-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, CoUsZL5MGpMWE2Eu1kF1pt0CMrUVPeXJL9Y8ERrAGnCqieg9MlecqNOaszbAIBzT 1Qqt4jWapujfJsff5yGzeg== 0000903423-01-500069.txt : 20010516 0000903423-01-500069.hdr.sgml : 20010516 ACCESSION NUMBER: 0000903423-01-500069 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20010331 FILED AS OF DATE: 20010515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COVANTA ENERGY CORP CENTRAL INDEX KEY: 0000073902 STANDARD INDUSTRIAL CLASSIFICATION: AIRPORTS, FLYING FIELDS & AIRPORT TERMINAL SERVICES [4581] IRS NUMBER: 135549268 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-03122 FILM NUMBER: 1640642 BUSINESS ADDRESS: STREET 1: 40 LANE ROAD CITY: FAIRFIELD STATE: NJ ZIP: 07004 BUSINESS PHONE: 2128686100 MAIL ADDRESS: STREET 1: 40 LANE ROAD CITY: FAIRFIELD STATE: NJ ZIP: 07004 FORMER COMPANY: FORMER CONFORMED NAME: OGDEN CORP DATE OF NAME CHANGE: 19920703 10-Q 1 covan10q_5-15.txt 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 March 31, 2001 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 Covanta Energy Corporation ------------------------ -------------------------- (Exact name of registrant as specified in its charter) Delaware 13-5549268 - --------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 40 Lane Road, Fairfield, NJ 07004 ------------------------------------------------- (Address or principal executive office) (Zip code) (973) 882-9000 --------------------------------------------------- (Registrant's telephone number including area code) Not Applicable --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by checkmark 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 March 31, 2001; 49,754,810 shares of Common Stock, $.50 par value per share. PART 1 - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COVANTA ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME FOR THE THREE MONTHS ENDED MARCH 31, --------------------------- 2001 2000 ------ ------ (In Thousands of Dollars, Except Per Share Data) Service revenues $ 139,648 $ 144,849 Electricity and steam sales 83,891 59,298 Equity in income of investees and joint ventures 4,482 3,010 Construction revenues 9,423 22,846 Other sales - net 11,478 9,629 Other - net 18 Net gain (loss) on sale of businesses 1,855 (634) ---------- ---------- Total revenues 250,777 239,016 ---------- ---------- Plant operating expenses 134,193 129,623 Construction costs 6,757 21,358 Depreciation and amortization 23,777 28,867 Debt service charges 20,735 21,768 Other operating costs and expenses 11,910 5,913 Costs of goods sold 10,930 10,181 Selling, administrative and general expenses 17,087 12,867 Project development expenses 1,726 3,362 Other - net 750 45 ---------- ---------- Total costs and expenses 227,865 233,984 ---------- ---------- Consolidated operating income 22,912 5,032 Interest expense - net (7,440) (8,485) ---------- ---------- Income (loss) from continuing operations before income taxes and minority interests 15,472 (3,453) Income taxes (4,658) 603 Minority interests (1,399) (1,324) ---------- ---------- Income (loss) from continuing operations 9,415 (4,174) Loss from discontinued operations (net of income tax benefit of $7,677 in 2000) (25,310) ---------- ---------- Net Income (loss) 9,415 (29,484) ---------- ---------- Other Comprehensive Income (Loss), Net of Tax: Foreign currency translation adjustments (net of income taxes of $127 in 2001) (724) (4,874) Unrealized Gains (Losses) on Securities: Unrealized holding losses arising during period (17) ---------- ---------- Other comprehensive income (loss) (724) (4,891) ---------- ---------- Comprehensive income (loss) $ 8,691 $ (34,375) ========== ========== Basic Earnings Per Share: Income (loss) from continuing operations $ 0.19 $ (0.08) Loss from discontinued operations (0.51) ---------- ---------- Net Income (Loss) $ 0.19 $ (0.59) ========== ========== Diluted Earnings Per Share: Income (loss) from continuing operations $ 0.19 $ (0.08) Loss from discontinued operations (0.51) ---------- ---------- Net Income (Loss) $ 0.19 $ (0.59) ========== ==========
COVANTA ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS March 31, 2001 December 31, 2000 -------------- ----------------- (In Thousands of Dollars, Except Per Share Amounts) Assets Current Assets: Cash and cash equivalents $ 91,147 $ 80,643 Restricted cash 194,118 Restricted funds held in trust 106,307 96,280 Receivables (less allowances: 2001, $28,128 and 2000, $19,234) 253,258 247,914 Deferred income taxes 37,132 36,514 Prepaid expenses and other current assets 81,849 77,239 Net assets held for sale 92,801 70,614 ----------- ----------- Total current assets 662,494 803,322 Property, plant and equipment - net 1,927,616 1,789,430 Restricted funds held in trust 154,026 157,061 Unbilled service and other receivables 166,259 155,210 Unamortized contract acquisition costs 87,026 88,702 Goodwill and other intangible assets 20,214 14,944 Investments in and advances to investees and joint ventures 192,545 223,435 Other assets 91,586 63,347 ----------- ----------- Total Assets $ 3,301,766 $ 3,295,451 =========== =========== Liabilities and Shareholders' Equity Liabilities: Current Liabilities: Current portion of long-term debt $ 31,490 $ 145,289 Current portion of project debt 106,039 99,875 Accounts payable 43,480 41,106 Accrued expenses, etc. 330,444 308,681 Deferred income 47,485 38,517 ----------- ----------- Total current liabilities 558,938 633,468 Long-term debt 292,186 310,126 Project debt 1,368,761 1,290,388 Deferred income taxes 318,046 315,931 Deferred income 170,788 172,050 Other liabilities 155,877 158,992 Minority interests 47,736 34,290 Convertible subordinated debentures 148,650 148,650 ----------- ----------- Total Liabilities 3,060,982 3,063,895 ----------- ----------- Shareholders' Equity: Serial cumulative convertible preferred stock, par value $1.00 per share; authorized, 4,000,000 shares; shares outstanding: 35,312 in 2001 and 35,582 in 2000, net of treasury shares of 29,820 in 2001 and 2000 35 36 Common Stock, par value $.50 per share; authorized, 80,000,000 shares; shares outstanding: 49,754,810 in 2001 and 49,645,459 in 2000, net of treasury shares of 4,157,375 and 4,265,115, respectively 24,877 24,823 Capital surplus 187,429 185,681 Notes receivable from key employees for common stock issuance (1,049) (1,049) Unearned restricted stock compensation (1,247) Earned surplus 35,227 25,829 Accumulated other comprehensive loss (4,488) (3,764) ----------- ----------- Total Shareholders' Equity 240,784 231,556 ----------- ----------- Total Liabilities and Shareholders' Equity $ 3,301,766 $ 3,295,451 =========== ===========
COVANTA ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY THREE MONTHS ENDED YEAR ENDED March 31, 2001 December 31, 2000 SHARES AMOUNTS SHARES AMOUNTS ---------- ---------- ---------- ---------- (In Thousands of Dollars, Except Per Share Amounts) Serial Cumulative Convertible Preferred Stock, Par Value $1.00 Per Share; Authorized, 4,000,000 Shares: Balance at beginning of period 65,402 $ 66 69,066 $ 69 Shares converted into common stock (270) (1) (3,664) (3) ---------- ---------- ---------- ---------- Total 65,132 65 65,402 66 Treasury shares (29,820) (30) (29,820) (30) ---------- ---------- ---------- ---------- Balance at end of period (aggregate involuntary liquidation value - 2001, $712) 35,312 35 35,582 36 ---------- ---------- ---------- ---------- Common Stock, Par Value $.50 Per Share; Authorized, 80,000,000 Shares: Balance at beginning of period 53,910,574 26,956 53,873,298 26,937 Shares issued for acquisition 15,390 8 Conversion of preferred shares 1,611 1 21,886 11 ---------- ---------- ---------- ---------- Total 53,912,185 26,957 53,910,574 26,956 ---------- ---------- ---------- ---------- Treasury shares at beginning of period 4,265,115 2,133 4,405,103 2,203 Issuance of restricted stock (92,108) (46) (139,988) (70) Exercise of stock options (15,632) (7) ---------- ---------- ---------- ---------- Treasury shares at end of period 4,157,375 2,080 4,265,115 2,133 ---------- ---------- ---------- ---------- Balance at end of period 49,754,810 24,877 49,645,459 24,823 ---------- ---------- ---------- ---------- Capital Surplus: Balance at beginning of period 185,681 183,915 Exercise of stock options 193 Issuance of restricted stock 1,557 1,602 Shares issued for acquisition 172 Conversion of preferred shares (2) (8) ---------- ---------- Balance at end of period 187,429 185,681 ---------- ---------- Notes receivable from key employees for common stock issuance (1,049) (1,049) ---------- ---------- Unearned restricted stock compensation: Issuance of restricted common stock (1,368) Amortization of unearned restricted stock compensation 121 ---------- ---------- Balance at end of period (1,247) ---------- ---------- Earned Surplus: Balance at beginning of period 25,829 255,182 Net income (loss) 9,415 (229,285) ---------- ---------- Total 35,244 25,897 ---------- ---------- Preferred dividends - per share 2001, $.46875, and 2000, $1.875 17 68 ---------- ---------- Balance at end of period 35,227 25,829 ---------- ---------- Cumulative Translation Adjustment - Net (4,079) (3,355) ---------- ---------- Minimum Pension Liability Adjustment (409) (409) ---------- ---------- TOTAL SHAREHOLDERS' EQUITY $ 240,784 $ 231,556 ========== ==========
COVANTA ENERGY CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED MARCH 31, ---------------------------- 2001 2000 ------ ----- (In Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $ 9,415 $ (29,484) Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by Operating Activities of Continuing Operations: Loss from discontinued operations 25,310 Depreciation and amortization 23,777 28,867 Deferred income taxes 1,669 42 Provisions for doubtful accounts 10,028 939 Other 4,257 (5,663) Management of Operating Assets and Liabilities: Decrease (Increase) in Assets: Receivables (18.097) 21,846 Inventories (1,512) Other assets (8,861) (1,754) Increase (Decrease) in Liabilities: Accounts payable (7,124) (3,398) Accrued expenses 3,897 (11,766) Deferred income 2,342 1,146 Other liabilities (9,550) (9,478) -------- --------- Net cash provided by operating activities of continuing operations 11,753 15,095 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of businesses 9,947 4,848 Proceeds from sale of marketable securities available for sale 3,574 Investments in facilities (4,329) (10,873) Other capital expenditures (3,912) (4,188) Decrease in other receivables 23 Distributions from investees and joint ventures 5,050 4,137 Increase in investments in and advances to investees and joint ventures (13,923) (2,284) -------- --------- Net cash used in investing activities of continuing operations (7,144) (4,786) -------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowing for facilities 55,766 Other new debt 3,415 652 (Increase) decrease in funds held in trust (7,104) 5,483 Payment of debt (184,046) (83,037) Dividends paid (17) (17) Decrease in restricted cash 194,118 Proceeds from exercise of stock options 200 Other (671) (603) -------- --------- Net cash provided by (used in) financing activities of continuing operations 5,895 (21,756) -------- --------- Net cash used in discontinued operations (9,350) -------- --------- Net Increase (Decrease) in Cash and Cash Equivalents 10,504 (20,797) Cash and Cash Equivalents at Beginning of Period 80,643 101,020 -------- --------- Cash and Cash Equivalents at End of Period $ 91,147 $ 80,223 ======== =========
ITEM 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated 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. The Company recorded total interest expense and total interest income of $11.3 million and $3.9 million, and $9.5 million and $1.0 million for the three-month periods ended March 31, 2001 and 2000, respectively. On January 1, 2001, Covanta Energy Corporation (the "Company") adopted Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and Hedging Activities" and has identified all derivatives within its scope. SFAS No. 133, as amended and interpreted, establishes accounting and reporting standards for derivative instruments, including certain derivatives embedded in other contracts, and for hedging activities. All derivatives are required to be recorded in the balance sheet as either an asset or liability measured at fair value, with changes in fair value recognized currently in earnings unless specific hedge accounting criteria are met. Special accounting for qualifying hedges allows derivative gains and losses to offset related results on the hedged item in the statement of income, and requires that a company must formally document, designate and assess the effectiveness of derivatives that receive hedge accounting. The Company's policy is to enter into derivatives to protect the Company against fluctuations in interest rates and foreign currency exchange rates as they relate to specific assets and liabilities. The Company's policy is to not enter into derivative instruments for speculative purposes. The adoption of SFAS No. 133 as of January 1, 2001 did not have a material impact on the results of operations of the Company and increased both assets and liabilities recorded on the January 1, 2001 balance sheet by approximately $12.3 million. The $12.3 million relates to the Company's interest rate swap agreement that economically fixes the interest rate on certain adjustable-rate revenue bonds reported in Project debt. The asset and liability recorded at January 1, 2001 were increased by $1.5 million during the three months ended March 31, 2001 to adjust for an increase in the swap's fair value at March 31, 2001. The swap agreement was entered into in September 1995 and expires in January 2019. Any payments made or received under the swap agreement, including fair value amounts upon termination, are included as an explicit component of the client community's obligation under the related service agreement. Accordingly, all payments under the swap agreement are a pass-through to the client community. Under the swap agreement, the Company will pay an average fixed rate of 9.8% for 2001 through January 2005 and 5.18% thereafter through January 2019, and will receive a floating rate based on current municipal interest rates, similar to the rate on the adjustable-rate revenue bonds, unless certain triggering events occur (primarily credit events), which result in the floating rate converting to either a set percentage of LIBOR or a set percentage of the BMA Municipal Swap Index, at the option of the swap counterparty. In the event the Company terminates the swap prior to its maturity, the floating rate used for determination of settling the fair value of the swap would also be based on a set percentage of one of these two rates at the option of the counterparty. For the three-month periods ended March 31, 2001 and 2000, the floating rates on the swap averaged 3.27% and 3.59%, respectively. The notional amount of the swap at March 31, 2001 and December 31, 2000 was $80.2 million and is reduced in accordance with the scheduled repayments of the applicable revenue bonds. Currently there are ongoing discussions surrounding the implementation and interpretation of SFAS No. 133 by the Financial Accounting Standards Board's Derivatives Implementation Group. The Company implemented SFAS No. 133 based on current rules and guidance in place of January 1, 2001 and through March 31, 2001. In December 1999, the staff of the Securities and Exchange Commission issued Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial Statements." SAB No. 101 provides guidance on the recognition, presentation, and disclosure of revenue, and was implemented by the Company in the quarter ended December 31, 2000. There was no impact from adoption of SAB No. 101 on the Company's financial position or results of operations. The accompanying financial statements for prior periods have been reclassified as to certain amounts, including various revenues and expenses, to conform with the 2001 presentation, which is more tailored for a stand-alone energy company. Discontinued Operations and Assets Held for Sale: On September 17, 1999, the Company announced that it intended to sell its aviation and entertainment businesses and on September 29, 1999, the Board of Directors of the Company formally adopted a plan to sell the operations of its aviation and entertainment units, which were previously reported as separate business segments. As a result of the adoption of this plan, the financial statements present the results of these operations as discontinued until December 31, 2000. At December 31, 2000, the Company had substantially completed its sales of the discontinued operations and, therefore, reclassified the remaining unsold aviation and entertainment businesses in the accompanying December 31, 2000 balance sheet to present those businesses as net assets held for sale. Those businesses include: the venue management businesses at the Arrowhead Pond Arena in Anaheim, California, and the Corel Centre near Ottawa, Canada; the Company's interest in certain entertainment assets in Argentina; its aviation fueling business; and the Company's interests in aviation businesses in Spain and Colombia. The aviation business in Italy was sold in February 2001 for approximately $10.0 million, and the Company's interest in the aviation business in Spain was sold in May 2001 for approximately $1.8 million. These noncore businesses are reported in the "Other" segment at December 31, 2000 and for the three months ended March 31, 2001. Other noncore businesses included in Net Assets Held for Sale are Datacom, Inc. (Datacom), a contract manufacturing company located in Mexico, and Compania General de Sondeos, S.A. (CGS), an environmental and infrastructure company in Spain. Datacom and CGS are reported in the Other segment and Energy segment, respectively, in the three-month periods ended March 31, 2001 and 2000. The Company expects to sell all of these remaining businesses during 2001. Revenues and loss from discontinued operations (expressed in thousands of dollars) for the three months ended March 31, 2000, were as follows: Revenues $ 155,605 ======== Loss Before Income Taxes and Minority Interests (33,033) Benefit for Income Taxes (7,677) Minority Interests (46) --------- Loss from Discontinued Operations $(25,310) ========= Revenues and loss before income taxes from assets held for sale (expressed in thousands of dollars) for the three months ended March 31, 2001, which are included in continuing operations in 2001, were as follows: Revenues $ 25,542 ========= Loss Before Income Taxes $ (1,265) ========= On January 1, 2001, the Company stopped recording depreciation and amortization expense related to assets held for sale which had the effect of decreasing the loss before income taxes by approximately $1.3 million. Net assets held for sale (expressed in thousands of dollars) at March 31, 2001 and December 31, 2000 were as follows: March 31, 2001 December 31, 2000 -------------- ----------------- Current Assets $ 76,669 $ 73,237 Property, Plant and Equipment - net 21,098 19,939 Other Assets 64,745 73,310 Notes Payable and Current Portion of Long-Term Debt (3,517) (28,651) Other Current Liabilities (51,935) (52,053) Long-Term Debt (655) (670) Other Liabilities (13,604) (14,498) -------- -------- Net Assets Held for Sale $ 92,801 $ 70,614 ======== ======== The increase in net assets held for sale during the three months ended March 31, 2001 is due mainly to the contribution of $25.0 million to an entertainment operation in order to pay certain of that operation's debt in connection with the closing of the Master Credit Facility (see Liquidity/Cash Flow below). 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 noncore businesses, the Company incurred various expenses in 1999 which were recognized in its continuing and discontinued operations. In addition, the Company incurred various expenses in 2000 relating to its decisions to reorganize its development office in Hong Kong and its Energy headquarters in New Jersey. Certain of those charges related to severance costs for its New York City employees and Energy employees, contract termination costs of its former Chairman and Chief Executive Officer, office closure costs, and professional services related to the Energy reorganization, will mostly be paid out over the next two years. The following is a summary of those costs and related payments during the three months ended March 31, 2001 (expressed in thousands of dollars): AMOUNTS PAID DURING THREE BALANCE AT MONTHS ENDED BALANCE AT DEC. 31, 2000 MARCH 31, 2001 MARCH 31, 2001 ---------------- -------------- -------------- Severance for approximately 200 employees $ 27,500 $ 3,000 $ 24,500 Severance for approximately 80 Energy employees 10,300 1,900 8,400 Contract termination settlement 400 400 Bank fees 2,100 2,100 Office closure costs 4,000 500 3,500 Professional services relating to Energy reorganization 1,500 1,300 200 ---------- ---------- ---------- $ 45,800 $ 6,700 $ 39,100 ========== ========== ==========
Receivables from California Utilities: During 2000, events affecting the energy market in California impacted the creditworthiness of two California utilities to which the Company sells power. Those two utilities are Pacific Gas & Electric Co. ("PG&E") and Southern California Edison ("SCE"). These events have resulted in these utilities delaying payment for power they have purchased from the Company. On March 27, 2001 the California Public Utilities Commission approved a substantial rate increase and directed that the utilities begin paying timely for power purchases commencing April 2001. SCE is paying currently for power purchases from March 27, 2001. On April 6, 2001, PG&E, one of California's largest electric utilities, filed for protection under Chapter 11 of the U.S. Bankruptcy Code. PG&E is now paying currently for power purchases from April 6, 2001. As of March 31, 2001, the Company had outstanding receivables from these two utilities of approximately $55.1 million (including the Company's 50% interest in several partnerships) net of reserves of approximately $19.4 million. Of these net receivables, $11.7 million was due from PG&E. From April 1 to May 9, 2001, the Company had received payments relating to the March 31, 2001 balances due from SCE of approximately $1.9 million. Payment of those remaining March 31, 2001 receivables for California power sales is likely to be obtained only in connection with resolution of that state's power crisis and resolution of PG&E's bankruptcy. Therefore, the amounts received and the timeliness of payment are subject to legal, regulatory and legislative developments. Although the matter is not free of doubt, the Company believes it will ultimately receive payment of these receivables. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS Revenues and income (loss) from operations by segment for the three months ended March 31, 2001 and 2000 (expressed in thousands of dollars) were as follows: Information Concerning Three Months Ended March 31, Business Segments 2001 2000 - ---------------------------------------------------------------------------- Revenues: Energy $ 223,887 $ 225,178 Other 26,890 13,838 ----------- ----------- Total Revenues $ 250,777 $ 239,016 =========== =========== Income (loss) from Operations: Energy $ 27,887 $ 13,228 Other (1,225) (2,611) ----------- ----------- Total Income from Operations 26,662 10,617 Corporate unallocated income and expenses-net (3,750) (5,585) Interest-net (7,440) (8,485) ----------- ----------- Income (loss) from continuing operations before income taxes and minority interests $ 15,472 $ (3,453) =========== =========== Continuing Operations: Revenues for the first three months of 2001 were $11.8 million higher than the comparable period of 2000 primarily reflecting an increase in Other segment revenues of $13.1 million, partially offset by a decrease in Energy segment revenues of $1.3 million. Service revenues in 2001 decreased $5.2 million compared to the first quarter of 2000. Energy service revenues in 2001 decreased $14.9 million primarily due to a decrease of $18.5 million related to the environmental consulting business which was sold in November 2000, partially offset by an increase of $3.6 million due mainly to contractual annual escalation adjustments at many plants, increased growth in the supplemental waste business and a water service operating agreement with the city of Bessemer, Alabama, which began in October 2000. The Other segment's service revenues increased $9.7 million mainly due to the inclusion in continuing operations of $14.6 million related to unsold aviation and entertainment businesses in 2001, which were included in discontinued operations in 2000, partially offset by a decrease of $4.9 million due to the sale of Applied Data Technology, Inc. (ADTI) in the first quarter of 2000. Electricity and steam sales revenue increased $24.6 million compared to the same period in 2000, attributable mainly to increased production and favorable energy pricing experienced primarily at plants in California as well as increased pricing experienced at certain waste-to-energy plants with merchant energy capacity. Equity in income of investees and joint ventures for the three months ended March 31, 2001 increased $1.5 million compared to the same period in 2000. The increase is primarily attributable to the Quezon project in the Philippines, which commenced operations in the second quarter of 2000, partially offset by equity losses related to unsold aviation and entertainment joint ventures. Construction revenues for the three months ended March 31, 2001 decreased $13.4 million from the comparable period in 2000. The decrease is attributable to the completion of the retrofit construction activity mandated by the Clean Air Act Amendments of 1990, the decision to wind-down activities in the civil construction business, and the completion of construction of a wastewater project in the third quarter of 2000. Other sales - net increased $1.8 million compared to the first quarter of 2000 due mainly to increased activity in the operations of Datacom associated with Genicom Corporation (Genicom), its major customer. Net gain on sale of businesses for the three months ended March 31, 2001 included the gain of $1.9 million on the sale of the aviation ground handling operations at the Rome, Italy airport. The net loss on sale of businesses in the comparable period of 2000 included a loss of $.6 million on the sale of ADTI. Total costs and expenses in the first quarter of 2001 decreased by $6.1 million compared to the first quarter of 2000. This decrease reflects a decrease in the Energy segment of $15.9 million and a decrease in corporate unallocated overhead of $1.8 million, partially offset by an increase in the Other segment of $11.6 million due mainly to the inclusion of unsold aviation and entertainment businesses in 2001. The Energy segment's plant operating expenses increased by $4.6 million in the three months ended in March 31, 2001 compared to the same period of 2000. Operating expenses increased by approximately $20.1 million primarily due to increased fuel costs attributable to higher natural gas and oil prices, higher generation, primarily at waste-wood plants in California, and the effect of increased provisions for doubtful accounts of approximately $7.9 million, related mainly to receivables from California utilities (see Liquidity Cash Flow below). This increase was partially offset by a decrease of $15.5 million in the environmental business, which was sold in November of 2000. Construction costs decreased by $14.6 million for the three months ended 2001 compared to the comparable period of 2000. The decrease is due to the decline in the civil construction business, which management anticipates will cease in 2001, the completion of the retrofit construction activity mandated by the Clean Air Act Amendments of 1990 and completion of the construction of a wastewater project in the third quarter of 2000. Depreciation and amortization expense decreased by $5.1 million in the first quarter 2001 compared to the comparable period in 2000. This decrease is primarily related to a decrease in corporate depreciation and amortization, which in 2000 included $2.9 million of accelerated amortization of a new data processing system. Also, Energy's depreciation and amortization expense decreased by $1.5 million in the three months ended March 31, 2001 compared to 2000 primarily due to accelerated depreciation in 2000 related to certain air pollution control equipment being replaced in connection with the Clean Air Act Amendments of 1990. Debt service charges decreased by $1.0 million in the first quarter of 2001 compared to the comparable period of 2000. The decrease is primarily due to lower project debt related to various facilities caused by redemption and maturity of bonds. The Energy segment had one interest rate swap agreement outstanding that resulted in additional debt service expense of $.5 million and $.4 million for the three month periods ended March 31, 2001 and 2000, respectively. Other operating costs and expenses for the first three months of 2001 increased $6.0 million due to activity in the Other segment. This increase was due mainly to the inclusion of unsold aviation and entertainment businesses in 2001, which were included in discontinued operations in 2000. This increase was partially offset by the effect of the sale of ADTI in 2000. Costs of goods sold for the first quarter of 2001 increased $.7 million compared to the first quarter of 2000 due to activity in the Other segment, mainly increased activity at Datacom. Selling, administrative and general expenses for the first three months of 2001 increased $4.2 million compared to the same period of 2001 due mainly to the inclusion in continuing operations of the unsold aviation and entertainment businesses in 2001. That increase was partially offset by a decrease in unallocated corporate overhead expenses that was fundamentally the result of a decrease in most overhead costs due to the wind-down of the Company's New York office. Selling, administrative and general expenses for the Energy segment decreased $1.8 million compared to the first quarter of 2000 principally due to the sale in November 2000 of the environmental consulting business. Project development expenses in the three months ended March 31, 2001 decreased by $1.6 million from the same period in 2000. The decrease is mainly due to a decrease in overhead and other costs related to development in the Asian market. Other expenses-net increased $.7 million compared to the first quarter of 2000. This increase is due mainly to the amortization of the Company's costs in securing its Revolving Credit and Participation Agreement (the "Agreement") in March 2001. Such costs are being amortized over the term of the Agreement, which matures May 31, 2002. Interest expense-net in the first quarter of 2001 decreased $1.0 million compared to the same period of 2000. Corporate interest expense-net decreased $1.9 million primarily due to lower average debt outstanding, and an increase in interest income on cash balances which were classified as Restricted Cash on the December 31, 2000 balance sheet. The Energy segment's interest expense - net increased by $.9 million in 2001 compared to 2000 due to interest on debt associated with the Quezon project, which became operational in the second quarter of 2000. This debt was fully paid in March 2001. The effective tax rate for the three months ended March 31, 2001 was 30.1% compared to 17.5% for the same period of 2000. This increase in the effective rate was primarily due to pretax earnings in the current year period, versus pretax losses in the 2000 period for which certain tax benefits were not recognized. Discontinued Operations: In the first quarter of 2000, all aviation and entertainment businesses were accounted for as discontinued operations while such businesses were accounted for in continuing operations in the first quarter of 2001. In the first quarter of 2000 the loss from discontinued operations totaled $25.3 million. The loss before interest and taxes from discontinued operations was $31.9 million, primarily reflecting a provision of $17.9 million for estimated pretax losses from April 1, 2000 through the then anticipated dates of sales of those businesses. The remaining loss was primarily attributable to legal, accounting and consulting expenses, and overhead costs incurred in connection with the discontinuance of those businesses, and accelerated amortization of the data processing systems used in those businesses. Property , plant and equipment - net increased $138.2 million during the first three months of 2001 due mainly to the consolidation of two energy project companies that were previously accounted for under the equity method. CAPITAL INVESTMENTS AND COMMITMENTS For the three months ended March 31, 2001, capital investments amounted to $8.2 million, virtually all of which related to Energy. At March 31, 2001, capital commitments amounted to $11.4 million for normal replacement and growth in Energy and $.1 million for Corporate and Other operations. Other capital commitments for Energy as of March 31, 2001 amounted to approximately $15.4 million. This amount includes a commitment to pay, in 2008, $10.6 million for a service contract extension at an energy facility. In addition, this amount includes $4.6 million for an oil-fired project in India and $.2 million for a mass-burn waste-to-energy facility in Italy. Covanta 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 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 Covanta's Consolidated Financial Statements. (See Liquidity/Cash Flow below.) 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 in June 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 letter of credit in the amount of approximately $119.0 million. 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 which include its obligation to pay shortfalls, if any, if net revenues of the venue are insufficient to pay debt service underlying the venue. The Company is exploring alternatives for disposing of these operations along with the reimbursement agreement and related obligations. During 1994, a subsidiary of Covanta 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. Covanta is obligated to purchase such senior debt in the amount of $86.2 million on December 23, 2002, if the debt is not refinanced prior to that time. Covanta is also required to repurchase the outstanding amount of certain subordinated secured debt of such customer in the amount of $45.7 million on December 23, 2002. In addition, as of March 31, 2001, the Company had guaranteed $3.2 million of senior secured term debt of an affiliate and principal tenant (the NHL Ottawa Senators) of this customer. Further, Covanta is obligated to purchase $19.0 million of the tenant's secured subordinated indebtedness on January 29, 2004, if such indebtedness has not been repaid or refinanced prior to that time. The Company is also exploring alternatives for disposing of these operations along with the related obligations. Management does not expect that these arrangements will have a material adverse effect on Covanta's Consolidated Financial Statements. LIQUIDITY/CASH FLOW Net cash provided by operating activities of continuing operations for the quarter ended March 31, 2001 was $11.8 million compared to the first quarter of 2000 of $15.1 million, resulting in a decrease of $3.3 million. This decrease primarily reflects an increase in accounts receivable of $39.9 million, due mainly to receivables from California utilities (see below). This decrease was partially offset by an increase in net income from continuing operations of $13.6 million, an increase in accounts payable and accrued expenses of $11.9 million, and an increase in provisions for doubtful accounts of $9.1 million. Net cash used in investing activities of continuing operations was $2.4 million higher than the comparable period of 2000 primarily relating to an increase of $11.6 million in investments in and advances to investees and joint ventures, and a decrease of $3.6 million in proceeds from the sales of marketable securities available for sale, partially offset by an increase in proceeds from the sale of businesses of $5.1 million, and lower capital expenditures of $6.8 million. Net cash provided by financing activities of continuing operations for the first quarter of 2001 was $5.9 million compared to cash used in financing activities of $21.8 million in the first quarter of 2000. This increase of $27.7 million is due primarily to a decrease in restricted cash of $194.1 million (used to repay debt), partially offset by an increase in funds held in trust of $12.6 million and a decrease in outstanding debt of $154.0 million. In addition, cash used in discontinued operations in the first quarter of 2000 totaled $9.4 million representing mainly operating losses of those businesses. During the first quarter of 2001, the Company sold its aviation ground handling business in Rome, Italy for approximately $10.0 million. In May 2001, the Company sold its interest in the aviation business in Spain for approximately $1.8 million. In connection with several of the sales of its noncore businesses, the Company is also entitled to certain deferred payments, subject to certain contingencies. In addition, the Company has contingent obligations under most of the related sale agreements with respect to liabilities arising before and, in some cases, after the consummation of the sale. At March 31, 2001, the Company had approximately $101.8 million in cash and cash equivalents, of which $10.6 million related to net assets held for sale. In addition, the Company had a revolving credit facility of approximately $146 million on which the Company had not drawn at March 31, 2001. That facility is further described below. The Company's Revolving Credit and Participation Agreement (the "Master Credit Facility") which matures on May 31, 2002 and is secured by substantially all of the Company's assets, provides the Company with the credit line of approximately $146 million, including a subfacility which may only be used to provide certain letters of credit that may be required to be posted by the Company in the event that the Company's long-term debt rating is downgraded below investment grade. The Company may utilize the balance of the credit facility for continued investment in existing and, to a more limited extent, new energy projects, as well as for working capital and other general corporate purposes. The Company's ability to make investments in new energy projects is subject to several financial covenants relating to the Company's cash position, net worth and compliance with leverage and interest coverage tests. During the first quarter of 2001, in connection with the closing of the Master Credit Facility, the Company repaid approximately $157 million of outstanding bank and other indebtedness on the closing date of the Master Credit Facility. This debt amount was repaid from the amount that had been on the Company's balance sheet under the heading "Restricted Cash". The Company expects to complete the sale of its aviation fueling business and its other remaining noncore businesses in 2001. Sales of its noncore businesses are not totally within the Company's control. In addition, the successful completion of the sales processes for noncore assets may be impacted by general economic conditions in the markets in which these assets must be sold, and in some instances necessary regulatory and third-party consents. Recently, events affecting the California energy markets resulted in delays in payments for power sold to two utilities. Those two utilities are Pacific Gas & Electric Co. ("PG&E") and Southern California Edison ("SCE"). On March 27, 2001, the California Public Utilities Commission approved a substantial rate increase and directed the utilities to begin making current payments for power sales starting in April 2001. SCE is paying currently for power purchases from March 27, 2001. On April 6, 2001, PG&E, one of California's largest electric utilities, filed for protection under Chapter 11 of the U.S. Bankruptcy Code. PG&E is now paying currently for power purchases from April 6, 2001. As of March 31, 2001, the Company's outstanding net receivables from these two utilities totaled approximately $55.1 million (including the Company's 50% interest in several partnerships) net of reserves of approximately $19.4 million. Of these net receivables, $11.7 million was due from PG&E. From April 1 to May 9, 2001, the Company had received payments relating to the March 31, 2001 balances due from SCE of $1.9 million. Payment of those remaining March 31, 2001 receivables for California power sales is likely to be obtained only in connection with resolution of that state's power crisis and resolution of that utility's bankruptcy. Therefore, the amounts received and the timeliness of payment are subject to legal, regulatory and legislative developments. Although the matter is not free of doubt, the Company believes it will ultimately receive payment of these receivables. Under its Master Credit Facility, the Company agreed to meet budgeted cash flows. The Company's ability to meet these tests could be adversely affected if payment of receivables for California power sales or completion of asset sales are significantly delayed. However, even if payments of these receivables or these asset sales are further delayed, the Company believes that it can meet these covenants by seeking access to capital markets and through scheduling the incurrence of expenditures. In addition, under the Master Credit Facility newly identified investment commitments can be made once stated asset sale objectives are achieved. Although the Company believes these sales objectives will be met in 2001, if the Company is not permitted to make newly identified investment commitments in 2001 due to delays in completing asset sales, it does not expect any substantial impact on the Company's anticipated business activities in the current year or in 2002. Under certain agreements previously reported, the Company is required to provide letters of credit if its debt securities are no longer rated investment grade. The Master Credit Facility provides a subfacility which the Company believes is adequate for this purpose. The Master Credit Facility expires May 31, 2002. At that time, outstanding revolving loans, if any, under this facility must be repaid and all letters of credit issued thereunder and other obligations must be satisfied or released. The Company expects to be able to replace this facility on a timely basis. Further, to date the Company has been able to work with its creditors to assure compliance with obligations that might have been adversely impacted by payment delay, and it expects that it will continue to be able to do so unless the status of the California utilities substantially deteriorates. ANY STATEMENTS IN THIS COMMUNICATION WHICH MAY BE CONSIDERED TO BE "FORWARD-LOOKING STATEMENTS," AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, ARE SUBJECT TO CERTAIN 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 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. 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 the 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. In addition, with respect to its aviation fueling business (which the Company has not yet divested), the Company and/or certain subsidiaries have been advised by various authorities that they are responsible for investigation, remediation and/or corrective action 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 such matter to seek fair and reasonable solutions. 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) 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 at New York's Kennedy International Airport. These cases have been consolidated for joint trial. Both United and American allege that Ogden New York negligently caused discharges of petroleum at the airport and that Ogden New York is obligated to indemnify the airlines pursuant to the Fuel Services Agreements between Ogden New York and the respective airline. United and American further allege that Ogden New York 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 New York, 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 New York 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 New York 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 complaint alleges damages in excess of $70,000,000. The Company disputes the allegations and believes that the damages sought are overstated in view of the Airlines' responsibility for the alleged contamination and that the Company has other defenses under their respective leases, contracts and permits with the Port Authority of New York and New Jersey. (ii) On December 23, 1999, Allied Services, Inc. ("Allied") 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. Third-party plaintiffs seek contribution and indemnification from Allied and over 90 other third-party defendants for costs incurred and to be incurred for cleanup. This action was stayed, pending the outcome of first- and second-party claims. 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. (iii) 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. (iv) On May 25, 2000, the California Regional Water Quality Control Board, Central Valley Region ("Board"), issued a cleanup and abatement order to Pacific-Ultrapower Chinese Station ("Chinese Station"), a general partnership of which a Company subsidiary owns 50% and which operates a wood-burning power plant located in Jamestown, California. This order arises from the use as fill material, by Chinese Station's neighboring property owner, of boiler bottom ash generated by Chinese Station. The order was issued jointly to Chinese Station and to the neighboring property owner. As required by the order, Chinese Station has prepared an environmental site assessment and a clean closure work plan for the removal of the material and has applied for required permits. The Board, on April 18, 2001, issued a Notice of Violation to Chinese Station and the neighboring property owner alleging that as a result of time delays in completing the cleanup activities respondents have a potential civil liability, as of that date, of $690,000. This matter remains under investigation by the Board and other state agencies with respect to alleged civil and criminal violations associated with the management of the material. Chinese Station believes it has valid defenses. (v) On December 26, 2000, I. Schumann & Co. named Ogden Corporation, Ogden Alloys, Inc., Ogden Metals, Inc. and American Motorists Insurance Company in a lawsuit filed in the United States District Court for the Northern District of Ohio. The lawsuit seeks reimbursement for response costs at a site formerly owned and operated by the Company's subsidiary related entities, damages for breach of contract and judgment declaring that the Company and its named subsidiaries is responsible for certain future remediation costs. The plaintiff is seeking response costs in excess of $3,000,000 and unspecified damages from the Company. The Company believes it has valid defenses and has moved to dismiss the complaint. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 3.0 Articles of Incorporation and By-laws. 3.1 (a) The Company's Restated Certificate of Incorporation as amended.* (b) Certificate of Ownership and Merger, merging Ogden-Covanta, Inc. into Ogden Corporation, dated March 7, 2001.* 3.2 The Company's By-Laws, as amended through April 8, 1998.* 4.0 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between the Company and Bankers Trust Company, dated as of June 1, 1987, and Offering Memorandum dated June 12, 1987, relating to U.S. $85 million 6% Convertible Subordinated Debentures Due 2002.* 4.2 Fiscal Agency Agreement between the Company and Bankers Trust Company, dated as of October 15, 1987, and Offering Memorandum, dated October 15, 1987, relating to U.S. $75 million 5-3/4% Convertible Subordinated Debentures Due 2002.* 4.3 Indenture dated as of March 1, 1992 from the Company to Wells Fargo Bank Minnesota, National Association, as Trustee (as successor in such capacity to The Bank of New York, Trustee), relating to U.S. $100 million principal amount of 9 1/4% Debentures Due 2022.* 4.4 Amended and Restated Rights Agreement between the Company and The Bank of New York, dated as of September 28, 2000.* 10.0 Material Contracts 10.1 Revolving Credit and Participation Agreement, dated as of March 14, 2001, among the Company, the Lenders listed therein, Bank of America, N.A., as Administrative Agent, Co-Arranger and Co-Book Runner and Deutsche Bank AG, New York Branch, as Documentation Agent, Co-Arranger and Co-Book Runner.* 10.2 Employment Agreements (a) Letter Agreement between the Company and Raymond E. Dombrowski, Jr. dated January 22, 2001 (filed herewith as Exhibit 10.2(a)). 11 Detail of Computation of Earnings per Share Applicable to Common Stock (filed herewith as Exhibit 11) * INCORPORATED BY REFERENCE AS SET FORTH IN THE EXHIBIT INDEX OF THIS QUARTERLY REPORT ON FORM 10-Q. (b) Reports on Form 8-K Form 8-K Current Reports filed on January 4, 2001, March 8, 2001, March 15, 2001, March 16, 2001, March 30, 2001 and April 9, 2001 are incorporated herein by reference. SIGNATURES ---------- Pursuant to the requirements of the Securities Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. COVANTA ENERGY CORPORATION (Registrant) Date: May 15, 2001 By: /s/ EDWARD W. MONEYPENNY ---------------------------------- Edward W. Moneypenny Executive Vice President and Chief Financial Officer Date: May 15, 2001 By: /s/ WILLIAM J. METZGER --------------------------------- William J. Metzger Vice President and Chief Accounting Officer EXHIBIT INDEX ------------- EXHIBIT NO. DESCRIPTION OF DOCUMENT FILING INFORMATION - ----------- ----------------------- ------------------ 3 Articles of Incorporation and By-Laws. 3.1 (a) The Company's Restated Certificate of Filed as Exhibit (3)(a) to the Company's Form 10-K for Incorporation as amended. the fiscal year ended December 31, 1988 and incorporated herein by reference. (b) Certificate of Ownership and Merger, Merging Filed as Exhibit 3.1(b) to the Company's Form 10-K for Ogden-Covanta, Inc., into Ogden Corporation, dated the fiscal year ended December 31, 2000 and March 7, 2001. incorporated herein by reference. 3.2 The Company's By-Laws as amended. Filed as Exhibit 3.2 to the Company's Form 10-Q for the quarterly period ended March 31, 1998 and incorporated herein by reference. 4 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between the Company and Filed as Exhibits (C)(3) and (C)(4) to the Company's Bankers Trust Company, dated as of June 1, 1987 and Form 8-K filed with the Securities and Exchange Offering Memorandum dated June 12, 1987, relating Commission on July 7, 1987 and incorporated herein by to U.S. $85 million 6% Convertible Subordinated reference. Debentures Due 2002. 4.2 Fiscal Agency Agreement between the Company and Filed as Exhibit (4) to the Company's Form S-3 Bankers Trust Company, dated as of October 15, Registration Statement filed with the Securities and 1987, and Offering Memorandum, dated October 15, Exchange Commission on December 4, 1987, Registration 1987, relating to U.S. $75 million 5-3/4% No. 33-18875, and incorporated herein by reference. Convertible Subordinated Debentures Due 2002. 4.3 Indenture dated as of March 1, 1992 from the Filed as Exhibit (4)(C) to the Company's Form 10-K for Company to Wells Fargo Bank Minnesota, National the fiscal year ended December 31, 1991 and Association, as Trustee (as successor in such incorporated herein by reference. capacity to The Bank of New York, Trustee), relating to U.S. $100 million 9-1/4% Debentures Due 2022. 4.4 Amended and Restated Rights Agreement between the Filed as Exhibit 1 to Amendment No. 1 to the Company's Company and The Bank of New York, dated as of Form 8-A filed with the Securities and Exchange September 28, 2000. Commission on September 29, 2000 and incorporated herein by reference. 10 Material Contracts. 10.1 Revolving Credit and Participation Agreement, Filed as Exhibit 10.1(b) to the Company's dated March 14, 2001, among the Company, the Form 10-K for the fiscal year ended Lenders listed therein, Bank of America, N.A., December 31, 2000 and as incorporated Administrative Agent, Co-Arranger and Co Book herein by reference. Runner, and Deutsche Bank AG, New York Branch, as Documentation Agent, Co-Arranger and Co-Book Runner. 10.2 Employment Agreements. (a) Letter Agreement dated January 22, 2001 Filed herewith as Exhibit 10.2(a). between the Company and Raymond E. Dombrowski, Jr. 11 Detail of Computation of Earnings Per Share Filed herewith as Exhibit 11. Applicable to Common Stock.
EX-10.2A 2 covex10-2a.txt Exhibit 10.2(a) --------------- OGDEN ENERGY GROUP, INC. 40 LANE ROAD FAIRFIELD, NEW JERSEY 07007 January 22, 2001 Raymond E. Dombrowski, Jr. 120 Glenwood Road Haddonfield, New Jersey 08033 Re: Employment Agreement Dear Ray: I would like to outline the proposal discussed over the weekend under which we would agree to a change in your employment status. We would like very much for you to stay on as Ogden Energy Group's ("OEG") Director of Restructuring Activities for a period of six months (through July 22, 2001). Your employment in that capacity would be on the following terms: A. Your employment as Chief Financial Officer of Ogden Corporation will terminate effective January 22, 2001 and your existing employment agreement will be terminated as of that date except that (x) you will be entitled to the benefits under Section 6(d) of your existing employment agreement, provided that the benefits payable under paragraph 6(d)(ii) thereof shall be (1) computed on the basis of your salary for 2000 of $300,000 and a bonus for 2000 which I have decided to set at $400,000 and (2) paid out monthly in 12 equal installments over a period of one year from termination, commencing February 1, 2001 and (y) the provisions of Sections 7 and 8 shall survive the termination of the agreement. In addition, although the parties believe that the payments provided for herein will not trigger any excise tax imposed on "Excess Parachute Payments" section 6(d)(iii) shall also survive the termination of the agreement. Furthermore, although paragraph 4(g) of your agreement will terminate effective as of January 22, 2001, the Company's undertaking that the use of such apartment prior to January 22, 2001 shall be "on an after tax basis" shall survive. Your 2000 bonus in the amount of $400,000 will be payable at the same time as other 2000 bonuses for Ogden executives are paid. You will also be entitled to a cash payment equal to $46,000 in respect of all accrued but unused vacation for the past two years, payable February 1, 2001. B. You, OEG and Ogden will enter into a new agreement providing for the payments and other terms described in A above and for the following. OEG will employ you as its Director of Restructuring Activities of OEG in Fairfield for the six month period ending July 22, 2001. You will perform the duties assigned to you by the Chief Executive Officer of OEG in good faith and in accordance with his direction. Such duties may include completing its bank refinancing and once completed, assisting in maintaining compliance therewith, assisting in rating agency matters, certain deleveraging activities, completion of asset sales, assisting in preparation of Ogden's 2000 Annual Report on Form 10K, and such related matters as are assigned to you by the Chief Executive Officer. C. During this six month employment period, you will receive a monthly salary of $50,000, payable on the first day of each month commencing on February 1, 2001 and standard medical, dental and life insurance benefits for OEG employees. You will also be eligible for a 2001 bonus based on the average of the closing prices of Ogden's common stock on the NYSE for the last 10 trading days ending July 31, 2001, to be paid no later than August 31, 2001. Such bonus shall be computed in accordance with the following schedule: if the closing price as determined above is $16 to $18 per share, the bonus shall be $150,000; if the closing price as determined above is more than $18 but not more than $20 per share, the bonus shall be $200,000; and if the closing price as determined above is above $20, the bonus shall be $250,000. Such bonus may be paid in either cash or stock, at the option of Ogden. Following the end of the six-month employment period, OEG will continue your medical and dental benefits pursuant to COBRA and will pay for a period of six months all of the costs of such continued coverage. D. Within 30 days after execution of your employment agreement in accordance with this letter, you will be paid an additional bonus of 15,000 shares of restricted stock pursuant to the terms of our stock incentive plan. Such restricted shares shall fully vest on July 31, 2001. E. If the Company terminates your employment prior to the conclusion of such six-month period for cause (including your failure to perform your duties in good faith), your rights with respect to the items under C and D shall terminate. F. Your employment agreement will provide a mutual non-denigration clause which will become effective on termination of employment. G. We will exchange mutual general releases relating to the Employment Agreement dated September 21, 1998, effective as of January 22, 2001. Ray, it is our sincere hope that you will choose to continue to work with us in the capacity outlined above. If you agree to the foregoing, please execute the attached copy of this letter in the space provided below and return it to me promptly. Sincerely, Ogden Energy Group, Inc. Ogden Corporation ------------------------- President ACCEPTED AND AGREED this day of January, 2001. - ---------------------------- Raymond Dombrowski EX-11 3 cov10q_ex-11.txt EXHIBIT 11 COVANTA ENERGY CORPORATION AND SUBSIDIARIES DETAILS OF COMPUTATION OF EARNINGS PER SHARE APPLICABLE TO COMMON STOCK FOR THE THREE MONTHS ENDED MARCH 31, ----------------------------------------------------------------------------- 2001 2000 ----------------------------------------------------------------------------- Income Shares Per Share Income Shares Per Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- --------- (In thousands, except per share amounts) Income (loss) from continuing operations $ 9,415 $ (4,174) Less: preferred stock dividend 17 17 ------- -------- Basic Earnings (Loss) Per Share 9,398 49,609 $ 0.19 (4,191) 49,496 $ (0.08) ------ ------- Effect of Dilutive Securities: Stock options 207 (A) Restricted stock 89 (A) Convertible preferred stock 17 212 (A) 6% convertible debentures (A) (A) 5 3/4% convertible debentures (A) (A) --------------------- ---------------------- Diluted Earnings (Loss) Per Share $ 9,415 50,117 $ 0.19 $ (4,191) 49,496 $ (0.08) ---------------------------------- ---------------------------------- (A) Antidulitive
Note: Basic earnings per common share was computed by dividing net income (loss), reduced by preferred stock dividend requirements, by the weighted average of the number of shares of common stock outstanding during each period. Diluted earnings per common share was computed on the assumption that all convertible debentures, convertible preferred stock, restricted stock and stock options converted or exercised during each period or outstanding at the end of each period were converted at the beginning of each period or the date of issuance or grant, if dilutive. This computation provides for the elimination of related convertible debenture interest and preferred dividends. -----END PRIVACY-ENHANCED MESSAGE-----