agreement.*
(f) Ogden Corporation Core Executive Benefit Program.*
(g) Ogden Projects Supplemental Pension and Profit
Sharing Plans.*
(h) Ogden Projects Core Executive Benefit Program.*
(i) Ogden Corporation Executive Performance Incentive
Plan.*
(j) Ogden Key Management Incentive Plan.*
10.4 Employment Agreements
(a) Employment Letter Agreement between Ogden Corporation
and Lynde H. Coit, Senior Vice President and General
Counsel, dated March 1, 1999.*
(b) Employment Agreement between R. Richard Ablon, President,
Chairman and C.E.O., and Ogden dated as of January 1,
1998.*
(c) Separation Agreement between Ogden and Philip G. Husby,
Senior Vice President and C.F.O., dated as of September
17, 1998.*
(d) Employment Agreement between Scott G. Mackin,
Executive Vice President and Ogden Corporation dated as
of October 1, 1998.*
(e) Employment Agreement between Ogden Corporation and
David L. Hahn, Senior Vice President - Aviation, 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.*
(f) Employment Agreement between Ogden Corporation and
Rodrigo Arboleda, Senior Vice President dated January 1,
1997.*
(i) Letter Amendment to Employment Agreement
between Ogden Corporation and Rodrigo Arboleda,
Senior Vice President, effective as of October 1,
1998.*
(g) Employment Agreement between Ogden Energy Group, Inc.
and Bruce W. Stone, dated May 1, 1999.*
(h) Employment Agreements between Ogden and Jesus Sainz,
Executive Vice President, effective as of January 1,
1998.*
(i) Letter Amendment to Employment Agreement
between Ogden Corporation and Jesus Sainz,
Executive Vice President, effective as of
October 1, 1998.*
(i) Employment Agreement between Peter Allen, Senior Vice
President, and Ogden Corporation dated July 1, 1998.*
<PAGE>
(j) Employment Agreement between Ogden Corporation and
Raymond E. Dombrowski, Jr., Senior Vice President and
C.F.O., dated as of September 21, 1998.*
11 Detail of Computation of Earnings Per Share Applicable to Common
Stock.
27 Financial Data Schedule (EDGAR Filing Only).
o Incorporated by reference as set forth in the Exhibit Index of this Form
10-Q.
(b) Reports on Form 8-K
Form 8-K Current Reports filed on May 17, 2000 and June 7, 2000
are incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
OGDEN CORPORATION
(Registrant)
Date: August 21, 2000 By /s/ RAYMOND E. DOMBROWSKI, JR.
--------------------------------
Raymond E. Dombrowski, Jr.
Senior Vice President
and Chief Financial Officer
Date: August 21, 2000 By: /s/ WILLIAM J. METZGER
--------------------------------
William J. Metzger
Vice President and
Chief Accounting Officer
