-----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, PSM3dOa3lHJijqr9JNgaWdjuXvsFAS/eTWdvTeIseiXtV6U+NMGQuELNGPNu3gvs S0THrolFGc0brbvZqMJqig== 0000912057-99-006914.txt : 19991122 0000912057-99-006914.hdr.sgml : 19991122 ACCESSION NUMBER: 0000912057-99-006914 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991119 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGDEN 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: 99761254 BUSINESS ADDRESS: STREET 1: TWO PENNSYLVANIA PLZ - 25TH FLR CITY: NEW YORK STATE: NY ZIP: 10121 BUSINESS PHONE: 2128686100 MAIL ADDRESS: STREET 1: TWO PENNSYLVANIA PLZ - 25TH FLR CITY: NEW YORK STATE: NY ZIP: 10121 10-Q 1 10-Q 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 September 30, 1999 ----------------------- 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 September 30, 1999; 49,465,891 shares of Common Stock, $.50 par value per share. PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS OGDEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE NINE MONTHS FOR THE THREE MONTHS ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, --------------------- ------------------- 1999 1998 1999 1998 -------- ------- --------- ------- (In Thousands of Dollars, Except per Share Data) Service revenues $ 595,787 $ 585,658 $ 208,165 $ 190,615 Net sales 39,975 52,853 13,437 16,505 Construction revenues 101,091 18,460 33,221 10,512 Net gain on disposition of businesses 5,664 1,469 800 -------- -------- -------- -------- Total revenues 742,517 658,440 255,623 217,632 -------- -------- -------- -------- Operating costs and expenses 416,637 390,210 150,212 119,824 Costs of goods sold 43,791 62,044 14,652 17,063 Construction costs 97,332 16,863 32,123 9,549 Selling, administrative and general expenses 63,165 71,675 20,103 21,299 Debt service charges 70,879 77,390 24,180 26,949 -------- -------- -------- -------- Total costs and expenses 691,804 618,182 241,270 194,684 -------- -------- -------- -------- Consolidated operating income 50,713 40,258 14,353 22,948 Equity in net income of investees and joint ventures 9,372 10,478 3,428 1,731 Interest income 3,605 9,315 808 4,573 Interest expense (25,411) (24,723) (9,038) (7,970) Other income (deductions)-net 5,137 432 (37) 147 ------- ------- -------- -------- Income before income taxes, minority interests, income (loss) from discontinued operations and the cumulative effect of change in accounting principle 43,416 35,760 9,514 21,429 Less: income taxes 11,558 10,780 525 5,934 minority interests 3,178 2,165 636 1,436 -------- ------- --------- ------- Income from continuing operations 28,680 22,815 8,353 14,059 Income (loss) from discontinued operations (net of income taxes, YTD, 1999, $15,022, 1998,$31,708; QTR, 1999, $2,598, 1998, $12,238) (883) 44,100 (16,069) 14,096 Cumulative effect of change in accounting principle (net of income taxes of $1,313) (3,820) -------- ------- --------- ------- Net Income (Loss) 23,977 66,915 (7,716) 28,155 -------- -------- ------ ------- Other Comprehensive Income, Net Of Tax: Foreign currency translation adjustments (5,577) (1,292) 1,780 83 Unrealized holding gains(losses) arising during period (320) (106) 229 (209) Less: reclassification adjustment for gains included in net income (666) (666) -------- ------- --------- ------- Other comprehensive income (6,563) (1,398) 1,343 (126) --------- -------- --------- -------- Comprehensive income $ 17,414 $ 65,517 $ (6,373) $ 28,029 ========= ======== ========= ======== BASIC EARNINGS PER SHARE Income from continuing operations $ .59 $ .45 $ .17 $ .28 Income (loss) from discontinued operations (.02) .88 (.33) .29 Cumulative effect of change in accounting principle (.08) -------- ------- --------- ------- Net Income (Loss) $ .49 $ 1.33 $ (.16) $ .57 ======== ======== ======== ======== DILUTED EARNINGS PER SHARE Income from continuing operations $ .58 $ .45 $ .17 $ .28 Income (loss) from discontinued operations (.02) .86 (.33) .28 Cumulative effect of change in accounting principle (.08) -------- ------- --------- ------- Net Income (Loss) $ .48 $ 1.31 $ (.16) $ .56 ======== ======== ======== =========
1 OGDEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, DECEMBER 31, 1999 1998 ----------- ----------- (In Thousands of Dollars) ASSETS Current Assets: Cash and cash equivalents $ 119,125 $ 181,169 Marketable securities available for sale 44,685 Restricted funds held in trust 108,676 110,553 Receivables (less allowances: 1999, $13,711 and 1998, $18,130) 287,371 274,307 Inventories 18,548 20,162 Deferred income taxes 48,881 47,921 Other 65,304 48,102 Net assets of discontinued operations 530,880 468,508 ----------- ----------- Total current assets 1,178,785 1,195,407 Property, plant and equipment-net 1,823,073 1,736,241 Restricted funds held in trust 168,428 180,922 Unbilled service and other receivables 177,935 159,409 Unamortized contract acquisition costs 111,941 69,260 Goodwill and other intangible assets 44,120 41,935 Investments in and advances to investees and joint ventures 178,834 149,663 Other assets 83,859 113,115 ----------- ----------- Total Assets $ 3,766,975 $ 3,645,952 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Current Liabilities: Current portion of long-term debt $ 41,276 $ 21,888 Current portion of project debt 56,946 63,201 Dividends payable 15,403 Accounts payable 75,032 50,550 Federal and foreign income taxes payable 12,604 21,776 Accrued expenses, etc. 234,160 232,607 Deferred income 46,140 45,090 ----------- ----------- Total current liabilities 466,158 450,515 Long-term debt 418,081 348,594 Project debt 1,432,061 1,367,528 Deferred income taxes 392,095 393,568 Deferred income 193,759 201,563 Other liabilities 139,876 160,728 Minority interests 30,939 25,706 Convertible subordinated debentures 148,650 148,650 ----------- ----------- Total Liabilities 3,221,619 3,096,852 ----------- ----------- Shareholders' Equity: Serial cumulative convertible preferred stock, par value $1.00 per share; authorized 4,000,000 shares; shares outstanding: 39,632 in 1999 and 42,218 in 1998; net of treasury shares of 29,820 in 1999 and 1998 40 43 Common stock, par value $.50 per share;authorized, 80,000,000 shares; shares outstanding: 49,465,891 in 1999 and 48,945,989 in 1998, net of treasury shares of 4,425,103 and 4,561,963 in 1999 and 1998, respectively 24,733 24,473 Capital surplus 182,806 173,413 Earned surplus 361,153 367,984 Accumulated other comprehensive income (23,376) (16,813) ----------- ----------- Total Shareholders' Equity 545,356 549,100 ----------- ----------- Total Liabilities and Shareholders' Equity $ 3,766,975 $ 3,645,952 =========== ===========
2 OGDEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Nine Months Ended Year Ended September 30, 1999 December 31, 1998 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 72,038 $ 73 74,166 $ 75 Shares converted into common stock (2,586) (3) (2,128) (2) ---------- ------ ---------- ------ Total 69,452 70 72,038 73 Treasury shares (29,820) (30) (29,820) (30) ---------- ------ ---------- ------ Balance at end of period (aggregate involuntary liquidation value - 1999 $799) 39,632 40 42,218 43 ---------- ------ ---------- ------ Common Stock, Par Value $.50 Per Share; Authorized, 80,000,000 Shares: Balance at beginning of period 53,507,952 26,754 53,430,246 26,715 Exercise of stock options 175,801 88 65,000 33 Shares issued for acquisition 191,800 96 Conversion of preferred shares 15,441 8 12,706 6 ---------- ------ ---------- ------ Total 53,890,994 26,946 53,507,952 26,754 ---------- ------ ---------- ------ Treasury shares at beginning of period 4,561,963 2,281 3,135,123 1,568 Purchase of treasury shares 102,000 51 2,121,100 1,060 Exercise of stock options (238,860) (119) (694,260) (347) ---------- ------ ---------- ------ Treasury shares at end of period 4,425,103 2,213 4,561,963 2,281 ---------- ------ ---------- ------ Balance at end of period 49,465,891 24,733 48,945,989 24,473 ---------- ------ ---------- ------ Capital Surplus: Balance at beginning of period 173,413 212,383 Exercise of stock options 6,952 16,355 Shares issued for acquisition 4,904 Purchase of treasury shares (2,458) (55,321) Conversion of preferred shares (5) (4) ------- ------- Balance at end of period 182,806 173,413 ------- ------- Earned Surplus: Balance at beginning of period 367,984 343,237 Net income 23,977 86,970 -------- -------- Total 391,961 430,207 -------- -------- Preferred dividends-per share 1999, $2.5128, 1998, $3.35 104 144 Common dividends-per share 1999, $.625 1998, $1.25 30,704 62,079 -------- -------- Total dividends 30,808 62,223 -------- -------- Balance at end of period 361,153 367,984 -------- -------- Cumulative Translation Adjustment-Net (21,609) (16,032) -------- -------- Minimum Pension Liability Adjustment (716) (716) -------- -------- Net Unrealized Loss on Securities Available For Sale (1,051) (65) -------- -------- CONSOLIDATED SHAREHOLDERS' EQUITY $545,356 $549,100 ======== ========
3 OGDEN CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30 1999 1998 -------- --------- (In Thousands of Dollars) CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 23,977 $ 66,915 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities of Continuing Operations: Loss (income) from discontinued operations 883 (44,100) Depreciation and amortization 65,553 58,925 Deferred income taxes 3,500 19,051 Cumulative effect of change in accounting principle 3,820 Other (18,954) (4,146) Management of Operating Assets and Liabilities: Decrease (Increase) in Assets: Receivables (20,301) 10,436 Inventories 1,614 1,436 Other assets 77 (9,666) Increase (Decrease) in Liabilities: Accounts payable 22,316 (7,800) Accrued expenses (11,156) 4,863 Deferred income 1,072 196,263 Other liabilities (30,779) 13,678 -------- --------- Net cash provided by operating activities of continuing operations 41,622 305,855 -------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of business 9,760 Proceeds from sale of property, plant and equipment 3,061 135 Proceeds from sale of marketable securities available for sale 59,438 Proceeds from sale of investment 5,138 Entities purchased, net of cash acquired (69,494) Investments in Energy facilities (27,906) (15,991) Other capital expenditures (14,418) (9,003) Decrease in other receivables 846 2,865 Distributions from investees and joint ventures 10,510 6,058 Increase in investment in and advances to investees and joint ventures (33,278) (24,688) --------- --------- Net cash used in investing activities of continuing operations (56,343) (40,624) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings for Energy facilities 135,110 267,303 Other new debt 87,769 30,254 Decrease in funds held in trust 14,364 5,397 Payment of debt (170,845) (312,272) Dividends paid (46,210) (47,150) Purchase of treasury shares (2,509) (48,916) Proceeds from exercise of stock options 4,892 14,032 Other (3,868) (4,287) --------- --------- Net cash provided by (used in) financing activities of continuing operations 18,703 (95,639) --------- --------- Net cash used in discontinued operations (66,026) (20,763) --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (62,044) 148,829 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 181,169 144,724 --------- --------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 119,125 $ 293,553 ========= =========
4 OGDEN CORPORATION AND SUBSIDIARIES SEPTEMBER 30, 1999 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. On January 1, 1999 the Company adopted the American Institute of Certified Public Accountants (AICPA) 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. 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 for discontinuing 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 presentation of the financial results have been reclassified in the accompanying financial statements to show these operations as discontinued and the prior periods have been restated. Net sales and income (loss) from discontinued operations are as follows:
NINE MONTHS ENDED THREE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, -------------------------- -------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ----------- (In Thousands of Dollars) Revenues $624,126 $640,003 $253,656 $223,481 ----------- ----------- ----------- ----------- Income (Loss) Before Income Taxes and Minority Interests $ 15,465 $ 76,052 $(12,358) $26,394 Income Taxes 15,022 31,708 2,598 12,238 Minority Interests 1,326 244 1,113 60 ----------- ----------- ----------- ----------- Income (Loss) from Discontinued Operations $ (883) $44,100 $ (16,069) $14,096 =========== =========== =========== ===========
5 Net assets of discontinued operations are as follows:
SEPTEMBER 30, DECEMBER 31, 1999 1998 -------------- --------------- (In Thousands of Dollars) Current Assets $ 243,397 $226,953 Noncurrent Assets 712,176 520,576 Current Liabilities (251,571) (173,662) Noncurrent Liabilities (173,122) (105,359) ------------- ------------- Net Assets of Discontinued Operations $ 530,880 $468,508 ============= =============
The accompanying financial statements for prior periods have been reclassified as to certain amounts to conform with the 1999 presentation. 6 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OPERATIONS: Revenues and income from continuing operations by segment for the nine months and the three months ended September 30, 1999 and 1998 were as follows:
NINE MONTHS ENDED THREE MONTHS ENDED Information Concerning SEPTEMBER 30, SEPTEMBER 30, Business Segments -------------------------- ---------------------------- 1999 1998 1999 1998 ----------- ----------- ----------- ------------ (In Thousands of Dollars) Revenues: Energy $ 685,407 $ 585,228 $ 235,954 $ 195,775 Other 57,110 73,212 19,669 21,857 ----------- ----------- ----------- ------------ Total Revenues $ 742,517 $ 658,440 $ 255,623 $ 217,632 ----------- ----------- ----------- ------------ Income (Loss) from Continuing Operations: Energy $ 65,861 $ 69,323 $ 17,804 $ 30,726 Other (2,140) (1,830) 431 (1,114) ----------- ----------- ----------- ------------ Total 63,721 67,493 18,235 29,612 Equity in net income of investees and joint ventures: Energy 9,372 10,478 3,428 1,731 ----------- ----------- ----------- ------------ Total 73,093 77,971 21,663 31,343 Corporate unallocated expenses - net (7,871) (26,803) (3,919) (6,517) Interest - net (21,806) (15,408) (8,230) (3,397) ----------- ----------- ----------- ------------ Income from Continuing Operations Before Income Taxes, Minority Interests, Income (Loss) from Discontinued Operations and Cumulative Effect of Change in Accounting Principle $ 43,416 $ 35,760 $ 9,514 $ 21,429 =========== =========== =========== ============
7 OVERVIEW As a result of the adoption of the plan to discontinue the operations of the Entertainment and Aviation businesses, the Company's financial statement presentation has changed. Segment information for two units previously reflected under the segment headings "Energy" and "Other" are now reported as Continuing Operations and will continue to be reported under those headings. Results previously reported under the segment headings "Entertainment" and "Aviation" are now reported as Discontinued Operations. The Company has engaged financial advisors to assist in the sale of the discontinued operations. Management expects this process to take approximately nine months to complete. While based upon a number of assumptions and judgments, and although no guarantees can be given, management believes, based upon multiples of earnings, cash flows and revenues for comparable businesses, that these dispositions will, in the aggregate after costs of disposition, be at book value or greater. REVENUES FROM CONTINUING OPERATIONS Revenues from Continuing Operations were $255.6 million for the quarter ended September 30, 1999, an increase of $38 million as compared with $217.6 million for the comparable period in 1998. For the nine-month period ended September 30, 1999, Revenues from Continuing Operations were $742.5 million, an increase of $84.1 million as compared with $658.4 million for the comparable period in 1998. The $38 million increase in revenues for the quarter ended September 30, 1999 is primarily related to increases in the Energy segment of approximately $40 million. These increases were partially offset by declines in revenues of approximately $2 million in the Other Segment. The Energy segment increase is attributable to increases at various waste-to-energy facilities amounting to approximately $4 million and an increase in construction revenues from waste-to-energy facility retrofits of $3 million. The Company anticipates that retrofit activity will decline during 2000 as facilities attain compliance with the Clean Air Act Amendments of 1990, which is mandated by the end of 2000. Revenues also increased by approximately $19 million in the Independent Power group primarily reflecting new projects that became operational in 1999 and the consolidation of a plant as a result of the acquisition of an additional 50% interest in the second quarter of 1999, and by $9 million in construction revenues related to the construction of a potable water treatment plant. Revenues at Ogden Environmental and Energy Services (OEES) increased by $5 million as a result of an increase in construction revenues of $11 million, partially offset by a decrease of $6 million in service revenues from the environmental consulting business due mainly to management focusing on the heavy construction business as opposed to the consulting business. The decline in revenues in the Other Segment of $2 million is mainly due to lower orders from a major 8 customer of Datacom (formerly Atlantic Design) partially offset by an increase in revenues from government contracts. The $84.1 million increase in revenues for the nine months ended September 30, 1999 compared to the same period in 1998 was principally attributable to the Energy segment which increased by approximately $100 million partially offset by a decrease in revenues of $16 million from the Other Segment. The Energy segment showed an increase in construction revenues from waste-to-energy facility retrofits of $25 million, partially offset by a net decrease in service revenues at various waste-to-energy facilities of approximately $6 million. This $6 million decrease is primarily attributable to a reduction of $18.7 million at the Lawrence, Massachusetts facility resulting from a gain recognized in the second quarter of 1998 on the buyout of a power sales agreement and decreases attributable to the closing of the Lawrence facility, also in the second quarter of 1998. These decreases were offset by increases at various other locations, primarily at the Union County, New Jersey facility which increased by $11.1 million as a result of a new service agreement negotiated in the third quarter of 1998. The Company anticipates that retrofit construction revenue will decline during 2000 as facilities attain compliance with the Clean Air Act Amendments of 1990, which is mandated by the end of 2000. The Independent Power group's revenues increased $34 million related to new plants that became operational in 1999, the consolidation of a plant as a result of the acquisition of an additional 50% interest in the second quarter of 1999, and a gain of approximately $5.7 million on the sale of an ownership interest in a joint venture. In addition, revenues increased by $16 million related to the construction of a potable water treatment plant. Revenues at OEES increased $31 million due to an increase in construction revenues of $42 million, offset by a decrease in service revenues from the environmental consulting business of $11 million due mainly to management focusing on the heavy construction business as opposed to the consulting business. These increases were offset by a decrease in the revenues from the Other Segment of $16 million, chiefly attributable to lower orders from a major customer of Datacom partially offset by an increase in revenues from government contracts. CONSOLIDATED OPERATING INCOME FROM CONTINUING OPERATIONS Consolidated operating income from continuing operations for the three-month and nine-month periods ended September 30, 1999 were $14.4 million and $50.7 million respectively, as compared with $22.9 million and $40.3 million for the comparable periods in 1998. Consolidated operating income for the three months ended September 30, 1999 decreased by approximately $8.5 million from the comparable period of 1998. The Energy segment's operating income for the three months ended September 30, 1999 decreased $12.9 million as compared to the three months ended September 30, 1998. The decrease in operating income is primarily due to an $8 million gain in connection with a payment received for the termination and restructuring of a waste-to-energy facility operating 9 contract in the 1998 period; a charge of $3.3 million associated with the write-off of certain air pollution control equipment being replaced with equipment designed to conform to the Clean Air Act Amendments of 1990; an increase in overhead and development expenses of $3.8 million in the Independent Power group; and a higher loss at OEES of $1.6 million principally related to the construction business; partially offset by an increase of $1.7 million in income from retrofit construction, and increased operating income from new plants that became operational in 1999 of $2.3 million. Operating income in the Other Segment increased $1.5 million due to reduced overhead costs and new government contracts. Consolidated operating income for the nine months ended September 30, 1999 increased by $10.4 million as compared to the nine months ended September 30, 1998. The Energy segment's operating income for the nine months ended September 30, 1999 decreased $3.5 million as compared to the nine months ended September 30, 1998. The decrease in operating income is primarily due to a $16.7 million decrease due to closure of the Lawrence facility in 1998, reduced activity at various waste-to-energy facilities and amortization of the prepayment of a power sales agreement. Operating income also decreased due to an $8 million gain in connection with a payment received for the termination and restructuring of a waste-to-energy facility operating contract in the 1998 period; a write-off of $3.3 million related to certain air pollution control equipment being replaced with equipment designed to conform to the Clean Air Act Amendments of 1990; and an increase in overhead and development expenses of $3.8 million in the Independent Power group. Also, OEES's operating loss increased $5.4 million due to increased losses in the environmental consulting business of $2.8 million and losses incurred in the construction business of $2.6 million. These decreases were partially offset by a gain of $9.3 million in connection with a payment received for the termination and restructuring of another waste-to-energy facility operating contract in the 1999 period, an increase in retrofit construction income of $3.7 million, adjustments of $9.0 million associated with the acquisition of the remaining 50% interest in a joint venture, increased income of $5.3 million primarily related to new projects that became operational in 1999, a $5.7 million gain on the sale of a joint venture interest and increased income related to construction of a potable water treatment plant of $700,000. Debt service charges were $2.8 million and $6.5 million lower for the three-month and nine-month periods ended September 30, 1999, respectively, compared with the same periods in 1998 due mainly to lower project debt outstanding on various facilities caused by redemption, refinancing and maturity of bonds. The Energy segment had interest rate swap agreements entered into as hedges against interest rate exposure on adjustable rate project debt that resulted in additional debt service expense of $1.6 million and $847,000 for the nine months ended September 30, 1999 and 1998, respectively, and $426,000 and $492,000 for the three-month periods ended September 30, 1999 and 1998, respectively. Two of these interest rate swap agreements were terminated in the third and fourth quarters of 1998 leaving only one remaining. Corporate unallocated expenses-net were $2.6 million and $18.9 million lower than the comparable three and nine-month periods in 1998. The reductions for the three-month 10 period were attributable principally to termination of the Executive Pension Plan, gain on the sale of pension plan assets and the absence of a year-end bonus provision, while the nine-month reduction reflects the absence of certain restructuring costs, certain litigation and proxy-related charges provided for in 1998, a gain of $5.1 million on the sale of an investment in June of 1999, as well as the items discussed above which impacted the three-month period. INTEREST INCOME AND EXPENSE Interest income from continuing operations decreased $3.8 million for the three months ended September 30, 1999 compared to the same period in 1998, due mainly to lower average cash invested in 1999, receipt of payment of certain receivables, and interest received in the 1998 period on state tax refunds. Interest income from continuing operations decreased $5.7 million for the nine months ended September 30, 1999 compared with the same period in 1998, due primarily to lower average cash invested. Average cash invested was lower in 1999 than in 1998 primarily due to cash used for acquisitions, including acquisitions relating to discontinued operations, purchases of property, plant and equipment, common stock repurchases, and dividends. Interest expense from continuing operations increased $1.1 million and $700,000 for the three-month and nine-month periods ended September 30, 1999, respectively, compared to the same periods in 1998, due mainly to interest on additional borrowings at the Energy segment and interest on borrowings under the Company's revolving credit facility. Ogden has one interest rate swap agreement covering a notional amount of $2 million which expires November 30, 2000 and was entered into to convert Ogden's variable rate debt to a fixed rate. Another swap agreement expired December 16, 1998 and was entered into to convert Ogden's fixed rate $100 million 9.25% debentures to a variable rate. Additional interest expense relating to these swap agreements was not significant in the nine-month and three-month periods ended September 30, 1999 and 1998. EQUITY IN NET INCOME OF INVESTEES AND JOINT VENTURES Equity in net income of investees and joint ventures for the three-month and nine-month periods ended September 30, 1999 increased $1.7 million and decreased $1.1 million, respectively, compared to the comparable periods of 1998. The increase in the three-month period is due mainly to increased earnings at Pacific Energy joint ventures, primarily Mammoth Geothermal. The decrease in the nine-month period is due mainly to decreased earnings at Pacific Energy joint ventures which included a gain on the buyout of an energy sales agreement in the second quarter of 1998. 11 INCOME TAXES The effective income tax rate for continuing operations was 5.5% for the quarter ended September 30, 1999 as compared with 27.7% for the comparable period in 1998. This decrease is mainly attributable to a decrease in income before taxes and an increase in the proportion of income from foreign sources taxed at rates lower than the Federal statutory rate. The effective income tax rate for the nine months ended September 30, 1999 was 26.6% compared with 30.1% for the same period of 1998. This decrease is primarily due to an increase in deductible permanent items and lower foreign taxes. DISCONTINUED OPERATIONS Income (Loss) from Discontinued Operations for the three-month and nine-month periods ended September 30, 1999 were ($16.1) million and ($883,000), respectively, compared with $14.1 million and $44.1 million for the comparable periods of 1998. Operating income (loss) from Discontinued Operations for the three-month and nine-month periods ended September 30, 1999 were ($13.9) million and $14.6 million, respectively, compared with $23.6 million and $75.9 million for the comparable periods of 1998. Entertainment Entertainment's operating (loss) for the three-month and nine-month periods ended September 30, 1999 were ($18.2) million and ($7.7) million, respectively, compared with operating income of $14.0 million and $28.8 million for the comparable periods of 1998. Operating income (loss) for the third quarter of 1999 was $32.2 million lower than the comparable period of 1998 primarily attributable to the following events: In the second quarter of 1999, the Company announced that it had signed an agreement to acquire Volume Services America ("VSA"). Pursuant to that agreement, the Company made a $10 million nonrefundable deposit to be applied against the purchase price. On September 30, 1999 the Company announced that it had decided not to complete the acquisition and, as a result, forfeited that deposit and took a charge in an equal amount. In addition, the Company has written off certain legal, accounting and other costs directly associated with that transaction totaling approximately $500,000. In addition, during the third quarter of 1999, the Company reached an agreement to sell its interest in the Grizzly Nature Center and sold its interest in a casino operation in Aruba resulting in losses of $4.2 million and $2.5 million, respectively. Additionally, Entertainment took charges of approximately $6.5 million to write off, as unrecoverable, contract acquisition costs for concession services at facilities (the Great Western Forum and the U.S. Air Arena) that 12 ceased to be utilized by professional sports teams. The Company continues to perform concession services at the new venues (the Staples Center and the MCI Arena) utilized by those teams, so on-going income is not expected to be materially altered as a result of these events. The Company also concluded that it would abandon its participation in a consortium that was developing a casino in Johannesburg, South Africa, resulting in losses of $2.1 million. In addition, Entertainment's results decreased by approximately $4.8 million at several site-based and venue management locations due to lower attendance, as well as a decrease of $1.9 million from Amphitheatre concessions due to a change in contract terms. Also, in the comparable period in 1998, Entertainment's results included $8.1 million in gains principally attributable to receipt of payments for exclusivity rights at certain facilities. These reductions were partially offset by income of $9.5 million at waterparks operations acquired in 1999. Operating income for the nine months ended September 30, 1999 was $36.5 million lower than the comparable period of 1998 primarily attributable to the items above affecting the third quarter as well as poor performance at Casino Iguazu acquired in December 1998, Aruba Casino, Tinseltown, and American Wilderness and start-up losses at several shopping malls in earlier periods of 1999, which were partially offset by a gain on the renegotiation of the management contract at Arrowhead Pond of $6.0 million and the gain on the sale of certain Amphitheatre contracts of $7.2 million. Aviation Aviation's operating income for the three-month and nine-month periods ended September 30, 1999 were $4.2 million and $22.3 million, respectively, compared with $9.6 million and $47.1 million for the comparable periods of 1998. The decrease in operating income of $5.4 million for the three months ended September 30, 1999 as compared to the same period of 1998 primarily reflects the additional gain on the sale of the Spanish inflight kitchens of $2.0 million, offset by income of $7.5 million relating to the sale of the domestic inflight catering operations in 1998. The decrease of $24.8 million in operating income for the nine months ended September 30, 1999 was chiefly associated with the gain on the sale of the domestic inflight catering operation in 1998 of $36.4 million and the items discussed above totaling $5.4 million, partially offset by provisions for restructuring European operations, certain legal claims and other charges in 1998 of $10.2 million, increased income in fueling and overseas ground service operations of $6.9 million and an insurance recovery of $1.5 million. The effective income tax rate for discontinued operations for the three months ended September 30, 1999 was (21.0%) as compared with 46.3% for the comparable period of 1998. This decrease is primarily attributable to net pretax losses and higher foreign income taxes caused by foreign losses that do not generate any foreign or domestic income tax benefits. The effective income tax rate for discontinued operations for the 13 nine months ended September 30, 1999 was 97.1% compared to 41.7% for the comparable period of 1998 due mainly to lower pretax income and proportionately higher foreign income taxes caused by foreign losses that do not generate any foreign or domestic income tax benefits. LIQUIDITY: At the end of the third quarter, the Company had approximately $119 million in cash and cash equivalents. In addition, the Company maintains a $200 million revolving credit facility. At September 30, 1999 the Company had drawn $50 million under the facility leaving an unused line of $150 million. In connection with the sales process, the Company is seeking waivers that will permit it to utilize the entirety of the unused portion of the facility. Net cash provided from operating activities was $264 million lower than the comparable period of 1998 primarily reflecting a decrease in deferred income of $195.2 million chiefly associated with the prepayment of a power sale agreement for the Haverhill, Massachusetts waste-to-energy facility in 1998, an increase of $30.1 million in accounts receivable, and a decrease of $44.5 million in other liabilities chiefly associated with decreases in pensions, severance and insurance liabilities. Net cash used in investing activities increased $15.7 million primarily reflecting the purchase of Energy operations in the Philippines and Thailand and the remaining 50% interest in a domestic joint venture amounting to $69.5 million, an increase of $17.3 million in investments in energy facilities and capital expenditures, and a net increase of $4.2 million in investments in joint ventures, partially offset by an increase of $59.4 million in proceeds from the sale of investments and $17.8 million from sales of property, plant and equipment and an ownership interest in a joint venture. Net cash provided from financing activities was $114.3 million higher primarily reflecting an increase of $66.7 million in debt mainly representing the revolving credit facility, a decrease of $46.4 million for the purchase of treasury shares and a decrease of $9.0 million in funds held in trust, partially offset by lower proceeds from the exercise of stock options of $9.1 million. Net cash used by discontinued operations increased $45.3 million compared to the nine months ended September 30, 1998 primarily due to Ogden funding additional acquisitions and purchases of property, plant and equipment for both the Aviation and Entertainment businesses. Because of the seasonal nature of the Entertainment and Aviation businesses, and certain capital improvements being made in the Energy business, the Company anticipates that it will need to utilize a portion of its cash and cash equivalents during the fourth quarter to fund existing operations. The Company believes that it has sufficient funds to do so. To complete the planned sales of its Aviation and Entertainment businesses, the Company will need to obtain from the banks under the revolving credit facility, as well as certain other banks that have issued letters of credit, waivers of certain covenants restricting dispositions of assets and the computation of certain covenants as a result of its decision to treat the Entertainment and Aviation businesses as discontinued. As a result of severance and other charges and expenses to be incurred associated with the planned disposition of the Aviation and Entertainment businesses, the Company has 14 also requested that such banks grant waivers permitting the Company to exceed restrictions on the Company's indebtedness as a percentage of its capitalization over the next nine months. The Company believes that this is necessary to insure that it maximizes the value of the assets being sold in an orderly auction process. Finally, under certain agreements entered into by the Company, if the Company's outstanding debt securities are no longer rated investment grade, it 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. It is the expressed intention of the Company to maintain an investment grade rating. To that end, the Company will seek to utilize sales proceeds to pay down existing corporate debt where economically feasible. The Company has also commenced discussions with its banks and believes that it will be successful in obtaining any necessary waivers from the covenants described above. To insure liquidity through the sales process, the Company has commenced discussions with alternative debt providers and is exploring additional equity sources. CAPITAL INVESTMENT AND COMMITMENTS For the nine months ended September 30, 1999, capital investments amounted to $42.3 million, of which $27.9 million, inclusive of restricted funds held in trust, was for Energy facilities and $14.4 million was for normal replacement and growth in Energy ($11.4 million) and Other ($3 million) operations. At September 30, 1999, capital commitments for continuing operations amounted to $12.1 million for normal replacement and growth in Energy ($12 million) and Other ($100,000) operations. Commitments for Discontinued Operations amounted to $78.1 million for normal replacement and growth in Entertainment ($75.1 million) and Aviation ($3 million) operations. Other capital commitments for Energy as of September 30, 1999 amounted to approximately $66.5 million. This amount includes a commitment to pay, in 2008, $10.6 million for a service contract extension at a waste-to-energy facility. In addition, this amount includes $5 million for additional equity commitments related to Energy's interest in a coal-fired power project in the Philippines, $23.6 million for additional equity commitments for a hydroelectric plant in the Philippines, $2.7 million for additional equity commitments for a natural gas-fired plant in Bangladesh, $1.7 million for additional equity commitments for a gas co-generation facility in Murcia, Spain and $22.9 million for standby letters of credit in support of debt service reserve requirements. Funding for the remaining mandatory equity contributions is being provided through bank credit facilities, which must be repaid in June 2000 through December 2001. The Corporation also has $5.1 million contingent equity contributions in Entertainment ($2.5 million in connection with its investment at Isla Magica) and Aviation ($2.6 million in connection with its investment in Argentina). The Corporation has no further obligations with respect to its previous agreement to acquire VSA. In addition, compliance with the standards and guidelines under the Clean Air Act Amendments of 1990 may require 15 further Energy capital expenditures of approximately $35 million through December 2000 subject to the final time schedules determined by the individual states in which the Corporation's waste-to-energy facilities are located. Ogden and certain of its subsidiaries have issued or are party to performance bonds and guarantees and related contractual obligations undertaken mainly pursuant to agreements to construct and operate certain waste-to-energy, entertainment, and other facilities. In the normal course of business, they are involved in legal proceedings in which damages and other remedies are sought. In connection with certain contractual arrangements, Ogden has agreed to provide a vendor with a specified amount of business over a two-year period. If this amount is not provided the Corporation may be liable for prorated damages of up to approximately $3 million. Management does not expect that these contractual obligations, legal proceedings, or any other contingent obligations incurred in the normal course of business will have a material adverse effect on Ogden's Consolidated Financial Statements. During 1994, a subsidiary of Ogden entered into a 30-year facility management contract, pursuant to which it agreed to advance funds to a customer, and if necessary, to assist the customer's refinancing of senior secured debt incurred in connection with the construction of the facility. Ogden is obligated to purchase such senior secured debt in the amount of $97.1 million 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 September 30, 1999, the amount outstanding was $51.6 million. In addition, on September 30, 1999, the Corporation has guaranteed $3.4 million of senior secured term debt of an affiliate and principal tenant of this customer and has guaranteed up to $3.4 million of the tenant's secured revolving debt. In addition, Ogden is obligated to purchase $20.4 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. In October 1999, Ogden also agreed to advance a secured loan to that tenant of up to approximately $8.4 million if certain contingencies occur. Ogden has guaranteed approximately $4 million of borrowings of a joint venture in which Ogden has an equity interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. Year 2000 Issues: BACKGROUND - The term `Year 2000 issue' generally refers to the problems that may occur from the improper processing of date sensitive calculations, date comparisons, and leap year determination by computers and other machinery containing computer chips (i.e., "embedded systems"). In an effort to save expensive memory and processing time, historically most of the world's computer hardware and software used only two digits to identify the year in a date. If not corrected or replaced, many systems will fail to distinguish between the years `2000' and `1900' and will incorrectly process related date information. 16 STATE OF READINESS - Ogden has established a Year 2000 Project that is actively addressing its Year 2000 issues. The project is comprised of four phases: awareness, assessment, action, and anticipation. The awareness phase included the education of the Corporation's Board of Directors, management, and staff regarding the Year 2000 issue and the Corporation's strategy to address the problem. The awareness phase of the project is completed. The objective of the project's assessment phase is to inventory and assess the Year 2000 compliance of Ogden's internal information technology and embedded systems, as well as to ascertain the compliance of the products and services provided to the Corporation by third parties. Ogden's internal assessment is complete. The assessment of third parties on which the Corporation relies for key products and services is now considered an iterative process that will continue through the end of 1999. Ogden's action phase includes the prioritization, remediation, and testing of Year 2000 solutions. The Corporation is performing the remediation of all its mission critical systems, through a series of projects with completion dates between January 1997 and November 1999. This phase is on target to be completed on schedule. The fourth phase of the Ogden's Year 2000 Project, the anticipation phase, includes the development and implementation of contingency plans for mission critical business functions. The anticipation phase of the project has begun and is expected to continue throughout 1999. Ogden has made considerable progress towards Year 2000 compliance, as a result of its initiative to improve access to business information through the implementation of common, integrated computing systems across the operations of the Corporation. Early in the process, Ogden adopted the strategy of implementing industry standard compliant packages, rather than remediate the code of its legacy systems. This initiative commenced in 1996, with the replacement of Ogden's domestic administrative systems with the PeopleSoft systems and the upgrade of associated infrastructure. The implementations of these Year 2000 compliant systems are completed. Additional efforts to replace or upgrade the international administrative systems and a variety of key operating systems are on schedule for completion. Ogden has not deferred any specific information technology project as a result of the implementation of the Year 2000 Project. COSTS - The total cost associated with resolving the Corporation's Year 2000 issues is not expected to be material to the Company's financial condition. Based on the assessments and remediation plans, the estimated costs of the Company's Year 2000 Project are $8.9 million, of which $5.5 million has been spent to date. Because of Ogden's strategy to implement or upgrade a number of systems (e.g., PeopleSoft) as part of its initiative to improve access to key business information, those costs of implementation are not included in these estimates. RISKS - The Securities and Exchange Commission requires that public companies forecast the most reasonably likely worst case Year 2000 scenario. Based on the assessment efforts to date, the Company does not believe that the Year 2000 issue will have a material adverse effect on its financial condition or results of operations. The Company operates a large number of geographically dispersed sites and has a large supplier base and believes that these factors will mitigate any adverse impact. The Company's beliefs 17 and expectations, however, are based on certain assumptions and expectations that ultimately may prove to be inaccurate. The Company has identified that a significant disruption in the supply chain represents the most reasonably likely worst case Year 2000 scenario. Potential sources of risk include (a) the inability of principal suppliers to be Year 2000 ready, which could result in delays in deliveries from such suppliers and (b) disruption of the Company's ability to provide products and services as a result of a general failure of systems and necessary infrastructure such as electricity supply. The Company is preparing contingency plans around an assumed period of disruption to the supply chain, to reduce the impact of significant failure. CONTINGENCY PLANS - Ogden's Year 2000 project strategy includes the development of contingency plans for any mission critical business functions determined to be at risk. While Ogden is not presently aware of any significant exposure, there can be no assurances that all Year 2000 remediation processes will be completed and properly tested before the Year 2000, or that contingency plans will sufficiently mitigate the risk of a Year 2000 compliance problem. Ogden is finalizing the development of its contingency plans and will be conducting a worldwide readiness review at the end of November. The contingency planning process is an ongoing one which will continue through 1999 as Ogden obtains relevant Year 2000 compliance information resulting from its internal remediation and testing efforts, as well as from third parties. ANY STATEMENTS IN THIS COMMUNICATION, INCLUDING BUT NOT LIMITED TO THE "YEAR 2000 ISSUE" DISCUSSION, WHICH MAY BE CONSIDERED TO BE "FORWARD-LOOKING STATEMENTS," AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995, ARE SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES. THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE SUGGESTED BY ANY SUCH STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED OR IDENTIFIED FROM TIME TO TIME IN THE CORPORATION'S PUBLIC FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION AND MORE GENERALLY, GENERAL ECONOMIC CONDITIONS, INCLUDING CHANGES IN INTEREST RATES AND THE PERFORMANCE OF THE FINANCIAL MARKETS; CHANGES IN DOMESTIC AND FOREIGN LAWS, REGULATIONS, AND TAXES; CHANGES IN COMPETITION AND PRICING ENVIRONMENTS; AND REGIONAL OR GENERAL CHANGES IN ASSET VALUATIONS. 18 PART II - OTHER INFORMATION Item 1. Legal Proceedings Ogden Corporation and its subsidiaries (the "Company") are parties to various legal proceedings involving matters arising in the ordinary course of business. The Company does not believe that there are any pending legal proceedings for damages against the Company, other than ordinary routine litigation incidental to its business, the outcome of which would have a material adverse effect on the Company on a consolidated basis. (a) Environmental Matters The Company conducts regular inquiries of its subsidiaries regarding litigation and environmental violations which include determining the nature, amount and likelihood of liability for any such claims, potential claims or threatened litigation. In the ordinary course of its business, the Company may become involved in Federal, state, and local proceedings relating to the laws regulating the discharge of materials into the environment and the protection of the environment. These include proceedings for the issuance, amendment, or renewal of the licenses and permits pursuant to which a Company subsidiary operates. Such proceedings also include actions brought by individuals or local governmental authorities seeking to overrule governmental decisions on matters relating to the subsidiaries' operations in which the subsidiary may be, but is not necessarily, a party. Most proceedings brought against the Company by governmental authorities or private parties under these laws relate to alleged technical violations of regulations, licenses, or permits pursuant to which a subsidiary operates. The Company believes that such proceedings will not have a material adverse effect on the Company's consolidated financial statements. The Company's operations are subject to various Federal, state and local environmental laws and regulations, including the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and Resource Conservation and Recovery Act (RCRA). Although the Company operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, the Company believes that it is in substantial compliance with existing environmental laws and regulations. In connection with certain previously divested operations, the Company may be identified, along with other entities, as being among potentially responsible parties responsible for contribution for costs associated with the correction and remediation of environmental conditions at various hazardous waste disposal sites subject to CERCLA. In certain instances the Company may be exposed to joint and several liability for remedial action or damages. The Company's ultimate liability in connection with such environmental claims will depend on many factors, including its volumetric share of waste, the total cost of remediation, the financial viability of other companies that also sent waste to a given site and its contractual arrangement with the purchaser of such operations. The potential costs related to such matters and the possible impact on future II - 1 operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the Company's responsibility. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that required remediation and continuing compliance with environmental laws will not have a material adverse effect on the Company's consolidated financial statements. (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. 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. 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. (c) Other Litigation On November 5, 1999, the Company received a summons and complaint filed in the Supreme Court of the State of New York, brought by R. Richard Ablon, the Company's former Chairman, President and Chief Executive Officer. In general, this complaint alleges that the Company has breached the employment agreement between the Company and Mr. Ablon (the terms of which are described in the company's most recent proxy statement), and seeks damages in the amount of $12.5 million, plus continuation of pension and certain other benefits valued in such complaint at approximately $10 million. The Company intends to defend the Action vigorously. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: 2 PLANS OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION Or SUCCESSION. 2.1 Agreement and Plan of Merger, dated as of October 31, 1989, among Ogden, ERCI Acquisition Corporation and ERC International, Inc.* II - 2 2.2 Agreement and Plan of Merger among Ogden Corporation, ERC International Inc., ERC Acquisition Corporation and ERC Environmental and Energy Services Co., Inc. dated as of January 17, 1991.* 2.3 Amended and Restated Agreement and Plan of Merger among Ogden Corporation, OPI Acquisition Corporation sub. and Ogden Projects, Inc., dated as of September 27, 1994.* 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 Ogden 6% Convertible Subordinated Debentures, Due 2002.* 4.2 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of October 15, 1987, and Offering Memorandum, dated October 15, 1987, relating to U.S. $75 million Ogden 5-3/4% Convertible Subordinated Debentures, Due 2002.* 4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to The Bank of New York, Trustee, relating to Ogden's $100 million debt offering.* 10 MATERIAL CONTRACTS 10.1 (a) U.S. $95 million Term Loan and Letter of Credit and Reimbursement Agreement among Ogden, the Deutsche Bank AG, New York Branch and the signatory Banks thereto, dated March 26, 1997.* (b) Ogden $200 million Credit Agreement by and among Ogden, The Bank of New York, as Agent and the signatory Lenders thereto dated as of June 30, 1997.* 10.2 Rights Agreement between Ogden Corporation and Manufacturers Hanover Trust Company, dated as of September 20, 1990.* II - 3 10.3 Executive Compensation Plans and Agreements. (a) Ogden Corporation 1990 Stock Option Plan.* (i) Ogden Corporation 1990 Stock Option Plan as Amended and Restated as of January 19, 1994.* (ii)Amendment adopted and effective as of September 18, 1997.* (b) Ogden Corporation 1999 Stock Option Plan, as amended.* (c) Ogden Energy Select Savings Plan. (d) Ogden Services Corporation Select Savings Plan Trust Amendment and Restatement as of January 1, 1995.* (e) Ogden Profit Sharing Plan as amended and restated effective as of January 1, 1995.* (f) Ogden Corporation Core Executive Benefit Program.* (g) Ogden Projects Pension Plan.* (h) Ogden Projects Profit Sharing Plan.* (i) Ogden Projects Supplemental Pension and Profit Sharing Plans.* (j) Ogden Projects Core Executive Benefit Program.* (k) Form of amendments to the Ogden Projects, Inc. Pension Plan and Profit Sharing Plans effective as of January 1, 1994.* (i) Form of amended Ogden Projects Profit Sharing Plan effective as of January 1, 1994.* (ii)Form of amended Ogden Projects Pension Plan, effective as of January 1, 1994.* (l) Ogden Corporation Amended and Restated CEO Formula Bonus Plan.* (m) Ogden Key Management Incentive Plan.* II - 4 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 Projects, Inc. and Bruce W. Stone, dated June 1, 1990.* (h) Employment Agreement between Ogden Corporation and Quintin G. Marshall, Senior Vice President - Corporate Development, dated October 30, 1996.* (i) Letter Amendment to Employment Agreement between Ogden Corporation and Quintin G. Marshall, Senior Vice President - Corporate II - 5 Development, effective as of October 1, 1998.* (i) 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.* (j) Employment Agreement between Alane Baranello, Vice President - Human Resources, and Ogden Services Corporation dated October 28, 1996.* (i) Letter Amendment to Employment Agreement between Ogden Corporation and Alane Baranello, Vice President - Human Resources, dated as of October 13, 1998.* (k) Employment Agreement between Peter Allen, Senior Vice President, and Ogden Corporation dated July 1, 1998.* (l) Employment Agreement between Ogden Corporation and Raymond E. Dombrowski, Jr., Senior Vice President and C.F.O., dated as of September 21, 1998.* 10.5 Stock Purchase Agreement among Volume Services America Holdings, Inc.; BCP Volume L.P.; BCP Offshore Volume L.P.; Recreational Services L.L.C.; VSI Management Direct L.P.; General Electric Capital Corporation; and Ogden Entertainment, Inc., dated June 24, 1999.* 11 Detail of Computation of Earnings Per Share Applicable to Common Stock. 27 Financial Data Schedule (EDGAR Filing Only). - - Incorporated by reference as set forth in the Exhibit Index of this Form 10-Q. (b) Reports on Form 8-K A Form 8-K Current Report was filed on September 17, 1999 and is incorporated herein by reference. II - 6 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, thereto duly authorized. OGDEN CORPORATION (Registrant) Date: November 19, 1999 By /s/ Raymond E. Dombrowski, Jr. ---------------------------------- Raymond E. Dombrowski, Jr. Senior Vice President and Chief Financial Officer Date: November 19, 1999 By: /s/ William J. Metzger --------------------------------- William J. Metzger Vice President and Chief Accounting Officer II - 7 EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION OF DOCUMENT FILING INFORMATION 3 ARTICLES OF INCORPORATION AND BY-LAWS. 3.1 Ogden's Restated Certificate Filed as Exhibit (3)(a) of Incorporation as amended. to Ogden's Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference. 3.2 Ogden By-Laws as amended. Filed as Exhibit 3.2 to Ogden's Form 10-Q for the quarterly period ended March 31, 1998 and incorporated herein by reference. 4 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between Filed as Exhibits (C)(3) and Ogden and Bankers Trust Company, (C)(4) to Ogden's Form 8-K dated as of June 1, 1987 and filed with the Securities and Offering Memorandum dated June Exchange Commission on July 7, 12, 1987, relating to U.S. 1987 and incorporated herein $85 million Ogden 6% Convertible by reference. Subordinated Debentures, Due 2002. 4.2 Fiscal Agency Agreement between Filed as Exhibit (4) to Ogden's Ogden and Bankers Trust Company, Form S-3 Registration Statement dated as of October 15, 1987, filed with the Securities and and Offering Memorandum, dated Exchange Commission on December October 15, 1987, relating to 4, 1987, Registration No. U.S. $75 million Ogden 5-3/4% 33-18875, and incorporated Convertible Subordinated herein by reference. Debentures, Due 2002. 4.3 Indenture dated as of March 1, Filed as Exhibit (4)(C) to 1992 from Ogden Corporation to Ogden's Form 10-K for fiscal The Bank of New York, Trustee, year ended December 31, 1991, relating to Ogden's $100 million and incorporated herein by debt offering. reference.
EXHIBIT NO. DESCRIPTION OF DOCUMENT FILING NFORMATION 10 MATERIAL CONTRACTS 10.1(a) U.S. $95 million Term Loan and Letter of Credit Filed as Exhibit 10.6 to Ogden's Form 10-Q and Reimbursement Agreement among Ogden, the for the quarterly period ended March 31, Deutsche Bank AG, New York Branch and the 1997 and incorporated herein by reference. signatory Banks thereto, dated March 26, 1997. 10.1(b) $200 million Credit Agreement among Ogden, The Filed as Exhibit 10.1(i) to Ogden's Form Bank of New York as Agent and the signatory 10-Q for the quarterly period ended June 30, Lenders thereto, dated as of June 30, 1997. 1997 and incorporated herein by reference. 10.2 Rights Agreement between Ogden Corporation and Filed as Exhibit (10)(h) to Ogden's Form Manufacturers Hanover Trust Company, dated as 10-K for the fiscal year ended December 31, of September 20, 1990 and amended August 15, 1990 and incorporated herein by reference. 1995 to provide The Bank of New York as successor agent. 10.3 EXECUTIVE COMPENSATION PLAN AND AGREEMENTS. (a) (i) Ogden Corporation 1990 Filed as Exhibit 10.6(b)(i) to Ogden's Form Stock Option Plan as 10-Q for the quarterly period ended Amended and Restated September 30, 1994 and incorporated herein as of January 19, 1994. by reference. (ii) Amendment to the Filed as Exhibit 10.7(a)(ii) to Ogden Corporation 1990 Ogden's Form 10-K for fiscal period Stock Option Plan as ended December 31, 1997 and Amended and Restated incorporated herein by reference. effective as of September 18, 1997. (b) Ogden Corporation 1999 Stock Filed as Exhibit 10.3(a)(a) to Ogden's Form Option Plan, as amended. 10-Q for the quarter period ended June 30, 1999 and incorporated herein by reference. (c) (i) Ogden Energy Select Savings Transmitted herewith as Exhibit 10.3(c) (ii). Plan.
2 (d) Ogden Services Corporation Filed as Exhibit 10.7 (e) (i) to Select Savings Plan Trust Ogden's Form 10-K for the fiscal Amendment and Restatement as year ended December 31, 1994 and of January 1, 1995. incorporated herein by reference. (e) Ogden Profit Sharing Plan as Filed as Exhibit 10.7(p)(ii) to amended and restated effective Ogden's Form 10-K for fiscal year as of January 1, 1995. ended December 31, 1994 and incorporated herein by reference. (f) Ogden Corporation Core Executive Filed as Exhibit 10.8(q) to Ogden's Form Benefit Program. 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (g) Ogden Projects Pension Plan. Filed as Exhibit 10.8(r) to Ogden's Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (h) Ogden Projects Profit Filed as Exhibit 10.8(s) to Ogden's Form 10-K for fiscal Sharing Plan. year ended December 31, 1992 and incorporated herein by reference. (i) Ogden Projects Supplemental Pension Filed as Exhibit 10.8(t) to Ogden's Form 10-K for fiscal and Profit Sharing Plans. year ended December 31, 1992 and incorporated herein by reference. (j) Ogden Projects Core Executive Filed as Exhibit 10.8(v) to Ogden's Form 10-K for fiscal Benefit Program. year ended December 31, 1992 and incorporated herein by reference. (k) Form of amendments to the Ogden Filed as Exhibit 10.8(w) to Ogden's Form Projects, Inc. Pension Plan 10-K for fiscal year ended December 31, 1993 and Profit Sharing Plans and incorporated herein by reference. effective as of January 1, 1994. (i) Form of amended Ogden Filed as Exhibit 10.7(w)(i) to Ogden's Form Projects Profit Sharing Plan 10-K for fiscal year ended December 31, 1994 effective as of January 1, and incorporated herein by reference. 1994.
3 (ii) Form of amended Ogden Filed as Exhibit 10.7(w)(ii) to Ogden's Form Projects Pension Plan, 10-K for fiscal year ended December 31, 1994 effective as of January 1, and incorporated herein by reference. 1994. (l) Ogden Corporation Amended and Restated Filed as Exhibit 10.3(n) to Ogden's Form CEO Formula Bonus Plan. 10-K for the fiscal year ended December 31, 1998 and incorporated herein by reference. (m) Ogden Key Management Incentive Filed as Exhibit 10.7(p) to Ogden's Form 10-K for Plan. the fiscal year ended December 31, 1997 and incorporated herein by reference. 10.4 EMPLOYMENT AGREEMENTS (a) Employment Letter Agreement between Filed as Exhibit 10.4(a) to Ogden's Form Ogden Corporation and Lynde H. Coit, 10-K for the fiscal year ended December 31, Senior Vice President and General 1998 and incorporated herein by reference. Counsel dated March 1, 1999. (b) Employment Agreement between R. Filed as Exhibit 10.3(h) to Ogden,s Form Richard Ablon and Ogden dated as of 10-Q for the quarterly period ended June 30, January 1, 1998. 1998 and incorporated herein by reference. (c) Separation Agreement between Ogden Filed as Exhibit 10.8(c) to Ogden's Form Corporation and Philip G. Husby, 10-Q for the quarterly period ended Senior Vice President and C.F.O., September 30, 1998 and incorporated herein dated as of September 17, 1998. by reference. (d) Employment Agreement between Scott G. Mackin, Executive Vice President, and Filed as Exhibit 10.8(e) to Ogden's Form Ogden Corporation dated as of October 10-Q for the quarter ended September 30, 1, 1998. 1998 and incorporated herein by reference. (e) Employment Agreement between Ogden Corporation and David L. Hahn, Senior Filed as Exhibit 10.8(i) to Ogden's Form Vice President - Aviation, dated 10-K for fiscal year ended December 31, 1995 and incorporated herein by reference.
4 December 1, 1995. (i) Letter Amendment to Employment Agreement between Filed as Exhibit 10.8(f)(i) to Ogden's Form Ogden Corporation and David 10-Q for the quarterly period ended L. Hahn, effective as of September 30, 1998 and incorporated herein October 1, 1998. by reference. (f) Employment Agreement between Ogden Filed as Exhibit 10.8(j) to Ogden's Form Corporation and Rodrigo Arboleda, 10-K for fiscal year ended December 31, 1996 Senior Vice President dated January 1, and incorporated herein by reference. 1997. (i) Letter Amendment to Filed as Exhibit 10.8(g)(i) to Ogden's Form Employment Agreement between 10-Q for the quarterly period ended Ogden Corporation and Rodrigo September 30, 1998 and incorporated herein Arboleda, Senior Vice by reference. President, effective as of October 1, 1998. (g) Employment Agreement between Ogden Filed as Exhibit 10.8(k) to Ogden's Form Projects, Inc. and Bruce W. Stone, 10-K for fiscal year ended December 31, 1996 dated June 1, 1990. and incorporated herein by reference. (h) Employment Agreement between Ogden Filed as Exhibit 10.8(l) to Ogden's Form Corporation and Quintin G. Marshall, 10-K for fiscal year ended December 31, 1996 Senior Vice President dated October and incorporated herein by reference. 30, 1996. (i) Letter Amendment to Filed as Exhibit 10.8(i)(i) to Ogden's Form Employment Agreement 10-Q for the quarter ended September 30, between Ogden Corporation and 1998 and incorporated herein by reference. Quintin G. Marshall, Senior Vice President - Corporate Development effective as of October 1, 1998. (i) Employment Agreements between Ogden Filed as Exhibit 10.8(m) to Ogden's Form and Jesus Sainz, Executive Vice 10-K for the fiscal year ended December 31, President, 1997 and incorporated
5 effective as of January 1, 1998. herein by reference. (i) Letter Amendment to Filed as Exhibit 10.8(j)(i) to Ogden's Form Employment Agreement between 10-Q for the quarter ended September 30, Ogden Corporation and Jesus 1998 and incorporated herein by reference. Sainz, Executive Vice President, effective as of October 1, 1998. (j) Employment Agreement between Alane Filed as Exhibit 10.3(m) to Ogden's Form Baranello, Vice President - Human 10-Q for the quarterly period ended June 30, Resources and Ogden Services 1998 and incorporated herein by reference. Corporation dated October 28, 1996. (i) Letter Amendment to Filed as Exhibit 10.8(k)(i) to Ogden's From Employment Agreement between 10-Q for the quarter ended September 30, Ogden Corporation and Alane 1998 and incorporated herein by reference. Baranello, Vice President - Human Resources, dated as of October 13, 1998. (k) Employment Agreement between Peter Filed as Exhibit 10.3(M)(1) to Ogden's Form Allen, Senior Vice President, and 10-Q for the quarterly period ended June 30, Ogden Corporation dated July 1, 1998. 1998 and incorporated herein by reference. (l) Employment Agreement between Ogden Filed as Exhibit 10.4(m) to Ogden's Form Corporation and Raymond E. Dombrowski, 10-Q for the quarter ended September 30, Jr., Senior Vice President and C.F.O., 1998 and incorporated herein by reference. dated as of September 21, 1998. 10.5 Stock Purchase Agreement among Volume Services Filed as Exhibit 10.5 to Ogden's Form 10-Q America Holdings, Inc.; BCP Volume L.P.; BCP for the quarter ended June 30, 1999 and Offshore Volume L.P.; Recreational Services incorporated herein by reference. L.L.C.; VSI Management Direct L.P.; General Electric Capital Corporation; and Ogden Entertainment, Inc., dated as of June 24, 1999.
6 11 Ogden Corporation and Subsidiaries Detail of Transmitted herewith as Exhibit 11. Computation of Earnings Per Share Applicable to Common Stock. 27 Financial Data Schedule. Transmitted herewith as Exhibit 27.
EX-11 2 EXHIBIT 11 EXHIBIT 11 OGDEN CORPORATION AND SUBSIDIARIES DETAIL OF COMPUTATION OF EARNINGS PER SHARE APPLICABLE TO COMMON STOCK
FOR THE NINE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------------------ 1999 1998 Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- -------- (In Thousands, Except per Share Amounts) Income from continuing operations $ 28,680 $ 22,815 Less: preferred stock dividends 104 109 -------- -------- Basic Earnings Per Share 28,576 49,157 $ 0.59 22,706 50,071 $ 0.45 ------ ------ Effect of Dilutive Securities: Stock options 405 887 Convertible preferred stock 104 249 109 258 6% convertible debentures (A) (A) 5 3/4% convertible debentures (A) (A) -------- ------ -------- ------ Diluted Earnings per Share $ 28,680 49,811 $ 0.58 $ 22,815 51,216 $ 0.45 -------- ------ ------ -------- ------ ------ Discontinued operations Basic $ (883) 49,157 $(0.02) $ 44,100 50,071 $ 0.88 -------- ------ ------ -------- ------ ------ Diluted $ (883) 49,811 $(0.02) $ 44,100 51,216 $ 0.86 -------- ------ ------ -------- ------ ------ Cumulative effect of change in accounting principle Basic $ (3,820) 49,157 $(0.08) -------- ------ ------ Diluted $ (3,820) 49,811 $(0.08) -------- ------ ------
(A) Anti-dilutive Note: Basic earnings per common share was computed by dividing net income, reduced by preferred stock dividend requirements, by the weighted average of the number of shares of common stock outstanding during each period. Diluted earnings per common share was computed on the assumption that all convertible debentures, convertible preferred 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. The computation provides for the elimination of related convertible debenture interest and preferred dividends. EXHIBIT 11 OGDEN CORPORATION AND SUBSIDIARIES DETAIL OF COMPUTATION OF EARNINGS PER SHARE APPLICABLE TO COMMON STOCK
FOR THE THREE MONTHS ENDED SEPTEMBER 30, ------------------------------------------------------------ 1999 1998 Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount ----------- ------------- --------- ----------- ------------- -------- (In Thousands, Except per Share Amounts) Income from continuing operations $ 8,353 $14,059 Less: preferred stock dividends 34 36 -------- ------- Basic Earnings Per Share 8,319 49,382 $ 0.17 14,023 49,653 $ 0.28 ------ ------ Effect of Dilutive Securities: Stock options 218 575 Convertible preferred stock 34 246 36 255 6% convertible debenture (A) (A) 5 3/4% convertible debentures (A) (A) -------- ------ ------- ------ Diluted Earnings per Share $ 8,353 49,846 $ 0.17 $14,059 50,483 $ 0.28 -------- ------ ------ ------- ------ ------ Discontinued operations Basic $(16,069) 49,382 $(0.33) $14,096 49,653 $ 0.29 -------- ------ ------- ------- ------ ------ Diluted $(16,069) 49,382 $(0.33) $14,096 50,483 $ 0.28 -------- ------ ------- ------- ------ ------
(A) Anti-dilutive EX-27 3 EXHIBIT 27
5 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 119,125 0 301,082 13,711 18,548 1,178,785 2,378,116 555,043 3,766,975 466,158 1,998,792 0 40 24,733 520,583 3,766,975 39,975 742,517 43,791 628,639 0 0 25,411 43,416 11,558 28,680 (883) 0 (3,820) 23,977 $0.49 $0.48
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