-----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, On2WmJb2/DV8xCPtSP/5KqbVwK7EUOJVroOkkfutidAlju5vuZYBGsFljfR45Abg N17zItiEauLFRYp5SwcytA== 0001005477-97-000913.txt : 19970329 0001005477-97-000913.hdr.sgml : 19970329 ACCESSION NUMBER: 0001005477-97-000913 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970328 SROS: NYSE 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-03122 FILM NUMBER: 97568080 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-K 1 FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] ANNUAL REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended December 31, 1996 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 incorporation or organization) Identification No.) Two Pennsylvania Plaza, New York, N.Y. 10121 - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code - (212) 868-6100 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered - ------------------- ------------------------- Common Stock, par value New York Stock Exchange $.50 per share $1.875 Cumulative Convertible New York Stock Exchange Preferred Stock (Series A) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES |X| NO |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. [X] The aggregate market value of registrant's voting stock, held by non-affiliates based on the New York Stock Exchange closing price as reported in the consolidated transaction reporting system as of the close of business on March 3, 1997 was as follows: Common Stock, par value $.50 per share $988,350,223 $1.875 Cumulative Convertible Preferred Stock (Series A) $ 9,245,005 The number of shares of the registrant's Common Stock outstanding as of March 3, 1997 was 49,810,846 shares. The following documents are hereby incorporated by reference into this Form 10-K: (1) Portions of the Registrant's Annual Report to Shareholders for the year ended December 31, 1996 (Parts II and IV). (2) Portions of the Registrant's 1997 Proxy Statement to be filed with the Securities and Exchange Commission (Part III). INDEX PART I PAGE - ------ ---- Item 1. Business Services Group 1 - 10 Entertainment 2 - 7 Aviation 8 - 10 Operational Restructuring 10 Energy Group 11 - 23 Independent Power 11 - 15 Waste to Energy 15 - 19 Water and Wastewater 20 - 21 Environmental Consulting and Engineering 21 International Business Development 22 - 23 Other Information 24 - 31 Markets, Competition and General Business Conditions 24 - 25 Equal Employment Opportunity 25 Employee and Labor Relations 26 Environmental Regulatory Laws 26 - 28 Energy and Water Regulation 29 - 31 Flow Control 31 Ash Residue 31 Item 2. Properties 32 - 34 Item 3. Legal Proceeding and Environmental Matters 35 - 36 Item 4. Submission of Matters to a Vote of Security Holders 36 Executive Officers of Ogden 36 - 39 PART II Item 5. Market For Ogden's Common Equity and Related Stockholder Matters 39 Item 6. Selected Financial Data 39 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 39 Item 8. Financial Statements and Supplementary Data 39 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 39 PART III Item 10. Directors and Executive Officers of Ogden 40 Item 11. Executive Compensation 40 Item 12. Security Ownership of Certain Beneficial Owners and Management 40 Item 13. Certain Relationships and Related Transactions 40 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 40 - 45 PART I Item 1. BUSINESS Ogden Corporation, a Delaware corporation (hereinafter together with its consolidated subsidiaries referred to as "Ogden" or the "Company"), is a global company engaged in providing a wide range of services through its operating groups within each of its two business segments, Services and Energy (formerly Projects). The Services segment is composed of Ogden's Entertainment group and Aviation group and the Energy segment consists of Ogden's Independent Power group, Waste-to-Energy group, Water and Wastewater group and Environmental Consulting and Engineering group. A description of the operations of each of the foregoing groups is set forth herein. Set forth in the following table is the amount of revenue attributable to each of the operating groups within Ogden's Services and Energy business segments for each of the last three fiscal years (in thousands of dollars): YEARS ENDED DECEMBER 31, ------------------------------------------ SERVICES: 1994 1995 1996 ------------------------------------------ AVIATION $ 413,337 $ 480,620 $ 443,321 ENTERTAINMENT 245,187 301,315 391,933 TECHNOLOGY 212,098 251,243 187,435 FACILITY MANAGEMENT 357,272 374,804 263,752 OTHER 10,811 7,257 7,196 NET GAIN ON DISPOSITION OF BUSINESSES 13,613 -------------------------------------- TOTAL SERVICES $1,238,705 $1,415,239 $1,306,800 -------------------------------------- ENERGY: WASTE-TO-ENERGY $ 459,478 $ 494,921 $ 536,221 INDEPENDENT POWER 26,368 57,443 61,341 ENVIRONMENTAL 140,745 145,748 121,575 WATER AND WASTEWATER 1,742 1,742 CONSTRUCTION ACTIVITIES 213,125 69,900 3,402 GAIN ON SALE OF LIMITED PARTNERSHIP INTERESTS 26,126 -------------------------------------- TOTAL ENERGY $ 865,842 $ 769,754 $ 724,281 -------------------------------------- TOTAL SERVICES AND ENERGY $2,104,547 $2,184,993 $2,031,081 ====================================== The amounts of revenue, operating profit or loss and identifiable assets attributable to each of Ogden's two business segments for each of the last three fiscal years is set forth on pages 38 and 39 of Ogden's 1996 Annual Report to Shareholders, certain specified portions of which are incorporated herein by reference. 2 SERVICES The operations of Ogden's Services segment are performed primarily through its Entertainment and Aviation groups. The operations and services provided by the Entertainment group and Aviation group are performed through joint ventures, partnerships and wholly-owned subsidiaries within each of the groups. Each group provides a wide range of services to private and public facilities throughout the United States and many foreign countries. In foreign countries the development, construction, ownership and the providing of services may expose Ogden to potential risks that typically are not involved in such activities in the United States. The Entertainment and Aviation groups seek to manage and mitigate these risks through political and financial analysis of the foreign country; the analysis of key participants in each operation; insurance; participation by international finance institutions; and joint ventures with other companies. Payment for services is often made in whole or part in the domestic currencies of the foreign country and the conversion of such currencies into U.S. dollars may not be assured by a governmental or other creditworthy foreign country agency. In addition, fluctuations in value of such currencies against the U.S. dollar may cause the operation to yield less return than expected. Also, the transfer of earnings and profits in any form beyond the borders of the foreign country may be subject to special taxes or limitations imposed by the laws of the foreign country. Some customers of these two groups are billed on cost-plus or fixed-price basis. Where services are performed on a cost-plus basis, the customer reimburses the appropriate group for all acceptable reimbursable expenditures made in connection with the job and also pays a fee, which may be a percentage of the reimbursable expenditures, a specific dollar amount, or a combination of the two. Many contracts in the Aviation group may be written on a month-to-month basis or provide for a longer or indefinite term but are terminable by either party on notice varying from 30 to 180 days. ENTERTAINMENT The Entertainment group consists principally of interests in themed attractions; live theater; concerts; gaming; large format theaters and films; performing artist management; recorded music and video development; as well as food, beverage and novelty concession operations; and facility management at arena, stadiums, amphitheaters, civic/convention centers and other recreational facilities. These services are provided to a wide variety of public and private facilities including stadiums, convention and exposition centers, arenas, parks, amphitheaters, and fairgrounds located in the United States, Mexico, Canada, Argentina, Germany, Australia, Spain and the United Kingdom. Entertainment also operates a racetrack and five off-track betting parlors in Illinois. The facility management and concession arrangements under which this group operates are individually negotiated and vary widely as to terms and duration. Concession 3 contracts and leases usually provide for payment by Entertainment of commissions or rentals based on a stipulated percentage of gross sales or net profits, sometimes with a minimum rental or payment. Most of the facility management contracts are on a cost-plus-a-fee basis but a number of such contracts provide for a sharing of profits and losses between Entertainment and the facility owner. Entertainment offers its customers a wide range of project-development options, including the operational design review, consultation during construction, and assistance with financing arrangements, as well as operations of facilities, usually in return for long-term services and concession contracts. In some cases Ogden Corporation guarantees Entertainment's performance of these contracts as well as the financing arrangements. Location Based Entertainment Entertainment is involved in the development and operation of nature-themed attractions and merchandising throughout the United States. Grizzly Park, a nature-based entertainment center located at the entrance to Yellowstone National Park is owned and operated by Entertainment. Within Grizzly Park are, among other attractions, the Grizzly Discovery Center, a natural habitat with grizzly bears and gray wolves, and a variety of stores and restaurants. The American Wilderness Experience(TM) is a newly developed nature-themed attraction concept which has targeted five sites for development, all at megamalls developed by The Mills Corporation in the United States. The first is scheduled to open at the Ontario Mills mall in California during mid 1997. The other sites slated for development with The Mills Corporation include Arizona Mills (Phoenix, Arizona), Grapevine Mills (Dallas, Texas), Gurnee Mills (Chicago, Illinois) and Sawgrass Mills (Fort Lauderdale, Florida). These nature-themed attractions will be developed and operated by Entertainment and will feature live animals, foliage, scents and climates indigenous to each environment, motion-simulation rides, themed retailing and restaurants. Through a long-term leasehold interest, Entertainment operates Silver Springs and Wild Waters, two nature-based attractions located near Ocala, Florida. Silver Springs, located on a 250-acre park, is open 365 days a year and features attractions consisting of jungle cruise boat rides, jeep safari rides, animal shows, gift shops and eateries. Wild Waters, located on a six acre park, features a variety of slides, a wave pool, miniature golf, food services and other attractions and is open March through Labor Day. In 1995, the Port Authority of New York and New Jersey awarded Entertainment an eleven and one-half year lease to renovate and operate the 107th Floor Observation Deck at the World Trade Center in New York City. The Observation Deck, after undergoing a $6 million renovation, was opened to the public in March 1997. The renovations include wide-screen, high- definition television theaters that will take visitors on an aerial sightseeing tour of New York City 4 and environs; interactive, multi-lingual kiosks at various viewing points; a nightly rooftop light show; and exhibits showcasing the region's pre-eminence in international trade, finance and the arts. The lease agreement provides that Entertainment will pay the Port Authority an annual fee plus a percentage of gross revenues above a certain level. Entertainment through a joint venture operates La Rural de Palermo, a 28-acre fair and exhibition center located in Buenos Aires, Argentina. The joint venture will continue the existing fair and exhibition business on the property while developing a master plan for the development of the property to include an entertainment attraction. Entertainment owns a 50% interest in the joint venture and serves as the managing partner. As such, Entertainment directs day-to-day operations and is responsible for creating and implementing the development plan for this property. Entertainment also owns an equity interest in Parques Tecnocultiroles, S.A. ("Partecsa"), a Spanish Corporation based in Seville, Spain. Partecsa was awarded a 30-year contract to convert, remodel, manage and operate a 200-acre theme park located in Seville, Spain where the 1992 Exposition Fair was held. The park is scheduled to open in 1997. Food, Beverage and Novelty Services at Stadiums, Arenas and Amphitheaters Food, beverage and novelty services are provided by Entertainment in the United States and Canada at a number of locations including those listed in the following table: Name Location ---- -------- Wrigley Field Chicago, Illinois Rich Stadium Buffalo, New York USAir Arena Landover, Maryland Milwaukee Exposition and Convention Center Milwaukee, Wisconsin Los Angeles Convention Center Los Angeles, California The Kingdome Seattle, Washington Veterans Stadium Philadelphia, Pennsylvania Market Square Arena Indianapolis, Indiana McNichols Arena Denver, Colorado Cobo Hall Detroit, Michigan Tempe Diablo Stadium Tempe, Arizona University of Oklahoma Stadium Norman, Oklahoma The MGM Grand Gardens Arena Las Vegas, Nevada Saint John Regional Exhibition Centre New Brunswick, Canada General Motors Place Vancouver, British Columbia Mile High Stadium Denver, Colorado Victory Field Indianapolis, Indiana 5 Entertainment will be the exclusive food and beverage provider for the MCI Center under construction in downtown Washington, D.C. which is scheduled to open in the fall of 1997. This new 20,000-seat facility will serve as the home of the Washington Bullets National Basketball Association team and the Washington Capitals National Hockey League team. Entertainment will provide concession services to the general seating area as well as in-seat services to 110 suites and more than 2,000 club seats. Entertainment owns a 50% interest in the Australian and New Zealand business of the International Facility Corporation Pty Ltd. ("IFC"), a private facility management firm based in Brisbane, Australia. IFC is the managing general partner for all of the Entertainment/IFC joint venture accounts in Australia and New Zealand. These accounts include the Brisbane Entertainment Centre, the Newcastle Entertainment Centre, the Cairns Convention Centre, and a significant interest in Convex, operator of the Brisbane Convention and Exposition Centre. IFC is also acting as a consultant for the design and construction and will be providing ongoing management of the Olympic 2000 Stadium in Sydney, Australia. Entertainment also provides food and beverage services at amphitheaters throughout the United States, including those listed in the following table: Name Location ---- -------- Starlake Amphitheatre Pittsburgh, PA Fiddlers Green Amphitheatre Englewood, CO Sandstone Amphitheatre Kansas City, MO Cynthia Woods Mitchell Pavilion Woodlands,TX Meadows Music Theater (All-Seasons) Hartford, CT Camden Amphitheatre (All-Seasons) Camden, NJ Polaris Amphitheatre Columbus, OH Nissan Amphitheatre Manassas, VA Molson Amphitheatre Toronto, Canada Virginia Beach Amphitheatre Virginia Beach, VA Facility Management and Concession Services Entertainment, through long-term management agreements, operates and manages, and in some cases provides concession services, at various convention centers, arenas and public facilities including the following: Name Location ---- -------- Arrowhead Pond Anaheim, CA Corel Centre Ottawa, Canada Pensacola Civic Center Pensacola, FL 6 Sullivan Arena Anchorage, Alaska Egan Convention Center Anchorage, Alaska Rosemont Horizon Chicago, IL Target Center Minneapolis, MN Northlands Coliseum Edmonton, Alberta The Great Western Forum Los Angeles, CA Newcastle Arena Newcastle, England NYNEX arena Manchester Manchester, England Bridgewater Hall* Manchester, England Stadium Australia Sydney, Australia Arena Oberhausen Oberhausen, Germany * This performing arts center is operated by a joint venture company comprised of Entertainment and the Halle Concerts Society of England. The Corel Centre (formerly the Ottawa Palladium), a 19,000-seat multipurpose indoor arena in Ottawa, Canada, which is owned by a third party, opened in January of 1996, and Entertainment commenced operations under a 30-year contract to provide complete facility management and concession services at this arena, which is the home of the Ottawa Senators of the National Hockey League. Pursuant to the 30-year contract, Entertainment has agreed that the Corel Centre, under Entertainment's management, will generate a minimum amount of revenues and has agreed to advance funds, if necessary, to its customer to assist in refinancing senior secured debt incurred in connection with construction of the facility. Such refinancing requirements are currently scheduled to amount to $75 million at maturity of the senior secured debt, which is expected to be on or about January 1, 2001. Ogden anticipates that these arrangements will be renegotiated to provide for an Ogden obligation to purchase such senior secured debt in the amount of $95 million at the end of March 2000 if the debt is not refinanced. In addition, Ogden has guaranteed indebtedness of $16.1 million of an affiliate and principal tenant of Entertainment's customer. The owners of the Corel Centre are parties to a 30-year license agreement with the owner of the Ottawa Senators, pursuant to which the Ottawa Senators began to play their home games at the arena in January 1996. Pursuant to a management agreement between the City of Anaheim, California and a wholly-owned subsidiary of Ogden, Entertainment manages and operates the Arrowhead Pond, a facility owned by and located within the City of Anaheim. Ogden has agreed that the Arrowhead Pond, under Entertainment's management, will generate a minimum amount of revenues computed in accordance with this 30-year management agreement with the City. The Arrowhead Pond is a multi-purpose facility capable of accommodating professional basketball and hockey, concerts and other attractions, and has a maximum seating capacity of approximately 19,400. Entertainment also has a 30-year lease agreement with The Walt Disney Company at the Arrowhead Pond pursuant to which the Anaheim Mighty Ducks, a National Hockey League team owned by The Walt Disney Company, plays its home games. 7 In Mexico, Entertainment provides food and beverage concessions at the Sports Palace, a 22,000 seat arena, located in Mexico City, as well as the new Autodrome Fundidora Amphitheater in Monterey, Mexico that is able to accommodate 18,000 people. Other Activities Metropolitan Entertainment Company Inc. ("Metropolitan"), is a leading concert promoter in New York, New Jersey, Connecticut, and parts of Massachusetts in which Entertainment owns a 50% interest. Metropolitan and Entertainment, through their joint venture called the Metropolitan Entertainment Group ("MEG"), conduct concert promotion activities, operate amphitheaters in the eastern United States and concentrate on national and global music tours, artist management, Broadway and television productions, recording, and music publishing. MEG, through a long-term lease, operates the 20,000 capacity Darien Lake Performing Arts Center located in Darien Lake, New York. MEG has also established its own record label, Hybrid Recordings. Entertainment leases and operates a thoroughbred and harness racetrack and five off-track betting parlors in Illinois where it telecasts races from Fairmount Park and other racing facilities. Restaurants and other food and beverage services are provided by Entertainment at these facilities. A large portion of the track's revenue is derived from its share of the pari-mutuel handle, which can be adjusted by state legislation. Other income is derived from admission charges, parking, programs and concessions. Entertainment also provides concessions at zoos located in Seattle, Washington; Cleveland, Ohio; and Columbia, South Carolina. Entertainment also is engaged in the large-format film and theater business. These large-format films are usually shown on screens six stories high in specially designed theaters. Entertainment and Toronto-based Imax Corporation have entered into a letter of intent to co- develop, build and operate fifteen (15) large-format IMAX(R) theaters domestically and internationally over the next five years. Entertainment has also formed a three-year co-production agreement with two-subsidiaries of Sony Corporation of America for several large-format films. Entertainment's first venture into the gaming business occurred in 1996 when it began to operate the casino at the Americana Beach Resort in Aruba. Entertainment's focus on gaming will be primarily on international properties linked to wider entertainment endeavors. 8 AVIATION The Aviation group provides specialized support services to airlines at locations throughout the United States, Canada, Europe, Latin America and the Pacific Rim. The specialized support services provided by this group include comprehensive ground handling, ramp, passenger, cargo and warehouse, aviation fueling and in-flight catering services. These services are performed through joint ventures, consortiums, contracts with individual airlines, consolidated agreements with several airlines, and contracts with various airport authorities. The Aviation group's operations have undergone and continue to undergo review and refinement through the sale of certain under-performing operations such as: (i) its ground services operations at New York's Kennedy International Airport; (ii) its VIP lounge in Chile; (iii) its in-flight kitchen operations at the Miami International Airport and at several airports in Spain; and (iv) certain of its skycap and security service operations at 15 airports throughout the United States. Ground Handling and Specialized Support Services Ground handling services include diversified ramp operations such as baggage unloading and loading, aircraft cleaning, aircraft maintenance, flight planning, de-icing, cargo handling, warehouse operations and passenger-related services such as ticketing, check-in, security and pre-board services, passenger lounge operations, cargo/warehouse services and other miscellaneous services. Global expansion by the Aviation group has resulted in providing comprehensive ground handling and related services at many international locations throughout Europe, Canada, South America, Asia and other countries. Set forth below is a sampling of major foreign airports where Aviation currently conducts ground handling operations: Airport Location - ------- -------- Heathrow Airport England Schiphol International Airport Netherlands Auckland International Airport New Zealand Jorge Chaves International Airport Lima, Peru Guarulhos International Airport Sao Paulo, Brazil Galeao International Airport Rio de Janeiro, Brazil Pearson International Airport Toronto, Canada Mirabel and Dorval Airports Montreal, Canada Simon Bolivar International Airport Caracas, Venezuela Mexico International Airport Mexico City, Mexico Chek Lap Kok Hong Kong* Macau International Airport Macau * Expected to open in 1998. 9 Aviation also performs ground handling operations at eight different airports throughout Germany; the Czech Republic through a 50% interest in a Prague-based airport handling company; ground handling operations at the Arturo Merino Benitez Airport in Santiago, Chile and through a joint venture with a Turkish company, aircraft cleaning, security and commissary supplies to carriers at Ataturk Airport in Istanbul and other locations in Turkey. Ogden Aviation continues to perform services at St. Maarten's Princess Juliana International Airport. In Aruba through a corporation jointly owned by Aviation and Air Aruba, Aviation provides ramp and passenger services at Reina Beatrix International Airport. Other ground handling operations include the La Union Airport in Puerto Plata, Dominican Republic; the Belo Horizonte International Airport, Brazil; eleven (11) Airports in Mexico; and through a joint venture with Aldeasa S.A. of Spain provides cargo handling and warehousing services at airports located in Madrid and Barcelona, Spain. Fueling Services Aviation operates fueling facilities, including storage and hydrant fueling systems for the fueling of aircraft. This operation assists airlines in designing, arranging financing for, and installing underground fueling systems. These fueling operation services are principally performed in the North American market, including the maintenance and operation of a new Fuel Farm located at the San Diego International Airport. However, Aviation is the sole fueling handling agent at Tocumen International Airport in Panama City, Panama and fuels aircrafts at the Luis Munoz International Airport in San Juan, Puerto Rico. . In-Flight Catering Aviation operates 11 in-flight kitchens for over 85 airline customers at a number of locations, including the following: Airport Location ------- -------- John F. Kennedy International New York LaGuardia New York Newark International New Jersey Los Angeles International California San Francisco International California Washington Dulles International Washington, D.C. McCarren International (Las Vegas) Nevada Airport Privatization and Related Projects A consortium, composed of Ogden Aviation Services, Inc., Macau Aviation Services Corporation, EVA Airways, Air Macau and several local companies and prominent businessmen, was awarded a 19-year contract, with a 16-year exclusivity arrangement, pursuant to which the consortium provides ramp and cargo handling, passenger services, and aircraft line maintenance service at the new Macau International Airport, which opened and began operations 10 in November 1995. The consortium, of which Aviation Services is the managing partner with a 29% participation, is providing all necessary passenger and ramp equipment, has constructed a cargo warehouse and is in process of building cargo and engineering facilities, an aircraft hangar and a state-of-the-art training center at the airport. The consortium's investment in infrastructure improvements and equipment in the new Macau airport is expected to exceed $40 million. Aviation is also part of a consortium, of which Aviation has a 19% interest, that has been awarded a 20-year concession contract by the Civil Aviation Authority of Colombia to finance, build and operate a second runway at the El Dorado Airport, in Bogota, Colombia. Aviation's consortium partners, including Spain's Dragados y Contrucciones SA and Colombia's Conconcreto, are building the 3.8-kilometer runway at an estimated cost of $97 million. Construction, which began in 1996, is expected to be completed by May 1998. The consortium will maintain the new runway, and the pre-existing runway, for approximately 17 years in return for runway landing fees. Applied Data Technology Applied Data Technology, Inc. ("ADTI"), located in San Diego, California, is a leading supplier of air combat maneuvering instrumentation systems and after-action reporting and display systems. ADTI's range systems are installed at Navy and Air Force aircraft training ranges to facilitate air-to-air combat exercises and monitor, record and graphically display the exact maneuvers of the aircraft on the ranges and simulate the various weapons systems aboard the aircraft. These range automated systems are used by the U.S. Navy and Air Force to train pilots for combat conditions and by the Department of Defense in training pilots to avoid "friendly fire" incidents. ADTI's systems are currently installed at four of the 14 domestic ranges, including the range at the Top Gun school at Miramar, California. The range systems business includes new ranges, expansion and upgrade of existing ranges, product support and related programs. OPERATIONAL RESTRUCTURING Ogden's Services segment has completed the disposition of most of its non-core businesses, including W.J. Schafer Associates, Inc., Ogden Professional Services Corporation, Facility Services (except the New York Region), Ogden BioServices Corporation, Universal Ogden Services (a 50% owned joint venture), and Analytical Technologies, Inc. The disposition of other non-core businesses, principally Atlantic Design Company, Inc., which provides contract manufacturing; Facility Services (New York Region) which provides facility management, maintenance, janitorial and manufacturing support services; and certain in-flight kitchen operations, skycap services and security services provided by its Aviation group, are expected to be sold during 1997. 11 ENERGY The operations of Ogden's Energy segment are conducted by Ogden Energy Group, Inc. through four principal business areas: independent power, waste-to-energy, water and waste water and environmental consulting and engineering (collectively the "Energy Group"). Since the early 1980's, affiliates and subsidiaries of the Energy Group have been engaged in developing and in some cases owning energy-generating projects fueled by municipal solid waste, and providing long term services from these projects to communities. The Energy Group is now the largest full service vendor (i.e., builder/operator) in the world for waste-to-energy projects, based on both number of facilities as well as throughput capacity. In addition, since 1989, subsidiaries have been engaged in developing, owning and/or operating independent power production projects. The Company seeks to utilize the expertise gained from these activities in developing, owning or operating energy generating facilities in the United States and abroad that utilize a variety of other fuels, as well as water and wastewater facilities that will similarly serve communities on a long term basis. The Energy Group generally seeks to participate in projects in which it can make an equity investment and become the operator; its returns will be derived from equity distributions and/or operating fees. It also seeks to have a role in the development of the projects. The types of projects in which the Energy Group seeks to participate sell the electrical power services they generate, or the waste or water-related services they provide, under long term contracts or market concessions to utilities, government agencies providing power distribution, creditworthy industrial users, or local government units providing waste disposal or water and wastewater services. For power projects utilizing a combustible fuel or geothermal sources, the Energy Group seeks projects which have a secure supply of fuel or geothermal brine through long-term supply arrangements or by obtaining control of the fuel source. The Energy Group generally looks to finance its projects using equity or capital commitments provided by it or other investors, combined with nonrecourse debt for which the lender's sole source of payment is project revenues and assets. The number of projects being pursued at any given time by the Energy Group will, naturally, fluctuate. The complexities and uniqueness of international project development in particular requires that the Energy Group continually assess the likelihood of successful project financing throughout the development stage and weigh that against the expected benefits. In addition, the Energy Group may, depending upon circumstances and at the appropriate time, elect to dispose of a portion of an equity interest it may have in a project after financing. INDEPENDENT POWER The Energy Group's independent power business is conducted by its wholly-owned subsidiary, Ogden Energy, Inc. ("OEI"). OEI develops, operates and/or invests in independent (i.e., nonutility) electric energy generation ("Independent Power Production" or "IPP") projects which sell their output to utilities, electricity distribution companies or industrial consumers in the 12 United States and abroad. The activities of this group do not include the development of generating facilities fueled by solid waste, which are conducted by the waste-to-energy group, discussed below. The Energy Group presently has interests in IPP projects with an aggregate generating capacity of 1172 MW (gross) either operating or under construction in the United States, Central and South America, and The Philippines. It continues to seek to expand its ownership and operation of IPP projects in these and other regions, primarily with focus on development opportunities in the Pacific Rim, Southeast Asia and India. The Energy Group's IPP business is facilitated through field offices in Hong Kong; Manila, The Philippines; Taipei, Taiwan, and Sao Paulo, Brazil. (a) IPP Projects. Quezon. During 1996 and early 1997, the Energy Group successfully completed the development stage of its largest international project to date. A consortium, of which the Energy Group is a member has developed and is now constructing a 480 MW coal-fired electric generating facility in the Republic of the Philippines (the "Quezon Project"). The other members of the consortium are affiliates of International Generating Company, an affiliate of Bechtel Enterprises, Inc. and PMR Limited Co., a Philippines partnership. The consortium entered into a power purchase agreement with Manila Electric Company ("Meralco"), the largest electric distribution company in The Philippines, which serves the area surrounding and including metropolitan Manila. Under the terms of the agreement, Meralco is obligated, for a period of 25 years, to purchase stated minimum annual quantities of electricity produced by the facility on terms and at prices set forth in the agreement. The consortium has entered into contracts for the supply of coal at stated prices for a portion of the term of the power purchase agreement. The power purchase agreement has been approved by the Philippines Energy Regulatory Board. The project has received an environmental clearance certificate, the primary environmental permit required for construction and operation, together with all permits required to commence ground-clearing and grading activities. Site acquisition has been substantially completed. Total cost of development and construction of the Quezon Project is expected to be approximately $800 million. A notice to proceed with construction of the facility has been issued to the turnkey contractors, which are affiliates of Bechtel Enterprises, Inc., and construction of the facility commenced on December 27, 1996. An Energy Group subsidiary will operate the Quezon Project on behalf of the consortium for a 25 year term from the commencement of commercial operation. On December 30, 1996, the consortium concluded negotiations with and executed financing agreements with construction and term lenders to the Quezon Project, including Union Bank of Switzerland and the US Export-Import Bank. On February 11, 1997 the financing was 13 closed, subject to certain conditions subsequent which must be satisfied prior to the initial loan disbursement. All conditions to release of loan proceeds are expected to be satisfied in due course. The Energy Group will receive certain limited amounts of revenue from the Quezon Project during construction. Operating revenue is expected to commence upon commercial operation, projected for January 2000. Operating Facilities. The Energy Group's operating IPP projects utilize a variety of energy sources: water (hydroelectric), natural gas, geothermal energy, and petroleum distillates. The Quezon Project when completed will utilize coal. The Group's hydroelectric projects include the New Martinsville, West Virginia project, which is operated through a wholly-owned subsidiary. The output is sold under a long term contract with Monongohela Power Company. The Energy Group has an ownership interest in the Don Pedro project in Costa Rica through an equity investment in Energia Global, Inc. ("EGI"). Don Pedro is owned by EGI and is operated by an affiliate of the Energy Group. A second hydroelectric project, Rio Vulcan, is scheduled to commence operation in 1997 and also will be operated by an Energy Group affiliate. The electric output from both of these facilities is sold to Instituto Costarricense de Electricidad. The Energy Group's natural gas projects include the Brandywine Maryland facility which began operation in 1996. This facility is operated by a subsidiary of the Energy Group, and its output is sold to Potomac Electric Power Company. The other natural gas projects are located in Bolivia, where affiliates of the Energy Group own an interest in Empresa Valle Hermoso ("EVH") which was formed by the Bolivian government as part of the capitalization of the government-owned utility ENDE. EVH owns and operates 215 MW of gas-fired generating capacity. An affiliate of OEI participates in a joint venture that supplies EVH with management services support. The Energy Group is the lessee of two geothermal facilities in California, both of which are operated by the Group's affiliates, and a geothermal resource which is adjacent to and supplies fluid to both geothermal facilities. The electricity from both projects, the Heber and SIGC facilities, is sold under long-term contracts with Southern California Edison. In 1996, the Energy Group added diesel fuel facilities to its portfolio through the acquisition of equity interests in two projects in the Philippines: the Bataan Cogeneration project and the Island Power project. These projects will be operated by an affiliate of the Energy Group. The Bataan Cogeneration project has a long-term contract to sell its electrical output to the National Power Corporation (with which it also has entered into a fuel management agreement for fuel supply) and the Bataan Export Processing Zone Authority, while the Island Power project has a long-term power contract with the Occidental Mindoro Electric Cooperative. 14 (b) Project Summaries. Certain information with respect to the Energy Group's IPP projects as of March 1, 1997 is summarized in the following table: IPP PROJECTS
Date of Acquisition/ Energy Commencement In Operation: Location Source Size Nature of Interest of Operations ------------- -------- ------ ---- ------------------ ------------- 1. New Martinsville West Virginia Hydro 40MW Lessee/Operator 1991 2. Heber (1)(2) California Geothermal 52MW 50% Lessee/ 1989 Operator 3. SIGC (2) California Geothermal 48MW Lessee/Operator 1994 4. Don Pedro Costa Rica Hydro 16MW Operator 1996 5. Island Power Philippines Diesel 7MW Part Owner/ 1996 Corporation(3)(4) Operator 6. Bataan Philippines Diesel 58MW Owner/Operator 1996 Cogeneration (3) 7. Empresa Valle Bolivia Natural Gas 215MW Part Owner/ 1995 Hermoso (5) Operations Mgmt. 8. Brandywine Maryland Natural Gas 240MW Operator 1996 Under Construction: - ------------------- 1. Quezon (6) Philippines Coal 480MW Operator/Part 2000(est.) Owner 2. Rio Vulcan Costa Rica Hydro 16MW Operator 1997(est.)
(1) An OEI affiliate is a 50% partner in the project entity which leases the facility from a third-party lessor. The lease expires in 2000 and is subject to a 15-year renewal at the OEI affiliate's option. (2) An OEI affiliate is a 50% partner of the lessee of the resource supplying fluid to the project, and the lessor is the same third-party that leases the Heber project to that project entity. (3) These projects are currently undergoing refurbishment. Accordingly, as of March 1, 1997, not all units of these projects were running at capacity. (4) An OEI affiliate has an approximately 40% ownership interest in this project. 15 (5) The OEI affiliate owns an approximately 24% interest in a consortium that purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by Bolivian pension funds. (6) An OEI affiliate has an approximately 26% ownership interest in the project. (c) Other Development Efforts. The Energy Group is actively pursuing several projects, some of which have achieved significant development milestones such as executed power purchase agreements, or receipt of key governmental approvals. As with all development efforts, however, there are in each case numerous conditions to be satisfied prior to financing, some of which are not within the Energy Group's control. As such, no assurance can be given that these projects will ultimately be developed successfully. WASTE-TO-ENERGY The Energy Group's waste-to-energy operations have been consolidated in a wholly-owned subsidiary, Ogden Waste to Energy, Inc. ("OWTE"). Waste-to-energy facilities combust municipal solid waste to make saleable energy in the form of electricity or steam. This group completed construction of its first waste-to-energy project in 1986. It currently operates 28 waste-to-energy projects at 27 locations. The Energy Group's affiliates are the owners or lessees of 17 of its projects. OWTE has the exclusive right to market in the United States the proprietary, mass-burn technology of Martin GmbH fur Umwelt-und Energietechnik ("Martin"). All of the facilities the Energy Group has constructed use this Martin technology. In addition, the Energy Group operates facilities using other technologies. Generally, OWTE, through wholly-owned subsidiaries ("Operating Subsidiaries"), provides waste-to-energy services pursuant to long-term service contracts ("Service Agreements") with local governmental units sponsoring the waste-to-energy project ("Client Communities"). Certain of its facilities do not have sponsoring Client Communities. (a) Terms and Conditions of Service Agreements. Each Service Agreement is different in order to reflect the specific needs and concerns of the Client Community, applicable regulatory requirements, and other factors. The following description sets forth terms that are generally common to these agreements: o The Operating Subsidiary designs the facility, helps to arrange for financing, and then constructs and equips the facility on a fixed price and schedule basis. o The Operating Subsidiary operates the facility and generally guarantees it will meet minimum processing capacity and efficiently standards, energy production levels, and environmental standards. The Operating Subsidiary's failure to meet these guarantees or to otherwise observe the material terms of the Service Agreement (unless caused by the Client Community or by events beyond its control ("Unforeseen 16 Circumstances")) may result in liquidated damages being charged to the Operating Subsidiary or, if the breach is substantial, continuing and unremedied, the termination of the Service Agreement. In the case of such Service Agreement termination, the Operating Subsidiary may be obligated to discharge project indebtedness; o The Client Community is generally required to deliver minimum quantities of municipal solid waste ("MSW") to the facility and is obligated to pay a service fee for its disposal, regardless of whether that quantity of waste is delivered to the facility. The service fee escalates to reflect indexes of inflation. In many cases the Client Community must also pay for transportation of the residue to the disposal site. Generally, expenses resulting from the delivery of unacceptable and hazardous waste on the site, are also borne by the Client Community. In addition, the Client Community is also generally responsible to pay increased expenses and capital costs resulting from Unforeseen Circumstances, subject to limits which may be specified in the Service Agreement; o Ogden Corporation typically guarantees each Operating Subsidiary's performance under its respective Service Agreement. o The Client Community reimburses the Operating Subsidiary for certain costs specified in the Service Agreement including taxes, governmental impositions (other than income taxes), certain consumables, ash disposal and utility expenses. The Client Community usually retains a portion of the energy revenues (generally 90%) generated by the facility, with the balance paid to the Operating Subsidiary. If the facility is owned by the Operating Subsidiary, the Client Community also pays as part of the Service Fee an amount equal to the debt service due to be paid on the bonds issued to finance the facility. At most facilities, the Energy Group may earn additional fees from accepting waste from the Client Community or others utilizing the capacity of the facility, which exceeds the amount of waste committed by the Client Community. Affiliates of the Energy Group operate transfer stations in connection with some of its waste-to-energy facilities and, in connection with the Montgomery County, Maryland project, use a railway system to transport MSW and ash residue to and from the facility. In addition, affiliates lease and operate a landfill located at its Haverhill, Massachusetts, facility, and lease, but do not operate, a landfill in connection with its Bristol, Connecticut, facility. (b) Other Arrangements for Providing Waste-to-Energy Services. The Energy Group owns two facilities that are not operated pursuant to Service Agreements with Client Communities and may undertake in the future additional such projects. In such projects, the Operating Subsidiary must obtain sufficient waste under contracts with haulers or communities to ensure sufficient project revenues. In these cases, the Operating Subsidiary is subject to risks 17 usually assumed by the Client Community, such as those associated with Unforeseen Circumstances and the supply and price of municipal waste to the extent not contractually assumed by other parties. The Group's current contracts with waste suppliers for these two facilities provide that the tipping fee charged for waste disposal service generally escalates with specified indices but otherwise is subject to limited increases in the event that costs of operation increase as a result of Unforeseen Circumstances. On the other hand, in these cases, the Operating Subsidiary generally retains all of the energy revenues from sales of power to utilities or industrial power users and disposal fees for waste accepted at these facilities. Accordingly, the Energy Group believes that such projects carry both greater risks and greater potential rewards than projects in which there is a Client Community. (c) Project Financing. Financing for domestic projects is generally accomplished through the issuance of a combination of tax-exempt and taxable revenue bonds issued by or on behalf of the Client Community. If the facility is owned by the Operating Subsidiary the Client Community loans the bond proceeds to the Operating Subsidiary and pays to the Operating Subsidiary amounts necessary to pay debt service. For such facilities, project-related debt is included as a liability in Ogden's consolidated financial statements. Generally, such debt is secured by the revenues pledged under the respective indenture and is collateralized by the assets of the Operating Subsidiary and otherwise provides no recourse to Ogden, subject to construction and operating performance guarantees and commitments. (d) OWTE Projects. Certain information with respect to projects as of March 1, 1997 is summarized in the following table: WASTE-TO-ENERGY PROJECTS Boiler Commencement Units Tons per Day Units of Operations - ----- ------------ ----- ------------- Tulsa, OK (I) (1) 750 2 1986 Haverhill/Lawrence,(8) 950 1 1984 MA-RDF Marion County, OR 550 2(2) 1987 Hillsborough County, FL (3) 1,200 3(2) 1987 Tulsa, OK (II) (1)(4) 375 1 1987 Bristol, CT 650 2(2) 1988 Alexandria/Arlington, VA 975 3 1988 Indianapolis, IN 2,362 3(2) 1988 Hennepin County, MN (1)(5) 1,000 2 1990 Stanislaus County, CA 800 2 1989 Babylon, NY 750 2(2) 1989 Haverhill, MA-Mass Burn 1,650 2 1989 Warren County, NJ (5) 400 2 1990 Kent County, MI (3) 625 2(2) 1990 Wallingford, CT (5) 420 3(2) 1990 Fairfax County, VA 3,000 4(2) 1990 18 Huntsville, AL (3) 690 2(2) 1990 Lake County, FL 520 2(2) 1990 Lancaster County, PA (3) 1,200 3(2) 1991 Pasco County, FL (3) 1,050 3(2) 1991 Huntington, NY (6) 750 3(2) 1991 Hartford, CT (3)(7)(8) 2,000 3 1989 Detroit, MI (1)(8) 3,300 3 1989 Honolulu, MI (1)(8) 2,160 2 1990 Union County, NJ (3) 1,440 3 1994 Lee County, FL (3) 1,200 3(2) 1994 Onondaga County NY (6) 990 3 1995 Montgomery County, MD (3) 1,800 3(2) 1995 ----- Total 33,565 ====== (1) Facility is owned by an owner/trustee pursuant to a sale/leaseback arrangement. (2) Facility has been designed to allow for the addition of another unit. (3) Facility is owned by the Client Community. (4) Phase II of the Tulsa facility, which was financed as a separate project, expanded the capacity of the facility from two to three units. (5) Operating Subsidiaries were purchased after completion, and use a mass-burn technology that is not the Martin Technology. (6) Owned by a limited partnership in which the limited partners are not affiliated with Ogden. (7) Under contracts with the Connecticut Resource Recovery Authority and Northeast Utilities, the Operating Subsidiary operates only the boiler and turbine for this facility. (8) Operating contracts were acquired after completion. Facility uses a refuse-derived fuel technology and does not employ the Martin Technology. (e) Technology. The principal feature of the Martin Technology is the reverse- reciprocating stoker grate upon which the waste is burned. The patent for the basic stoker grate technology used in the Martin Technology expired in 1989. The Energy Group has no information that would cause it to believe that any other company uses the basic stoker grate technology that was protected by the expired patent. Moreover, the Energy Group believes that unexpired patents on other portions of the Martin technology and other proprietary know how would limit the ability of other companies to effectively use the basic stoker grate technology in competition with the Energy Group. There are several unexpired patents related to the Martin Technology including: (i) Grate Bar for Grate Linings, especially in Incinerators - expires, 1999; (ii) Method and Arrangement for Reducing NOx Emissions from Furnaces - expires 2000; (iii) Method and Apparatus for Regulating the Furnace Output of Incineration Plants - expires 2007; (iv) Method for Regulating the Furnace Output in Incineration Plants - expires 2008; and (v) Feed Device with Filling Hopper and Adjoining Feed Chute for Feeding Waste to Incineration Plants - 19 expires 2008. More importantly, the Energy Group believes that it is Martin's know-how and worldwide reputation in the waste-to-energy field, and the Energy Group know-how in designing, constructing and operating waste-to-energy facilities, rather than the use of patented technology, that is important to the Energy Group's competitive position in the waste-to-energy industry in the United States. Ogden does not believe that the expiration of the patent covering the basic stoker grate technology or patents on other portions of the Martin Technology will have a material adverse effect on Ogden's financial condition or competitive position. The Energy Group believes that mass burn technology is now the predominant technology used for the combustion of solid waste. Overall, there are several other mass-burn technologies available in the market including those of Von Roll, W&E, Takuma, Volund, Steinmueller, Deutsche Babcock, and Detroit Stoker. In addition, other innovative non-mass burn technologies have been developed from time-to-time. Such technologies may claim reduced air emissions, but to date have been unproven on a large scale operation and appear likely to be substantially more expensive. Martin seeks to implement improvements and modifications to its technology in order to maintain its competitive position with non-mass burn technologies. However, should such technologies develop that offer competitive advantages to mass burn, the Energy Group's ability to respond in the United States would be limited by the Cooperation Agreement--see (f) below. (f) The Cooperation Agreement. Under an agreement between Martin and an Ogden affiliate (the "Cooperation Agreement"), the Energy Group's subsidiary, Ogden Projects, Inc. ("OPI") has the exclusive rights to market the proprietary technology (the "Martin Technology") of Martin in the United States, Canada, Mexico, Bermuda, certain Caribbean countries, most of Central and South America, and Israel. Martin is obligated to assist OPI in installing, operating, and maintaining facilities incorporating the Martin technology. The fifteen year term of the Cooperation Agreement renews automatically each year unless notice of termination is given, in which case the Cooperation Agreement would terminate 15 years after such notice. Additionally, the Cooperation Agreement may be terminated by either party if the other fails to remedy its material default within 90 days or notice. The Cooperation Agreement is also terminable by Martin if there is a change of control (as defined in the Cooperation Agreement) of Ogden Martin Systems, Inc. ("OMS"), a wholly-owned subsidiary of OPI or any direct or indirect parent of OMS not approved by its respective board of directors. Although termination would not affect the rights of OPI to design, construct, operate, maintain, or repair waste-to-energy facilities for which contracts have been entered into or proposals made prior to the date of termination, the loss of OPI's right to use the Martin Technology could have a material adverse effect on OPI's future business and prospects. (g) Other Development Efforts. The Energy Group has no firm commitments in its waste-to-energy backlog as of December 31, 1996. As of December 31, 1995, it had one project in its backlog, which the client community, Mercer County, New Jersey, has since announced it intends to cancel. 20 WATER AND WASTEWATER The Energy Group's water and wastewater business is conducted through Ogden Yorkshire Water Company ("OYWC"). OYWC's mission is to develop, design, construct, maintain, operate, and in some cases own, water and wastewater treatment facilities and distribution and collection networks in the United States, Canada, Latin America and elsewhere. Although OYWC was formed in 1994 as a joint venture with a British water utility, Yorkshire Water PLC, in 1996, Yorkshire Water PLC determined that it needed to refocus its efforts on its core business in the United Kingdom, and terminated its ownership interest in OYWC and its projects. Yorkshire Water PLC and its affiliates will, however, continue to provide engineering, operations and marketing support and services to OYWC under a contract which expires in 1999. In the United States, OYWC seeks to participate in water projects in which, under contracts with municipalities, it privatizes water or wastewater facilities, agrees to build new or substantially augment existing facilities and agrees to operate and maintain the facilities under long term contracts. Although in certain situations it would consider entering into operational contracts for facilities in which it has no ownership or long term leasehold interest, and presently has such contracts with three small communities in New York State, the Energy Group generally does not believe such contracts provide adequate returns. The development of the privatization market for water and wastewater projects in the United States has been hampered by certain legal constraints, primarily restrictions imposed by federal tax regulations that have historically limited the ability of municipalities to enter into long term operating contracts with private entities for facilities financed with tax exempt municipal bonds. In early 1997, the Internal Revenue Service significantly relaxed these restrictions. It is expected that these changes should allow municipalities to more easily privatize existing water and wastewater systems. OYWC believes there are opportunities for projects in the United States, especially in circumstances where substantial new construction is required, and in 1996 it submitted proposals to municipalities for several such opportunities. In countries other than the United States, the Energy Group is seeking water and wastewater opportunities in which it will provide services to municipalities in which it can own an equity interest in water facilities under a concession that grants it the right to provide service to, and collect revenues from, consumers. The Energy Group believes that the lack of creditworthiness of non-U.S. municipalities, which may result from their limited ability to raise revenues or from other causes, makes the collection of tariffs from the consumer a more secure source of revenue. Under contractual arrangements, OYWC may be required to warrant certain levels of performance and may be subject to financial penalties or termination if it fails to meet these warranties. The Company may be required to guarantee the performance of OYWC. OYWC seeks not to take responsibility for conditions that are beyond its control. (a) Water and Wastewater Projects. OYWC operates and maintains wastewater treatment facilities for three small municipalities in New York State. Such facilities cumulatively 21 process approximately 11.8 million gallons per day ("mgd"). In addition, OYWC operates and maintains the municipal wastewater treatment facilities for several other small government and privately owned concerns that cumulatively process less than 1 mgd. All of the facilities are operated pursuant to short-term contracts. (b) Other Development Efforts. The Energy Group currently has no firm commitments in its water and wastewater backlog. It has, however, received a project award with respect to a 32 year concession serving a population in excess of 700,000 in the City of Muscat, the capital of the Sultanate of Oman. The project encompasses taking over the existing wastewater and sewage facilities in Muscat, as well as the construction and operation of new water and wastewater infrastructure. The infrastructure capital program would be phased in over eight years, with the first phase projected to require approximately $285 million in new construction. OYWC's role would be as operator on behalf of a joint venture to be formed. The joint venture's arrangement with the government would be on a Build/Own/Operate/Transfer basis, and some equity capital, expected to be approximately $12 million, would be required of OYWC. The implementation of the Muscat project remains subject to several conditions precedent, many of which are beyond the control of OYWC. ENVIRONMENTAL CONSULTING AND ENGINEERING The Energy Group's environmental consulting services are provided through Ogden Environmental and Energy Services Co., Inc. ("OEES") which provides a comprehensive range of environmental, infrastructure and energy consulting, engineering and design services to industrial and commercial companies, electric utilities and governmental agencies. These services include analysis and characterization, remedial investigations, engineering and design, data management, project management, and regulatory assistance which are provided to a variety of clients in the public and private sectors in the United States and abroad. Principal clients include major Federal agencies, particularly the Department of Defense and the Department of Energy, as well as major corporations in the chemical, petroleum, transportation, public utility and health care industries and Federal and state regulatory authorities. United States Government contracts may be terminated, in whole or in part, at the convenience of the government or for cause. In the event of a convenience termination, the government is obligated to pay the costs incurred under the contract plus a fee based upon work completed. Professional environmental engineering services, including program management, environmental analysis, and restoration continues to be provided by OEES to the United States Navy CLEAN Program (Comprehensive Long Term Environmental Action Navy) pursuant to a 10-year contract awarded during 1991. Thus far OEES has provided these services at Navy bases in Hawaii, Guam, Japan, Hong Kong, the Philippines, Australia and Korea. OEES also continues to oversee the removal of storage tanks and contaminated soil from Air Force bases across the United States and in U.S. territories. 22 INTERNATIONAL BUSINESS DEVELOPMENT The Energy Group develops projects in many countries, and in doing so seeks to implement its strategy for the development of its business in selected international markets where private development is encouraged. It seeks to do so by focusing on a limited number of opportunities which can be developed in conjunction with high quality local and international partners. Offices have been established in Hong Kong, Manila, Sao Paulo, and Taipei in order to service foreign projects. Opportunities in foreign countries for the services provided by the Group are highly dependent upon the elimination of historic legal and political barriers to the participation of foreign capital and foreign companies in the financing, construction, ownership and operation of infrastructure facilities. For example, in many countries, the production, distribution and delivery of electricity has traditionally been provided by governmental or quasi-governmental agencies. Although a number of these countries have recently liberalized their laws and policies with regard to the participation of private interests and foreign capital in their electric sectors, not all have done so, and not all that have done so may afford acceptable opportunities for the Energy Group. The development, construction, ownership and operation of facilities in foreign countries also exposes the Company to several potential risks that typically are not involved in such activities in the United States. Many of the countries in which the Energy Group is or intends to be active are lesser developed countries or developing countries. The financial condition and creditworthiness of the potential purchasers of power and services provided by the Energy Group which may be a governmental or private utility or industrial consumer--or of the suppliers of fuel for projects in these countries--may not be as strong as those of similar entities in developed countries. The obligations of the purchaser under the power purchase agreement, the service recipient under the related service agreement and the supplier under the fuel supply agreement generally are not guaranteed by any host country or other creditworthy governmental agency. Whenever such governmental guarantees are not available, the Energy Group undertakes a credit analysis of the proposed power purchaser or fuel supplier. It also seeks to cause such parties to adequately secure the performance of their obligations through contractual commitments and, where necessary, through the provision by such entities of financial instruments such as letters of credit or arrangements regarding the escrowing of the receivables of such parties in the case of power purchasers. The Energy Group's IPP and waste-to-energy projects in particular are dependent on the reliable and predictable delivery of fuel meeting the quantity and quality requirements of the project facilities. The Energy Group will typically seek to negotiate long-term contracts for the supply of fuel with creditworthy and reliable suppliers under terms that will permit it to project the future cost of fuel through the life of the contract. However, the reliability of fuel deliveries may be compromised by one or more of several factors that may be more acute or may occur more frequently in developing countries than in developed countries, including a lack of sufficient infrastructure to support deliveries under all circumstances, bureaucratic delays in the import, transportation and storage of fuel in the host country, customs and tariff disputes and local or 23 regional unrest or political instability. In most of the projects in which the Energy Group participates internationally, it seeks to shift the consequences of interruptions in the delivery of fuel, whether due to the fault of the fuel supplier or due to reasons beyond the fuel supplier's control, to the electricity purchaser or service recipient by securing a suspension of its operating responsibilities under the applicable agreements and an extension of its operating concession under such agreements and/or, in some instances, by requiring the energy purchaser or service recipient to continue to make payments in respect of fixed costs. In order to mitigate the effect of short term interruptions in the supply of fuel, the Energy Group endeavors to provide on-site storage of fuel in sufficient quantities. Payment for services that the Energy Group provides will often be made in whole or part in the domestic currencies of the host countries. Conversion of such currencies into U.S. dollars generally is not assured by a governmental or other creditworthy country agency, and may be subject to limitations in the currency markets, as well as restrictions of the host country. In addition, fluctuations in value of such currencies against the value of the U.S. dollar may cause the Energy Group's participation in such projects to yield less return than expected. Transfer of earnings and profits in any form beyond the borders of the host country may be subject to special taxes or limitations imposed by host country laws. The Energy Group seeks to participate in projects in jurisdictions where limitations on the convertibility and expatriation of currency have been lifted by the host country and where such local currency is freely exchangeable on the international markets. In most cases, components of project costs incurred or funded in the currency of the United States are recovered without risk of currency fluctuation through negotiated contractual adjustments to the price charged for electricity or service provided. In addition, the Energy Group will generally participate in projects which provide services that are treated as a matter of national or key economic importance by the laws and politics of many host countries. There is therefore risk that the assets constituting the facilities of these projects could be temporarily or permanently expropriated or nationalized by a host country, or made subject to martial or exigent law or control. The Energy Group will seek to manage and mitigate these risks through all available means that it deems appropriate. They will include: political and financial analysis of the host countries and the key participants in each project; guarantees of relevant agreements with creditworthy entities; political risk and other forms of insurance; participation by international finance institutions, such as affiliates of the World Bank, in financing of projects in which it participates; and joint ventures with other companies to pursue the development, financing and construction of these projects. 24 OTHER INFORMATION MARKETS, COMPETITION AND GENERAL BUSINESS CONDITIONS Ogden's Entertainment, Aviation and Energy Groups business segments can be adversely affected by general economic conditions, war, inflation, adverse competitive conditions, governmental restrictions and controls, natural disasters, energy shortages, weather, the adverse financial condition of customers and suppliers, various technological changes and other factors over which Ogden has no control. The economic climate can also adversely affect several of Ogden's operations, including, but not limited to, fewer airline flights, reduced in-flight meals and flight cancellations in the Aviation group; and, reduced event attendance in its Entertainment group. In addition, disputes between owners of professional sports organizations and the professional players of such organizations have affected and may continue to affect the operations of the Entertainment group. Competition for projects is intense in all markets in which the Energy Group does business or intends to do business. There are numerous companies in the United States and in foreign countries that pursue these projects. Many of these companies have more experience, capital and other resources than does Ogden. The Energy Group expends substantial amounts for the development of new businesses, some of which expenditures are capitalized. Generally, it receives funds to undertake these activities from Ogden. Beyond staffing costs, expenditures include the costs of contract and site acquisition, feasibility and environmental studies, technical and financial analysis, and in some cases the preparation of extensive proposals in response to public or private requests for proposals. Development of projects involves substantial risk to the developers which is not within their control. Success depends upon obtaining in a timely manner acceptable contractual arrangements and financing, appropriate sites, acceptable licenses, environmental permits and governmental approvals. Even after the required contractual arrangements are achieved, implementation of the contract often is subject to substantial conditions that may be outside the control of the developer. If development opportunities in which the Energy Group is involved are no longer viewed as viable, such costs are written off as an expense. In some, but not all, circumstances, the Energy Group makes contractual arrangements for the partial recovery of development costs if the project fails to be implemented for reasons beyond its control. The Energy Group's businesses are subject to a variety of competitive and market influences, and these influences are different for each of its principal business areas. Its IPP business faces a domestic market that is expected to change substantially in the years ahead from a mature, highly regulated and uncompetitive market for energy services to a less regulated and more competitive market as utilities restructure for deregulation and termination of their traditional monopolies. The international market for energy services is characterized by a large demand and much competition for projects within a relatively immature market framework. 25 The domestic market for waste-to-energy services has largely matured and is now heavily regulated. New opportunities for domestic projects are expected to be scarce for the foreseeable future. Foreign demand for waste to energy projects is also expected to exist only in unique circumstances where other disposal options are unavailable or unusually costly. This reflects a number of factors that adversely affected communities' willingness to make long-term capital commitments to waste disposal projects, including: declining prices at which energy can be sold; declining alternative disposal costs; uncertainties about the impact of recycling on the waste stream; and continuing concerns arising from the Clean Air Act Amendments of 1990. Another factor affecting the demand for new waste-to-energy projects was a 1994 United States Supreme Court decision invalidating state and local laws and regulations mandating that waste generated within a given jurisdiction be taken to a designated facility. See "Flow Control". Notwithstanding the decline in opportunities for new waste-to-energy facilities, OWTE believes there may be opportunities at existing facilities for expansion. Many of these factors also impact, to varying degrees, the competitiveness of the pricing established by Client Communities at OWTE's operating projects. For example, in most of the markets that OWTE currently serves, the cost of waste-to-energy services is competitive with the cost of other disposal alternatives, mainly landfilling. However, much of the landfilling done in the United States is done on a spot market or through short-term contracts (less than 5 years), and the resulting price volatility means that market prices may at times be lower than prices at waste-to-energy facilities, which, like OWTE's, are typically based on long-term contracts and pricing. In addition, the cost competitiveness of operating waste-to-energy facilities also depends on the prices at which the facility can sell the energy it generates, and the additional charges that some Client Communities add to their fee structures. The Energy Group's water and wastewater business faces an immature but developing domestic market for private water and wastewater services, and, like energy, a large foreign demand within an immature marketplace. With these market dynamics, the Energy Group believes that its primary but not exclusive development focus for new projects during the next several years will be in the IPP area. EQUAL EMPLOYMENT OPPORTUNITY In recent years, governmental agencies (including the Equal Employment Opportunity Commission) and representatives of minority groups and women have asserted claims against many companies, including some Ogden subsidiaries, alleging that certain persons have been discriminated against in employment, promotions, training, or other matters. Frequently, private actions are brought as class actions, thereby increasing the practical exposure. In some instances, these actions are brought by many plaintiffs against groups of defendants in the same industry, thereby increasing the risk that any defendant may incur liability as a result of activities which are the primary responsibility of other defendants. Although Ogden and its subsidiaries have attempted to provide equal opportunity for all of its employees, the combination of the foregoing factors and others increases the risk of financial exposure. 26 EMPLOYEE AND LABOR RELATIONS As of March 1, 1997, Ogden and its subsidiaries had approximately 30,000 U.S. and Canadian employees. Certain employees of Ogden are employed pursuant to collective bargaining agreements with various unions. During 1996 Ogden successfully renegotiated collective bargaining agreements in certain of its business sectors with no strike-related loss of service. However, in January 1996, negotiations between New York City commercial office building owners and Local 32B-32J Service Employees international Union, AFL-CIO broke off following the December 31, 1995 expiration of the previous industry-wide collective bargaining agreement. As a result thereof approximately 30,000 Union employees went on strike on January 4, 1996. Ogden's New York Facility Management operations employs approximately 1,700 Union employees which were affected by the strike under contracts with the building owners. The strike was settled in February 1996 and there was no significant impact on Ogden's consolidated operations as a result of this strike. Ogden considers relations with its employees to be good and does not anticipate any further significant labor disputes in 1997. ENVIRONMENTAL REGULATORY LAWS (a) Domestic. The Energy Group business activities in the United States are pervasively regulated pursuant to federal, state and local environmental laws. Federal laws, such as the Clean Air Act and Clean Water Act, and their state counterparts, govern discharges of pollutants to air and water. Other federal, state, and local laws, comprehensively govern the generation, transportation, storage, treatment, and disposal of solid waste, including hazardous waste (such laws and the regulations thereunder, "Environmental Regulatory Laws"). The Environmental Regulatory Laws and other federal, state, and local laws, such as the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") (collectively, "Environmental Remediation Laws"), make the Energy Group potentially liable on a joint and several basis for any environmental contamination which may be associated with its activities at sites, including landfills, which the Energy Group's subsidiaries have owned, operated, or leased or at which there has been disposal of residue or other waste handled or processed by such subsidiaries. Through its subsidiaries, the Energy Group leases and operates a landfill in Haverhill, Massachusetts, and leases a landfill in Bristol, Connecticut, in connection with its projects at those locations. Some state and local laws also impose liabilities for injury to persons or property caused by site contamination. Some Service Agreements provide for indemnification of the operating subsidiaries from some such liabilities. The Environmental Regulatory Laws require that many permits be obtained before the commencement of construction and operation of waste-to-energy, independent power and water and wastewater projects. There can be no assurance that all required permits will be issued, and the process of obtaining such permits can often cause lengthy delays, including delays caused by third-party appeals challenging permit issuance. Failure to meet conditions of these permits or of the Environmental Regulatory Laws and the corresponding regulations can subject an 27 Operating Subsidiary to regulatory enforcement actions by the appropriate governmental unit, which could include monetary penalties, and orders requiring certain remedial actions or limiting or prohibiting operation. To date, the Energy Group has not incurred material penalties, been required to incur material capital costs or additional expenses, nor been subjected to material restrictions on its operations as a result of violations of environmental laws, regulations, or permits. Certain of the Environmental Regulatory Laws authorize suits by private parties for damages and injunctive relief. Repeated unexcused failure to comply with environmental standards may also constitute a default by subsidiaries of the Energy Group. The Environmental Regulatory Laws and federal and state governmental regulations and policies governing their enforcement are subject to revision. New technology may be required or stricter standards may be established for the control of discharges of air or water pollutants or for solid waste or ash handling and disposal. Thus as new technology is developed and proven, it may be required to be incorporated into new facilities or major modifications to existing facilities. This new technology may often be more expensive than that used previously. The Clean Air Act Amendments of 1990 required EPA to promulgate New Source Performance Standards ("NSPS") and Emission Guidelines ("EG") applicable to new and existing municipal waste combustion units for particulate matter (total and fine), opacity, sulfur dioxide, hydrogen chloride, oxides of nitrogen, carbon monoxide, dioxins and dibenzofurans. The NSPS and EG, which were issued in final form in 1995, will require capital improvements or operating changes to most of the waste-to-energy facilities operated by OWTE to control emissions of nitrogen oxides, organics, mercury and acid gases. The timing and cost of the modifications required at OWTE facilities will depend on the provisions of implementing regulations that states must adopt and EPA approve. The deadline for states to submit their implementing regulations was December 19, 1996. On December 6, 1996, however, the Court of Appeals for the D.C. Circuit vacated the NSPS and EG in its decision in Davis County Solid Waste Management and Energy Recovery Special Services District v. USEPA. A petition for reconsideration is pending. If the Court does not reverse its ruling, states may suspend or repeal their regulations until EPA revises and reissues the NSPS and EG in accordance with the Court of Appeals' direction. Many states' laws require this result in any event to prevent having regulations more stringent than federal requirements. It is uncertain how long EPA will take to reissue the NSPS and EG, but the agency has announced its intention to minimize the delay in achieving the enhanced emissions controls for large facilities that the NSPS and EG would have provided. The Company believes that EPA will probably reissue the NSPS and EG for all its other facilities in substantially identical form as those that were vacated, and that OWTE projects may have until early in 2002 to achieve compliance. The costs to meet new rules for existing facilities owned by Client Communities generally will be borne by the Client Communities. For projects owned or leased by Ogden and operated under a Service Agreement, the Client Community has the obligation to fund such capital improvements, to which Ogden may be required to make an equity contribution, generally 20%. In certain cases, Ogden is required to fund the full cost of these capital improvements at those facilities that are either not operated pursuant to a Service Agreement or whose Service Agreement 28 does not require the costs to be borne by the Client Community. The Company estimates that its commitments for these capital improvements will total approximately $30 million over the four years following the reissuance of the NSPS and EG by EPA. OWTE believes that most costs incurred to meet EG and operating permit requirements at facilities it operates may be recovered from Client Communities and other users of its facilities through increased service fees permitted under applicable contracts. Such increased service fees will be paid for either out of their general revenues or by increasing fees charged to facility users by the Client Community. Because of the reluctance or inability of some municipalities to increase taxes, or tipping fees if the market may not bear the increase without some loss of waste deliveries, Client Communities may seek to have OWTE subsidize the cost, or modify its contractual relationship. Domestic drinking water facilities developed in the future by OYWC will be subject to regulation of water quality by the EPA under the Federal Safe Drinking Water Act and by similar state laws. Domestic wastewater facilities are subject to regulation under the Federal Clean Water Act and by similar state laws. These laws provide for the establishment of uniform minimum national water quality standards, as well as governmental authority to specify the type of treatment processes to be used for public drinking water. Under the Federal Clean Water Act, OYWC may be required to obtain and comply with National Pollutant Discharge Elimination System permits for discharges from its treatment stations. Generally, under its current contracts, the client community is responsible for fines and penalties resulting from the delivery to OYWC's treatment facilities of water not meeting standards set forth in those contracts. The Environmental Remediation Laws prohibit disposal of hazardous waste other than in small, household-generated quantities at OWTE's municipal solid waste facilities. The Service Agreements recognize the potential for improper deliveries of hazardous wastes and specify procedures for dealing with hazardous waste that is delivered to a facility. Although certain Service Agreements require the Operating Subsidiary to be responsible for some costs related to hazardous waste deliveries, to date, no Operating Subsidiary has incurred material hazardous waste disposal costs. (b) International. Among the Energy Group's objectives is providing energy generating and other infrastructure through environmentally protective project designs, regardless of the location of a particular project. This approach is consistent with the increasingly stringent environmental requirements of multilateral financing institutions, such as the World Bank, and also with the Energy Group's experience in domestic waste-to-energy projects, where environmentally protective facility design and performance has been required. The laws of other countries also may require regulation of emissions into the environment, and provide governmental entities with the authority to impose sanctions for violations, although these requirements are generally not as rigorous as those applicable in the United States. Compliance with environmental standards comparable to those of the United States may be conditions to the provision of credit by multilateral banking agencies as well as other lenders or credit providers. As with domestic project development, there can be no assurance that all required permits will be issued, and the process can often cause lengthy delays. 29 ENERGY AND WATER REGULATIONS OWTE and OEI's domestic businesses are subject to the provisions of federal, state and local energy laws applicable to their development, ownership and operation of their domestic facilities, and to similar laws applicable to their foreign operations. Federal laws and regulations govern transactions with utilities, the types of fuel used and the power plant ownership. State regulatory regimes govern rate approval and other terms under which utilities purchase electricity from independent producers, except to the extent such regulation is pre-empted by federal law. Pursuant to Federal Public Utility Regulatory Policies Act ("PURPA"), the Federal Energy Regulatory Commission ("FERC") has promulgated regulations that exempt qualifying facilities (facilities meeting certain size, fuel and ownership requirements) from compliance with certain provisions of the Federal Power Act ("FPA"), the Public Utility Holding Company Act of 1935 ("PUHCA"), and, except under certain limited circumstances, state laws regulating the rates charged by, or the financial and organizational activities of, electric utilities. PURPA was enacted in 1978 to encourage the development of cogeneration facilities and small facilities making use of non-fossil fuel power sources, including waste-to-energy facilities. The exemptions afforded by PURPA to qualifying facilities from the FPA and PUHCA and most aspects of state electric utility regulation are of great importance to the Energy Group and its competitors in the waste-to-energy and independent power industries. State public utility commissions must approve the rates, and in some instances other contract terms, by which public utilities purchase electric power from the Group's projects. PURPA requires that electric utilities purchase electric energy produced by qualifying facilities at negotiated rates or at a price equal to the incremental or "avoided" cost that would have been incurred by the utility if it were to generate the power itself or purchase it from another source. PURPA does not require public utilities to enter into long-term contracts. In 1995, the FERC issued two orders in which it modified its previous interpretation of PURPA and held that state laws and regulatory orders directing utilities to purchase electricity from qualifying facilities at rates in excess of the utility's projected avoided costs were pre-empted by PURPA and that contracts providing for such above-avoided cost rates were void. The FERC stated in both orders that it intends to apply its reinterpretation of PURPA only on a prospective basis and that it generally will not entertain requests by utilities to invalidate power sales agreements entered into pursuant to such state laws and regulatory orders. The Energy Group does not believe any of the power sales agreements related to its OWTE and OEI facilities is subject to challenge based on the prospective nature of the orders. However, certain utilities have challenged the legality of FERC's determination not to apply its new policy on preemption to existing contracts. These appeals are currently pending before the Circuit Court of Appeals for the District of Columbia. Under PUHCA, any entity owning or controlling ten percent or more of the voting securities of a "public utility company" or company which is a "holding company" of a public utility company is subject to registration with the Securities and Exchange Commission (the "SEC") and regulation by the SEC unless exempt from registration. Under PURPA, most 30 projects that satisfy the definition of a "qualifying facility" are exempt from regulation under PUHCA. Under the Energy Policy Act of 1992, projects that are not qualifying facilities under PURPA but satisfy the definition of an "exempt wholesale generator" ("EWG") are not public utility companies under PUHCA. Finally, projects that satisfy the definition of "foreign utility companies" are exempt from regulation under PUHCA. The Energy Group believes that all of its projects involved in the generation, transmission and/or distribution of electricity, both domestically and internationally, will qualify for an exemption from PUHCA and that it will not be required to register with the SEC. In the past there has been consideration in the U.S. Congress of legislation to repeal PURPA entirely, or at least to repeal the obligation of utilities to purchase power from Qfs. It is likely that similar legislation will be introduced in the current Congress. There is strong support for grandfathering existing QF contracts if such legislation is passed, and also support for requiring utilities to conduct competitive bidding for new electric generation if the PURPA purchase obligation is eliminated. Various bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both independents and vertically integrated utilities to acquire retail utilities in the United States that are geographically widespread, as opposed to the current limitations of PUHCA which require that retail electric systems be capable of physical integration. Also, registered holding companies would be free to acquire non-utility businesses, which they may not do now, with certain limited exceptions. With the repeal of PURPA or PUHCA, competition for independent power generators from vertically integrated utilities would likely increase. In addition, the FERC, many state PUCs and Congress are currently studying a number of proposals to restructure the electric utility industry in the United States to permit utility customers to choose their utility supplier in a competitive electric energy market. The FERC has issued a rulemaking decision to require utilities to offer wholesale customers and suppliers open access on their transmission lines on a comparable basis to the utilities' own use of the line. All public utilities have already filed "open access" tariffs to implement this requirement. The utilities contend that they should recover from departing customers their fixed costs that will be "stranded" by the ability of their wholesale customers (and perhaps eventually, their retail customers) to choose new electric power suppliers. These include the costs utilities are required to pay under many QF contracts which the utilities view as excessive when compared with current market prices. Many utilities are therefore seeking ways to lower these contract prices, or rescind or buy out these contracts altogether, out of concern that their shareholders will be required to bear all or part of such "stranded" costs. Regulatory agencies to date have recognized the continuing validity of approved power purchase agreements. Future U.S. electric rates may be deregulated in a restructured U.S. electric utility industry and increased competition may result in lower rates and less profit for U.S. electricity sellers developing new projects. Falling electricity prices and uncertainty as to the future structure of the industry can be expected to inhibit United States utilities from entering into long-term power purchase contracts. On the other hand, deregulation could open up markets for the sale of electricity previously available only to regulated utilities. The effect of any such restructuring on the Energy Group cannot be predicted, although Ogden does not believe that any such restructuring will have a material adverse effect on its consolidated financial position. 31 The Energy Group presently has, and intends to continue to acquire, ownership and operating interests in projects outside the United States. Most countries have expansive systems for the regulation of the power business. These generally include provisions relating to ownership, licensing, rate setting and financing of generating and transmission facilities. OYWC's business may be subject to the provisions of state, local and, in the case of foreign operations, national utility laws applicable to the development, ownership and operation of water supply and wastewater facilities. Whether such laws apply depends upon the local regulatory scheme as well as the manner in which OYWC provides its services. Where such regulations apply, they may relate to rates charged, services provided, accounting procedures, acquisitions and other matters. In the United States, rate regulations have typically been structured to provide a predetermined return on the regulated entities investments. In other jurisdictions, the trend is towards periodic price reviews comparing rates to anticipated capital and operating revenues. The regulated entity benefits from efficiencies achieved during the period for which the rate is set. FLOW CONTROL Many states provide for local and regional solid waste planning and require that new solid waste facilities may be constructed only in conformity with these plans. Certain of these laws, sometimes referred to as legal flow control, authorize state agencies to require delivery of waste generated within their jurisdiction to designated facilities. In 1994, the United States Supreme Court held that such laws were constitutionally invalid. Federal legislation proposed to authorize flow control has not been adopted to date. The rates OWTE charges its Client Communities are generally competitive with other disposal options. Some Client Communities have experienced erosion of waste deliveries, but overall 1996 deliveries to OWTE facilities exceeded 1995 levels. Under most Service Agreements, the Client Community bears the economic impact of waste delivery shortfalls. Client Communities are now evaluating options to attract additional waste to facilities. Certain of these options have been tested in the federal courts and sustained. Although it is likely that the Supreme Court's decision has adversely affected the market for new waste-to-energy facilities, other factors are believed by Ogden to be more significant for low projected market activity. See Other Information: MARKETS, COMPETITION, AND GENERAL BUSINESS CONDITIONS. ASH RESIDUE In 1994, the United States Supreme Court held that municipal solid waste ash residue demonstrated by testing to possess hazardous characteristics is subject to RCRA's provisions for management as a hazardous waste relating to transportation, disposal and treatment downstream of the point of generation. The Supreme Court's ruling has not had a significant impact on OWTE's business. 32 Item 2. PROPERTIES (a) Services Ogden's executive offices are located at Two Pennsylvania Plaza, New York, New York 10121, pursuant to a lease that expires on April 30, 2008, subject to an option by Ogden to renew the lease for an additional five years. The principal physical properties of Ogden are the fueling installations operated by the Aviation group located at various airports in the United States and Canada and the corporate premises of Ogden located at Two Pennsylvania Plaza, New York, New York 10121 under lease, which expires on April 30, 2008 and which contains an option by Ogden to renew for an additional five years. Atlantic Design Company's corporate offices are located in Charlotte, North Carolina. Atlantic Design owns a 51,000 square foot operating facility on 3.5 acres of land in Vestal, New York. Atlantic Design also leases operating facilities at various locations in Florida, New Jersey and New York. The leases range from a term of one year to as long as ten years. The Entertainment and Aviation groups own and lease buildings in various areas in the United States and several foreign countries which house office and warehousing operations. The leases range from a month-to-month term to as long as five years. Ogden Services Corporation also owns a 12,000 square-foot warehouse and office facility located in Long Island City, New York. The Aviation group's in-flight food service operation facilities, aggregating approximately 600,000 square feet, are leased, except at Newark which is owned. Entertainment operates Fairmount Park racetrack pursuant to a long-term lease which expires in 2017. Fairmount Park conducts thoroughbred and harness racing on a 150-acre site located in Collinsville, Illinois, eight miles from downtown St. Louis. Entertainment also owns a 148-acre site located at East St. Louis, Illinois. Entertainment also owns and operates Grizzly Park, a nature-based entertainment facility located on approximately 25-acres near Yellowstone National Park in West Yellowstone, Montana. Pursuant to a lease agreement with the State of Florida, which expires in 2008, Entertainment also has a leasehold interest in Silver Springs, a 250-acre nature-based park, and Wild Waters, a 6-acre park featuring a variety of water slides and events. Both parks are located near Ocala, Florida. (b) Energy The principal executive offices of Ogden Energy Group, Inc. are located in Fairfield, New Jersey, in an office building located on a 5.4-acre site owned by OPI. It also leases approximately 47,000 square feet of office space in Fairfax, Virginia. 33 The following table summarizes certain information relating to the locations of the properties owned or leased by OPI or its subsidiaries as of January 31, 1997(1). Approximate Site Size Location in Acres Site Use Nature of Interest - -------- -------- -------- ------------------ Fairfield, New Jersey 5.4 Office space Own Marion County, Oregon 15.2 Waste-to-energy Own (2) facility Alexandria/Arlington, Virginia 3.3 Waste-to-energy Acquiring the Alexandria facility Authority's and the Arlington Authority's interest under Site lease (expires Oct. 1, 2025) pursuant to Conditional Sale Agreement Bristol, Connecticut 18.2 Waste-to-energy Own (2) facility Bristol, Connecticut 35.0 Landfill Site lease (expires Jul. 1, 2014) Indianapolis, Indiana 23.5 Waste-to-energy Site lease (expires Dec., facility 2008 subject to four 5- year renewal options) (2) Stanislaus County, California 16.5 Waste-to-energy Site lease (expires Aug. facility 20, 2021 subject to 15- year renewal option) (2) Babylon, New York 9.5 Waste-to-energy Site lease (expires Dec. facility 19, 2010, with renewal options) Haverhill, Massachusetts 12.7 Waste-to-energy Site lease (expires Mar. facility 16, 1997, subject to sixteen 5-year renewal options) (2) Haverhill, Massachusetts 16.8 RDF processing Site lease (expires Mar. facility 16, 1997, subject to sixteen 5-year renewal options) (2) Haverhill, Massachusetts 20.2 Landfill Site lease (expires Mar. 16, 1997, subject to sixteen 5-year renewal options) (2) Lawrence, Massachusetts 11.8 RDF power plant Own (2) Lake County, Florida 15.0 Waste-to-energy Own (2) facility Wallingford, Connecticut 10.3 Waste-to-energy Site lease (expires Dec. facility 1, 2026) (2) Fairfax County, Virginia 22.9 Waste-to-energy Acquiring Fairfax facility Authority's interest under Site Lease (expires Mar. 10, 2016) pursuant to Conditional Sale Agreement Imperial County, California 83.0 Undeveloped land Own Montgomery County, Maryland 35.0 Waste-to-energy Site lease (expires Nov. 16, facility 2030) (2) 34 Approximate Site Size Location in Acres Site Use Nature of Interest - -------- -------- -------- ------------------ Huntington, New York 13.0 Waste-to-energy Site lease (expires Oct. facility 28, 2012, subject to successive renewal terms through Jan. 28, 2029)(2) Warren County, New Jersey 19.8 Waste-to-energy Site lease (expires Nov. facility 16, 2005 subject to two ten-year renewals)(2) Hennepin County, Minnesota 14.6 Waste-to-energy Leases of site and facility facility (expires Oct. 1, 2017 subject to renewal options to December 20, 2024)(2)(3) Stockton, California 4.5 Contaminated soil Site lease (expired remediation remediation facility February 1, 1994) (discontinued) Tulsa, Oklahoma 22.0 Waste-to-energy Leases of site and facility facility (expires April 30, 2012 subject to renewal options to August 2, 2026)(2)(3) Onondaga County, New York 12.0 Facility site Site lease expires contemporaneously with service agreement, subject to renewal options to May 9, 2020(2) New Martinsville, West Virginia N/A Hydroelectric (See description under Power Generating Facility "Energy Group Independent Power") Heber, California N/A Geothermal Power (See description under Plant "Energy Group Independent Power") Heber, California N/A Geothermal Power (See description under Plant "Energy Group Independent Power") Bataan, Philippines 3,049.32 Diesel Power Site Lease sq. Plant meters - ---------- (1) Two Facilities not listed in the table were initially owned by political subdivisions and were sold to a leveraged lessor. The leverage lessor entered into lease agreements with the respective Operating subsidiaries as accommodation leases. All of the lease obligations, including the obligation to pay rent, are passed through to the client communities. (2) The Operating Subsidiary's ownership or leasehold interest is subject to material liens in connection with the financing of the related project. (3) Sublease of site expires contemporaneously with facility lease. 35 Item 3. LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS (a) 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 the outcome of which would have a material adverse effect on the Company's consolidated financial statements. (b) 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 36 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 operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the Company's responsibility. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that currently required remediation and continuing compliance with environmental laws will not have a material adverse effect on the Company's consolidated financial statements. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the security holders of Ogden during the fourth quarter of 1996. EXECUTIVE OFFICERS OF OGDEN Set forth below are the names, ages, position and office held and year appointed, of all "executive officers" (as defined by Rule 3b-7 of the Securities Exchange Act of 1934) of Ogden as of March 1, 1997: CONTINUALLY AN OGDEN POSITION AND EXECUTIVE NAME OFFICE HELD AGE AS OF 3/1/97 OFFICER SINCE ---- ----------- ---------------- ------------- R. Richard Ablon Chairman of the 47 1987 Board, President & Chief Executive Officer Scott G. Mackin Executive Vice 40 1992 President Bruce W. Stone Executive Vice 49 1997 President for Waste- to-Energy Operations and Managing Director-Ogden Energy Group, Inc. 37 Philip G. Husby Senior Vice 50 1991 President, Chief Financial Officer and Treasurer Lynde H. Coit Senior Vice 42 1991 President and General Counsel Rodrigo Arboleda Senior Vice 56 1995 President - Business Development, Latin America David L. Hahn Senior Vice 45 1995 President, Business Development, East Asia Quintin G. Marshall Senior Vice 35 1995 President, Corporate Development Gary D. Perusse Senior Vice 48 1996 President - Risk Management Robert M. DiGia Vice President, 72 1965 Controller and Chief Accounting Officer Kathleen Ritch Vice President and 54 1981 Secretary There is no family relationship by blood, marriage or adoption (not more remote than first cousins) between any of the above individuals and any Ogden director, except that R. Richard Ablon, an Ogden director and Chairman of the Board, President and Chief Executive Officer, is the son of Ralph E. Ablon, an Ogden director. The term of office of all officers shall be until the next election of directors and until their respective successors are chosen and qualified. There are no arrangements or understandings between any of the above officers and any other person pursuant to which any of the above was selected as an officer. 38 The following briefly describes the business experience, the principal occupation and employment of the foregoing Executive Officers during the past five years: R. Richard Ablon has been President and Chief Executive Officer of Ogden since May 1990 and Chairman of the Board since May, 1996. Scott G. Mackin has been considered an Executive Officer of Ogden since 1992 and was elected Executive Vice President of Ogden in 1997. He has been President and Chief Operating Officer of Ogden Projects, Inc., now the Energy Group since January 1991. Bruce W. Stone was designated an Executive Officer of Ogden in 1997. Mr. Stone served as Co-President and Chief Operating Officer of Ogden Projects, Inc. and the Energy Group between October 5, 1990 and January 29, 1991 and currently serves as Executive Vice President and Managing Director of Ogden Projects, Inc. and the Energy Group, a position he has held since January 29, 1991. Philip G. Husby has been Senior Vice President and Chief Financial Officer of Ogden since January 1, 1991 and Treasurer since January 19, 1995. Lynde H. Coit has been a Senior Vice President and General Counsel of Ogden since January 17, 1991. Rodrigo Arboleda was elected Senior Vice President of Ogden in January 1995. Since 1992, he has served as Senior Vice President-Business Development for Latin America of Ogden Services Corporation. David L. Hahn was elected Senior Vice President of Ogden in January 1995. He previously served as Vice President-Marketing of Ogden Services Corporation for more than the past five years. Quintin G. Marshall was elected Senior Vice President - Corporate Development of Ogden on January 16, 1997. Prior thereto, he served as Ogden's Vice President - Investor Relations since October 1995. From May 1993 to October 1995 he served as Managing Director of CDA Investment Technologies, a division of Thomson Financial. From July 1992 to May 1993 he served as Senior Vice President at Gavin Andersen & Company, an investor relations consulting firm. From September 1986 to March 1992 he served first as Managing Director and then Co-Chief Operation Officer of Georgeson & Company, a proxy solicitation and consulting company. Gary D. Perusse was elected Senior Vice President - Risk Management in September, 1996. Prior thereto he had served as Director - Risk Management of Ogden for more than the past five years. 39 Robert M. DiGia has been Vice President, Controller and Chief Accounting Officer of Ogden for more than the past five years. Kathleen Ritch has been Vice President and Secretary of Ogden for more than the past five years. PART II Item 5. MARKET FOR OGDEN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Page 43 of Ogden's 1996 Annual Report to Shareholders. As of March 1, 1997, the approximate number of record holders of Ogden common stock was 8,500. Item 6. SELECTED FINANCIAL DATA Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Page 20 of Ogden's 1996 Annual Report to Shareholders. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Pages 16 through 19 of Ogden's 1996 Annual Report to Shareholders. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Pages 20 through 40 and Page 43 of Ogden's 1996 Annual Report to Shareholders. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. 40 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF OGDEN Pursuant to General Instruction G (3), the information regarding directors called for by this item is hereby incorporated by reference from Ogden's 1997 Proxy Statement to be filed with the Securities and Exchange Commission. The information regarding officers called for by this item is included at the end of Part I of this document under the heading "Executive Officers of Ogden." Item 11. EXECUTIVE COMPENSATION Pursuant to General Instruction G (3), the information called for by this item is hereby incorporated by reference from Ogden's 1997 Proxy Statement to be filed with the Securities and Exchange Commission. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pursuant to General Instruction G (3), the information called for by this item is hereby incorporated by reference from Ogden's 1997 Proxy Statement to be filed with the Securities and Exchange Commission. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to General Instruction G (3), the information called for by this item is hereby incorporated by reference from Ogden's 1997 Proxy statement to be filed with the Securities and Exchange Commission. Part IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Listed below are the documents filed as a part of this report: 1). All financial statements contained on pages 21 through 40 and the Independent Auditors' Report on page 41 of Ogden's 1996 Annual Report to Shareholders are incorporated herein by reference. 2). Financial statement schedules as follows: 41 (i) Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 1996, 1995 and 1994. 3). Those exhibits required to be filed by Item 601 of Regulation S-K: EXHIBITS 2.0 Plans of Acquisition, Reorganization, Arrangement, Liquidation or Succession. 2.1 Agreement and Plan of Merger, dated as of October 31, 1989, among Ogden, ERCI Acquisition Corporation and ERC International, Inc.* 2.2 Agreement and Plan of Merger among Ogden Corporation, ERC International, Inc., ERC Acquisition Corporation and ERC Environmental and Energy Services Co., Inc., dated as of January 17, 1991.* 2.3 Amended and Restated Agreement and Plan of Merger among Ogden Corporation, OPI Acquisition Corp. and Ogden Projects, Inc., dated as of September 27, 1994.* 3.0 Articles of Incorporation and By-laws. 3.1 Ogden's Restated Certificate of Incorporation as amended.* 3.2 Ogden's By-Laws, as amended.* 4.0 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of June 1, 1987, and Offering Memorandum dated June 12, 1987, relating to U.S. $85 million Ogden 6% Convertible Subordinated Debentures, Due 2002.* 4.2 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of October 15, 1987, and Offering Memorandum, dated October 15, 1987, relating to U.S. $75 million Ogden 5-3/4% Convertible Subordinated Debentures, Due 2002.* 4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to The Bank of New York, Trustee, relating to Ogden's $100 million debt offering.* 42 10.0 Material Contracts 10.1 Credit Agreement by and among Ogden, The Bank of New York, as Agent and the signatory bank Lenders thereto dated as of September 20, 1993.* (i) Amendment to Credit Agreement, dated as of November 16, 1995.* 10.2 Stock Purchase Agreement, dated May 31, 1988, between Ogden and Ogden Projects, Inc.* 10.3 Tax Sharing Agreement, dated January 1, 1989, between Ogden, Ogden Projects, Inc. and subsidiaries, Ogden Allied Services, Inc. an subsidiaries, and Ogden Financial Services, Inc. and subsidiaries.* 10.4 Stock Purchase Option Agreement, dated June 14, 1989, between Ogden and Ogden Projects, Inc. as amended on November 16, 1989.* 10.5 Preferred Stock Purchase Agreement, dated July 7, 1989, between Ogden Financial Services, Inc. and Image Data Corporation.* 10.6 Rights Agreement between Ogden Corporation and Manufacturers Hanover Trust Company, dated as of September 20, 1990 and amended August 15, 1995 to provide The Bank of New York as successor agent.* 10.7 Executive Compensation Plans (a) Ogden Corporation 1986 Stock Option Plan.* (b) Ogden Corporation 1990 Stock Option Plan.* (i) Ogden Corporation 1990 Stock Option Plan as Amended and Restated as of January 19, 1994.* (c) Ogden Services Corporation Executive Pension Plan.* (d) Ogden Services Corporation Select Savings Plan.* (i) Ogden Services Corporation Select Savings Plan Amendment and Restatement as of January 1, 1995.* (e) Ogden Services Corporation Select Savings Plan Trust.* 43 (i) Ogden Services Corporation Select Savings Plan Trust Amendment and Restatement dated as of January 1, 1995.* (f) Ogden Services Corporation Executive Pension Plan Trust.* (g) Changes effected to the Ogden Profit Sharing Plan effective January 1, 1990.* (h) Ogden Corporation Profit Sharing Plan.* (i) Ogden Profit Sharing Plan as amended and restated January 1, 1991 and as in effect through January 1, 1993.* (ii) Ogden Profit Sharing Plan as amended and restated effective as of January 1, 1995.* (i) Ogden Corporation Core Executive Benefit Program.* (j) Ogden Projects Pension Plan.* (k) Ogden Projects Profit Sharing Plan.* (l) Ogden Projects Supplemental Pension and Profit Sharing Plans.* (m) Ogden Projects Employee's Stock Option Plan.* (i) Amendment, dated as of December 29, 1994 to the Ogden Projects Employees' Stock Option Plan. Transmitted herewith as Exhibit 10.7 (u)(i).* (n) Ogden Projects Core Executive Benefit Program.* (o) Form of amendments to the Ogden Projects, Inc. Pension Plan and Profit Sharing Plans effective as of January 1, 1994.* (i) Form of Amended Ogden Projects, Inc. Profit Sharing Plan, effective as of January 1, 1994. Transmitted herewith as Exhibit 10.7 (w)(i).* (ii) Form of Amended Ogden Projects, Inc. Pension Plan, effective as of January 1, 1994. Transmitted herewith as Exhibit 10.7 (w)(ii).* (p) Ogden Corporation CEO Formula Bonus Plan.* 44 10.8 Employment Agreements (a) Employment Letter Agreement between Ogden and Lynde H. Coit dated January 30, 1990.* (b) Employment Agreement between Ogden and R. Richard Ablon dated as of May 24, 1990.* (i) Letter Amendment Employment Agreement between Ogden and R. Richard Ablon dated as of October 11, 1990.* (c) Employment Agreement between Ogden and C. G. Caras dated as of July 2, 1990.* (i) Letter Amendment to Employment Agreement between Ogden Corporation and C.G. Caras, dated as of October 11, 1990.* (ii) Termination Agreement between C.G. Caras and Ogden dated April 30, 1996. Transmitted herewith as Exhibit 10.8(c)(ii). (d) Employment Agreement between Ogden and Philip G. Husby as of July 2, 1990.* (e) Termination Letter Agreement between Maria P. Monet and Ogden dated as of October 22, 1990.* (f) Letter Agreement between Ogden Corporation and Ogden's Chairman of the Board, dated as of January 16, 1992.* (g) Employment Agreement between Ogden and Ogden's Chief Accounting Officer dated as of December 18, 1991.* (h) Employment Agreement between Scott G. Mackin and Ogden Projects, Inc. dated as of January 1, 1994.* (i) Letter Amendment to Employment Agreement between Ogden Projects, Inc. and Scott G. Mackin, dated December 20, 1996. Transmitted herewith as Exhibit 10.8(h)(i). (i) Employment Agreement between David L. Hahn and Ogden Corporation, dated December 1, 1995.* 45 (j) Employment Agreement between Ogden Services Corporation and Rodrigo Arboleda dated January 1, 1997. Transmitted herewith as Exhibit 10.8(j). (k) Employment Agreement between Ogden Projects, Inc. and Bruce W. Stone dated June 1, 1990. Transmitted herewith as Exhibit 10.8(k). (l) Employment Agreement between Ogden Corporation and Quintin G. Marshall, dated October 30, 1996. Transmitted herewith as Exhibit 10.8(l). 10.9 First Amended and Restated Ogden Corporation Guaranty Agreement made as of January 30, 1992 by Ogden Corporation for the benefit of Mission Funding Zeta and Pitney Bowes Credit Corporation.* 10.10 Ogden Corporation Guaranty Agreement as of January 30, 1992 by Ogden Corporation for the benefit of Allstate Insurance Company and Ogden Martin Systems of Huntington Resource Recovery Nine Corporation.* 11 Ogden Corporation and Subsidiaries Detail of Computation of Earnings Applicable to Common Stock for the years ended December 31, 1996, 1995 and 1994. Transmitted herewith as Exhibit 11. 13 Those portions of the Annual Report to Stockholders for the year ended December 31, 1996, which are incorporated herein by reference. Transmitted herewith as Exhibit 13. 21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21. 23 Consent of Deloitte & Touche LLP. Transmitted herewith as Exhibit 23. 27 Financial Data Schedule (EDGAR Filing Only). * Incorporated by reference as set forth in the Exhibit Index of this Annual Report on Form 10-K. (b) No Reports on Form 8-K were filed by Ogden during the fourth quarter of 1996. SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OGDEN CORPORATION Date: March 13, 1997 By /S/ R. Richard Ablon ---------------------------------- R. Richard Ablon Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. SIGNATURE TITLE --------- ----- /S/ R. Richard Ablon Chairman of the Board, President and Chief - -------------------------- Executive Officer and Director R. RICHARD ABLON /S/ Ralph E. Ablon Director - -------------------------- RALPH E. ABLON /S/ Philip G. Husby Senior Vice President, Treasurer and Chief - -------------------------- Financial Officer PHILIP G. HUSBY /S/ Robert M. DiGia Vice President, Controller and Chief Accounting - -------------------------- Officer ROBERT M. DIGIA /S/ David M. Abshire Director - -------------------------- DAVID M. ABSHIRE /S/ Norman G. Einspruch Director - -------------------------- NORMAN G. EINSPRUCH (i) /S/ Attallah Kappas Director - -------------------------- ATTALLAH KAPPAS ________________________ Director TERRY ALLEN KRAMER /S/ Judith D. Moyers Director - -------------------------- JUDITH D. MOYERS _______________________ Director HOMER A. NEAL /S/ Stanford S. Penner Director - -------------------------- STANFORD S. PENNER /S/ Jesus Sainz Director - -------------------------- JESUS SAINZ /S/ Frederick Seitz Director - -------------------------- FREDERICK SEITZ /S/ Robert E. Smith Director - -------------------------- ROBERT E. SMITH /S/ Helmut F.O. Volcker Director - -------------------------- HELMUT F.O. VOLCKER /S/ Abraham Zaleznik Director - -------------------------- ABRAHAM ZALEZNIK (ii) INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of Ogden Corporation: We have audited the consolidated financial statements of Ogden Corporation and subsidiaries as of December 31, 1996 and 1995 and for each of the three years in the period ended December 31, 1996, and have issued our report thereon dated February 10, 1997, which report includes an explanatory paragraph relating to the adoption of Statements of Financial Accounting Standards Nos. 112 and 121; such consolidated financial statements and report are included in your 1996 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Ogden Corporation and subsidiaries, listed in Item 14. This consolidated financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Deloitte & Touche LLP New York, New York February 10, 1997 EX-10.8(C)(II) 2 TERMINATION LETTER OGDEN CORPORATION TWO PENNSYLVANIA PLAZA NEW YORK, N. Y. 10121 R. RICHARD ABLON PRESIDENT & CHIEF EXECUTIVE 0FFICER (212) 868-6050 April 30, 1996 FAX (212) 868-5480 Mr. Constantine G. Caras P.O. Box 3999 Greenville, DE 19807 Dear Gus: This letter sets forth the agreement and understanding between you and Ogden Corporation or its successors ("Ogden") concerning the termination of your employment and the termination of your Employment Agreement between you and Ogden dated July 2, 1990, (the "Employment Agreement"). Therefore, you and Ogden hereby agree as follows: 1) You are currently employed by Ogden in the capacity of Executive Vice President and Chief Administrative Officer and serve on the Board of Directors of Ogden and many of its subsidiaries. 2) Effective with the close of business on April 30, 1996 the Employment Agreement and your employment by Ogden as Executive Vice President and Chief Administrative Officer is terminated without cause (the "Termination Date"). 3) As a consequence of the termination of your employment and your Employment Agreement: (a) Ogden will continue to pay you, or in the event of your death your designated beneficiary, your current annual salary in the amount of $275,000 (less applicable withholding taxes) in the same manner as heretofore through December 31, 1996; and (b) Ogden will pay to you, or in the event of your death your designated beneficiary, an annual severance payment in the amount of $390,000, payable bi-weekly (less applicable withholding taxes) over a period of three (3) years commencing January 1, 1997 and ending with the close of business on December 31, 1999 (the "Severance Period"). 5) On the Termination Date you will no longer be considered an employee of Ogden and you will also no longer be eligible to participate in the Ogden Select Plan, the Ogden Executive Pension Plan and the Ogden Profit Sharing and 401(K) Plan. Any payments due to you under any of the foregoing plans will be distributed to you in accordance with the terms and conditions of each of the plans and you will be provided with all necessary information and forms on a timely basis by Ogden's Human Resources Department following the Termination Date. 6) Following the Termination Date, coverage under the Ogden Core Medical and Health Program shall continue in full force and effect for your life, the life of your spouse and for your eligible dependents identical in scope and terms as heretofore provided, subject to your continued bi-weekly contribution of $18.20 which will be deducted by Ogden from the payments referred to in Paragraph 3(b) above until the expiration of the Severance Period. Upon your attainment of age 65 the Core Retiree Health Plan becomes coordinated with Medicare, which becomes the primary insurer. Upon your death, the same coverage for your spouse and eligible dependents will be continued under the Core Retiree Health Plan. Nothing contained herein shall prevent Ogden from modifying or discontinuing the Ogden Core Medical and Health Program on a consistent and nondiscriminatory basis applicable to all participants, including all retired participants. Your life insurance coverage payable to your designee will be continued until your death at an amount equal to two times your base salary and bonus ($750,000), and the premiums will at all times be paid by Ogden. The value of this coverage will be reported to you annually on the applicable Internal Revenue Service form. All other health and accident related benefits discontinue on the Termination Date. 7) Your Ogden Corporation stock options will be exercisable in accordance with the terms and conditions set forth in the applicable Stock Option Plan under which they were granted and in accordance with your stock option agreement. 8) (a) On or before the Termination Date you shall have returned to Ogden all property of Ogden in your possession, including but not limited to, all office equipment, credit cards, keys, documents, etc. retaining to Ogden's business. (b) You currently operate and possess an Ogden leased 1995 Lincoln Continental Sedan Automobile VIN 1LNLM97V1SY649992, which Ogden has agreed to sell to you for a purchase price of $26,184.61, excluding all taxes and registration fees which will be paid by you, payable in cash on or before April 30, 1996. 9) In consideration of the foregoing, (a) you, for yourself and your heirs and legal representatives agree to release Ogden and its subsidiaries, affiliates, officers, directors and employees (the "Ogden Group") from all actions, causes of actions, suits, claims, damages and demands whatsoever, in law or equity which against the Ogden Group you and your heirs and legal representatives ever had, now have or hereafter may have for, upon 2 or by reason of any matter, cause or thing whatsoever from the beginning of time to the Termination Date, excluded claims arising under this letter agreement and excluding claims based upon the Ogden Group's fraud, willful misconduct or violation of law, and (b) the Ogden Group agrees to release you and your heirs and legal representatives from all actions, causes of actions, suits, claims, damages and demands whatsoever, in law or equity which against you and your heirs and legal representatives the Ogden Group ever had, now have or hereafter may have for, upon or by reason of any matter, cause or thing whatsoever from the beginning of time to the Termination Date, excluding claims arising under this letter agreement and excluding claims based upon fraud, willful misconduct or violation of law. 10) You will continue to be covered by any indemnity provisions contained in Ogden's Restated Certificate of Incorporation and By-laws immediately prior to the Termination Date for your acts or omissions during your employment with Ogden. 11) You agree that you will refrain from the disparagement of Ogden, its officers, directors and customers and Ogden agrees that Ogden nor any officer or director of Ogden will disparage you. Each of us agree not to make or cause to be made any public statement concerning the termination of your employment with Ogden that would be inconsistent with the foregoing. 12) You agree that you will keep inviolate and confidential and will not reveal to any competitor or other person, firm, corporation, association or other entity or use to the detriment of Ogden any knowledge or information of a confidential nature obtained by you in the course of your employment by Ogden with respect to the conduct and details of the business of Ogden and its subsidiaries. 13) This letter agreement constitutes the entire agreement and understanding between you and Ogden with respect to the subject matter hereof and supersedes any and all prior understandings, written or oral, including the Employment Agreement, in all respects. The terms of this letter agreement may not be changed, modified or amended, except by an instrument in writing signed by both parties hereto. 14) This letter agreement shall be governed by and construed in accordance with the laws of the state of New York without giving effect to principles relating to conflicts of law. 3 If the foregoing correctly sets forth our agreement, please indicate your acceptance by signing, dating and returning a copy of this letter to Ogden. Very truly yours, Ogden Corporation By: /s/ R. Richard Ablon ------------------------------------ President and Chief Executive Officer Accepted and Agreed to April 30, 1996. /s/ C.G. Caras - --------------------------- C.G. Caras 4 EX-10.8(H)(I) 3 LETTER AMENDMENT OGDEN CORPORATION TWO PENNSYLVANIA PLAZA NEW YORK, N. Y 10121 R. RICHARD ABLON CHAIRMAN & CHIEF EXECUTIVE 0FFICER (212) 868-6050 December 20, 1996 FAX (212) 868-5480 Mr Scott G Mackin 19 Hall Road Chatham, New Jersey Dear Mr. Mackin: This letter will confirm the agreement between you and Ogden Projects, Inc. (the "Company") that, effective as of January 1, 1997, the third sentence only of Paragraph 1. Employment/Capacity/Term; the first sentence only of Paragraph 9. Severance Payment; and Paragraph 14. Limited Covenant Not to Compete of your Employment Agreement dated as of January 1, 1994 (the "Employment Agreement") are hereby amended to read as follows: I. The third sentence only of Paragraph 1. Employment/Capacity/Term. of the Employment Agreement is hereby amended to read as follows, all other terms of Paragraph 1. remain unchanged and in full force and effect: "Such employment shall commence on January 1, 1997 and shall continue through December 31, 2001 and from year to year thereafter subject to the right of the Employee or the Company to terminate such employment as of December 31, 1997, or any subsequent December 31, by written notice given to the other party at least sixty (60) days prior to such termination date stating any intention to so terminate such employment." II. The first sentence only of Paragraph 9. Severance Pay. of the Employment Agreement is hereby amended to read as follows, all other terms of Paragraph 9. remain unchanged and in full force and effect: "9. Severance Payment. If the Company gives notice to terminate in accordance with Paragraph 1. or if the employment of the Employee is terminated at any time (i) by the Employee for Good Reason (as defined in Paragraph 10), or (ii) by the Company for any reason other than for Cause (as hereinafter defined), the Company will be obligated to pay to the Employee in cash a severance payment equal to the product of (i) and (ii); where (i) shall equal the sum of (A) the Employee's annual salary at the time of such termination, and (B) the Employee's annual incentive bonus during the twelve (12) month period ending with the close of the month in which such termination of employment occurs (the "Date of Termination"), but not less than the incentive bonus paid to the Employee in January 1996 for services rendered during 1995, which was Three Hundred Seventy Five Thousand and 00/100 Dollars ($375,000), divided by twelve (12); and where (ii) shall be sixty (60)." III. Paragraph 14. Employment/Capacity/Term. of the Employment Agreement is hereby amended in its entirety to read as follows: "14. Limited Covenant Note to Compete. If the employment of the Employee is terminated (i) by the Employee pursuant to Paragraph 1. hereof or (ii) by the Company for Cause (as defined in Paragraph 9.(b) above), then in either case (y) the Employee will not, for a period of five (5) years from such termination of employment, within the territorial confines of the United States of America, directly or indirectly, own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business in competition with the business conducted by the Company at the time of such termination, and (z) the Employee will, for a period of five (5) years from such termination refrain from carrying on a business similar to that presently carried on by the Company within the states in which the business of the Company has been carried on, so long as the Company carries on like business therein." All of the other terms and conditions of the Employment Agreement shall remain in full force and effect. Very truly yours, Ogden Projects, Inc. By: /s/ R. Richard Ablon ---------------------------------- Chairman of the Board and Chief Executive Officer AGREED AND ACCEPTED: /s/ Scott G. Mackin - ----------------------------- Scott G. Mackin Date: December 20, 1996 EX-10.8(J) 4 EMPLOYMENT AGREEMENT CONFIDENTIAL AND LEGALLY PRIVILEGED EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 1st day of January 1997, by and between OGDEN SERVICES CORPORATION, a Delaware corporation maintaining its principal office at Two Pennsylvania Plaza, New York, New York (the "Company") and Rodrigo Arboleda, an individual now residing at 611 North Mashya Drive, Key Biscayne, Florida 33149 (the "Employee"). WITNESSETH THAT: WHEREAS, the Employee is currently serving in an executive capacity as a Vice President of the Company and the Company desires to ensure that the Employee will continue to be available to provide business development services for the Company in Latin America; and WHEREAS, to induce the Employee to provide such services, the Company is offering to provide the Employee with the compensation, benefits and security provided for in this Agreement. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. Employment/Capacity/Term/Release. (a) The Company agrees to and does hereby employ the Employee, and the Employee agrees to and hereby does enter into the employ of the Company upon the terms and conditions set forth in this Agreement. Such employment shall be in an executive capacity as Senior Vice President - Business Development, Latin America of the Company. (b) This Agreement and such employment shall commence on January 1, 1997 and shall continue through December 31, 1999 (the "Initial Term"), and from year to year thereafter (the "Extended Term"). As used in this Agreement, the phrase "term of this Agreement" shall be deemed to include the period subsequent to the date hereof and prior to the Termination Date. (c) Upon the termination of this Agreement and the Employee's employment, the Employee shall execute and deliver to the Company a general release of claims in form and substance acceptable to the Company. 2 2. Time and Effort/Absences. During the "term of this Agreement", the Employee shall devote his entire time and attention during normal business hours to the development of new business on behalf of the Company and its subsidiaries in Latin America and elsewhere as directed by the Company, subject to the supervision of the Board of Directors and the President and Chief Executive Officer of the Company, and he shall not engage in any other business activity whether or not such business activity is pursued for gain, profit, or other pecuniary advantage, but this restriction shall not be construed to restrict the Employee (i) from performing services as a member of the Board of Directors, Board of Trustees or the like of any non-profit entity for which the Employee receives no compensation, provided that, such services do not unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him under this Agreement, and (ii) from investing his assets in such form or manner as will not require any services on the part of the Employee in the operation of the business of the entity in which such investments are made. The Employee shall be excused from rendering his services during reasonable vacation periods and during other reasonable temporary absences as authorized from time to time by the Board of Directors or the President and Chief Executive Officer of the Company. 3. Corporate Offices. If elected, the Employee will serve, without additional compensation, as an officer and director (or in either capacity) of the Company its parent and subsidiaries. 4. Salary/Bonus/Other Benefits. In consideration of the services and duties to be rendered and performed by the Employee during the "term of this Agreement", the Company agrees to pay and provide for the Employee the compensation and benefits described below: (a) An annual salary, payable in equal monthly or bi-weekly installments, in the amount of Two Hundred Eighty-Five Thousand Dollars ($285,000) or in such greater amount as may from time to time be fixed, in its sole discretion, by the Board of Directors of the Company. 3 (b) An annual discretionary incentive bonus in such amount as may from time to time be determined by the Board of Directors of the Company. (c) Other Benefits. It is intended that the Company shall continue to provide the Employee with benefits at least as favorable as benefits provided on behalf of other executives of the Company who furnish services of comparable significance, as they may exist from time to time. Such benefits presently include participation in (i) Group Life Insurance, Supplemental Executive Group Life Insurance, Medical and Dental Insurance, Ogden Stock Option Plan, Executive Pension Plan, Ogden Select Plan and Ogden 401(k) Plan, and (ii) an automobile allowance in the amount of $700.00 per month. Provided, however, any such participation shall be in accordance with the provisions of any such plans and nothing contained in this Agreement is intended to or shall be deemed to affect adversely any of the Employee's rights as a participant under any such plans. However, nothing herein shall prevent the Company from modifying or discontinuing any benefit or benefit plan on a consistent and non-discriminatory basis applicable to all such executives. 5. Expenses. The Employee shall be reimbursed for out-of-pocket expenses incurred from time to time on behalf of the Company in the performance of his duties under this Agreement, upon the presentation of such supporting documents and forms as the Company shall reasonably request. 6. Medical Leave, Reasonable Accommodation, Termination for Medical Incapacity and Disability Benefits. The Company agrees to provide the Employee with a medical leave of absence not to exceed six (6) months in duration in any twelve (12) month period if the Employee has a medical condition that precludes the Employee from being fully functional in his or her position. The term "fully functional" means able to travel to and from work, be at work, perform satisfactorily all essential functions of the position as identified herein, and otherwise meet the demands of the position and the conditions of employment without significant risk of substantial harm to self or others. Any leave entitlement granted by Federal, state or local law shall run concurrently with the commencement of this six month period of leave, whether such leave is taken all at once, intermittently or on a reduced time basis. Nothing herein is intended to diminish any entitlement 4 granted by law. If appropriate, the Company will support the Employee's application for disability benefits. If the Employee is not able to return to the position in a fully functional capacity at the conclusion of six months of medical leave in a twelve month period, this Agreement may be terminated by the Board of Directors of the Company at its sole discretion, without prior notice. Unless otherwise prohibited by law, the Employees agrees that the Employee will furnish for review by a medical professional designated by the Company, copies of the Employee's medical records pertaining to any medical condition for which the Employee requests a medical leave of more than twelve (12) weeks in duration, return to work from any such leave, work restrictions, modification or accommodation; or the Employee or the Company believes that the Employee has a medical condition that may be causing or contributing to performance or conduct deficiencies. The Employee also agrees to authorize any health care professional from whom the Employee is receiving diagnostic evaluation, treatment or other medical care to discuss the Employee's medical condition with the medical professional designated by the Company to receive and review the Employee's medical records. The Employee further agrees that he or she will undergo, at the sole expense of the Company, any medical specialty evaluation if requested to do so by the Company. The Company agrees to provide the Employee with medically necessary accommodation if it likely will enable the employee to be fully functional in the position and is reasonable, feasible and will not impose undue hardship on Company operations. The term "medically necessary" means that the accommodation has risk-avoiding or therapeutic value in accordance with scientifically valid medical principles and practice and that the Employee requires similar accommodation when performing comparable non-work functions. The inability of the Employee to be fully functional in his position for medical reasons shall not constitute a breach of this Agreement by the Employee. If this Agreement is terminated by the Company because the Employee is not fully functional in his position for medical reasons, as provided for in this paragraph, the Company shall be obligated to continue the salary of the Employee as provided in Paragraph 4.(a) for a period equal to the greater of (a) twelve (12) months, or (b) such longer period as may be determined by the Board of Directors of the Company, in each case, reduced 5 by any disability insurance benefits provided for the benefit of the Employee at the expense of the Company. 7. Death/Death Benefit. In the event of the death of the Employee during the "term of this Agreement", this Agreement shall terminate and the Employee's salary shall continue to be paid to his designated beneficiary or, if none, to his personal representative, through the last day of the month in which such death occurs. 8. Severance Payment If this Agreement and the employment of the Employee is terminated at any time (i) by the Employee for Good Reason (as defined in Paragraph 9), or (ii) by the Company for any reason other than for Cause (as hereinafter defined), the Company will be obligated to pay to the Employee a lump-sum cash payment in an amount equal to the product of (i) and (ii); where (i) shall equal the sum of (A) the Employee's then existing annual salary and (B) the Employee's then existing annual incentive bonus during the twelve (12) month period ending with the close of the month in which such termination of employment occurs (the "Date of Termination"), but not less than $60,000, which represents his 1996 incentive award, divided by twelve (12); and where (ii) shall be the lesser of, (x) thirty-six (36), or (y) the number of months until the Employee's Retirement (the "Severance Payment"). Termination of the Employee's employment on account of his or her disability, death or retirement (as hereinafter defined) will not be considered a termination of the Employee's employment by the Company and will not require the Company to pay and provide any Severance Payment. No Severance Payment will be required if the employment of the Employee is terminated by the Company for Cause (as hereinafter defined) or by the Employee (other than for Good Reason as defined in Paragraph 9). The Severance Payment provided herein is provided in order to reinforce and encourage the continued loyalty, attention, and dedication of the Employee to the Company's business and affairs without the concerns which normally arise from the possibility of a loss of employment security. As used herein, the terms "Retirement" and "Cause" shall have the following meanings, respectively: 6 (a) Retirement. Termination of the Employee's employment on account of "Retirement" shall mean termination on or after the Employee's normal retirement date in accordance with the terms of the Ogden 401(k) Plan; and (b) Cause Termination by the Company of the Employee's employment for "Cause" shall mean termination as a result of (i) the willful and continued failure by the Employee to perform substantially the services contemplated by this Agreement (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by a member or representative of the Board of Directors of the Company which specifically identifies the manner in which it is alleged that the Employee has not substantially performed such services, or (ii) the willful engaging by the Employee in gross misconduct which is materially and demonstrably injurious to the Company; provided that, no act, or failure to act, on the Employee's part shall be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that such action or omission was in, or not opposed to, the best interests of the Company. Anything in this Agreement to the contrary notwithstanding, the Employee's employment may not be terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution of the Board of Directors of the Company finding that in the good faith opinion of the Board the Employee was guilty of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and specifying the particulars thereof in detail. 9. Termination by the Employee for Good Reason. The termination by the Employee of this Agreement and his employment for "Good Reason" shall be deemed justifiable termination of his employment and shall excuse the Employee from the obligation to render services as provided in Paragraph 2 hereof. Upon such termination, the Employee shall be entitled to a Severance Payment in accordance with the provisions of Paragraph 8 hereof. As used herein, the phrase "Good Reason" shall mean: (a) a change in the Employee's status, title or position(s) as an officer of the Company in the executive capacity set forth in this Agreement which, in his or her reasonable 7 judgment, does not represent a promotion from or enhancement of his status, title and position, or the assignment by the Board of Directors of the Company to the Employee of any duties or responsibilities which, in his reasonable judgment, are inconsistent with such status, title or position, or any removal of the Employee from or any failure to reappoint or reelect him to such position, provided, however, none of the foregoing shall apply where there is justifiable termination by the Company of this Agreement and the Employee's employment for Cause or on account of disability. Retirement or death of the Employee or the termination by the Employee of his employment other than for Good Reason; (b) a reduction in the Employee's annual salary or a failure by the Company to pay to the Employee any installment of the annual salary required by Paragraph 4, which failure continues for a period of twenty (20) days after written notice thereof is given by the Employee to the Company; (c) the failure by the Company, upon written notice from the Employee, to obtain the assumption of this Agreement in form and substance to the reasonable satisfaction of the Employee by any successor of the Company (other than by merger or consolidation for which no separate assumption is necessary) as referred to in Paragraph 12; or (d) any refusal by the Company to allow the Employee to attend to matters or engage in activities not directly related to the business of the Company which is permitted by this Agreement. 10. Notice of Termination. Any purported notice of termination of the Employee's employment shall be communicated in writing and delivered to the other party as provided in Paragraph 12. below (hereinafter a "Notice of Termination"). 11. Confidentiality and Limited Covenant Not to Compete. In connection with the performance of the Employee's duties hereunder, the Employee will be in a position of trust and confidence, he will develop or receive confidential, restricted or unpublished information involving trade secrets, customer-related information, vendor-related information, copyrights, lists, data and other information, strategic planning or operating data, 8 computer programs, financial, pricing, operating or training data or other confidential business techniques, processes, methods or information which is not generally known to the public (collectively referred to as "proprietary information"). He will receive or have access to "proprietary information" which was obtained and developed through the investment of substantial amounts of money, time and effort by the Company. He acknowledges and agrees that disclosure of this proprietary information or its use for the benefit of any other person or entity would be injurious to the Company. He also acknowledges and agrees that unless he agrees to maintain the confidentiality of such "proprietary information" and to limit its use solely to the Company, he would not have been granted employment or, if already employed, his employment would cease immediately. Regardless of the cessation of his employment for any reason, the Employee's obligation to continue to maintain the confidentiality of the "propriety information" shall continue for a period of one (1) year following such cessation of employment. The Employee agrees to deliver to the Company, at its request, or in any event, upon cessation of Employee's employment with the Company (for whatever reason and at whatever time) (a) all memoranda, notes, records, files or other documentation, whether made or compiled by the Employee alone or in conjunction with others (regardless of whether such persons are employed by the Company); (b) all "proprietary information" and other information of the Company which is in the Employee's control or possession; and (c) copies of such information, as well as other corporate property. Regardless of cessation of the Employee's employment by the Company, and without any fee, the Employee will assist the Company in protecting all rights the Company may have to such "proprietary information." The Employee recognizes that, as a direct consequence of the materials, information and training provided to him by the Company, the access he is granted to "proprietary information" and the opportunities that he will have while employed by the Company to cultivate the loyalty and goodwill of the Company's customers, suppliers, vendors and other persons, it is important that the Employee refrain from engaging in activities which could result in damage to the Company's business. The Employee further recognizes that the Company has invested considerable time and money to train its employees in the services provided by the Company and to develop the special 9 skills required to perform such services. Therefore, the Employee will not, during the term of his employment with the Company and for a period of one (1) year immediately thereafter, solicit, entice, hire or otherwise seek to persuade, either directly or through any other entity, any officer, employee, consultant or agent of the Company or its subsidiaries, to discontinue such relationship for any reason. During such period, the Employee will not solicit business with any customers of the Company or its subsidiaries, nor will he seek to entice or persuade any sources of referral, vendors or other entities, who are then doing business with the Company or its subsidiaries to reduce, discontinue or curtail any services provided to the Company or its subsidiaries in any respect. To avoid the use of "proprietary information", the Employee agrees to refrain from engaging in competing employment either directly or indirectly on his own behalf or as an agent, consultant or employee of any partnership, corporation or other entity, in those areas of Latin America and the United States where the Employee had been responsible for developing new business on behalf of the Company and its subsidiaries for a period of one (1) year after his employment ceases (regardless of the reason for cessation of such employment). The Employee recognizes and agrees that ascertaining damages in the event of his breach or violation of any covenant or undertaking contained in this Agreement would be difficult, if not impossible, and further recognizes that the various rights and duties created in this Agreement are essential for the operation of the Company's business. Consequently, irreparable injury would result from any violation of this Agreement by the Employee. Since it would be difficult, if not impossible, to compensate fully the Company by monetary damages in the event of the Employee's breach (although the Company retains the right to commence a civil action seeking monetary damages), the Employee agrees that the Company, in addition to and without limiting any other remedy or right it may have, shall have the immediate right to obtain a preliminary, and subsequently, a final injunction against the Employee, to be issued by a court of competent jurisdiction, enjoining the Employee from engaging in any breach or violation of this Agreement. An injunction shall be issued without posting a bond that otherwise might be required. If an injunction is issued or if monetary damages are awarded against the Employee, he will reimburse the Company for the legal fees and court costs incurred in obtaining such relief (including all appeals and other proceedings). 10 12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of: (a) Any successors or assigns of the Company, whether by way of a merger or consolidation, or liquidation of the Company, or by way of the Company selling all or substantially all of the assets of the Company to a successor entity; and (b) The Employee's estate, his executors, administrators, heirs and beneficiaries. 13. Notices. Any notice or other communication required under this Agreement shall be in writing, shall be deemed to have been given and received when delivered in person, or, if mailed, shall be deemed to have been given when deposited in the United States mail, first class, registered or certified, return receipt requested, with proper postage prepaid, and shall be deemed to have been received on the third business day thereafter, and shall be addressed as follows: If to the Company, addressed to: Ogden Services Corporation Two Pennsylvania Plaza New York, New York 10121 Attention: President and Chief Executive Officer With a copy to its: General Counsel If to the Employee, addressed to: Rodrigo Arboleda 611 North Mashya Drive Key Biscayne, Florida 33149 or such other address as to which any party hereto may have notified the other in writing. 14. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, without regard to its conflict or choice of laws provisions to preserve the parties' intent, and the enforceability of this Agreement. 11 15. Entire Agreement. This Agreement contains the entire arrangement or understanding between the Employee and the Company relating to the employment of the Employee by the Company. No provision of the Agreement may be modified or amended except by any instrument in writing by or for both parties hereto. All references to paragraphs refer to paragraphs of this Agreement. 16. Waiver. Failure of either party hereto to insist upon strict compliance by the other party with any term, covenant or condition hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment or failure to insist upon strict compliance of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. 17. Assignment by Employee. The rights and benefits of the Employee under this Agreement are personal and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; provided, however, that nothing in this Paragraph shall preclude the Employee from designating a beneficiary or beneficiaries to receive any benefit payable on his death. 18. Severability. If for any reason any provision of this Agreement shall be held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and all other provisions shall to the full extent consistent with law continue in full force and effect. If any such provision shall be held invalid in part, such invalidity shall in no way affect the remaining portion of such provision not held so invalid, and the remaining portion of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 12 19. Headings. The headings of paragraphs are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. OGDEN SERVICES CORPORATION Dated: 3/3, 1997 By /s/ R. Richard Ablon ----------------------------- President and Chief Executive Officer Dated: Feb. 18, 1997 By /s/ Rodrigo Arboleda ----------------------- Rodrigo Arboleda, Employee EX-10.8(K) 5 EMPLOYMENT AGREEMENT CONFIDENTIAL AND LEGALLY PRIVILEGED EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 1st day of June, 1990, by and between OGDEN PROJECTS, INC., a Delaware corporation maintaining its principal office at 40 Lane Road, Fairfield, New Jersey (the "Company") and Bruce W. Stone, now residing at 53 Northway, Bronxville, New York (the "Employee"). WITNESSETH THAT: WHEREAS, the Employee is serving as First Executive Vice President and Managing Director Project Implementation, and the Company desires to ensure that the Employee will continue to be available to provide services in a similar capacity in the future, which services are significant to the Company's long-range prospects and the long-range prospects of the Company's subsidiaries (the Company and its subsidiaries are hereinafter referred to as the "OPI Group") WHEREAS, to induce the Employee to provide such services, the Company is offering to provide the Employee with the compensation, benefits and security provided for in this Agreement. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. Employment/Capacity/Term. The Company agrees to and does hereby continue to employ the Employee, and the Employee agrees to and does hereby continue in the employ of the Company upon the terms and conditions set forth in this Agreement. Such employment shall be in an executive capacity as First Executive Vice president and Managing Director -Project Implementation. Such employment shall commence on January 1, 1991 and shall continue through December 31, 1993, and from year to year thereafter subject to the right of the Employee or the company to terminate such employment as of December 31, 1993, or any subsequent December 31, by written notice given to the other party at least sixty (60) days prior to such termination date stating an intention to so terminate such employment. Termination by either party, in accordance with the provisions of the preceding sentence, shall not require a statement of the reason or cause for such termination and shall not be deemed a breach or violation of this Agreement by the party giving such notice. As used in this Agreement, the phrase "term of this Agreement" shall be deemed to include the period subsequent to the date hereof and prior to termination of this Agreement; however, such phrase shall not be construed as limiting the enforceability by either -2- party of any rights which survive termination of this Agreement. 2. Time and Effort/Absences. During the term of this Agreement, the Employee shall devote his entire time and attention during normal business hours to the business of the Company and the OPI Group, subject to the supervision of the Board of Directors of the Company, and he shall not engage in any other business activity whether or not such business activity is pursued for gain, profit, or other pecuniary advantage, but this restriction shall not be construed to restrict the Employee (i) from performing services as a member of the Board of Directors, Board of Trustees or the like of any non-profit entity for which the Employee receives no compensation, provided that, such services do not unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him under this Agreement, and (ii) from investing his assets in such form or manner as will not require any services on the part of the Employee in the operation of the business of the entity in which such investments are made. The Employee shall be excused from rendering his services during reasonable vacation periods and during other reasonable temporary absences as authorized from time to time by the Board of Directors of the Company. At the date hereof, the principal office of the Company is located in Fairfield, New Jersey, considered to be a New York suburb and part of the metropolitan New York area. -3- It is understood that the Employee will not be required to relocate from the metropolitan New York area to discharge his responsibilities under this Agreement. 3. corporate Offices. If elected, the Employee will serve, without additional compensation, as an officer and director (or in either capacity) of the Company and the OPI Group. 4. Salary/Bonus/Other Benefits. In consideration of the services and duties to be rendered and performed by the Employee during the term of this Agreement, the company agrees to pay and provide for the Employee the compensation and benefits described below: (a) An annual salary, payable in equal monthly or bi-weekly installments, in the amount of One Hundred Forty-Four Thousand and Two Hundred Dollars ($144,200) or in such greater amount as may from time to time be fixed by the Board of Directors of the Company. (b) An annual incentive bonus in such amount as may from time to time be fixed by the Board of Directors of the Company, provided that in determining the annual incentive bonus the Board of Directors shall utilize standards which are reasonably applied to the Employee and other executives of the company who furnish services of comparable significance, on a non-discriminatory basis. (c) Other Benefits. It is intended that the Company shall continue to provide the Employee with benefits -4- at least as favorable as benefits provided on behalf of other executives of the Company and the OPI Group who furnish services of comparable significance, as they may exist from time to time. Such benefit plans presently include Group Life Insurance, Group Health Insurance, Automobile Allowance, Pension and Profit Sharing Plans. Except as otherwise provided herein, any such participation shall be in accordance with the provisions of such plans and nothing contained in this Agreement is intended to or shall be deemed to affect adversely any of the Employee's rights as a participant under any such plan. Nothing herein shall prevent the Company from modifying or discontinuing any benefit plan on a consistent and non-discriminatory basis applicable to all such executives. 5. Expense. The Employee shall be reimbursed for out-of-pocket expenses incurred from time to time on behalf of the company and the OPI Group or in the performance of his duties under this Agreement, upon the presentation of such supporting documents and forms as the company shall reasonably request. 6. Disability/Disability Benefit. In the event that the Employee is incapable because of physical or mental illness of rendering services of the character contemplated hereby, for a period of six (6) consecutive months, the Board of Directors of the Company may determine that the Employee -5- has become disabled. In the event of such a determination of disability, the Company shall have the continuing right and option while such disability continues to terminate this Agreement by notice in writing to the Employee, effective thirty (30) days after such notice of termination is so given, unless, within such thirty (30) day period, the Employee resumes rendering full-time services of the character contemplated hereby. The incapacity due to physical or mental illness to render the services of the character contemplated hereby, shall not constitute a breach of this Agreement by the Employee. If this Agreement is terminated by the Company as a result of a determination of disability, as aforesaid, the company shall be obligated to continue the salary and benefits of the Employee as provided in paragraph 4 for a period equal to the greater of (a) twelve (12) months, or (b) such longer period as may be determined by the Board of Directors of the Company, in each case reduced by any disability insurance benefits provided for the benefit of the Employee at the expense of the Company. 7. Death/Death Benefit. In the event of the death of the Employee during the term of this Agreement, this Agreement shall terminate and the Employee's salary shall continue to be paid to his designated beneficiary or, if none, to his personal representative, through the last day of the -6- month in which such death occurs. In addition, the Employee, his personal representative(s) and/or his beneficiaries will be entitled to such death benefits as are provided to Employee under paragraph 4 hereof. 8. Company Stock Option plan. The Board of Directors of the Company has awarded the Employee non-qualified stock options to purchase Thirty-Five Thousand (35,000) shares of the Company Common Stock under the Company's Employees' Stock option Plan (the "Employees' Plan"). If the employment of the Employee terminates under circumstances entitling him to a Severance Payment (as defined in paragraph 9.), he shall thereupon be entitled to exercise any an all options granted to him under the Employees' Plan to the extent permitted pursuant to the terms and conditions of the Employees' Plan. 9. Severance Payment. If the Company gives notice to terminate in accordance with paragraph 1 or if the employment of the Employee is terminated at any time (i) by the Employee for Good Reason (as defined in paragraph 10), or (ii) by the Company for any reason other than for Cause (as hereinafter defined), the Company will be obligated to pay to the Employee in cash a severance payment equal to the product of (i) and (ii); where (i) shall equal the sum of (A) the Employee's annual salary at the time of such termination, and (b) the Employee's annual incentive bonus during the twelve (12) month period ending with the close of the month in which such termination of employment occurs (the "Date of Termination") -7- but not less than the incentive bonus awarded to the Employee in December 1989, which was Seventy Thousand and 00/100 Dollars ($70,000), divided by twelve (12); and where (ii) shall be thirty-six (36). Termination of the Employee's employment on account of his disability, death or retirement (as hereinafter defined) will not be considered a termination of the Employee's employment by the Company and will not require the Company to pay and provide any Severance Payment. No Severance payment will be required if the employment of the Employee is terminated by the Company for Cause (as hereinafter defined) or by the Employee (other than for Good Reason as defined in paragraph 10.) or if the Employee gives notice to terminate in accordance with paragraph 1. The Severance payment provided herein is provided in order to reinforce and encourage the continued loyalty, attention, and dedication of the Employee to the Company's business and affairs without the concerns which normally arise from the possibility of a loss of employment security. As used herein, the terms "Retirement" and "Cause11 shall have the following meanings, respectively: (a) Retirement. Termination of the Employee's employment on account of "Retirement" shall mean termination on or after the Employee's normal retirement date in accordance with the terms of the Company's pension plan (or any successor or substitute plan or plans of the Company or of any subsidiary of the Company under which the Employee may be a participant); and -8- (b) Cause. Termination by the Company of the Employee's employment for "Cause" shall mean termination as a result of (i) the willful and continued failure by the Employee to devote the time, attention and effort necessary to perform substantially the services contemplated by this Agreement in a manner consistent with the Employee's past performance (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by a member or representative of the Board of Directors of the Company which specifically identifies the manner in which it is alleged that the Employee has not substantially performed such services, or (ii) the willful engaging by the Employee in gross misconduct which is materially and demonstrably injurious to the Company; provided that, no act, or failure to act, on the Employee's part shall be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that such action or omission was in, or not opposed to, the best interests of the Company. It is also expressly understood that the Employee's attention to or engagement in matters not directly related to the business of the Company shall not provide a basis for termination for Cause if such attention or engagement is authorized by the terms of this Agreement or has otherwise been approved by the Board of Directors of the Company. Anything in this Agreement to the contrary notwithstanding the Employee's employment may -9- not be terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (after reasonable notice to the Employee and an opportunity for the Employee, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Employee was guilty of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and specifying the particulars thereof in detail. Except as otherwise provided in paragraphs 1 and 6, no purported termination by the Company of the Employee's employment which is not justified as a termination of the Employee's employment for Cause shall be effective. 10. Termination by the Employee for Good Reason. The termination by the Employee of his employment for "Good Reason" shall be deemed a justifiable termination of his employment and shall excuse the Employee from the obligation to render services as provided in Paragraph 2 hereof. Upon such termination, the Employee shall be entitled to the severance Payment in accordance with the provisions of Paragraph 9. hereof. As used herein, the phrase "Good Reason" shall mean: (a) a change in the Employee's status, title or position(s) as an officer of the Company in the executive capacity set forth in paragraph 1. hereof, which in his reasonable judgment, does not represent a promotion from or -10- enhancement of his status, title and position, or the assignment by the Board of Directors of the Company to the Employee of any duties or responsibilities which, in his reasonable judgment, are inconsistent with such status, title or position, or any removal of the Employee from or any failure to reappoint or reelect him to such position, except in connection with a justifiable termination by the Company of the Employee's employment for Cause or on account of disability, the Retirement or death of the Employee or the termination by the Employee of his employment other than for Good Reason; (b) a reduction in the Employee's annual salary or a failure by the Company to pay to the Employee any installment of the annual salary required by paragraph 4. hereof, which failure continues for a period of twenty (20) days after written notice thereof is given by the Employee to the company; (c) the Company's requiring the Employee to be based anywhere other that the Fairfield, New Jersey area, except for required travel on the business of the Company or the OPI Group to an extent substantially consistent with the business travel obligations which the Employee has previously undertaken on behalf of the Company or the OPI Group; (d) the failure by the Company to obtain the assumption of this Agreement in form and substance to the reasonable satisfaction of the Employee by any successor -11- (other than by merger or consolidation for which no separate assumption is necessary) as referred to in paragraph 17.; or (e) any refusal by the company to allow the Employee to attend to matters or engage in activities not directly related to the business of the Company which is permitted by this Agreement or which, prior thereto, was permitted by the Board of Directors of the Company. 11. Notice of Termination. Any purported notice of termination of the Employee's employment (other than a Notice given by either party pursuant to Paragraph 1. hereof) shall be communicated in writing and delivered to the other party as provided in Paragraph 18. (hereinafter a "Notice of Termination"). For purposes of this Agreement a "Notice of Termination" shall mean a notice which specifies the termination provision relied upon by the party giving such notice and shall set forth in detail such facts and circumstances claimed by said party to provide a justified basis for termination of the Employee's employment under the provision(s) so indicated. 12. Trade Secrets. Etc. The Employee acknowledges that prior to his employment by the company he had no knowledge of the formulae, processes or methods of manufacture or other trade secrets of the company. Upon the termination of his employment, the Employee agrees forthwith to deliver up to the company notebooks and other data relating to research or -12- experiments as conducted by him or relating to the products, formulae, processes or methods of manufacture of the Company. 13. Customer List. The Employee recognizes and acknowledges that the written list of the customers of the Company, its subsidiaries and affiliates, as it may exist from time to time, is a valuable, special and unique asset. The Employee agrees that he will not during the term of his employment or within five (5) years thereafter, use for his own personal benefit or disclose the written list of the customers of the Company, its subsidiaries and affiliates or any part thereof, to any person, firm, corporation, association or other entity for any reason or purpose whatsoever. 14. Limited Covenant Not to Compete. If the employment of the Employee hereof is terminated (i) by the Employee pursuant to Paragraph 1. hereof or (ii) by the Company for Cause (as defined in Paragraph 9. above), then in either case (y) the Employee will not, for a period of two (2) years from such termination of employment, within the territorial confines of the United States of America, directly or indirectly, own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business in competition with the business conducted by the Company at the time of such termination, and (z) the Employee will, for a period of two (2) years from such termination refrain from carrying on a business similar to that presently carried on by the Company within the -13- states in which the business of the Company has been carried on, so long as the company carries on like business therein. 15. Injunctive Relief. In the event of a breach or threatened breach by the Employee of the provisions of Paragraphs 12., 13. or 14. during or after the term of this Agreement, the Company shall be entitled to an injunction restraining the Employee from violation of such paragraph. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedy it may have in the event of breach of this Agreement by the Employee. 16. Certain Proprietary Rights. Employee agrees to and hereby does assign to the Company all his right, title and interest in and to all inventions, whether or not patentable, which are made or conceived solely or jointly by him: (a) At any time during the term of his employment by the Company in an executive, managerial, planning, technical research or engineering capacity (including development, manufacturing, systems, applied science and sales), or (b) During the course of or in connection with his duties during the term of this Agreement, or (c) with the use of time or materials of the Company. The Employee agrees to communicate to the Company or its representatives all facts known to him concerning such inventions, to sign all rightful papers, make all rightful oaths and generally to do everything possible to aid the Company in obtaining and enforcing proper patent protection -14- for all such inventions in all countries and in vesting title to such inventions and patents in the Company. For the purpose of this Agreement, the subject matter of any application for patent naming Employee as a sole or joint inventor filed during the course of employment or within one year subsequent to the termination thereof shall be deemed to be an invention made or conceived by him during the course of his employment by the Company and assignable to the company hereunder, unless the Employee establishes by a preponderance of the evidence that such invention was made or conceived by him subsequent to termination of his employment hereunder. At the company's request (during or after the term of this Agreement) and expense, the Employee will promptly execute a specific assignment of title to the company, and perform any other acts reasonably necessary to implement the foregoing assignment. 17. Binding Effect. This Agreement shall be binding upon and inure to the benefit of: (a) The Company, and any successors or assigns of the Company, whether by way of a merger or consolidation, or liquidation of the Company, or by way of the company selling all or substantially all of the assets of the Company, or a division thereof, to a successor entity; however, in the event of the assignment by the Company of this Agreement, the Company shall nevertheless remain liable and obligated to the Employee in accordance with the terms hereof; and -15- (b) The Employee, his estate, his executors, administrators, heirs and beneficiaries. 18. Notice. Any notice or other communication required under this Agreement shall be in writing, shall be deemed to have been given and received when delivered in person, or, if mailed, shall be deemed to have been given when deposited in the United states mail, first class, registered or certified, return receipt requested, with proper postage prepaid, and shall be deemed to have been received on the third business day thereafter, and shall be addressed as follows: If to the company, addressed to: Ogden Projects, Inc. 40 Lane Road Fairfield, New Jersey 07007-2615 Attention: President If to the Employee, addressed to: Bruce W. stone 53 Northway Bronxville, New York or such other address as to which any party hereto may have notified the other in writing. 19. Governing raw. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New Jersey. 20. Entire Agreement. This Agreement contains or refers to the entire arrangement or understanding between the Employee and the Company relating to the employment of the -16- Employee by the Company. No provision of the Agreement may be modified or amended except by an instrument in writing by or for both parties hereto. 21. Waiver. Failure of either party hereto to insist upon strict compliance by the other party with any term, covenant or condition hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment or failure to insist upon strict compliance of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. 22. Assignment by Employee. The rights and benefits of the Employee under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; provided, however, that nothing in this Paragraph 22. shall preclude the Employee from designating a beneficiary or beneficiaries to receive any benefit payable on his death. OGDEN PROJECTS, INC. By /s/ David Sokol -------------------------------- President and Chief Executive Officer /s/ Bruce Stone - --------------------------------- Bruce Stone -17- EX-10.8(L) 6 EMPLOYMENT AGREEMENT CONFIDENTIAL AND LEGALLY PRIVILEGED EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 30th day of October 1996, by and between OGDEN CORPORATION, a Delaware corporation maintaining its principal office at Two Pennsylvania Plaza, New York, New York (the "Company") and Quintin G. Marshall, an individual now residing at 222 Guinea Road, Stamford, CT 06903 (the "Employee"). WITNESSETH THAT: WHEREAS, the Employee is currently serving in an executive capacity as a Vice President-Investor Relations of the Company and the Company desires to ensure that the Employee will continue to be available to provide investor relation services for the Company; WHEREAS, to induce the Employee to provide such services, the Company is offering to provide the Employee with the compensation, benefits and security provided for in this Agreement. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. Employment/Capacity/Term. (a) The Company agrees to and does hereby employ the Employee, and the Employee agrees to and hereby does enter into the employ of the Company upon the terms and conditions set forth in this Agreement. Such employment shall be in an executive capacity as Vice President, Investor Relations of the Company. (b) This Agreement and such employment shall commence on November 1, 1996 and shall continue through October 31, 1999 (the "Initial Term"), and from year to year thereafter (the "Extended Term"), subject to the right of the Employee or the Company to terminate this Agreement and such employment by written notice stating an intention to terminate such employment at least thirty (30) days prior to such termination date stating an intention to terminate such employment (the "Termination Date"). Termination by either party, in accordance with the provisions of the preceding sentence shall not require a statement of the reason or cause for such termination and shall not be deemed a breach or violation of this Agreement by the party giving such notice. As used in this Agreement, the phrase "term of this Agreement" shall be deemed to include the period subsequent to the date hereof and prior to the Termination Date. 2. Time and Effort/Absences. During the "term of this Agreement", the Employee shall devote his or her entire time and attention during normal business hours to the business of the Company subject to the supervision of the Board of Directors of the Company and the President and Chief Executive Officer of the Company, and he or she shall not engage in any other business activity whether or not such business activity is pursued for gain, profit, or other pecuniary advantage, but this restriction shall not be construed to restrict the Employee (i) from performing services as a member of the Board of Directors, Board of Trustees or the like of any non-profit entity for which the Employee receives no compensation, provided that, such services do not unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him or her under this Agreement, and (ii) from investing his or her assets in such form or manner as will not require any services on the part of the Employee in the operation of the business of the entity in which such investments are made. The Employee shall be excused from rendering his or her services during reasonable vacation periods and during other reasonable temporary absences as authorized from time to time by the Board of Directors or the President and Chief Executive Officer of the Company. 3. Corporate Offices. If elected, the Employee will serve, without additional compensation, as an officer and director (or in either capacity) of the Company. 4. Salary/Bonus/Other Benefits. In consideration of the services and duties to be rendered and performed by the Employee during the term of this Agreement, the Company agrees to pay and provide for the Employee the compensation and benefits described below: 2 (a) An annual salary, payable in equal monthly or bi-weekly installments, in the amount of One Hundred Seventy Five Thousand Dollars($175,000) or in such greater amount as may from time to time be fixed by the Board of Directors of the Company. (b) An annual incentive bonus in such amount as may from time to time be fixed by the Board of Directors of the Company. (c) Other Benefits. It is intended that the Company shall continue to provide the Employee with benefits at least as favorable as benefits provided on behalf of other executives of the Company who furnish services of comparable significance, as they may exist from time to time. Such benefits presently include (i) Group Life Insurance, Supplemental Executive Group Life Insurance, Medical and Dental Insurance, Ogden Stock Option Plan, Executive Pension Plan, Ogden Select Plan and Ogden 401(k) Plan and (ii) an automobile allowance in the amount of $700 per month. Provided, however, any such participation shall be in accordance with the provisions of such plans and nothing contained in this Agreement is intended to or shall be deemed to affect adversely any of the Employee's rights as a participant under any such plans. Nothing herein shall prevent the Company from modifying or discontinuing any benefit plan on a consistent and non-discriminatory basis applicable to all such executives. 5. Expenses. The Employee shall be reimbursed for out-of-pocket expenses incurred from time to time on behalf of the company or in the performance of his or her duties under this Agreement, upon the presentation of such supporting documents and forms as the Company shall reasonably request. 6. Medical Leave, Reasonable Accommodation, Termination for Medical Incapacity and Disability Benefits. The Company agrees to provide the Employee with a medical leave of absence not to exceed six (6) months in duration in any twelve (12) month period if the Employee has a medical condition that precludes the Employee from being fully functional in his or her position. The term "fully functional" means able to travel to and from work, be at work, perform satisfactorily all essential 3 functions of the position as identified herein, and otherwise meet the demands of the position and the conditions of employment without significant risk of substantial harm to self or others. Any leave entitlement granted by Federal, state or local law shall run concurrently with the commencement of his or her six month period of leave, whether such leave is taken all at once, intermittently or on a reduced time basis. Nothing herein is intended to diminish any entitlement granted by law. If appropriate, the Company will support the Employee's application for disability benefits. If the Employee is not able to return to the position in a fully functional capacity at the conclusion of six months of medical leave in a twelve month period, this Agreement may be terminated by the Board of Directors of the company at its sole discretion, without prior notice. Unless otherwise prohibited by law, the Employee agrees that the Employee will furnish for review by a medical professional designated by the Company, copies of the Employee's medical records pertaining to any medical condition for which the Employee requests a medical leave of more than twelve (12) weeks in duration, return to work from any such leave, work restrictions, modification or accommodation; or the Employee or the Company believes that the Employee has a medical condition that may be causing or contributing to performance or conduct deficiencies. The Employee also agrees to authorize any health care professional from whom the Employee is receiving diagnostic evaluation, treatment or other medical care to discuss the Employee's medical condition with the medical professional designated by the company to receive and review the Employee's medical records. The Employee further agrees that he or she will undergo, at the sole expense of the company, any medical specialty evaluation if requested to do so by the Company. The Company agrees to provide the Employee, if he or she is otherwise qualified for the position, with medically necessary accommodation if it likely will enable the employee to be fully functional in the position and is reasonable, feasible and will not 4 impose undue hardship on Company operations. The term "medically necessary" means that the accommodation has risk-avoiding or therapeutic value in accordance with scientifically valid medical principles and practice and that the Employee requires similar accommodation when performing comparable non-work functions. The inability of the Employee to be fully functional in his or her position for medical reasons shall not constitute a breach of this Agreement by the Employee. If this Agreement is terminated by the Company because the Employee is not fully functional in his or her position for medical reasons, as provided for in this paragraph, the Company shall be obligated to continue the salary of the Employee as provided in Paragraph 4(a) for a period equal to the greater of (a) twelve (12) months, or (b) such longer period as may be determined by the Board of Directors of the Company, in each case, reduced by any disability insurance benefits provided for the benefit of the Employee at the expense of the Company. 7. Death/Death Benefit. In the event of the death of the Employee during the term of this Agreement, this Agreement shall terminate and the Employee's salary shall continue to be paid to his or her designated beneficiary or, if none, to his or her personal representative, through the last day of the month in which such death occurs. 8. Severance Pay. If the Company gives notice to terminate in accordance with Paragraph 1 or if the employment of the Employee is terminated at any time (i) by the Employee for Good Reason (as defined in Paragraph 9), or (ii) by the Company for any reason other than for Cause (as hereinafter defined), the Company will be obligated to pay to the Employee a cash payment in an amount equal to the product of (i) and (ii); where (i) shall equal the sum of (A) the Employee's annual salary and (B) the Employee's annual incentive bonus during the twelve (12) month period ending with the close of the month in which such termination of employment occurs (the "Date of Termination"), but not less than $70,000, which represents the 1996 target incentive, divided by twelve (12); and where (ii) shall 5 be the lesser of, (x) thirty-six (36), or (y) the number of months until the Employee's normal retirement date (the "Severance Pay"). Termination of the Employee's employment on account of his or her disability, death or retirement (as hereinafter defined) will not be considered a termination of the Employee's employment by the Company and will not require the Company to pay and provide any Severance Pay. No Severance Pay will be required if the employment of the Employee is terminated by the Company for Cause (as hereinafter defined) or by the Employee (other than for Good Reason as defined in Paragraph 9) or if the Employee gives notice to terminate in accordance with Paragraph 1. The Severance Pay provided herein is provided in order to reinforce and encourage the continued loyalty, attention, and dedication of the Employee to the Company's business and affairs without the concerns which normally arise from the possibility of a loss of employment security. As used herein, the terms "Retirement" and "Cause" shall have the following meanings, respectively: (a) Retirement. Termination of the Employee's employment on account of "Retirement" shall mean termination on or after the Employee's normal retirement date in accordance with the terms of the Ogden 401(k) Plan; and (b) Cause. Termination by the Company of the Employee's employment for "Cause" shall mean termination as a result of (i) the willful and continued failure by the Employee to perform substantially the services contemplated by this Agreement (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by a member or representative of the Board of Directors of the Company which specifically identifies the manner in which it is alleged that the Employee has not substantially performed such services, or (ii) the willful engaging by the Employee in gross misconduct which is materially and demonstrably injurious to the Company; provided that, no act, or failure to act, on the Employee's part shall be considered "willful" 6 unless done, or omitted to be done, in bad faith and without reasonable belief that such action or omission was in, or not opposed to, the best interests of the Company. It is also expressly understood that the Employee's attention to or engagement in matters not directly related to the business of the Company shall not provide a basis for termination for Cause if such attention or engagement is authorized by the terms of this Agreement or has otherwise been approved by the Board of Directors of the Company. Anything in this Agreement to the contrary notwithstanding, the Employee's employment may not be terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board at a meeting of the Board called and held for that purpose (after reasonable notice to the Employee and an opportunity for the Employee, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Employee was guilty of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and specifying the particulars thereof in detail. Except as otherwise provided in Paragraphs 1 and 6, no purported termination by the Company of the Employee's employment which is not justified as a termination of the Employee's employment for Cause shall be effective. 9. Termination by the Employee for Good Reason. The termination by the Employee of his employment for "Good Reason" shall be deemed a justifiable termination of his employment and shall excuse the Employee from the obligation to render services as provided in Paragraph 2 hereof. Upon such termination, the Employee shall be entitled to Severance Pay in accordance with the provisions of Paragraph 8 hereof. As used herein, the phrase "Good Reason" shall mean: (a) a change in the Employee's status, title or position(s) as an officer of the Company or the Ogden Group in the executive capacity set forth in this Agreement which, in his or her reasonable judgment, does not represent a promotion from or enhancement of his status, title and position, or the assignment by 7 the Board of Directors of the Company to the Employee of any duties or responsibilities which, in his or her reasonable judgment, are inconsistent with such status, title or position, or any removal of the Employee from or any failure to reappoint or reelect him or her to such position, except in connection with a justifiable termination by the Company of the Employee's employment for Cause or on account of disability, the retirement or death of the Employee or the termination by the Employee of his or her employment other than for Good Reason; (b) a reduction in the Employee's annual salary or a failure by the Company to pay to the Employee any installment of the annual salary required by Paragraph 4, which failure continues for a period of twenty (20) days after written notice thereof is given by the Employee to the Company; (c) the failure by the Company within ten (10) days of notice from the Employee to obtain the assumption of this Agreement in form and substance to the reasonable satisfaction of the Employee by any Successor (other than by merger or consolidation for which no separate assumption is necessary) as referred to in Paragraph 12; or (d) any refusal by the Company to allow the Employee to attend to matters or engage in activities not directly related to the business of the Company which is permitted by this Agreement or which, prior thereto, was permitted by the Board of Directors of the Company. 10. Notice of Termination. Any purported notice of termination of the Employee's employment shall be communicated in writing and delivered to the other party as provided in Paragraph 12, below (hereinafter a "Notice of Termination"). 11. Confidentiality and Limited Covenant Not to Compete. In connection with the performance of the Employee's job duties in a position of trust and confidence, he or she will develop or receive confidential, restricted or unpublished information involving trade secrets, customer-related information, vendor-related information, copyrights, lists, data and other 8 information, strategic planning or operating data, computer programs, financial, pricing, operating or training data or other confidential business techniques, processes, methods or information which is not generally known to the public (collectively referred to as "proprietary information") . He or she will receive or have access to proprietary information which was obtained and developed through the investment of substantial amounts of money, time and effort by the Company. He or she acknowledges and agrees that disclosure of his or her proprietary information or its use for the benefit of any other person or entity would be injurious to the Company. He or she also acknowledges and agrees that unless he or she agrees to maintain the confidentiality of such information and to limit its use solely to the Company, he or she would not have been granted employment, if already employed, his or her employment would cease immediately. Regardless of the cessation of his or her employment for any reason, the Employee's obligation to continue to maintain the confidentiality of the propriety information shall continue. The Employee agrees to deliver to the Company, at its request, or in any event, upon cessation of Employee's employment with the Company (for whatever reason and at whatever time) (a) all memoranda, notes, records, files or other documentation, whether made or compiled by the Employee alone or in conjunction with others (regardless of whether such persons are employed by the Company); (b) all proprietary and other information of the Company which is in Employee's control or possession; and (c) copies of such information, as well as other corporate property. Regardless of cessation of Employee's employment by the Company, and without any fee, the Employee will assist the Company in protecting all rights the Company may have to such proprietary information. The Employee recognizes that, as a direct consequence of the materials, information and training provided to him or her by the Company, the access he or she is granted to proprietary information and the opportunities that he or she will have while employed by the Company to cultivate the loyalty and goodwill of the Company's customers, suppliers, vendors and other persons, it is important 9 that the Employee refrain from engaging in activities which could result in damage to the Company's business. The Employee further recognizes that the Company has invested considerable time and money to train its employees, in the services provided by the Company and to develop the special skills required to perform such services. Therefore, he or she will not, during the term of his or her employment with the Company and for a period of one (1) year immediately thereafter, solidity, entice, hire or otherwise seek to persuade, either directly or through any other entity, any officer, employee, consultant or agent of the Company to discontinue such relationship for any reason. During such period, the Employee will not solicit business with any customers of the Company, nor will he or she seek to entice or persuade any sources of referral, vendors or other entities, who are then doing business with the Company to reduce, discontinue or curtail any services provided to the Company in any respect. To avoid the use of proprietary information, the Employee agrees to refrain from engaging in competing employment either directly or indirectly on his or her own behalf or as an agent, consultant or employee of any partnership, corporation or other entity, in any state where the Company conducts business for a period of six (6) months after his or her employment ceases (regardless of the reason for cessation of such employment). The Employee recognizes and agrees that ascertaining damages in the event of his or her breach or violation of any covenant or undertaking contained in this Agreement would be difficult, if not impossible, and further recognizes that the various rights and duties created in this Agreement are essential for the operation of the Company's business operations. Consequently, irreparable injury would result from any violation of this Agreement by him or her. Since it would be difficult, if not impossible, to compensate fully the Company by monetary damages in the event of the Employee's breach (although the Company retains the right to commence a civil action seeking monetary damages), the Employee agrees that the Company, in addition to and without limiting any other remedy or right it may have, shall have the immediate right 10 to obtain a preliminary, and subsequently, a final injunction against the Employee, to be issued by a court of competent jurisdiction, enjoining the Employee from engaging in any breach or violation of this Agreement. An injunction shall be issued without posting a bond that otherwise might be required. If an injunction is issued or if monetary damages are awarded against the Employee, he or she will reimburse the Company for the legal fees and court costs incurred in obtaining such relief (including all appeals and other proceedings). 12. Binding Effect. This Agreement shall be binding upon and inure to the benefit of: (a) Any successors or assigns of the Company, whether by way of a merger or consolidation, or liquidation of the Company, or by way of the Company selling all or substantially all of the assets of the Company to a successor entity; and (b) The Employee's estate, his or her executors, administrators, heirs and beneficiaries. 13. Notices. Any notice or other communication required under this Agreement shall be in writing, shall be deemed to have been given and received when delivered in person, or, if mailed, shall be deemed to have been given when deposited in the United States mail, first class, registered or certified, return receipt requested, with proper postage prepaid, and shall be deemed to have been received on the third business day thereafter, and shall be addressed as follows: If to the Company, addressed to: Ogden Corporation Two Pennsylvania Plaza New York, New York 10121 Attention: President and Chief Executive Officer With a copy to its: General Counsel 11 If to the Employee, addressed to: Quintin G. Marshall 222 Guinea Road Stamford, CT 06903 or such other address as to which any party hereto may have notified the other in writing. 14. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, without regard to its conflict or choice of laws provisions to preserve the parties' intent, and the enforceability of this Agreement. 15. Entire Agreement. This Agreement contains the entire arrangement or understanding between the Employee and the Company relating to the employment of the Employee by the Company. No provision of the Agreement may be modified or amended except by any instrument in writing by or for both parties hereto. All references to paragraphs refer to paragraphs of this Agreement. 16. Waiver. Failure of either party hereto to insist upon strict compliance by the other party with any term, covenant or condition hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment or failure to insist upon strict compliance of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right or power at any other time or times. 17. Assignment by Employee. The rights and benefits of the Employee under this Agreement are personal to him or her and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; provided, however, that nothing in this Paragraph shall preclude the Employee from designating a beneficiary or beneficiaries to receive any benefit payable on his or her death. 18. Severability. If for any reason any provision of this Agreement shall be held invalid, such invalidity shall not affect any other 12 provision of this Agreement not held so invalid, and all other provisions shall to the full extent consistent with law continue in full force and effect. If any such provision shall be held invalid in part, such invalidity shall in no way affect the remaining portion of such provision not held so invalid, and the remaining portion of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. 19. Headings. The headings of paragraphs are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. OGDEN CORPORATION Dated: By /s/ R. Richard Ablon -------------------------- ------------------------------ President and Chief Executive Officer Dated: Oct. 29, 1996 By /s/ Quintin G. Marshall -------------------------- ------------------------------ Quintin G. Marshall Employee EX-11 7 STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS EXHIBIT 11 OGDEN CORPORATION AND SUBSIDIARIES DETAIL OF COMPUTATION OF EARNINGS APPLICABLE TO COMMON STOCK FOR THE THREE YEARS ENDED DECEMBER 31, 1996
- --------------------------------------------------------------------------------------- 1996 1995 1994 --------------------------------------------- NUMBER OF SHARES USED FOR COMPUTATION OF EARNINGS PER SHARE: Average number of common shares 49,663,000 49,385,000 43,610,000 ================================================ NUMBER OF SHARES USED FOR COMPUTATION OF EARNINGS PER SHARE ASSUMING FULL DILUTION: Average number of common shares 49,663,000 49,385,000 43,610,000 Issuable for options-treasury stock method Shares issuable for conversion of preferred stock 290,000 306,000 329,000 --------------------------------------------- Number of shares used for computation 49,953,000 49,691,000 43,939,000 ================================================ COMPUTATION OF EARNINGS APPLICABLE TO COMMON SHARES: Income from continuing operations before cumulative effect of change in accounting principle $ 64,534,000 $ 7,444,000 $ 67,826,000 Add (deduct): Adjustments arising from minority interest in consolidated subsidiaries 10,000 Dividends on Ogden preferred stock (161,000) (171,000) (184,000) --------------------------------------------- Consolidated income applicable to Ogden common stock $ 64,373,000 $ 7,273,000 $ 67,652,000 ================================================ Cumulative effect of change in accounting principles -- -- ($ 1,520,000) ============ COMPUTATION OF EARNINGS APPLICABLE TO COMMON SHARE ASSUMING FULL DILUTION: Income from continuing operations before cumulative effect of change in accounting principle $ 64,534,000 $ 7,444,000 $ 67,826,000 Add: Adjustments arising from minority interest in consolidated subsidiaries -- -- 10,000 --------------------------------------------- Consolidated income applicable to Ogden common stock $ 64,534,000 $ 7,444,000 $ 67,836,000 ================================================ Cumulative effect of change in accounting principles -- -- ($ 1,520,000) ============
Note: Current options result in less than three percent dilution with the expectation of continuing at less than three percent dilution. SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS -------------------------------- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND CHARGED TO END OF DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Allowances deducted in the balance sheet from the assets to which they apply: Doubtful receivables - current $37,039,000 $10,442,000 $ 370,000(A) $ 9,576,000(B) $38,275,000 Doubtful receivables-noncurrent 6,000,000 6,000,000 Deferred charges on projects 3,670,000 4,968,000 8,638,000 -------------------------------------------------------------------------------- TOTAL $40,709,000 $21,410,000 $ 370,000 $ 9,576,000 $52,913,000 ================================================================================ Allowances not deducted: Estimated cost of disposal of discontinued operations $ 186,000 $ 186,000(C) Estimated cost of disposal of assets 14,993,000 14,130,000(C) $ 863,000 Provision for restructuring 6,110,000 $ 682,000 4,285,000(C) 2,507,000 Reserves relating to tax indemnification and other contingencies in connection with the sale of limited partnership interests in and related tax benefits of a waste-to-energy facility 3,000,000 3,000,000 Other 9,371,000 3,743,000 6,221,000(D) 6,893,000 -------------------------------------------------------------------------------- TOTAL $33,660,000 $ 4,425,000 $24,822,000 $13,263,000 ================================================================================
Notes: - ------ (A) Recoveries of amounts previously written off. (B) Write-offs of receivables considered uncollectible. (C) Payments charged to allowances. (D) Reversal to operating costs of provisions no longer required. SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1995 - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS -------------------------------- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND CHARGED TO END OF DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Allowances deducted in the balance sheet from the assets to which they apply: Doubtful receivables - current $32,783,000 $ 7,204,000 $ 64,000(A) $ 3,012,000(B) $37,039,000 Deferred charges on projects 7,000,000 3,670,000 7,000,000(C) 3,670,000 --------------------------------------------------------------------------------- TOTAL $39,783,000 $10,874,000 $ 64,000 $10,012,000 $40,709,000 ================================================================================= Allowances not deducted: Provision for consolidation of facilities $ 3,400,000 $ 2,850,000(D) 550,000(E) Estimated cost of disposal of discontinued operations 945,000 $ 4,510,000 5,269,000(E) $ 186,000 Estimated cost of disposal of assets 14,993,000 14,993,000 Provision for restructuring 8,200,000 2,090,000(E) 6,110,000 Reserves relating to tax indemnification and other contingencies in connection with the sale of limited partnership interests in and related tax benefits a of waste-to-energy facility 6,000,000 3,000,000(D) 3,000,000 Other 3,604,000 7,267,000 1,500,000(D) 9,371,000 --------------------------------------------------------------------------------- TOTAL $13,949,000 $34,970,000 $15,259,000 $33,660,000 =================================================================================
Notes: - ------ (A) Recoveries of amounts previously written off. (B) Write-offs of receivables considered uncollectible. (C) Write-offs of unsuccessful development costs. (D) Reversal to operating costs of provisions no longer required. (E) Payments charged to allowances. SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1994 - --------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS -------------------------------- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND CHARGED TO END OF DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD - --------------------------------------------------------------------------------------------------------------------------------- Allowances deducted in the balance sheet from the assets to which they apply: Doubtful receivables - current $25,547,000 $ 5,869,000 $ 10,241,000(A) $9,047,000(D) $32,783,000 31,000(B) 142,000(C) Deferred charges on projects 750,000 5,650,000 1,350,000(B) 750,000(E) 7,000,000 ---------------------------------------------------------------------------------- TOTAL $26,297,000 $11,519,000 $ 11,764,000 $9,797,000 $39,783,000 ================================================================================== Allowances not deducted: Provision for consolidation of facilities $ 4,720,000 -- -- $1,320,000(G) $ 3,400,000 Estimated cost of disposal of discontinued operations 1,008,000 -- $ 1,485,000(F) 1,548,000(G) 945,000 Reserves relating to tax indemnification and other contingencies in connection with the sale of limited partnership interests in and related tax benefits of a waste-to-energy facilty -- $ 6,000,000 -- -- 6,000,000 Other 1,477,000 3,500,000 (1,350,000)(B) 23,000(G) 3,604,000 ---------------------------------------------------------------------------------- TOTAL $ 7,205,000 $ 9,500,000 $ 135,000 $2,891,000 $13,949,000 ==================================================================================
Notes: - ------ (A) Reserve for contract billing adjustments. (B) Transfer from other accounts. (C) Recoveries of amounts previously written off. (D) Write-offs of receivables considered uncollectible. (E) Write-offs of unsuccessful development costs. (F) Net proceeds from operations and sale of assets relating to discontinued operations credited to provision. (G) Payments charged to allowances. EX-21 8 SUBSIDIARIES OF OGDEN OGDEN CORPORATION - U.S. SUBSIDIARIES LIST (See Attachment A for foreign subsidiaries list)
PERCENT DOMESTIC COMPANY OWNERSHIP STATE CO. CODE/E.I.N. - ------- --------- ----- --------------- Ogden Corporation ............................................................................... DE ..... 13-5549268 ..Ogden Management Services, Inc. .................................................. 100 ...... DE ..... 13-2918484 .....OFS Equity of Babylon, Inc. ................................................... 100 ...... NY ..... 13-3543094 .....OFS Equity of Huntington, Inc. ................................................ 100 ...... NY ..... 13-3543092 ..Ogden Services Corporation ....................................................... 100 ...... DE ..... 141*/ 13-3058273 .....Ogden Firehole Entertainment Corp ............................................. 100 ...... DE ..... /13-3516164 .......Ogden Asia Pacific Services, Inc. (See Attachment A for subsidiaries) ....... 100 ...... DE ..... 134/13-3793247 .......Ogden Central and South America, Inc. (See Attachment A for subsidiaries).... 100 ...... DE ..... 135/13-3793248 .......Ogden International Europe Inc. (See Attachment A for subsidiaries) ......... 100 ...... DE ..... 164/13-3688536 .......Ogden Entertainment, Inc. ................................................... 100 ...... DE ..... 00l/11-2145117 ..........Doggie Diner, Inc. ....................................................... 100 ...... DE ..... 003/92-1228666 ..........The Metropolitan Entertainment Co., Inc. ................................. 50 ...... NJ ..... 22-1968974 ..........Offshore Food Service, Inc. .............................................. 100 ...... LA ..... 027/72-0535141 .............Gulf Coast Catering Company, Inc. ..................................... 100 ...... LA ..... 028/13-3537164 ..........Ogden American Food Services, Inc. ....................................... 100 ...... OH ..... 008/34-4197320 ..........Ogden Attractions, Inc. .................................................. 100 ...... DE ..... /13-3934857 ..........Ogden Aviation Food Services, Inc. ....................................... 100 ...... DE ..... 080/11-2161743 .............Ogden Aviation Food Services (ALC), Inc. .............................. 100 ...... NY ..... 085/11-1619941 ..........Ogden-Burtco Services, Inc. .............................................. 100 ...... WA ..... 042/92-0022939 .............Alpine Food Products, Inc. ............................................ 100 ...... WA ..... 041/91-0760148 .............Ogden Facility Management of Alaska, Inc. ............................. 100 ...... AK ..... 058/92-0097503 .........Ogden Entertainment of Florida, Inc. ...................................... 100 ...... DF ..... /13-3877904 .........Ogden Entertainment of New York, Inc. ..................................... 100 ...... NY ..... 011/13-3428320 .........Ogden Facility Management Corporation ..................................... 100 ...... NY ..... 098/13-3282969 .........Ogden Facility Management Corporation of Anaheim .......................... 100 ...... CA ..... 060/13-3526194 .........Ogden Facility Management Corporation of Huntington ....................... 100 ...... WV ..... 13-3852104 .........Ogden Facility Management Corporation of Iowa ............................. 100 ...... IA ..... 007/13-3444248 .........Ogden Facility Management Corporation of Pensacola ........................ 100 ...... FL ..... 006/13-3245048 .........Ogden Facility Management Corporation of West Virginia .................... 100 ...... WV ..... 55-0459949 .........Ogden Film and Theatre, Inc. .............................................. 100 ...... DE ..... /13-3934858 .........Ogden Food Service Corporation ............................................ 100 ...... DE ..... 023/23-0404985 .............Ogden Confection Corporation .......................................... 100 ...... DE ..... 039/36-2392940 .........Ogden Food Service Corporation of Indiana ................................. 40 ...... IN ..... 048/13-2723781 .........Ogden Food Service Corporation of Kansas .................................. 100 ...... KS ..... 0032/13-3703705 .........Ogden Food Service Corporation of Milwaukee ............................... 100 ...... WI ..... 063/13-2783130 .........Ogden Food Service Corporation of Texas ................................... 100 ...... TX ..... 092/74-1310443 .........Ogden Food Service Corporation of Wisconsin ............................... 100 ...... WI ..... 056/39-0912345 .........Ogden Leisure, Inc. ....................................................... 100 ...... DE ..... 54-0848368 .............Ogden Fairmount, Inc. ................................................. 100 ...... DE ..... 021/37-0912053 .......Ogden Technology Services Corporation ....................................... 100 ...... DE ..... 54-1267901 ...........Applied Data Technology, Inc. ........................................... 100 ...... CA ..... 33-0297326 ...........InteCAD Corporation ..................................................... 100 ...... MD ..... 52-1314763 ...........Ogden Range Services, Inc. .............................................. 100 ...... DE ..... 169/13-3712961 .............Logistics Operations, Inc. ............................................ 100 ...... VA ..... 164/54-1163284 ...........Ogden Support Services, Inc. ............................................ 100 ...... DE ..... 165*/13-3688521 .......Ogden Allied Maintenance Corporation ........................................ 100 ...... NY ..... 010*/13-5565939 ...........Atlantic Design Company, Inc. ........................................... 100 ...... NY ..... 086*/l3-2629642 .............Lenzar Electro-Optics, Inc. ........................................... 100 ...... DE ..... 175/59-3063752 ...........Ogden Allied Payroll Services, Inc. ..................................... 100 ...... NY ..... 063*/13-6160158 ...........Ogden Cisco, Inc. ....................................................... 100 ...... DE ..... 157*/13-3670141 ...........Ogden Communications, Inc. .............................................. 100 ...... DE ..... 130/13-3793364
Page 1
PERCENT DOMESTIC COMPANY OWNERSHIP STATE CO. CODE/E.I.N. - ------- --------- ----- --------------- Ogden Corporation ..Ogden Services Corporation DE ....Ogden Allied Maintenance Corporation (con't) ................................... 100 ...... NY ...... 010*/13-5565939 .......Ogden Aviation Services, Inc. ............................................... 100 ...... DE ...... 015/13-3846270 .......Ogden Aviation Distributing Corp ............................................ 100 ...... NY ...... 046*/13-l835320 .......Ogden Aviation Fueling Company, Inc. ........................................ 100 ...... DE ...... 0l2*/13-5564521 .......Ogden Aviation Fueling Company of Atlanta, Inc. ............................. 100 ...... GA ...... 129*/13-3054674 .......Ogden Aviation Fueling Company of Houston, Inc. ............................. 100 ...... TX ...... 068*/13-2557861 .......Ogden Aviation Fueling Company of St. Louis, Inc. ........................... 100 ...... DE ...... 025*/13-5665586 .......Ogden Aviation Fueling Company of Texas, Inc. ............................... 100 ...... TX ...... 024*/13-566I328 .......Ogden Aviation Fueling Company of Virginia, Inc. ............................ 100 ...... DE ...... 031*/13-1954027 .......Ogden Aviation Security Services, Inc. ...................................... 100 ...... DE ...... 013/13-3876173 .......Ogden Aviation Service Company of Colorado, Inc. ............................ 100 ...... CO ...... 104*/13-2694899 .......Ogden Aviation Service Company of Hawaii, Inc. .............................. 100 ...... HI ...... 107*/13-2706452 .......Ogden Aviation Service Company of Kansas City, Inc. ......................... 100 ...... MO ...... 118*/13-2942892 .......Ogden Aviation Service Company of New Jersey, Inc. .......................... 100 ...... NJ ...... 003*/13-5565924 .......Ogden Aviation Service Company of New York, Inc. ............................ 100 ...... NY ...... 007*/13-5565925 ..........Ogden Ground Services, Inc. .............................................. 100 ...... DE ...... 146*/23-1707864 .............ARA Sunset Airport Systems, Inc. ...................................... 100 ...... CA ...... 152*/95-2959114 .......Ogden Aviation Service Company of Pennsylvania, Inc. ........................ 100 ...... PA ...... 018*/13-2749962 .......Ogden Aviation Service Company of Texas, Inc. ............................... 100 ...... DE ...... 019*/13-5649342 .......Ogden Aviation Service Company of Washington, Inc. .......................... 100 ...... DE ...... 011*/13-5581082 .......Ogden Aviation Service International Corporation ............................ 100 ...... NY ...... 006*/13-5565926 ..........Ogden Aviation, Inc. ..................................................... 100 ...... DE ...... 177/133634105 ..........Ogden Aviation Security Services of Indiana. Inc. ........................ 100 ...... IN ...... 163*/13-3606125 .......Ogden Aviation Terminal Services, Inc. ...................................... 100 ...... MA ...... 005*/13-5565923 .......Ogden New York Ground Services, Inc. ........................................ 100 ...... DE ...... 13-3889795 .......Ogden New York Services, Inc. ............................................... 100 ...... NY ...... 020/13-5623889 .......Ogden Pipeline Services Corporation ......................................... 100 ...... DE ...... l25*/13-2949046 ..........Ogden Facility Holdings. Inc. ............................................ 100 ...... DE ...... 13-3852102 .......Ogden Facility Services, Inc. ............................................... 100 ...... DE ...... 13-3773192 ..........Ogden Allied Building & Airport Services Inc. ............................ 100 ...... DE ...... 017*/13-56I8372 ..........Ogden Allied Building Service Corporation ................................ 100 ...... DE ...... 121*/13-2928817 ..........Ogden Allied Maintenance Company of Hawaii, Inc. ......................... 100 ...... HI ...... 090*/99-0119711 ..........Ogden Allied Maintenance Corporation of New England ...................... 100 ...... MA ...... 009/04-2453238 ..........Ogden Allied Maintenance Corporation of Pennsylvania ..................... 100 ...... DE ...... 014*/13-5611594 ..........Ogden Allied Maintenance Corporation of Texas ............................ 100 ...... TX ...... 042*/13-1987767 ..........Ogden Allied Service Agency Corporation .................................. 100 ...... DE ...... 0l6*/13-5616071 ..........Ogden Allied Window Cleaning Company, Inc. ............................... 100 ...... NY ...... 008*/13-5565941 ..........Ogden Hawaii Company, Inc. ............................................... 100 ...... HI ...... 062*/99-0086682 ..........Ogden Industrial Services, Inc. .......................................... 100 ...... DE ...... 143*/13-3330336 ..........Ogden Plant Maintenance Company, Inc. .................................... 100 ...... NJ ...... 088*/13-2640359 ..........Ogden Plant Maintenance Company of Missouri .............................. 100 ...... MO ...... 069*/13-2556007 ..........Ogden Plant Maintenance Company of North Carolina ........................ 100 ...... NC ...... 113*/13-2761092 ....Ogden Resource Recovery Support Services, Inc. ................................. 100 ...... DE ...... 149*/13-3560729 .......Ogden Plant Services of New Jersey, Inc. .................................... 100 ...... NJ ...... 176/13-3597547 ....Ogden Water Treatment Support Services, Inc. ................................... 100 ...... DE ...... 199*/13-3807441 ....Ogden Allied Abatement & Decontamination Service, Inc. ......................... 100 ...... NY ...... 144*/13-3429112 ..Ogden Energy Group. Inc. (formerly known as Ogden Projects, Inc.)................. 100 ...... DE ...... 13-3213657
(See Attachment B for Ogden Energy Group, Inc. - U.S. and foreign subsidiaries list) Page 2
PERCENT DOMESTIC COMPANY OWNERSHIP STATE CO. CODE/E.l.N. - ------- --------- ----- --------------- Ogden Corporation ..Ogden Services Corporation DE ....Ogden Financial Services, Inc. ................................................. 100 ...... DE ...... 13-3057250 ......BDC Liquidating Corp ......................................................... 100 ...... DE ...... 13-2757633 .........Bouldin Development Corp. ................................................. 100 ...... CA ...... 94-1695641 .........Ogden Bulk Systems Company, Inc. .......................................... 90 ...... NY ...... 13-2754960 ......BiE Leasing Company .......................................................... 100 ...... DE ...... 47-6031366 ......Greenway Insurance Company of Vermont ........................................ 100 ...... VT ...... 13-3167991 ......International Terminal Operating Co., Inc. ................................... 50 ...... DE ...... ......OFS Equity of Delaware, Inc. ................................................. 100 ...... DE ...... 13-3495890 .........OFS Equity of Alexandria/Arlington, Inc. .................................. 100 ...... VA ...... 13-3495889 .........OFS Equity of Indianapolis, Inc. .......................................... 100 ...... IN ...... 13-3495887 .........OFS Equity of Stanislaus, Inc. ............................................ 100 ...... CA ...... 13-3495880 ......Ogden Allied Financial Services Corporation .................................. 100 ...... DE ...... 13-3179226 .........Ogden Allied Maintenance Securities, Inc. ................................. 100 ...... DE ...... 004*/51-0102045 .............Denver Fuel Facilities Corporation .................................... 100 ...... CO ...... 105*/13-2694896 .............Kansas City International Fueling Facilities Corporation............... 100 ...... MO ...... 080*/13-2604290 .............LaGuardia Fuel Facilities Corporation ................................. 100 ...... NY ...... 100*/13-2660143 .............Lambert Field Fueling Facilities Corporation .......................... 100 ...... DE ...... 057*/13-6116279 .............Love Field Fueling Facilities Corporation ............................. 100 ...... TX ...... 058*/13-6116341 .............Newark Automotive Fuel Facilities Corporation ......................... 100 ...... NJ ...... 114*/13-2806865 .............Philadelphia Fuel Facilities Corporation .............................. 100 ...... PA ...... 097*/13-2671427 ..Rototest Laboratories, Inc. ...................................................... 91 ...... CA ...... 95-1878684
* For payroll/personnel, add 200 to codes of Maintenance companies only. Page 3 ATTACHMENT A OGDEN CORPORATION - FOREIGN SUBSIDIARIES LIST
PERCENT DOMESTIC CO. COMPANY OWNERSHIP COUNTRY CODE - ------- --------- -------- ---- Ogden Corporation ............................................................................... DE/U.S.A. ..Ogden Services Corporation ....................................................... 100 ...... DE/U.S.A........141 .....Ogden Aviation Services Limited ............................................... 100 ...... U.K. ...........186 ........Ogden Aviation Engineering Limited ......................................... 100 ...... U.K. ...........188 ........Ogden Entertainment Services (UK) Ltd. ..................................... 100 ...... U.K. ...........015 ...........Ogden Ice Hockey Limited ................................................ 100 ...... U.K. ........Ogden SkyCare Cargo Limited ................................................ 100 ...... U.K. ...........SkyCare Limited ......................................................... 100 ...... U.K. ...........Air Cargo Enterprises Limited ........................................... 50 ...... U.K. .....Ogden Asia Pacific Services, Inc. ............................................. 100 ...... DE/U.S.A. ........IEA of Japan Company Ltd. .................................................. 50 ...... Japan ........HO/Ogden Investimentos e Transportes, Limitada ............................. 51 ...... Macau ........Ogden Aviation (Hong Kong) Limited ......................................... 100 ...... Hong Kong ........Ogden Aviation Services (NZ) Limited ....................................... 100 ...... New Zealand.....156 ........Ogden International Facilities Corporation (Asia Pacific) Pty Ltd. ......... 100 ...... Australia.......172 ........Ogden International Facilities Corporation (Australia) Pty Ltd. ............ 50 ...... Australia ...........International Facilities Corporation (Cairns) Pty Ltd. .................. 100 ...... Australia ...........International Facilities Corporation (NZ) Pty Ltd. ...................... 100 ...... New Zealand.....156 ...........International Facility Corporation (Newcastle) Ltd. ..................... 100 ...........International Facility Corporation (Hong Kong) Pty Ltd. ................. * ...... Hong Kong ............. * Boscastle Ltd and Coverack Ltd are shareholders due to residency requirements. .....Ogden Central and South America, Inc. ......................................... 100 ...... DE/U.S.A. ........Americana Entertainment N.V. ............................................... 80 ...... Aruba ........Ogden Argentina, S.A. ...................................................... 100 ...... Argentina .........Ogden Aviation Services (Chile) Ltda. ..................................... 99 ...... Chile...........158 ..............(1% held by Ogden Asia Pacific Services Inc.) ...........Aviation Services Leader S.A. ........................................... 80 ...... Chile...........185 ........Ogden Aviation Services Dominicana, S.A .................................... 99 ...... Dominican Rep. ........Ogden Aviation Services (Panama) Corp ...................................... 85 ...... Panama..........171 ...........Ogden Ground Services of Panama Corp. ................................... 75 ...... Panama ........Ogden Aviation Services (Venezuela), S.A ................................... 100 ...... Venezuela.......168 ...........Ogden Ground Services Caracas, C.A. ..................................... 100 ...... Venezuela.......182 ........Ogden do Brazil Participacoes S/C Ltda ..................................... 100 ...... Brazil..........174 ...........Ogden Hellen's International Ltda ....................................... 60 ...... Brazil..........181 ...........Ogden - Servicos de Atendimento Aeroterrestre Ltda. ("SERVAIR") ......... 100 ...... Brazil ...........Ogden Alimentos Comercio e Servicoes Ltda ............................... 100 ...... Brazil ........Ogden Ground Services, Inc. (St. Thomas) ................................... 100 ...... Virgin Islands..155 ........Ogden, S. de R.L. de C.V. .................................................. 66.67..... Mexico ........Ogden Servair Servicios Aeroportuarios, S.A ................................ 50 ...... Mexico..........184 ........Servicios Especializados Para La Industria ...........del Transporte, S.A. de C.V. ("SEITSA") ................................. 94.9...... Mexico..........150 ........Ogden SEITSA Leasing. S.A. de C.V. ......................................... 94.9...... Mexico..........183 ........Ogden Saint Maarten Ground Services NV ..................................... 100 ...... Netherlands..... ........Ogden & Talma Aviation Services of Peru S.A. ............................... 54 ...... Peru............178
Page 4
PERCENT DOMESTIC CO. COMPANY OWNERSHIP COUNTRY CODE - ------- --------- -------- ---- Ogden Corporation ............................................................................... DE/U.S.A. .. Ogden Services Corporation (cont'd) ............................................. 100 ...... DE/U.S.A .......141 ......Ogden International Europe Inc. .............................................. 100 ...... DE/U.S.A .......164 ........ Ogden Atlantic Design (Europe) Limited .................................... 100 ...... Ireland ........ Ogden Holdings B.V. ....................................................... 100 ...... Netherlands ....166 ............Compania General de Sondeos CGS, S.A. .................................. 100 ...... Spain ..........191 ............Czech-Ogden Airhandling s.r.o .......................................... 50 ...... Czech ..........162 ............KCL Ogden Aviation Services (Private) Limit ............................ 0 ...... Pakistan ............Ogden Aviation (Schiphol) B.V. ......................................... 100 ...... Netherlands ....161 .............. Ogden Cargo B.V. .................................................... 100 ...... Netherlands ............Ogden Aviation Spain S.A. .............................................. 100 ...... Spain ..........159 .............. Ogden Aviation Services, S.A. ....................................... 100 ...... Spain (Canary Islands) ............Ogden Entertainment Services Portugal, S.A. ............................ 100 ...... Portugal .......160 ............Ogden Entertainment Services Spain. S.A. ............................... 100 ...... Spain ............Ogden Power Agua y Energia Torte Pacheco, S.A. ......................... 83.3...... Spain ............Parque Isla Magica, S.A. ............................................... 26.48..... Spain ............Sezai Turkes Feyzi Akkaya Ogden Hizmet Ve Isletmecilik A.S. ............ .............. ("STFA Ogden Maintenance and Service Co.") .......................... 50........ Turkey ............Ogden Holdings (Deutschland) GmbH ...................................... 100 ...... Germany ........192 .............. Ogden Allied Services GmbH .......................................... 100 ...... Germany ........138 .............. Ogden Aviation Services GmbH & Co. KG ............................... 100 ...... Germany ........193 .............. Ogden Entertainment (Oberhausen) GmbH ............................... 100 ...... Germany ........194 .............. Ogden Tegel Verwaltungs GmbH (formerly DAN AIR Services GmbH) ....... 100 ...... Germany ........195 ..................Tegel Aircraft Handling GmbH ..................................... 100 ...... Germany ........196 .............. Verwaltung Ogden Aviation Services GmbH ............................. 100 ...... Germany ........197 ......Ogden Entertainment, Inc. .................................................... 100 ...... DE/U.S.A. ........ Ogden Entertainment of Cape Town (Proprietary) Limited .................... 80 ...... Rep. of South Africa ........ Ogden Entertainment Services (Canada) Inc. - ........ Services de Divertissements Ogden (Canada) Inc. ........................... 100 ...... Canada .........012 ............Fortier Associates International, Inc. ................................. 100 ...... Canada ............The Ogden Northmount Evergreen Group Limited ........................... 100 ...... Canada ............Ogden Palladium Services (Canada) Inc. ................................. 100 ...... Canada ........ Ogden Entertainment Services de Mexico, S.A. de C.V. ...................... 100 ...... Mexico ........ Servicios de Alimentos Bebidas Especializados, S.A. de C.V. ............... 100 ...... Mexico ......Ogden Allied Maintenance Corporation ......................................... 100 ...... NY/U.S.A. ........ Allied Aviation Service Company of Newfoundland, Ltd. ..................... 100 ...... Canada .........022 ........ Atlantic Design Company, Inc. ............................................. 100 ...... NY/U.S.A. ............Datacom de Mexico, S.A. de C.V. ........................................ 100 ...... Mexico ........ Ogden Aviation Services, Inc. ............................................. 100 ...... DE/U.S.A. ............Ogden Aviation Service Company of New York, Inc. ....................... 100 ...... NY/U.S.A. .......007 .............. Ogden Ground Services, Inc. ......................................... 100 ...... DE/U.S.A. ......146 ..................Ogden/Air Aruba Ground Services N.V. ............................. 49 ...... Aruba ........ Ogden Facility Holdings, Inc. ............................................. 100 ...... BE/U.S.A. ............Ogden Facility Services, Inc. .......................................... 100 ...... DIE/U.S.A. .............. Ogden Servicios de Seguridad, S.A. .................................. 100 ...... Costa Rica .............. Ogden Agencia de Seguridad, S.A. .................................... 100 ...... Panama ........ Ogden Services of Canada Inc. ............................................. 100 ...... Canada .........054 ............Cafas Inc. ............................................................. 100 ...... Canada .........028 .............. Airconsol Aviation Services Ltd. .................................... Les Services D'Aviation Airconsol - Limitee ......................... 100 ...... Canada .........115 ..................Ogden Ground Services (Canada) Ltd. .............................. 100 ...... Canada .................... Aircraft Services Limited ..................................... 100 ...... Canada .........189 ............Consolidated Aviation Fueling of Toronto Limited ....................... 100 ...... Ontario ........052 ............Consolidated Aviation Services of Alberta Limited ...................... 100 ...... Canada .........119 ............Ogden Allied Security Services Inc. - Services de Securite Ogden Allied Inc. .......................................................... 100 ...... Canada .........190 ............Ogden Allied Services Inc. - Services Ogden Allied Inc. ................ 100 ...... Canada .........029
Page 5 OGDEN ENERGY GROUP. INC. - U.S. AND FOREIGN SUBSIDIARIES LIST
PLACE % OF OF COMPANY OWNERSHIP INCORP. FED. I.D. NOS - ------- --------- ------- ------------- Ogden Energy Group, Inc. ........................................................... 100 ...... Delaware ....... PENDING .. Ogden Projects, Inc. ............................................................ 100 ...... Delaware ....... 13-3213657 ......Ogden Energy, Inc. ........................................................... 100 ...... Delaware ....... 22-3405522 ........ Ogden Philippines Operating, Inc. ......................................... 100 ...... Cayman Islands NA ........ Ogden Power Corporation ................................................... 100 ...... Delaware ....... 54-1732981 ............Geothermal, Inc. ....................................................... 100 ...... Virginia ....... 54-1504703 ............Imperial Power Services, Inc. .......................................... 100 ...... California ..... 95-3677245 ............New Martinsville Hydro-Operations Corporation .......................... 100 ...... West Virginia .. 31-1275468 ............Ogden Brandywine Operations, Inc. ...................................... 100 ...... Delaware ....... 54-1740297 ............Ogden Geothermal Operations, Inc. ...................................... 100 ...... Delaware ....... 54-1607228 ............Ogden Hydro Operations, Inc. ........................................... 100 ...... Tennessee ...... 52-1661862 ............Ogden Oil & Gas, Inc. .................................................. 100 ...... Delaware ....... 54-1734589 ............Ogden Power Equity Corporation ......................................... 100 ...... Delaware ....... 54-1504746 .............. Catalyst New Martinsville Hydroelectric Corporation ................. 100 ...... Delaware ....... 13-3372123 .............. ERC Energy, Inc. .................................................... 100 ...... Delaware ....... 54-1523295 .............. Ogden Heber Field Energy, Inc. ...................................... 100 ...... Delaware ....... 54-1611569 .............. Ogden Hydro Energy, Inc. ............................................ 100 ...... Delaware ....... 54-1606911 ............Ogden Power International Holdings, Inc. ............................... 100 ...... Delaware ....... 54-1742808 ..............Edison Bataan Cogeneration Corporation ............................... 100 ...... Philippine ..... NA ..............Hidro Operaciones Don Pedro S.A. ..................................... 100 ...... Costa Rica ..... NA ..............Island Power Corporation ............................................. 40******.. Philipppine .... NA ..............Ogden Energy India Investments Ltd ................................... 100 ...... Mauritius ...... NA ..............OPI Quezon, Inc. ..................................................... 100 ...... Delaware ....... 13-3670144 ................ Ogden Power Development - Cayman, Inc. ............................ 100 ...... Cayman Islands.. NA (formerly Ogden Quezon Power, Inc.- old dvlpmnt. co.).............. ....................Quezon Power, Inc. (new dvlpmnt co.) ...........................39.01***..... Cayman Islands . NA ..............Ogden Power Development, Inc. ........................................ 100 ...... Delaware ....... 13-3662254 ................ Ogden Power Development of Bolivia, Inc. .......................... 100 ...... Delaware ....... 13-3852464 ................ OPDB, Ltd. ........................................................ 100 ...... Cayman Islands.. NA ................ Ogden Power Development of Peru, Inc. ............................. 100 ...... Delaware ....... PENDING ............Ogden Rosemary Operations, Inc. ........................................ 100 ...... Delaware ....... 22-3433655 ............Ogden SIGC Energy, Inc. ................................................ 100 ...... Delaware ....... 54-1742810 .............. AMOR 14 Corporation ................................................. 100 ...... Delaware ....... 88-0243401 ............Ogden SIGC Energy II, Inc. ............................................. 100 ...... California ..... 54-1742553 ............Ogden SIGC Geothermal Operations, Inc. ................................. 100 ...... California ..... 54-1645557 ........ Ogden Energy Resource Corp ................................................ 100 ...... Delaware ....... 63-0837475 ........ Ogden Environmental and Energy Services Co., Inc. ......................... 100 ...... Delaware ....... 52-1594168 ............Analytical Technologies, Inc. .......................................... 100 ...... Delaware ....... 95-3705905 ..............G A Technical Services, Inc. ......................................... 100 ...... Tennesse ....... 62-1238177 ............Multiple Dynamics Corporation .......................................... 100 ...... Michigan ....... 38-2278155 ............Ogden Environmental and Energy Services Co., Inc. of Ohio .............. 100 ...... Ohio ........... 31-1357919 ............Ogden Environmental and Engineering Services Co., Inc. ................. 100 ...... North Carolina.. 56-0840101 ............Ogden Environmental Federal Systems Co., Inc. .......................... 100 ...... Delaware........ 54-1694984 (formerly Ogden Environmental Services Alaska Co., Inc.) ............Ogden Remediation Services Co., Inc. ................................... 100 ...... Florida ........ 59-2661991
Page 1 OEG foreign subsidiaries are highlighted in bold.
PLACE % OF OF COMPANY OWNERSHIP INCORP. FED. I.D. NOS - ------- --------- ------- ------------- Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) .. Ogden Environmental and Energy Services Co., Inc. (cont.)........................ ......Ogden umwelt und energie systeme GmbH ........................................ 100 ....... Germany........ NA ........ IEAL energie & umwelt consult, GmbH ....................................... 100 ....... Germany........ NA ......Olmec Insurance, Ltd. ........................................................ 100 ....... Bermuda........ NA .. Ogden Waste to Energy, Inc. ..................................................... 100 ....... Delaware....... 13-3871973 ......Ogden Martin Systems, Inc. ................................................... 100 ....... Delaware....... 13-3162629 ........ Ogden Engineering Services, Inc. .......................................... 100 ....... New Jersey..... 13-3284896 ........ Ogden Marion Land Corp .................................................... 100 ....... Oregon......... 13-3369730 ........ Ogden Martin Systems, Ltd. ................................................ 100 ....... Ontario ....... NA ............Ogden Martin Systems of Nova Scotia, Ltd. .............................. 100 ....... Nova Scotia.... NA ........ Ogden Martin Systems of Alexandria/Arlington, Inc. ........................ 100 ....... Virginia ...... 58-1594213 ........ OMS Equity of Alexandria/Arlington, Inc. .................................. 100 ....... Virginia ...... 13-3389573 ........ Ogden Martin Systems of Babylon, Inc. ..................................... 100 ....... New York ...... 13-3246689 ........ Ogden Martin Systems of Bristol, Inc. ..................................... 100 ....... Connecticut.... 13-3246723 ........ Ogden Martin Systems of Clark, Inc. ....................................... 100 ....... Ohio........... 11-3140377 ........ OMSC One, Inc. ............................................................ 100 ....... Delaware....... 13-3690804 ........ OMSC Two, Inc. ............................................................ 100 ....... Delaware....... 13-3690801 ........ OMSC Three, Inc. .......................................................... 100 ....... Delaware....... 13-3690806 ........ OMSC Four, Inc. ........................................................... 100 ....... Delaware....... 13-3690807 ........ Ogden Martin Systems of Fairfax, Inc. ..................................... 100 ....... Virginia....... 13-3410434 ........ Ogden Martin Systems of Haverhill, Inc. ................................... 100 ....... Massachusetts.. 13-3375647 ............Haverhill Power, Inc. .................................................. 100 ....... Massachusetts.. 04-2908628 ............LMI, Inc. .............................................................. 100 ....... Massachusetts.. 04-2943947 ............Ogden Omega Lease, Inc. ................................................ 100 ....... Delaware....... 13-3028120 ........ Ogden Haverhill Properties, Inc. .......................................... 100 ....... Massachusetts.. 13-338~l30 ........ Ogden Martin Systems of Hillsborough, Inc. ................................ 100 ....... Florida........ 13-3228206 ........ Ogden Martin Systems of Huntington, Inc. .................................. 100 ....... New York....... 13-3394817 ........ Ogden Martin Systems of Huntington Resource ............Recovery One Corp ...................................................... 100 ....... Delaware....... 06-1260495 ........ Ogden Martin Systems of Huntington ............Resource Recovery Two Corp. ............................................ 100 ....... Delaware....... 06-1260497 ........ Ogden Martin Systems of Huntington ............Resource Recovery Three Corp. .......................................... 100 ....... Delaware....... 06-1260498 ........ Ogden Martin Systems of Huntington ............Resource Recovery Four Corp. ........................................... 100 ....... Delaware....... 06-1260489 ........ Ogden Martin Systems of Huntington ............Resource Recovery Five Corp. ........................................... 100 ....... Delaware....... 06-1260492 ........ Ogden Martin Systems of Huntington ............Resource Recovery Six Corp. ............................................ 100 ....... Delaware....... 13-3629151
Page 2 OEG foreign subsidiaries are highlighted in bold.
PLACE % OF OF COMPANY OWNERSHIP INCORP. FED. I.D. NOS - ------- --------- ------- ------------- Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) .. Ogden Waste to Energy, Inc. (con't) ......Ogden Martin Systems, Inc. (con't) ........ Ogden Martin Systems of Huntington ............Resource Recovery Seven Corp ........................................... 100 ....... Delaware....... 13-3631168 ........ Ogden Martin Systems of Huntsville, Inc. .................................. 100 ....... Alabama........ 13-3456026 ........ Ogden Martin Systems of Indianapolis, Inc. ................................ 100 ....... Indiana........ 35-1621833 ........ Ogden Martin Systems of Kent, Inc. ........................................ 100 ....... Michigan....... 13-3369158 ........ NRG/Recovery Group, Inc. .................................................. 100 ....... Florida........ 13-3482491 (formerly Ogden Martin Systems of Lake, Inc.) ........ Ogden Martin Systems of Lancaster, Inc. ................................... 100 ....... Pennsylvania... 13-3408215 ........ Ogden Martin Systems of Lawrence, Inc. .................................... 100 ....... Massachusetts.. 13-3714674 ........ Ogden Martin Systems of Lee, Inc. ......................................... 100 ....... Florida........ 13-3557826 ........ Ogden Martin Systems of Long Island, Inc. ................................. 100 ....... Delaware....... 11-3081090 ........ Ogden Martin Systems of Marion, Inc. ...................................... 100 ....... Oregon......... 91-1246805 ........ Ogden Martin Systems of Mercer, Inc. ...................................... 100 ....... New Jersey..... 13-3431734 ........ Ogden Martin Systems of Montgomery, Inc. .................................. 100 ....... Maryland....... 13-3547268 ........ Ogden Martin Systems of Onondaga, Inc. .................................... 100 ....... New York....... 13-3528458 ........ Ogden Martin Systems of Onondaga Two Corp ................................. 100 ....... Delaware....... 13-3690841 ........ Ogden Martin Systems of Onondaga Three Corn ............................... 100 ....... Delaware....... 13-3690843 ........ Ogden Martin Systems of Onondaga Four Corp ................................ 100 ....... Delaware....... 13-3690838 ........ Ogden Martin Systems of Onondaga Five Corp ................................ 100 ....... Delaware....... 13-3684127 ........ OMS Onondaga Operations, Inc. ............................................. 100 ....... Delaware....... 13-3714674 ........ Ogden Martin Systems of Pasco, Inc. ....................................... 100 ....... Florida........ 13-3447536 ........ Ogden Martin Systems of San Bernardino, Inc. .............................. 100 ....... California..... 13-3397879 ........ Ogden Martin Systems of Stanislaus, Inc. .................................. 100 ....... California..... 13-3315310 ........ OMS Equity of Stanislaus, Inc. ............................................ 100 ....... California..... 13-3436232 ........ Ogden Martin Systems of Tulsa, Inc. ....................................... 100 ....... Oklahoma....... 13-3203172 ........ Ogden Martin Systems of Union, Inc. ....................................... 100 ....... New Jersey..... 13-3323867 ......OPI Carmona Limited .......................................................... 100 ....... Cayman Islands. NA ......OPI Carmona One Limited ...................................................... 100 ....... Cayman Islands. NA .. Ogden Projects Americas, Inc. ................................................... 100 ....... Delaware....... 13-3795624 .. Ogden Projects Asia Pacific Limited ............................................. 100* ....... Hong Kong...... NA .. Ogden Projects Holdings, Inc. ................................................... 100 ....... Delaware....... 13-3640508 ......Ogden Projects (U.K.) Limited ................................................ 100 ....... U.K. .......... NA ........ Ogden Projects (Birmingham) Limited ....................................... 100 ....... U.K. .......... NA .. Ogden Projects of Haverhill, Inc. ............................................... 100 ....... Massachusetts.. 13-3522006 .. Ogden Wallingford Associates, Inc. .............................................. 100 ....... Connecticut.... 13-3494166 .. Ogden Waste Treatment Services, Inc. ............................................ 100 ....... Delaware....... 13-3362679 ......Ogden Environmental Services of Houston, Inc. ................................ 100 ....... Texas.......... 13-3586015 ......Stockton Soil Treatment Facility, Inc. ....................................... 100 ....... California..... 13-3610053
Page 3 OEG foreign subsidiaries are highlighted in bold.
PLACE % OF OF COMPANY OWNERSHIP INCORP. FED. I.D. NOS - ------- --------- ------- ------------- Ogden Energy Group Inc. (cont.) ..Ogden Projects Inc. (cont.) .... Ogden Waste Treatment Services USA, Inc. ...................................... 100 ....... Delaware....... PENDING .... Ogden Water Holdings, Inc. .................................................... 100 ....... Delaware....... 13-3779130 ........Ogden Water Systems, Inc. .................................................. 100 ....... Delaware....... 13-3756577 .......... Ogden Yorkshire Acquisition. Inc. ....................................... 55**....... Delaware....... 13-3806665 ..............Cunningham Environmental Support, Inc. ............................... 55***...... New York....... 16-1386872 .......... Ogden Yorkshire Water of Bessemer, Inc. ................................. 100 ....... Delaware....... 22-3405521 .......... Ogden Yorkshire Water of Canada, Ltd .................................... 55 ....... Ontario........ NA .......... Ogden Yorkshire Water of Taunton, Inc. .................................. 100 ....... Massachusetts . 22-3481731 .... Ogden Water Systems of Canada, Ltd ............................................ 100 ....... Ontario........ NA .......... (formerly Ogden Projects of Hamilton, Ltd.) .... OPW Associates, Inc. .......................................................... 100 ....... Connecticut.... 13-3487064 .... OPWH, Inc. .................................................................... 100 ....... Delaware....... 13-3592054 .... Projects Ogden Quebec Inc. .................................................... 100 ....... Quebec............. NA .... RRS Holdings Inc. ............................................................. 100 ....... Delaware....... 13-3697005 ...... Michigan Waste Energy, Inc. ................................................. 100 ....... Delaware....... 06-1331600 ...... Oahu Waste Energy Recovery, Inc. ............................................ 100 ....... California..... 95-2638052 ...... Ogden Projects of Hawaii, Inc. .............................................. 100 ....... Hawaii......... 99-0230284 ...... Resource Recovery Systems of Connecticut, Inc. .............................. 100 ....... Connecticut.... 13-3696927 .... Yorkshire USA, Inc. ........................................................... 100*****.... Delaware....... ????????????
* Ogden Projects Asia Pacific Limited's stock is owned 50% by Ogden Projects, Inc. and 50% by Ogden Power Development, Inc. ** 100% of the stock of both Ogden Yorkshire Acquisition, Inc. and Ogden Yorkshire Water of Canada, Ltd. is actually owned directly by Ogden Yorkshire Water Company, a Delaware general partnership, of which Ogden Water Systems, Inc. and Yorkshire USA, Inc. (a Delaware corporation not owned by Ogden) are both General Partners, with Ogden Water Systems, Inc. owning 55% of the partnership interest and Yorkshire USA, Inc. owning 45% of the partnership interest. *** 100% of the stock of Cunningham Environmental Support, Inc. is owned by Ogden Yorkshire Acquisition, Inc., but Ogden Corporation indirectly owns only a 55% interest in Ogden Yorkshire Acquisition, Inc., and thus, only owns a 55% interest in Cunningham Environmental Support, Inc. ****Quezon Power, Inc (new development company) is owned 39.01%, by Ogden Power Development - Cayman, Inc., 1.30% by PMR Power, Inc. and 59.69% by Quezon Generating Company, Ltd. *****Yorkshire USA, Inc. was acquired by Ogden Projects, Inc. when Yorkshire Water terminated its involvement as a direct participant in the Venture. ******40% of the stock of Island Power Corporation is owned by Ogden Power International Holdings, Inc. and 60% is owned by various stockholders. Page 4 OEG foreign subsidiaries are highlighted in bold. EX-23 9 INDEPENDENT AUDITORS' CONSENT Exhibit 23 INDEPENDENT AUDITORS' CONSENT The Board of Directors and Shareholders of Ogden Corporation: We consent to the incorporation by reference in Registration Statement Nos. 33-36658, 33- 38487, 33-36657, 33-17558, 33-54143 of Ogden Corporation on Forms S-8 of our reports dated February 10, 1997 (which express an unqualified opinion and include an explanatory paragraph relating to the adoption of Statements of Financial Accounting Standards Nos. 112 and 121) appearing or incorporated by reference in this Annual Report on Form 10-K of Ogden Corporation for the year ended December 31, 1996. Deloitte & Touche LLP New York, New York March 24, 1997 EX-27 10 FDS -- FOR YEAR 1996-10-K
5 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 140,824 0 541,699 38,275 56,566 886,172 2,394,188 542,884 3,597,532 541,524 1,958,717 0 48 24,872 526,005 3,597,532 621,830 2,031,081 592,223 1,183,999 0 17,517 28,572 109,641 46,161 64,534 0 0 0 64,534 1.30 1.29
EX-99.1 11 ANNUAL REPORT Financial REVIEW Management's Discussion and Analysis of Consolidated Operations 16 Selected Financial Data 20 Statements of Consolidated Income 21 Consolidated Balance Sheets 22 Statements of Shareholders' Equity 23 Statements of Consolidated Cash Flows 24 Notes to Consolidated Financial Statements 25 Independent Auditors' Report 41 Report of Management 42 Quarterly Results of Operations/ Price Range of Stock and Dividend Data 43 OGDEN CORPORATION/15 Ogden Corporation and Subsidiaries Management's Discussion and Analysis of Consolidated Operations The following discussion and analysis should be read in conjunction with the Corporation's Financial Statements and notes thereto. Operations: Revenues for 1996 were $153,900,000 lower than the comparable period of 1995. Revenues in Facility Services declined $111,000,000, primarily reflecting the sale of its operations outside of New York as of June 30, 1996; Technology Services revenues declined $63,800,000, reflecting the disposition of certain of those businesses sold in late 1995 and 1996, partially offset by increased revenues of its remaining business, Atlantic Design Company (ADC), a contract manufacturing operation; construction revenues declined $66,500,000, primarily due to the completion of the Montgomery County (Maryland) waste-to-energy facility in August 1995 and reduced construction at the Detroit (Michigan) facility; Aviation Services revenues declined $37,300,000, chiefly associated with reduced activity in the air range and pilot training systems company, the sale of the ground handling service operations at John F. Kennedy International Airport in 1996, and a Brazilian aviation unit disposed of in 1995; and Ogden Environmental revenues declined $24,200,000, primarily due to the sale of its laboratory business in January 1996. These revenue decreases were partially offset by increased revenues of $90,600,000 in Entertainment Services, primarily reflecting new contracts, increased customer activity, primarily at sports venues, the start-up of operations in Europe and Argentina, and the acquisition of Florida Leisure, Inc., in 1996; increased Waste-to-Energy Services revenues of $41,300,000, reflecting the full commercial operations of the Onondaga County (New York) and Montgomery County facilities, which commenced operations in March and August 1995, respectively, increased activity and efficiency at other facilities, and the effect of certain legal settlements; and a net gain of $13,200,000 from the disposition of certain businesses in 1996. Consolidated operating income for 1996 was $118,200,000, as compared with $49,369,000 in 1995. Operating income for 1995 was reduced by a net charge of $69,300,000, which reflected the early adoption of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"; restructuring initiatives; and other unusual losses and costs that totaled $82,800,000, which were reduced by a gain of $13,500,000 from the sale of a noncore business. In addition, 1996 operating income reflects an increase of $21,500,000 in Waste-to-Energy Services income (service revenues less operating costs and debt service charges), chiefly associated with the effect of certain legal settlements in 1995 and 1996 and restructuring costs incurred in 1995, partially offset by a facility shutdown for major boiler repairs, decreased energy rates at one facility, and reduced profitability at several facilities; an increase of $19,000,000 in Entertainment Services income, primarily due to new contracts, increased customer activity, a reduction in losses in European operations, the start-up of operations in Argentina, and the acquisition of Florida Leisure, Inc., in 1996; a net gain of $13,200,000 from the disposition of certain noncore services businesses, namely the sale of Facility Services' operations outside of New York and of a unit of the Technology Services group--Ogden Professional Services--and the discontinuance of asbestos abatement operations; and reduced costs of approximately $4,700,000, reflecting initial benefits derived from restructuring initiatives commenced in 1995. Operating income for 1996 also reflects a reduction of $26,900,000 in construction income, reflecting the completion of the Montgomery County facility in August 1995 and reduced activity at the Detroit facility; a reduction of $28,000,000 in operating income of Technology Services associated with businesses that have been disposed of and reduced margins, higher operating costs, adjustments to inventories, and deferred charges at ADC and lower income in its overseas operations; and a reduction of $3,500,000 in Independent Power Services income, primarily due to increased development costs. Energy has three interest rate swap agreements entered into as hedges against interest rate exposure on three series of adjustable-rate project debt that resulted in additional debt service of $700,000 in 1996 and lower debt service of $230,000 in 1995. The effect of these swap agreements on the weighted-average interest rate of project debt was not significant. Interest income for 1996 was relatively comparable with 1995. Interest expense for 1996 was $1,900,000 lower than 1995, chiefly associated with lower borrowings, lower interest rates on variable-rate debt, and a reduction in interest costs on two interest rate swap agreements covering notional amounts of $100,000,000 and $6,300,000, respectively. The first swap agreement expires on December 16, 1998, and was entered into in order to convert Ogden's fixed-rate $100,000,000, 9.25% debentures into variable-rate debt. The second swap agreement expires November 20, 2000, and was entered into in 16/OGDEN CORPORATION December 1995 in order to convert Ogden's $6,300,000 variable-rate debt to a fixed rate. These agreements resulted in additional interest expense of $200,000 in 1996 and $600,000 in 1995. The effect of these swap agreements on the weighted-average interest rate was not significant. Equity in net income of investees and joint ventures for 1996 was $3,300,000 lower, primarily reflecting reduced earnings in Independent Power joint ventures due to reduced prices. The effective income tax rate for 1996 was 42.1%, compared with 84.5% in 1995. This decrease of 42.4% was primarily due to the effect of adopting SFAS No. 121 in 1995, which included the write-down of goodwill, for which the Corporation did not receive tax benefits, as well as higher foreign tax rates and certain nondeductible foreign losses in 1995, which did not recur in 1996. Note 23 to the Consolidated Financial Statements contains a more detailed reconciliation of the variances from the Federal statutory income tax rate. Revenues for 1995 were $80,400,000 higher than the comparable period of 1994, primarily due to increased revenues of $67,300,000 in Aviation Services, reflecting the acquisition in 1995 of an air range and pilot training systems company, four airline catering kitchens in the Canary and Balearic Islands, and in late 1994, an airline cargo operation at Heathrow Airport in the United Kingdom; $56,100,000 in Entertainment Services, chiefly associated with new contracts at Wrigley Field, the Target Center, General Motors Place, and amphitheaters, as well as the start-up of operations in the United Kingdom; $39,100,000 in Technology Services due to increased customer activity and new contracts in the ADC operations as well as the start-up of operations in Ireland; $35,400,000 in Waste-to-Energy Services, primarily due to revenues generated at the Lee County (Florida), Onondaga County, and Montgomery County facilities, which commenced commercial operations in December 1994 and March and August 1995, respectively; $31,100,000 in Independent Power Services, primarily reflecting the acquisition of SIGC in December 1994; and $17,500,000 in Facility Services, reflecting several new contracts and increased customer activity. These increases were partially offset by a decrease of $143,200,000 in construction revenues due primarily to the completion of the Union County (New Jersey) and Lee County facilities in May and December 1994, respectively; reduced construction activity at the Montgomery County facility; and a reduction of $26,100,000 in revenues from the gain on the sale of limited partnership interests and related tax benefits in 1994, which did not recur in 1995. Consolidated operating income for 1995 was $92,400,000 lower than 1994, primarily reflecting the effects of the early adoption of SFAS No. 121; restructuring initiatives; and other unusual losses and costs totaling $82,800,000, which were reduced by a gain of $13,500,000 from the sale of a noncore business, for a net charge of $69,300,000. The charges principally related to the early adoption of SFAS No. 121, amounting to $45,300,000, included anticipated losses on the sale of noncore businesses of $32,800,000; costs of restructuring initiatives of $8,200,000; and an impairment loss of $12,200,000 for the write-down of certain deferred charges relating to a previously awarded contract not expected to be completed, unusual waste-to-energy repair costs, and an adjustment of inventory balances resulting from a physical inventory. Also included in the second quarter of 1995 was a charge of $17,100,000 relating to the write-off of accounts receivable of $10,300,000, disposal of inventory of $3,900,000, and $2,900,000 of costs related to curtailment of operations--all at Ogden Communications, Inc. Of the net charge of $69,300,000, $36,900,000 was applicable to the Services segment and $32,400,000 pertained to Energy. (Also see Notes 21 and 22 to the Consolidated Financial Statements for further information.) Before the charges discussed above, consolidated operating income for 1995 would have been $23,100,000 lower than 1994, primarily reflecting lower income of $26,100,000 due to the gain on the sale of limited partnership interests in and related tax benefits of the Onondaga County facility in 1994, which did not recur in 1995; lower income of $10,500,000 in Entertainment Services, primarily reflecting development costs in Europe, lower income from the Corel Centre, and costs associated with the acquisition of Firehole Entertainment Corp.; lower income of $6,800,000 at Ogden Environmental, primarily due to reduced activity in the environmental laboratory area; and lower income of $3,200,000 in Water/Wastewater Treatment Services, its first year of operations, primarily reflecting continuing development costs. These decreases were partially offset by increased income of $9,000,000 in construction activities, primarily reflecting increased activity on the Detroit facility and an early completion bonus on the Montgomery County facility; increased income of $5,600,000 in Independent OGDEN CORPORATION/17 Power Services, primarily due to the acquisition of SIGC in 1994; and increased income of $2,600,000 in Waste-to-Energy Services income (service revenues less operating costs and debt service charges), primarily reflecting increased income from the full commercial operations of the Lee County, Onondaga County, and Montgomery County facilities, as well as enhanced performance at the Honolulu (Hawaii) facility, offset in part by lower income at the Union County and Hartford (Connecticut) facilities resulting from lower margins in 1995 than 1994 due to a contract renegotiation. Energy has three interest rate swap agreements entered into as hedges against interest rate exposure on three series of adjustable-rate project debt that resulted in lower debt service of $230,000 in 1995 and additional debt service of $1,400,000 in 1994. The effect of these swap agreements on the weighted-average interest rate was not significant. Interest income for 1995 was $2,400,000 higher than 1994, primarily reflecting interest earned on loans made in the second half of 1994. Interest expense was $6,800,000 higher, chiefly associated with higher interest rates on variable-rate debt, higher borrowings, and a net increase of $1,412,000 in interest costs on two interest rate swap agreements covering notional amounts of $100,000,000 each. One swap agreement expired in March 1994. The other swap agreement expires on December 16, 1998. These swap agreements were entered into in order to convert Ogden's fixed-rate $100,000,000, 9.25% debentures into variable-rate debt. During 1995, Ogden paid $603,000 on the remaining swap, while in 1994, Ogden received $809,000 on the two swaps. The effect of these swap agreements on the weighted-average interest rate was not significant. The effective income tax rate for 1995 was 84.5%, compared with 44.4% for 1994. This increase of 40.1% was primarily due to the effect of adopting SFAS No. 121 in 1995, which included the write-down of goodwill, for which the Corporation will not receive tax benefits, as well as higher foreign tax rates and certain nondeductible foreign losses. Note 23 to the Consolidated Financial Statements contains a more detailed reconciliation of the variances from the Federal statutory income tax rate. Capital Investments and Commitments: During 1996, capital investments amounted to $64,191,000, of which $14,303,000, inclusive of restricted funds transferred from funds held in trust, was for Energy (principally Independent Power) facilities and $49,888,000 was for normal replacement and growth in Services' and Energy's operations. At December 31, 1996, capital commitments amounted to $121,900,000, which included $44,500,000 for normal replacement, modernization, and growth in Services' ($35,100,000) and Energy's ($9,400,000) operations. Also included was $74,600,000 for a coal-fired power project in The Philippines reflecting $55,200,000 for a mandatory equity contribution, $5,700,000 for contingent equity contributions, and $13,700,000 for a standby letter of credit in support of debt service reserve requirements. Funding for the mandatory equity contribution has been provided by a credit facility, which must be repaid in December 2001. The Corporation also has a $2,800,000 contingent equity contribution in an entertainment joint venture. In addition, compliance with standards and guidelines under the Clean Air Act Amendments of 1990 may require further capital expenditures of $30,000,000 during the next four years. 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 also are involved in legal proceedings in which damages and other remedies are sought. Management does not expect that these contractual obligations, legal proceedings, or any other contingent obligations incurred in the normal course of business will have a material adverse effect on Ogden's Consolidated Financial Statements. During 1994, a subsidiary of the Corporation entered into a 30-year facility management contract, pursuant to which it agreed to advance funds to a customer, if necessary, to assist refinancing senior secured debt incurred in connection with construction of the facility. Such refinancing requirements are currently scheduled to amount to $75,000,000 at the refinancing date, which is January 1, 2001. It is expected that these arrangements will be renegotiated to provide for an Ogden obligation to purchase such senior secured debt in the amount of $95,000,000 at the end of March 2000 if the debt is not refinanced. In addition, at December 31, 1996, the Corporation has guaranteed indebtedness of $16,100,000 of an affiliate and principal tenant of this customer, which is due in September 1997. 18/OGDEN CORPORATION Ogden continues as guarantor of surety bonds and letters of credit totaling approximately $15,100,000 on behalf of International Terminal Operating Co. Inc. and has guaranteed borrowings of certain customers amounting to approximately $26,700,000 as well as $10,500,000 of borrowings of joint ventures in which Ogden has an equity interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. Liquidity/Cash Flow: Net cash provided by operating activities in 1996 was $103,900,000 higher than 1995, primarily reflecting higher net income of $57,100,000; a decrease of $98,500,000 in receivables chiefly associated with the sale of certain businesses; a decrease in contract acquisition costs of $13,700,000; and reduced Federal income tax payments of $12,100,000. These increases in the net cash provided by operating activities were partially offset by $45,300,000, being the write-down of long-lived assets in 1995, which did not recur in 1996; an increase in inventories of $15,500,000; and $16,700,000 in lower amortization of underwriters' discounts, lower restructuring costs, the effect of certain legal settlements, and other noncash items included in income. Net cash provided by investing activities was $64,600,000 higher, primarily reflecting $72,900,000 of increased proceeds from the sale of certain businesses; $28,600,000 in reduced investments in Energy facilities and other capital expenditures; a decrease of $8,000,000, primarily reflecting reduced equity investments and advances to investee affiliates; and the collection of long-term receivables of $13,400,000. These increases in funds provided by investing activities were partially offset by reduced proceeds of $58,200,000 from the sale of marketable securities. Net cash used in financing activities increased $104,200,000, primarily reflecting increased revolving credit debt repayments of $48,000,000; a reduction of $34,400,000 in new borrowings; and a $5,600,000 decrease in restricted funds used. The increases in borrowings for Energy facilities and the payment of debt include the refinancing of project debt in 1996 in excess of the amounts refinanced in 1995. Exclusive of changes in Energy facility construction activities, the Corporation's various types of contracts are not expected to have a material effect on liquidity. Debt service associated with project debt, which is an explicit component of a client community's obligation under its service agreement, is paid as it is billed and collected. Cash required for investing and financing activities is expected to be satisfied from operating activities; available funds, including short-term investments; proceeds from the sale of noncore businesses; and the Corporation's unused credit facilities to the extent needed. At December 31, 1996, the Corporation had $140,800,000 in cash and cash equivalents and unused revolving credit lines of $217,350,000. The Corporation adopted American Institute of Certified Public Accountants Statement of Position No. 96-1, "Environmental Remediation Liabilities," at December 31, 1996. Management has concluded that it does not have any liability or disclosure requirements as a result of adopting this Statement of Position. OGDEN CORPORATION/19 Ogden Corporation and Subsidiaries Selected Financial Data
- ------------------------------------------------------------------------------------------------------------------------------------ December 31, 1996 1995 1994 1993 1992 - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands of dollars, except per-share amounts) Total Revenues .................................... $2,031,081 $2,184,993 $2,104,547 $2,035,860 $1,766,443 ---------- ---------- ---------- ---------- ---------- Income before cumulative effect of changes in accounting principles ............... 64,534 7,444 67,826 62,130 60,767 Cumulative effect of changes in accounting principles ............................. (1,520) (5,340) (5,186) ---------- ---------- ---------- ---------- ---------- Net income ........................................ 64,534 7,444 66,306 56,790 55,581 ---------- ---------- ---------- ---------- ---------- Earnings per common share before cumulative effect of changes in accounting principles .......................... 1.30 0.15 1.55 1.43 1.41 Cumulative effect of changes in accounting principles ............................. (0.03) (0.12) (0.12) ---------- ---------- ---------- ---------- ---------- Total ............................................. 1.30 0.15 1.52 1.31 1.29 ---------- ---------- ---------- ---------- ---------- Earnings per common share-- assuming full dilution--before cumulative effect of changes in accounting principles ........ 1.29 0.15 1.54 1.42 1.40 ---------- ---------- ---------- ---------- ---------- Cumulative effect of changes in accounting principles ............................. (0.03) (0.12) (0.12) ---------- ---------- ---------- ---------- ---------- Total ............................................. 1.29 0.15 1.51 1.30 1.28 ---------- ---------- ---------- ---------- ---------- Total Assets ...................................... 3,597,532 3,652,671 3,644,886 3,340,729 3,187,826 ---------- ---------- ---------- ---------- ---------- Long-Term Obligations ............................. 1,958,717 2,044,186 2,047,031 1,946,547 2,003,091 ---------- ---------- ---------- ---------- ---------- Shareholders' Equity .............................. 550,925 546,978 596,818 486,267 481,084 ---------- ---------- ---------- ---------- ---------- Shareholders' Equity Per Common Share ............. 11.06 11.04 12.21 11.15 11.11 ---------- ---------- ---------- ---------- ---------- Cash Dividends Declared Per Common Share ...................................... 1.25 1.25 1.25 1.25 1.25 ---------- ---------- ---------- ---------- ----------
Net income in 1995 reflects a net after-tax charge of $48.9 million, or $.99 per share. (See Notes 21 and 22 to the Consolidated Financial Statements.) Net income in 1993 was reduced by $.08 per share, reflecting the retroactive effect of the increased Federal income tax rate that was enacted in August 1993 on the previous years' deferred income tax balances. 20/OGDEN CORPORATION Ogden Corporation and Subsidiaries Statements of Consolidated Income
- ------------------------------------------------------------------------------------------------------------------------------------ For the years ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Service revenues ................................................. $ 1,392,686,000 $ 1,563,748,000 $ 1,408,710,000 Net sales ........................................................ 621,830,000 551,345,000 456,586,000 Construction revenues ............................................ 3,402,000 69,900,000 213,125,000 Net gain on sale of businesses ................................... 13,163,000 Gain on sale of limited partnership interests .................... 26,126,000 --------------- --------------- --------------- Total revenues ................................................... 2,031,081,000 2,184,993,000 2,104,547,000 --------------- --------------- --------------- Operating costs and expenses ..................................... 1,089,265,000 1,318,847,000 1,127,348,000 Costs of goods sold .............................................. 592,223,000 518,457,000 405,190,000 Construction costs ............................................... 2,196,000 41,756,000 194,022,000 Selling, administrative, and general expenses .................... 119,147,000 144,714,000 135,852,000 Debt service charges ............................................. 110,055,000 111,850,000 100,358,000 --------------- --------------- --------------- Total costs and expenses ......................................... 1,912,886,000 2,135,624,000 1,962,770,000 --------------- --------------- --------------- Consolidated operating income .................................... 118,195,000 49,369,000 141,777,000 Equity in net income of investees and joint ventures ............. 3,604,000 6,866,000 7,683,000 Interest income .................................................. 15,142,000 15,126,000 12,709,000 Interest expense ................................................. (28,572,000) (30,491,000) (23,655,000) Other income (deductions)--net ................................... 1,272,000 (344,000) 850,000 --------------- --------------- --------------- Income before income taxes and minority interests ................ 109,641,000 40,526,000 139,364,000 Income taxes ..................................................... (46,161,000) (34,237,000) (61,883,000) Minority interests ............................................... 1,054,000 1,155,000 (9,655,000) --------------- --------------- --------------- Income before cumulative effect of change in accounting principle ............................................. 64,534,000 7,444,000 67,826,000 Cumulative effect of change in accounting principle (net of income taxes of $1,100,000) ............................. (1,520,000) --------------- --------------- --------------- Net income ....................................................... $ 64,534,000 $ 7,444,000 $ 66,306,000 =============== =============== =============== Earnings (Loss) Per Common Share: Income before cumulative effect of change in accounting principle ............................................. $ 1.30 $ .15 $ 1.55 Cumulative effect of change in accounting principle .............. (0.03) --------------- --------------- --------------- Total ............................................................ $ 1.30 $ 0.15 $ 1.52 =============== =============== =============== Earnings (Loss) Per Common Share--Assuming Full Dilution: Income before cumulative effect of change in accounting principle ............................................. $ 1.29 $ 0.15 $ 1.54 Cumulative effect of change in accounting principle .............. (0.03) --------------- --------------- --------------- Total ............................................................ $ 1.29 $ 0.15 $ 1.51 =============== =============== ===============
See Notes to Consolidated Financial Statements OGDEN CORPORATION/21 Ogden Corporation and Subsidiaries Consolidated Balance Sheets
- ------------------------------------------------------------------------------------------------------------------------------------ Assets December 31, 1996 1995 - ------------------------------------------------------------------------------------------------------------------------------------ Current Assets: Cash and cash equivalents............................................................... $ 140,824,000 $ 96,782,000 Marketable securities available for sale................................................ 13,939,000 Restricted funds held in trust.......................................................... 101,326,000 95,238,000 Receivables (less allowances: 1996, $38,275,000 and 1995, $37,039,000).................. 503,424,000 597,644,000 Inventories............................................................................. 56,566,000 36,583,000 Deferred income taxes................................................................... 31,434,000 31,979,000 Other................................................................................... 52,598,000 54,201,000 -------------- -------------- Total current assets.................................................................... 886,172,000 926,366,000 Property, plant, and equipment--net...................................................... 1,851,304,000 1,879,179,000 Restricted funds held in trust.......................................................... 209,485,000 218,551,000 Unbilled service and other receivables (less allowances: 1996, $6,000,000).............. 218,422,000 191,753,000 Unamortized contract acquisition costs.................................................. 138,777,000 148,342,000 Goodwill and other intangible assets.................................................... 81,555,000 87,596,000 Other assets............................................................................ 211,817,000 200,884,000 -------------- -------------- Total Assets............................................................................ $3,597,532,000 $3,652,671,000 ============== ============== - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities: Current Liabilities: Current portion of long-term debt ........................................ $ 3,560,000 $ 4,680,000 Current portion of project debt .......................................... 60,966,000 55,774,000 Dividends payable ........................................................ 15,547,000 15,294,000 Accounts payable ......................................................... 104,978,000 114,648,000 Federal and foreign income taxes payable ................................. 7,648,000 Accrued expenses, etc .................................................... 302,597,000 291,421,000 Deferred income .......................................................... 46,228,000 28,702,000 -------------- -------------- Total current liabilities ................................................ 541,524,000 510,519,000 Long-term debt ........................................................... 309,377,000 344,333,000 Project debt ............................................................. 1,500,690,000 1,551,203,000 Deferred income taxes .................................................... 325,925,000 310,400,000 Other liabilities ........................................................ 212,538,000 230,558,000 Minority interests ....................................................... 7,903,000 10,030,000 Convertible subordinated debentures ...................................... 148,650,000 148,650,000 -------------- -------------- Total Liabilities ........................................................ 3,046,607,000 3,105,693,000 -------------- -------------- Shareholders' Equity: Serial cumulative convertible preferred stock, par value $1.00 per share; authorized, 4,000,000 shares; shares outstanding: 47,689 in 1996 and 49,469 in 1995, net of treasury shares of 29,820 in 1996 and 1995 ............................. 48,000 50,000 Common stock, par value $.50 per share; authorized, 80,000,000 shares; shares outstanding: 49,744,527 in 1996 and 49,467,781 in 1995, net of treasury shares of 3,606,123 and 3,735,123 in 1996 and 1995, respectively .............. 24,872,000 24,734,000 Capital surplus ........................................................................ 202,162,000 197,921,000 Earned surplus ......................................................................... 330,302,000 328,047,000 Cumulative translation adjustment--net ................................................. (5,768,000) (2,657,000) Pension liability adjustment ........................................................... (565,000) (760,000) Net unrealized loss on securities available for sale ................................... (126,000) (357,000) -------------- -------------- Total Shareholders' Equity ............................................................. 550,925,000 546,978,000 -------------- -------------- Total Liabilities and Shareholders' Equity ............................................. $3,597,532,000 $3,652,671,000 ============== ==============
See Notes to Consolidated Financial Statements 22/OGDEN CORPORATION Ogden Corporation and Subsidiaries Statements of Shareholders' Equity
- ---------------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1996 - ---------------------------------------------------------------------------------------------------------------------------- Shares Amounts - ---------------------------------------------------------------------------------------------------------------------------- Serial Cumulative Convertible Preferred Stock, Par Value $1.00 Per Share; Authorized, 4,000,000 Shares: Balance at beginning of year......................................................... 79,289 $ 80,000 Shares converted into common stock................................................... (1,780) (2,000) ---------- --------------- Total................................................................................ 77,509 78,000 Treasury shares...................................................................... (29,820) (30,000) ---------- --------------- Balance at end of year (aggregate involuntary liquidation value--1996, $961,000).................................................... 47,689 48,000 ---------- --------------- Common Stock, Par Value $.50 Per Share; Authorized, 80,000,000 Shares: Balance at beginning of year......................................................... 53,202,904 26,602,000 Acquisition of Ogden Projects, Inc., minority interests.............................. Exercise of stock options, less common stock utilized................................ 137,134 68,000 Shares used for pooling of interests................................................. Conversion of preferred shares....................................................... 10,612 5,000 ---------- --------------- Total................................................................................ 53,350,650 26,675,000 ---------- --------------- Treasury shares at beginning of year................................................. 3,735,123 1,868,000 Exercise of stock options............................................................ (129,000) (65,000) ---------- --------------- Treasury shares at end of year....................................................... 3,606,123 1,803,000 ---------- --------------- Balance at end of year............................................................... 49,744,527 24,872,000 ---------- --------------- - ----------------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1995 - ----------------------------------------------------------------------------------------------------------------------------- Shares Amounts - ----------------------------------------------------------------------------------------------------------------------------- Serial Cumulative Convertible Preferred Stock, Par Value $1.00 Per Share; Authorized, 4,000,000 Shares: Balance at beginning of year......................................................... 83,323 $ 84,000 Shares converted into common stock................................................... (4,034) (4,000) ---------- --------------- Total................................................................................ 79,289 80,000 Treasury shares...................................................................... (29,820) (30,000) ---------- --------------- Balance at end of year (aggregate involuntary liquidation value--1996, $961,000).................................................... 49,469 50,000 ---------- --------------- Common Stock, Par Value $.50 Per Share; Authorized, 80,000,000 Shares: Balance at beginning of year......................................................... 52,641,215 26,320,000 Acquisition of Ogden Projects, Inc., minority interests.............................. Exercise of stock options, less common stock utilized................................ 10,735 6,000 Shares used for pooling of interests................................................. 526,869 264,000 Conversion of preferred shares....................................................... 24,085 12,000 ---------- --------------- Total................................................................................ 53,202,904 26,602,000 ---------- --------------- Treasury shares at beginning of year................................................. 3,864,123 1,932,000 ---------- --------------- Exercise of stock options............................................................ (129,000) (64,000) ---------- --------------- Treasury shares at end of year....................................................... 3,735,123 1,868,000 ---------- --------------- Balance at end of year............................................................... 49,467,781 24,734,000 ---------- --------------- - ----------------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1994 - ----------------------------------------------------------------------------------------------------------------------------- Shares Amounts - ----------------------------------------------------------------------------------------------------------------------------- Serial Cumulative Convertible Preferred Stock, Par Value $1.00 Per Share; Authorized, 4,000,000 Shares: Balance at beginning of year......................................................... 87,017 $ 87,000 Shares converted into common stock................................................... (3,694) (3,000) ---------- --------------- Total................................................................................ 83,323 84,000 Treasury shares...................................................................... (29,820) (30,000) ---------- --------------- Balance at end of year (aggregate involuntary liquidation value--1996, $961,000).................................................... 53,503 54,000 ---------- --------------- Common Stock, Par Value $.50 Per Share; Authorized, 80,000,000 Shares: Balance at beginning of year......................................................... 47,472,245 23,736,000 Acquisition of Ogden Projects, Inc., minority interests.............................. 5,139,939 2,570,000 Exercise of stock options, less common stock utilized................................ 6,977 3,000 Shares used for pooling of interests................................................. Conversion of preferred shares....................................................... 22,054 11,000 ---------- --------------- Total................................................................................ 52,641,215 26,320,000 ---------- --------------- Treasury shares at beginning of year................................................. 3,973,123 1,986,000 Exercise of stock options............................................................ (109,000) (54,000) ---------- --------------- Treasury shares at end of year....................................................... 3,864,123 1,932,000 ---------- --------------- Balance at end of year............................................................... 48,777,092 24,388,000 ---------- --------------- - ------------------------------------------------------------------------------------------------------------------------------------ For the years ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Shares Amounts Shares Amounts Shares Amounts - ------------------------------------------------------------------------------------------------------------------------------------ Capital Surplus: Balance at beginning of year ........................................... 197,921,000 194,496,000 100,223,000 Acquisition of Ogden Projects, Inc., minority interests 91,876,000 Exercise of stock options, less common stock utilized .................. 4,244,000 2,620,000 2,164,000 Arising from pooling of interests ...................................... 813,000 Capital transactions of subsidiary companies--net ...................... 241,000 Conversion of preferred shares ......................................... (3,000) (8,000) (8,000) ------------- ------------- ------------- Balance at end of year ................................................. 202,162,000 197,921,000 194,496,000 ------------- ------------- ------------- Earned Surplus: Balance at beginning of year ........................................... 328,047,000 381,864,000 370,231,000 Net income ............................................................. 64,534,000 7,444,000 66,306,000 ------------- ------------- ------------- Total .................................................................. 392,581,000 389,308,000 436,537,000 ------------- ------------- ------------- Preferred dividends--per share 1996, 1995, and 1994, $3.35 ............. 161,000 171,000 184,000 Common dividends--per share 1996, 1995, and 1994, $1.25 ................ 62,118,000 61,090,000 54,489,000 ------------- ------------- ------------- Total dividends ........................................................ 62,279,000 61,261,000 54,673,000 ------------- ------------- ------------- Balance at end of year ................................................. 330,302,000 328,047,000 381,864,000 ------------- ------------- ------------- Cumulative Translation Adjustment--Net ................................. (5,768,000) (2,657,000) (1,399,000) ------------- ------------- ------------- Pension Liability Adjustment ........................................... (565,000) (760,000) (441,000) ------------- ------------- ------------- Net Unrealized Loss on Securities Available For Sale ............................................................... (126,000) (357,000) (2,144,000) ------------- ------------- ------------- Total Shareholders' Equity ............................................. $ 550,925,000 $ 546,978,000 $ 596,818,000 ============= ============= =============
See Notes to Consolidated Financial Statements OGDEN CORPORATION/23 Ogden Corporation and Subsidiaries Statements of Consolidated Cash Flows
- ------------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------- Cash Flows From Operating Activities: Net income.................................................... $ 64,534,000 $ 7,444,000 $ 66,306,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization................................. 115,263,000 109,604,000 90,545,000 Deferred income taxes......................................... 20,027,000 18,153,000 37,704,000 Cumulative effect of change in accounting principle........... 1,520,000 Long-lived asset write-downs.................................. 45,260,000 Other......................................................... (20,663,000) 11,986,000 38,390,000 Management of Operating Assets and Liabilities: Decrease (Increase) in Assets: Accounts receivable........................................... 54,633,000 (43,852,000) (63,527,000) Inventories................................................... (27,392,000) (11,825,000) (10,878,000) Other assets.................................................. (25,231,000) (56,410,000) (50,717,000) Increase (Decrease) in Liabilities: Accounts payable.............................................. (1,608,000) 8,472,000 3,153,000 Accrued expenses.............................................. (1,689,000) 1,920,000 17,629,000 Deferred income............................................... 10,233,000 3,861,000 1,222,000 Other liabilities............................................. (11,927,000) (22,369,000) 35,218,000 ------------ ------------ ------------ Net cash provided by operating activities..................... 176,180,000 72,244,000 166,565,000 ------------ ------------ ------------ Cash Flows From Investing Activities: Entities purchased, net of cash acquired...................... (16,968,000) (15,474,000) (32,404,000) Proceeds from sale of marketable securities available for sale 13,158,000 71,364,000 63,545,000 Purchase of marketable securities available for sale.......... (56,418,000) Proceeds from sale of businesses.............................. 90,946,000 18,000,000 12,516,000 Proceeds from sale of property, plant, and equipment.......... 6,803,000 5,402,000 2,824,000 Investments in Energy facilities.............................. (14,303,000) (26,827,000) (76,686,000) Other capital expenditures.................................... (49,888,000) (65,999,000) (42,961,000) Decrease (increase) in other receivables...................... 10,553,000 (2,809,000) (21,127,000) Other......................................................... (19,985,000) (27,983,000) 268,000 ------------ ------------ ------------ Net cash provided by (used in) investing activities........... 20,316,000 (44,326,000) (150,443,000) ------------ ------------ ------------ Cash Flows From Financing Activities: Borrowings for Energy facilities.............................. 124,272,000 96,822,000 Decrease in funds held in trust............................... 3,903,000 9,514,000 52,337,000 Other new debt................................................ 6,552,000 40,948,000 31,589,000 Payment of debt............................................... (229,206,000) (139,205,000) (38,455,000) Dividends paid................................................ (62,026,000) (59,604,000) (54,630,000) Proceeds from exercise of stock options....................... 4,377,000 2,691,000 3,524,000 Other......................................................... (289,000) 630,000 (2,043,000) ------------ ------------ ------------ Net cash used in financing activities......................... (152,417,000) (48,204,000) (7,678,000) ------------ ------------ ------------ Effect of foreign currency exchange rate changes on cash and cash equivalents.................................. (37,000) (291,000) (182,000) ------------ ------------ ------------ Net Increase (Decrease) in Cash and Cash Equivalents.......... 44,042,000 (20,577,000) 8,262,000 Cash and Cash Equivalents at Beginning of Year................ 96,782,000 117,359,000 109,097,000 ------------ ------------ ------------ Cash and Cash Equivalents at End of Year...................... $140,824,000 $ 96,782,000 $117,359,000 ============ ============ ============
See Notes to Consolidated Financial Statements 24/OGDEN CORPORATION Ogden Corporation and Subsidiaries Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Policies Principles of Consolidation, Combinations, etc.: The Consolidated Financial Statements include the accounts of Ogden Corporation and its subsidiaries (Ogden). Companies in which Ogden has equity investments of 50% or less are accounted for using the "Equity Method," if appropriate. All intercompany transactions and balances have been eliminated. In 1996, in transactions accounted for as purchases, Ogden acquired the shares of Florida Leisure, Inc., and Edison (Bataan) Cogeneration Corporation (Bataan) for a total cost of $16,968,000. The operations of these companies have been included in the accompanying financial statements from the dates of acquisition. If Ogden had acquired these companies at January 1, 1995, consolidated revenues, net income, and earnings per share would have been $2,033,000,000, $60,565,000, and $1.22 for 1996 and $2,210,000,000, $2,687,000, and $.05 for 1995. In December 1995, Ogden issued 526,869 shares of common stock in exchange for all of the outstanding shares of Firehole Entertainment Corp. (Firehole). This transaction was accounted for as a pooling of interests. The accompanying financial statements for 1994 have not been restated to include the accounts of Firehole, since the amounts did not have a significant effect on prior period reported results or balances. In addition, in other transactions accounted for as purchases in 1995, Ogden acquired the shares of Applied Data Technology, Inc., an air range and pilot training systems company, and four airline catering kitchens in the Canary and Balearic Islands for a total cost of $15,474,000. The operations of these companies have been included in the accompanying financial statements from dates of acquisition. If Ogden had acquired these companies at January 1, 1994, total revenues, net income, and earnings per share would have been $2,185,000,000, $7,346,000, and $.15 for 1995 and $2,157,000,000, $65,255,000, and $1.49 for 1994, respectively. Ogden also acquired a 50% interest in Metropolitan Entertainment Company, Inc.; a 50% interest in IFC, an Australian entertainment company; as well as a 50% interest in SFTA, a Turkish airport handling company. On December 29, 1994, in a transaction accounted for as a purchase, Ogden acquired the minority interest in Ogden Projects, Inc. (OPI), for .84 of an Ogden common share for each OPI share. Ogden issued 5,139,939 shares of common stock valued at $18.375 per share for a total purchase price of $94,446,000. The cost of other 1994 acquisitions was $32,404,000. In connection with Ogden's restructuring plan, the environmental business of Ogden Environmental and Energy Services (OEES) was transferred to the Energy group, formerly Projects, as of January 1, 1996. In the first quarter of 1996, the laboratory business of OEES and W.J. Schafer Associates, a unit of Ogden Technology Services, were sold. The Ogden Professional Services group, another unit of Ogden Technology Services, was sold in April 1996. In June 1996, the Facility Services group's operations outside of New York were sold, and the asbestos abatement operations were discontinued. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents: Cash and cash equivalents include all cash balances and highly liquid investments having original maturities of three months or less. Marketable Securities: Marketable securities are classified as available for sale and recorded at current market value. Net unrealized losses on marketable securities available for sale and noncurrent marketable equity securities are charged to Shareholders' Equity (see Note 2). Contracts and Revenue Recognition: Service revenues primarily include only the fees for cost-plus contracts and the gross billings for fixed-fee and other types of contracts. Both the service revenues and operating expenses exclude reimbursed expenditures of $357,698,000, $450,696,000, and $439,195,000 for the years ended December 31, 1996, 1995, and 1994, respectively. Subsidiaries engaged in governmental contracting recognize revenues from cost-plus-fixed-fee contracts on the basis of direct costs incurred plus indirect expenses and the allocable portion of the fixed fee. Revenues under time and material contracts are recorded at the contracted rates as the labor hours and other direct costs are incurred. Revenues under fixed-price contracts are recognized on the basis of the estimated percentage of completion of services rendered. Service revenues also include the fees earned under contracts to operate and maintain the waste-to-energy facilities and to service the facilities' debt, with additional fees earned based on excess tonnage processed and energy generation. Long-term unbilled service receivables related to waste-to-energy operations are discounted in recognizing the present value for services performed currently. Such unbilled receivables amounted to $123,420,000 and $108,953,000 at December 31, 1996 and 1995, respectively. Subsidiaries engaged in long-term construction contracting record income on the percentage-of-completion method of accounting and recognize income as the work progresses. Anticipated losses on contracts are recognized as soon as they become known. Inventories: Inventories, consisting primarily of raw materials and finished goods, are recorded principally at the lower of first-in, first-out cost or market. Property, Plant, and Equipment: Property, plant, and equipment is stated at cost. For financial reporting purposes, depreciation is provided by the straight-line method over the estimated useful lives of the assets, which range generally from five years for machinery and equipment to 50 years for waste-to-energy facilities. Accelerated depreciation is generally used for Federal income tax purposes. Leasehold improvements are amortized by the straight-line method over the terms of the leases or the estimated useful lives of the improvements as appropriate. Landfills are amortized based on the quantities deposited into each landfill compared to the total estimated capacity of such landfill. Property, plant, and equipment is periodically reviewed to determine recoverability by comparing the carrying value to expected future cash flows. Contract Acquisition Costs: Costs associated with the acquisition of specific contracts are amortized over their respective contract terms. OGDEN CORPORATION/25 Bond Issuance Costs: Costs incurred in connection with the issuance of revenue bonds are amortized over the terms of the respective debt issues. Deferred Charges on Projects: Costs incurred in connection with certain project development efforts are deferred until the award of the related project is determined. Costs on awarded projects are deferred until the commencement of construction, at which time they are either capitalized in property, plant, and equipment for privately owned facilities or charged to construction costs for municipally owned facilities. Costs associated with projects that are no longer under consideration are charged to operating costs. Restricted Funds: Restricted funds represent proceeds from the financing of waste-to-energy facilities and the operations of a waste-to-energy facility and a power plant. Funds are held in trust and released as expenditures are made or upon satisfaction of conditions provided under the respective trust agreements. Interest Rate Swap Agreements: Amounts received or paid relating to swap agreements during the year are credited or charged to interest expense. Goodwill: Goodwill acquired subsequent to 1970 is being amortized by the straight-line method over periods ranging from 15 to 40 years. Goodwill acquired prior to 1970 is not being amortized. Retirement Plans: The Corporation and certain subsidiaries have several retirement plans covering substantially all of their employees. Certain subsidiaries also contribute to multiemployer plans for unionized hourly employees that cover, among other benefits, pensions and postemployment health care. Ogden adopted Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits," as of January 1, 1994. The effect of adopting SFAS No. 112 is shown as a cumulative effect of a change in accounting principle and is reflected as a charge to income of $1,520,000 in 1994. Income Taxes: Ogden files a consolidated Federal income tax return, which includes all eligible United States subsidiary companies. Foreign subsidiaries are taxed according to regulations existing in the countries in which they do business. Provision has not been made for United States income taxes on distributions, which may be received from foreign subsidiaries, that would be substantially offset by foreign tax credits. Investment credits are accounted for by the "flow-through" method, and provisions for income taxes have been reduced by the amount of investment credits earned. Long-Lived Assets: Ogden adopted SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," in the fourth quarter of 1995. The effect of adopting SFAS No. 121 resulted in an after-tax charge of $34,700,000 in 1995 (see Note 21). When indications of impairment are present, the Corporation evaluates the carrying value of its long-lived assets in relation to the operating performance and future undiscounted cash flows of the underlying businesses. Long-lived assets to be disposed of, if any, are evaluated in relation to the net realizable value. Reclassification: The accompanying financial statements have been reclassified to conform with the 1996 presentation. 2. Investments in Marketable Securities Available for Sale At December 31, 1996 and 1995, marketable equity and debt securities available for current operations are classified in the balance sheet as current assets and recorded at current market value. Securities held for noncurrent uses, such as nonqualified pension liabilities and a deferred compensation plan, are classified as long-term assets. Net unrealized losses on marketable equity and debt securities and on noncurrent securities are charged to Shareholders' Equity. Marketable securities at December 31, 1996 and 1995 (expressed in thousands of dollars), include the following:
1996 1995 ----------------------------------------------------------------------------------------------------------------------- Market Market Value Cost Value Cost ----------------------------------------------------------------------------------------------------------------------- Classified as Current Assets: United States government securities................ $ 1,652 $ 1,736 Tax-exempt municipal bonds......................... 6,214 6,374 Mortgage-backed securities......................... 5,560 5,727 Other securities................................... 513 360 ------ ------ Total current...................................... 13,939 14,197 ------ ------ Classified as Noncurrent Assets: Mutual and bond funds.............................. $21,159 $21,410 16,538 17,037 ------- ------- ------ ------ Total.............................................. $21,159 $21,410 $30,477 $31,234 ======= ======= ====== ======
Unrealized holding losses at December 31, 1996 and 1995, amounted to $251,000 and $757,000, respectively. Deferred tax benefits on these losses amounted to $125,000 and $400,000, respectively, resulting in net charges of $126,000 and $357,000, respectively, to Shareholders' Equity. 26/OGDEN CORPORATION Proceeds and realized gains and losses from the sales of securities classified as available for sale for the years ended December 31, 1996, 1995, and 1994, were $13,158,000, $1,455,000, and $304,000; $71,364,000, $235,000, and $1,749,000; and $63,545,000, $256,700, and $476,400, respectively. For the purpose of determining realized gains and losses, the cost of securities sold was based on specific identification. Marketable securities classified as noncurrent assets are included in Other Assets. 3. Unbilled Service and Other Receivables Unbilled service and other receivables (expressed in thousands of dollars) consisted of the following: 1996 1995 ------------------------------------------------------------------- Unbilled service receivables................. $123,420 $108,953 Notes receivable............................. 95,002 82,800 Total........................................ $218,422 $191,753 Long-term unbilled service receivables are for services, which have been performed for municipalities, that are due by contract at a later date and are discounted in recognizing the present value of such services. Current unbilled service receivables, which are included in Receivables, amounted to $35,747,000 and $34,482,000 at December 31, 1996 and 1995, respectively. Long-term notes receivable primarily represent loans made to the owners of entertainment and sports facilities and notes received relating to the sale of noncore businesses. 4. Restricted Funds Held in Trust Funds held by trustees from proceeds received from the financing of waste-to-energy facilities and the operations of a waste-to-energy facility and a power plant are segregated principally for the construction of the facilities; debt service reserves for payment of principal and interest on project debt; lease reserves for lease payments under operating leases; capitalized interest for payment of interest during the construction period; and deposits of revenues received. Such funds are invested principally in United States Treasury bills and notes and United States government agencies securities. Fund balances (expressed in thousands of dollars) were as follows: 1996 1995 --------------------------------------------------------------------------- Current Noncurrent Current Noncurrent --------------------------------------------------------------------------- Construction funds.......... $ 2,888 $ 2,931 Debt service funds.......... 53,960 $142,149 64,706 $144,915 Revenue funds............... 13,289 12,173 Lease reserve funds......... 19,556 14,190 Other funds................. 31,189 47,780 15,428 59,446 -------- -------- ------- -------- Total....................... $101,326 $209,485 $95,238 $218,551 ======== ======== ======= ======== 5. Property, Plant, and Equipment Property, plant, and equipment (expressed in thousands of dollars) consisted of the following: 1996 1995 --------------------------------------------------------------------------- Land........................................ $ 6,654 $ 6,667 Waste-to-energy facilities.................. 1,721,670 1,722,375 Geothermal power plant...................... 105,738 105,738 Buildings and improvements.................. 192,566 175,214 Machinery and equipment..................... 305,723 352,238 Landfills................................... 14,508 10,927 Construction in progress.................... 47,329 26,864 ---------- ---------- Total....................................... 2,394,188 2,400,023 Less accumulated depreciation and amortization 542,884 520,844 ---------- ---------- Property, plant, and equipment--net......... $1,851,304 $1,879,179 ========== ========== OGDEN CORPORATION/27 6. Other Assets Other assets (expressed in thousands of dollars) consisted of the following: 1996 1995 ------------------------------------------------------------------------ Investment in and advances to investees and joint ventures $ 91,980 $ 67,095 Unamortized bond issuance costs................ 35,517 38,473 Spare parts.................................... 17,045 19,544 Noncurrent securities available for sale....... 21,159 16,538 Deferred charges on projects................... 3,819 10,975 Insurance deposits............................. 5,388 5,388 Other.......................................... 36,909 42,871 -------- -------- Total.......................................... $211,817 $200,884 ======== ======== 7. Accrued Expenses, etc. Accrued expenses, etc. (expressed in thousands of dollars), consisted of the following: 1996 1995 ------------------------------------------------------------------- Debt service charges and interest............. $ 32,755 $ 33,886 Payroll....................................... 23,196 25,743 Insurance..................................... 45,415 37,278 Construction costs............................ 9,023 12,740 Operating expenses............................ 49,445 37,847 Municipalities' share of energy revenues...... 25,162 18,154 Retainage payable............................. 2,044 6,641 Lease payments................................ 16,747 12,538 Payroll and other taxes....................... 16,983 16,171 Pension and profit sharing.................... 7,727 9,050 Commissions................................... 7,983 8,477 Other......................................... 66,117 72,896 -------- -------- Total......................................... $302,597 $291,421 ======== ======== 8. Deferred Income Deferred income (expressed in thousands of dollars) comprised the following:
1996 1995 ----------------------------------------------------------------------------------------------------- Current Noncurrent Current Noncurrent ----------------------------------------------------------------------------------------------------- Sale and leaseback arrangements............. $ 1,523 $21,963 $ 1,523 $23,360 Advance billings to municipalities.......... 16,505 11,644 Other....................................... 28,200 15,535 ------- ------- ------- ------- Total....................................... $46,228 $21,963 $28,702 $23,360 ======= ======= ======= =======
The gain from sale and leaseback transactions consummated in 1986 and 1987 was deferred and is being amortized as a reduction of rental expense. Advance billings to various customers are billed one or two months prior to performance of service and are recognized as income in the period the service is provided. Noncurrent deferred income is included in Other Liabilities. 9. Long-Term Debt Long-term debt (expressed in thousands of dollars) consisted of the following: 1996 1995 ----------------------------------------------------------------------- Adjustable-rate revenue bonds due 2014--2024... $124,755 $124,755 9.25% debentures due 2022...................... 100,000 100,000 Variable-rate revolving credit lines........... 48,000 Other long-term debt........................... 84,622 71,578 -------- -------- Total.......................................... $309,377 $344,333 ======== ======== 28/OGDEN CORPORATION The adjustable-rate revenue bonds are adjusted periodically to reflect current market rates for similar issues, generally with an upside cap of 15%. The average rate for this debt was 3.49% and 3.90% in 1996 and 1995, respectively. These bonds were issued under agreements that contain various restrictions, the most significant being the requirements to comply with certain financial ratios and to maintain Shareholders' Equity of at least $400,000,000. At December 31, 1996, Ogden was in compliance with all requirements and had $150,925,000 in excess of the required amount of Shareholders' Equity. At December 31, 1996, Ogden had two long-term interest rate swap agreements covering notional amounts of $100,000,000 and $6,300,000, respectively, which expire December 16, 1998, and November 30, 2000, respectively. These swaps were entered into to convert Ogden's fixed-rate $100,000,000, 9.25% debentures due in 2022 to variable-rate debt and Ogden's $6,300,000 variable-rate debt to a fixed rate. On the $100,000,000 swap, Ogden receives a fixed rate of 5.52% per annum paid on a semi-annual basis and pays a floating rate of three months LIBOR set in arrears on a quarterly basis. On the $6,300,000 swap, Ogden pays a fixed rate of 5.83% paid on a quarterly basis and receives a floating rate of three months LIBOR on a quarterly basis. At December 31, 1996, the three-month LIBOR rate was 5.56%. The counterparties to these interest rate swaps are major financial institutions. Management believes its credit risk associated with nonperformance by the counterparties is not significant. Amounts (received) or paid on swap agreements amounted to $200,000, $600,000, and $(809,000) for 1996, 1995, and 1994, respectively, and were (credited) or charged to interest expense. The effect on Ogden's weighted-average borrowing rate for 1996, 1995, and 1994 was an increase (decrease) of .04%, .14%, and (.20)%, respectively. Other long-term debt includes an obligation for approximately $28,400,000, representing the equity component of a sale and leaseback arrangement relating to a waste-to-energy facility. This arrangement is accounted for as a financing, has an effective interest rate of 5%, and extends through 2017. Additionally, other long-term debt includes $22,450,000 resulting from the sale of limited partnership interests in and related tax benefits of the Onondaga County, New York, waste-to-energy facility, which has been accounted for as a financing for accounting purposes. This obligation has an effective interest rate of 10% and extends through 2015. The remaining other debt of $33,772,000 consists primarily of debt associated with entertainment facilities in the United Kingdom and Argentina, debt acquired in the Firehole acquisition, and debt associated with an investment in a coal-fired power project in The Philippines. These loans bear various interest rates and maturity dates. The maturities on long-term debt (expressed in thousands of dollars) at December 31, 1996, were as follows: 1997.................................................... $ 3,560 1998.................................................... 7,651 1999.................................................... 5,018 2000.................................................... 2,077 2001.................................................... 11,361 Later years............................................. 283,270 -------- Total................................................... 312,937 Less current portion.................................... 3,560 -------- Total long-term debt.................................... $309,377 ======== 10. Project Debt Project debt (expressed in thousands of dollars) consisted of the following:
1996 1995 ----------------------------------------------------------------------------------------------------------------------- Revenue Bonds Issued by and Prime Responsibility of Municipalities: 4.25--8.1% serial revenue bonds due through 2008 .............................. $ 238,908 $ 198,933 5.4--8.5% term revenue bonds due through 2019 ................................. 764,876 845,476 Adjustable-rate revenue bonds due through 2013 ................................ 86,590 86,965 ---------- ---------- Total ......................................................................... 1,090,374 1,131,374 ---------- ---------- Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties: 4.95--8.9% serial revenue bonds due through 2007 .............................. 62,886 71,006 7.25--7.4% term revenue bonds due 1999 through 2011 ........................... 105,859 105,901 Adjustable-rate revenue bonds due through 2011 ................................ 121,723 127,820 ---------- ---------- Total ......................................................................... 290,468 304,727 ---------- ---------- Other project debt ............................................................ 119,848 115,102 ---------- ---------- Total long-term project debt .................................................. $1,500,690 $1,551,203 ========== ==========
Project debt associated with the financing of waste-to-energy facilities is generally arranged by municipalities through the issuance of tax-exempt and taxable revenue bonds. The category, "Revenue Bonds Issued by and Prime Responsibility of Municipalities," includes bonds issued with respect to which debt service is an explicit component of the client community's obligation under the related service agreement. In the event that a municipality is unable to satisfy its payment obligations, the bondholders' recourse with respect to the Corporation is limited to the waste-to-energy facilities and restricted funds pledged to secure such obligations. The category, OGDEN CORPORATION/29 "Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties," includes bonds issued to finance three facilities for which contractual obligations of third parties to deliver waste ensure sufficient revenues to pay debt service, although such debt service is not an explicit component of the third parties' service fee obligations. Payment obligations for the project debt associated with waste-to-energy facilities are nonrecourse to the Corporation subject to construction and operating performance guarantees and commitments. These obligations are secured by the revenues pledged under various indentures and are collateralized principally by a mortgage lien and a security interest in each of the respective waste-to-energy facilities and related assets. At December 31, 1996, such revenue bonds were collateralized by property, plant, and equipment with a net carrying value of $1,509,110,000, credit enhancements of approximately $170,000,000 for which Ogden has certain reimbursement obligations, and substantially all restricted funds (see Note 4). The interest rates on adjustable-rate revenue bonds are adjusted periodically to reflect current market rates for similar issues, generally with an upside cap of 15%. The average rate for such revenue bonds was 4.6% and 5.28% in 1996 and 1995, respectively. Other project debt includes an obligation of a special-purpose limited partnership acquired by two special-purpose subsidiaries of Ogden in December 1994 and represents the lease of a geothermal power plant, which has been accounted for as a financing. This obligation, which amounted to $86,709,000 at December 31, 1996, has an effective interest rate of 5.3% and extends through 2008 with options to renew for additional periods and has a fair market value purchase option at the conclusion of the initial term. Payment obligations under this lease arrangement are limited to assets of the limited partnership and revenues derived from a power purchase agreement with a third party, which are expected to provide sufficient revenues to make rental payments. Such payment obligations are secured by all the assets, revenues, and other benefits derived from the geothermal power plant, which had a net carrying value of approximately $106,811,000 at December 31, 1996. In September 1995, the Corporation borrowed $20,984,000 from a financial institution as part of the refinancing of project debt in the category "Revenue Bonds Issued by and Prime Responsibility of Municipalities." The debt service associated with this loan is included as an explicit component of the client community's obligation under the related service agreement. A portion of the funds was retained in the Corporation's restricted funds and is loaned to the community each month to cover the community's monthly service fees. The Corporation's repayment for the other part of the loan is limited to the extent repayment is received from the client community. This overall obligation totaled $18,839,000 at December 31, 1996, has an effective interest rate of 7.05%, and extends through 2005. In addition, other project debt includes $14,300,000 assumed in August 1996 as part of the acquisition of Bataan. The debt is due to financial institutions and bears interest at an adjustable rate equal to the three-month LIBOR rate plus 3.5% (9.2% at December 31, 1996). The debt extends through 2001 and is secured by all the assets of Bataan, which had a net carrying value of approximately $32,761,000 at December 31, 1996. At December 31, 1996, Ogden had three interest rate swap agreements as hedges against interest rate exposure on certain adjustable-rate revenue bonds. The first two interest rate swap agreements expire in May 1999 and the third swap expires in 2019 and had notional amounts at December 31, 1996, of $91,070,000, $33,485,000, and $80,220,000, respectively, which are reduced in accordance with the scheduled repayments of the revenue bonds. Under the first swap agreement, Ogden pays a fixed rate of 3.95% per annum on a semi-annual basis and receives a floating rate based on an index of tax-exempt, variable-rate obligations. Under the second swap agreement, Ogden pays a fixed rate of 5.25% per annum on a semi-annual basis and receives a floating rate based on a defined commercial paper rate. Under the third swap agreement, Ogden pays a fixed rate of 6.07% per annum on a semi-annual basis through 1998 and thereafter a fixed rate of 5.18% per annum and receives a floating rate based on a defined LIBOR-based rate. At December 31, 1996, the floating rates on the three swaps were 3.66%, 5.72%, and 5.6%, respectively. These swap agreements were entered into to convert from floating rates to fixed interest rates $91,070,000 of tax-exempt, adjustable-rate revenue bonds and $113,705,000 of taxable, adjustable-rate revenue bonds. The counterparties to these interest rate swaps are major financial institutions. Management believes the credit risk associated with nonperformance by the counterparties is not significant. Amounts (received) or paid on these swap agreements amounted to $700,000, $(230,000), and $1,400,000 for 1996, 1995, and 1994, respectively, and were charged or (credited) to debt service charges. The effect on Ogden's weighted-average borrowing rate was an increase (decrease) of .04%, (.01)%, and .09% for 1996, 1995, and 1994, respectively. The maturities on long-term project debt (expressed in thousands of dollars) at December 31, 1996, were as follows: 1997 ..................................................... $ 60,966 1998 ..................................................... 74,171 1999 ..................................................... 80,101 2000 ..................................................... 80,305 2001 ..................................................... 89,470 Later years .............................................. 1,176,643 ---------- Total .................................................... 1,561,656 Less current portion ..................................... 60,966 ---------- Total long-term project debt ............................. $1,500,690 ========== 30/OGDEN CORPORATION 11. Credit Arrangements At December 31, 1996, Ogden had unused revolving credit lines amounting to $217,350,000, of which $200,000,000 is available under its principal revolving credit line at various borrowing rates including prime, the Eurodollar rate plus .30%, or certificate-of-deposit rates plus .425%. Ogden is not required to maintain compensating balances; however, Ogden pays a facility fee of 3/16 of 1% on its principal revolving credit line of $200,000,000, which expires October 29, 1998. 12. Convertible Subordinated Debentures Convertible subordinated debentures (expressed in thousands of dollars) consisted of the following: 1996 1995 --------------------------------------------------------------------- 6% debentures due June 1, 2002 ............. $ 85,000 $ 85,000 5 3/4% debentures due October 20, 2002 ..... 63,650 63,650 -------- -------- Total ........................................ $148,650 $148,650 ======== ======== The 6% convertible subordinated debentures are convertible into Ogden common stock at the rate of one share for each $39.077 principal amount of debentures. The debentures are redeemable at Ogden's option at 101.8% of principal amount during the year commencing June 1, 1996, and at decreasing prices thereafter. The 5 3/4% convertible subordinated debentures are convertible into Ogden common stock at the rate of one share for each $41.772 principal amount of debentures. The debentures are redeemable at Ogden's option at 100% of face value. 13. Preferred Stock The outstanding Series A $1.875 Cumulative Convertible Preferred Stock is convertible at any time at the rate of 5.97626 common shares for each preferred share. Ogden may redeem the outstanding shares of preferred stock at $50 per share, plus all accrued dividends. These preferred shares are entitled to receive cumulative annual dividends at the rate of $1.875 per share, plus an amount equal to 150% of the amount, if any, by which the dividend paid or any cash distribution made on the common stock in the preceding calendar quarter exceeded $.667 per share. 14. Common Stock and Stock Options In 1986, Ogden adopted a nonqualified stock option plan (the "1986 Plan"). Under this plan, options and/or stock appreciation rights were granted to key management employees to purchase Ogden common stock at prices not less than the fair market value at the time of grant, which became exercisable during a five-year period from the date of grant. Options were exercisable for a period of ten years after the date of grant. As adopted and as adjusted for stock splits, the 1986 Plan called for up to an aggregate of 2,700,000 shares of Ogden common stock to be available for issuance upon the exercise of options and stock appreciation rights, which were granted over a 10-year period ending March 10, 1996. At December 31, 1996, all of the authorized shares of this plan had been granted. In October 1990, Ogden adopted a nonqualified stock option plan (the "1990 Plan"). Under this plan, nonqualified options, incentive stock options, and/or stock appreciation rights and stock bonuses may be granted to key management employees and outside directors to purchase Ogden common stock at an exercise price to be determined by the Ogden Compensation Committee, which become exercisable during the five-year period from the date of grant. These options are exercisable for a period of ten years after the date of grant. Pursuant to the 1990 Plan, which was amended in 1994 to increase the number of shares available by 3,200,000 shares, an aggregate of 6,200,000 shares of Ogden common stock became available for issuance upon the exercise of such options, rights, and bonuses, which may be granted over a 10-year period ending October 11, 2000; 2,053,000 shares were available for grant at December 31, 1996. Under the foregoing plans, Ogden issued 4,442,500 limited stock appreciation rights in conjunction with the stock options granted. These limited rights are exercisable only during the period commencing on the first day following the occurrence of any of the following events and terminate 90 days after such date: the acquisition by any person of 20% or more of the voting power of Ogden's outstanding securities; the approval by Ogden shareholders of an agreement to merge or to sell substantially all of its assets; or the occurrence of certain changes in the membership of the Ogden Board of Directors. The exercise of these limited rights entitles participants to receive an amount in cash with respect to each share subject thereto, equal to the excess of the market value of a share of Ogden common stock on the exercise date or the date these limited rights became exercisable, over the related option price. In connection with the acquisition of the minority interest of OPI, Ogden assumed the pre-existing OPI stock option plan then outstanding and converted these options into options to acquire shares of Ogden common stock. No further options will be granted under this plan. OGDEN CORPORATION/31 The Corporation has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for these stock option plans. Had compensation cost for the options granted in 1996 and 1995 under these plans been determined consistent with the provisions of SFAS No. 123, using the binomial option-pricing model with the following assumptions --dividend yield of 5.7% and 6.2%, volatility of 22.74% and 24.77%, risk-free interest rate of 5.42% and 7.72%, and an expected life of 7.5 years--the effect on net income and earnings per share for 1996 and 1995 would not have been significant. Information regarding the Corporation's stock option plans is summarized as follows:
Option Available Price For Per Share Outstanding Exercisable Grant ------------------------------------------------------------------------------------------------------------------------- 1986 Plan: December 31, 1993, balance ......................... $14.98-$28.54 1,030,687 762,687 115,500 Granted ............................................ $22.50 115,500 (115,500) Became exercisable ................................. $18.31-$28.54 134,000 Exercised .......................................... $14.98 (18,644) (18,644) ------------- --------- --------- --------- December 31, 1994, balance ......................... $14.98-$28.54 1,127,543 878,043 Became exercisable ................................. $18.31-$28.54 157,100 Exercised .......................................... $14.98 (16,618) (16,618) ------------- --------- --------- --------- December 31, 1995, balance ......................... $14.98-$28.54 1,110,925 1,018,525 Became exercisable ................................. $22.50 23,100 Exercised .......................................... $14.98 (235,425) (235,425) ------------- --------- --------- --------- December 31, 1996, balance ......................... $22.50-$28.54 875,500 806,200 ------------- --------- --------- --------- 1990 Plan: December 31, 1993, balance ......................... $18.31-$23.56 2,640,000 1,433,300 237,000 Increase in authorized option shares ............... 3,200,000 Granted ............................................ $21.50-$22.50 1,169,500 (1,169,500) Became exercisable ................................. $18.31-$20.31 507,500 Exercised .......................................... $18.31-$20.31 (109,000) (109,000) Cancelled .......................................... $18.31-$23.56 (115,000) (32,000) 115,000 ------------- --------- --------- --------- December 31, 1994, balance ......................... $18.31-$23.56 3,585,500 1,799,800 2,382,500 Granted ............................................ $20.06-$22.69 409,000 (409,000) Became exercisable ................................. $18.31-$23.56 699,900 Exercised .......................................... $18.31-$21.31 (129,000) (129,000) Cancelled .......................................... $18.31-$23.56 (184,700) (34,000) 184,700 ------------- --------- --------- --------- December 31, 1995, balance ......................... $18.31-$23.56 3,680,800 2,336,700 2,158,200 Granted ............................................ $21.00-$21.94 252,500 (252,500) Became exercisable ................................. $18.31-$23.56 346,800 Exercised .......................................... $18.31-$21.31 (129,000) (129,000) Cancelled .......................................... $18.31-$23.56 (147,300) (84,300) 147,300 ------------- --------- --------- --------- December 31, 1996, balance ......................... $18.31-$23.56 3,657,000 2,470,200 2,053,000 ------------- --------- --------- --------- Conversion of OPI Plan: December 29, 1994 .................................. $14.17-$29.46 266,561 266,561 ------------- --------- --------- --------- December 31, 1995, balance ......................... $14.17-$29.46 266,561 266,561 Exercised .......................................... $14.17 (19,740) (19,740) Cancelled .......................................... $14.17 (3,360) (3,360) ------------- --------- --------- --------- December 31, 1996, balance ......................... $14.17-$29.46 243,461 243,461 ------------- --------- --------- --------- Total December 31, 1996 ............................ $14.17-$29.46 4,775,961 3,519,861 2,053,000 ============= ========= ========= =========
At December 31, 1996, there were 10,816,264 shares of common stock reserved for the exercise of stock options and the conversion of preferred shares and debentures. 32/OGDEN CORPORATION 15. Preferred Stock Purchase Rights In 1990, the Board of Directors declared a dividend of one preferred stock purchase right (Right) on each outstanding share of common stock. Among other provisions, each Right may be exercised to purchase a one one-hundredth share of a new series of cumulative participating preferred stock at an exercise price of $80, subject to adjustment. The Rights may only be exercised after a party has acquired 15% or more of the Corporation's common stock or commenced a tender offer to acquire 15% or more of the Corporation's common stock. The Rights do not have voting rights, expire October 2, 2000, and may be redeemed by the Corporation at a price of $.01 per Right at any time prior to the acquisition of 15% of the Corporation's common stock. In the event a party acquires 15% or more of the Corporation's outstanding common stock in accordance with certain defined terms, each Right will then entitle its holders (other than such party) to purchase, at the Right's then-current exercise price, a number of the Corporation's common shares having a market value of twice the Right's exercise price. At December 31, 1996, 49,744,527 Rights were outstanding. 16. Sale of Businesses and Limited Partnership Interests Revenues for 1996 include a net gain of $13,163,000 relating to the sale of certain noncore businesses. In 1994, revenues include $26,100,000 from the sale of limited partnership interests in and related tax benefits of the Onondaga County waste-to-energy facility, which was partially offset by the recapture of investment tax credits and minority interests. 17. Foreign Exchange Foreign exchange translation adjustments for 1996, 1995, and 1994, amounting to $(3,111,000), $(1,258,000), and $3,240,000, respectively, have been credited (charged) directly to Shareholders' Equity. Foreign exchange transaction adjustments, amounting to $(215,000), $1,590,000, and $(1,844,000), have been credited (charged) directly to income for 1996, 1995, and 1994, respectively. 18. Debt Service Charges Debt service charges for Ogden's project debt (expressed in thousands of dollars) consisted of the following:
1996 1995 1994 -------------------------------------------------------------------------------------------------------------------------- Interest incurred on taxable and tax-exempt borrowings ................... $107,595 $112,029 $109,586 Interest earned on temporary investment of certain restricted funds .............................................. 4,256 4,908 6,782 -------- -------- -------- Net interest incurred .................................................... 103,339 107,121 102,804 Interest capitalized during construction in property, plant, and equipment ..................................................... 485 1,512 8,893 -------- -------- -------- Interest expense--net .................................................... 102,854 105,609 93,911 Amortization of bond issuance costs ...................................... 7,201 6,241 6,447 -------- -------- -------- Debt service charges ..................................................... $110,055 $111,850 $100,358 ======== ======== ========
19. Retirement Plans Ogden has retirement plans that cover substantially all of its employees. A substantial portion of hourly employees of Ogden Services Corporation participates in defined contribution plans. Other employees participate in defined benefit or defined contribution plans. The defined benefit plans provide benefits based on years of service and either employee compensation or a flat benefit amount. Ogden's funding policy for those plans is to contribute annually an amount no less than the minimum funding required by ERISA. Contributions are intended to provide not only benefits attributed to service to date but also for those expected to be earned in the future. OGDEN CORPORATION/33 The following table sets forth the defined benefit plans' funded status and related amounts recognized in Ogden's Consolidated Balance Sheets (expressed in thousands of dollars):
1996 1995 ------------------------------------------------------------------------------------------------------------------------------- Assets Accumulated Assets Accumulated Exceed Benefits Exceed Benefits Accumulated Exceed Accumulated Exceed Benefits Assets Benefits Assets ------------------------------------------------------------------------------------------------------------------------------- Accumulated Benefit Obligation: Vested .................................................................. $ 8,820 $ 10,480 $ 7,015 $ 9,724 Nonvested ............................................................... 314 442 389 501 -------- --------- --------- --------- Total ................................................................... $ 9,134 $ 10,922 $ 7,404 $ 10,225 ======== ========= ========= ========= Projected benefit obligation for services rendered to date ........................................................ $ 12,715 $ 15,355 $ 10,773 $ 14,319 Plan assets at fair value ............................................... 13,495 5,764 10,325 5,581 -------- --------- --------- --------- Over (underfunded) projected benefits ................................... $ 780 $ (9,591) $ (448) $ (8,738) ======== ========= ========= ========= Source of Underfunded Status: Unrecognized net gain (loss) from past experience different from that assumed and effects of changes in assumptions .................................................. $ 588 $ (1,037) $ (480) $ (1,241) Unrecognized net transition asset (obligation) at January 1, 1986, being recognized over 15 years ........................................................... 417 (320) 494 (400) Pension liability costs ................................................. (688) (5,916) (961) (4,146) Unrecognized prior service costs ........................................ 463 (2,318) 499 (2,951) -------- --------- --------- --------- Over (underfunded) projected benefits ................................... $ 780 $ (9,591) $ (448) $ (8,738) ======== ========= ========= =========
At December 31, 1996 and 1995, the accumulated benefit obligation of certain pension plans exceeded plan assets. The Corporation's liability for those plans was increased by $1,463,000 and $2,033,000 at December 31, 1996 and 1995, respectively. Such amounts were offset by intangible assets and reductions in Shareholders' Equity, net of income taxes of $565,000 and $760,000 at December 31, 1996 and 1995, respectively. At December 31, 1996, the Corporation has designated $11,000,000 of its marketable securities (Note 2) as pertaining to a nonqualified pension plan that is underfunded by $7,000,000, which underfunding is reflected above under plans in which accumulated benefits exceeded assets. Pension costs for Ogden's defined plans included the following components (expressed in thousands of dollars):
1996 1995 1994 ---------------------------------------------------------------------------------------------------------------- Service cost on benefits earned during the period ............ $ 2,139 $ 2,078 $ 1,979 Interest cost on projected benefit obligation ................ 1,900 1,716 1,629 Net amortization and deferral ................................ 2,268 2,584 (436) Actual return on plan assets ................................. (2,746) (3,260) 32 ------- ------- ------- Net periodic pension cost .................................... $ 3,561 $ 3,118 $ 3,204 ======= ======= =======
The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations were 7 1/2% and 4 1/2% for 1996 and 1995 and 8 1/4% and 5% for 1994, respectively. The expected long-term rate of return on plan assets was 8% for each year. Contributions and costs for defined contribution plans are determined by benefit formulas based on percentage of compensation as well as discretionary contributions and totaled $7,954,000, $10,358,000, and $12,052,000 in 1996, 1995, and 1994, respectively. Plan assets at December 31, 1996, 1995, and 1994, primarily consisted of common stocks, United States government securities, and guaranteed insurance contracts. With respect to union employees, the Corporation is required under contracts with various unions to pay, generally based on hours worked, retirement, health, and welfare benefits. These multiemployer defined benefit and defined contribution plans are not controlled or administered by the Corporation. The amount charged to expense for such plans during 1996, 1995, and 1994 was $26,600,000, $27,900,000, and $30,100,000, respectively. 20. Postretirement Health Care and Life Insurance Benefits In 1992, the Corporation discontinued its policy of providing postretirement health care and life insurance benefits for all salaried employees, except those employees who were retired or eligible for retirement at December 31, 1992, or who were covered under certain company-sponsored union plans. The Corporation adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," as of January 1, 1993. SFAS No. 106 requires the accrual method of accounting for postretirement health care and life insurance benefits, based on actuarial determined costs to be recognized over the period from the date of hire to the full eligibility date of employees who are expected to qualify for such benefits. 34/OGDEN CORPORATION For the years ended December 31, 1996, 1995, and 1994, the components of the periodic expense for these benefits were as follows: Recognition of Components of Net Periodic Postretirement Benefit Costs for the Years Ended December 31:
1996 1995 1994 --------------------------------------------------------------------------------------------------------------------------- Service costs ............................................. $ 126,879 $ 131,966 $ 162,107 Interest .................................................. 806,016 755,944 775,142 Amortization of unrecognized net (gain) loss .............. 18,481 (22,113) 67,820 ---------- ---------- ---------- Total ..................................................... $ 951,376 $ 865,797 $1,005,069 ========== ========== ==========
As of December 31, 1996, 1995, and 1994, the actuarial recorded liabilities for these postretirement benefits, none of which have been funded, were as follows: Accumulated Postretirement Benefit Obligation:
Retirees .................................................. $ 5,618,399 $ 4,352,614 $ 3,884,885 Eligible active participants .............................. 4,616,340 4,832,637 4,581,234 Other active .............................................. 959,853 1,740,792 1,480,725 ----------- ----------- ----------- Total accumulated postretirement obligation ............... 11,194,592 10,926,043 9,946,844 Unrecognized net loss ..................................... 603,201 611,978 117,947 ----------- ----------- ----------- Accrued postretirement benefit liability .................. $10,591,391 $10,314,065 $ 9,828,897 =========== =========== ===========
The accumulated postretirement benefit obligation was determined using a discount rate of 7 1/2% for 1996 and 1995 and 8 1/4% for 1994; an estimated increase in compensation levels of 4 1/2% for 1996 and 1995 and 5% for 1994; and a health care cost rate of approximately 14 1/2%, decreasing in subsequent years until it reaches 6% in the year 2008 and thereafter. The effect of a one percentage point increase in the assumed health care cost trend rates for each future year on the aggregate of the service and interest cost components of net periodic postretirement health care benefit cost and the accumulated postretirement benefit obligation for health care benefits would be $78,623 and $734,319, respectively. 21. Impairment of Long-Lived Assets Ogden adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," in the fourth quarter of 1995. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles held and used by an entity, including any goodwill related to these assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. In performing this review for recoverability, the Corporation estimated future cash flows expected from the use of such assets and their eventual disposition. If the sum of expected future cash flows (undiscounted) was less than the carrying value of the assets, an impairment loss was recognized. The Statement also requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying value or fair value less the costs to sell. The effect of recognizing SFAS No. 121 resulted in a pretax charge of $45,300,000 and an after-tax charge of $34,700,000, or $.70 per share. This charge included estimated losses on the disposal of noncore businesses, as announced in the fourth quarter of 1995, of $32,800,000 and the write-down of other long-lived assets of $12,500,000. The loss of $32,800,000 on the assets to be disposed of was based on the Corporation's estimate of realizable or liquidation values of the operations and bids received from prospective purchasers. The impairment loss of $12,500,000 on other long-lived assets represents the difference between the carrying amount of the assets and their estimated fair values, which was determined based on operating projections and future discounted cash flows. The remaining carrying value of these assets is not significant. These amounts were charged to cost of goods sold ($4,500,000) and operating expenses ($40,800,000) in the accompanying 1995 financial statements. 22. Other Charges--1995 During 1995, the Corporation recognized unusual charges of $37,500,000, which were reduced by a $13,500,000 gain on the sale of a noncore business in the fourth quarter for a net pretax charge of $24,000,000 and an after-tax charge of $14,200,000 or $.29 per share. The charge of $37,500,000 includes, in the second quarter, $17,100,000 at Ogden Communications, Inc. (OCI), for the write-off of receivables of $10,300,000 and related costs recorded in connection with a telecommunications project at OCI, as well as a loss on the disposal of inventory of $3,900,000 and costs related to the curtailment of operations of $2,900,000; and in the fourth quarter, $8,200,000 for costs, principally severance pay relating to restructuring activities, and $12,200,000 representing the write-down of deferred charges relating to a previously awarded waste-to-energy project that is not expected to be completed; unusual waste-to-energy repair costs; and an adjustment of inventory balances resulting from a physical inventory. The $17,100,000 charge at OCI resulted from a review of the activities of this unit, during which the Corporation concluded that contracts and other documentation did not provide a basis for recovering any of the accounts receivable related to the telecommunications project and that the sale of inventory would not recover its full carrying value. In addition, the Corporation decided to discontinue the business of OCI and estimated the costs relating thereto. OGDEN CORPORATION/35 These amounts were charged to sales allowances ($10,300,000); operating costs ($3,800,000); cost of goods sold ($6,000,000); and selling, administrative, and general expenses ($3,900,000) in the accompanying financial statements. The gain on the sale of the noncore business of $13,500,000 was included as a reduction of operating expenses. In addition, 1995 operating expenses include $3,500,000 for the settlement of litigation relating to the discontinuance of the fixed-site hazardous waste business. 23. Income Taxes The components of the provision for income taxes (expressed in thousands of dollars) were as follows: 1996 1995 1994 ------------------------------------------------------------------------ Current: Federal................................ $14,661 $ 6,444 $10,141 State.................................. 9,048 5,038 11,616 Foreign................................ 2,425 4,602 2,422 ------- ------- ------- Total current.......................... 26,134 16,084 24,179 ======= ======= ======= Deferred: Federal................................ 18,984 17,120 36,520 State.................................. 1,043 1,033 1,184 ------- ------- ------- Total deferred......................... 20,027 18,153 37,704 ------- ------- ------- Total provision for income taxes....... $46,161 $34,237 $61,883 ======= ======= ======= The current provision for Federal income taxes results principally from the alternative minimum tax. The provision for income taxes (expressed in thousands of dollars) varied from the Federal statutory income tax rate due to the following:
1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ Percent Percent Percent of Income of Income of Income Amount Before Amount Before Amount Before of Tax Taxes of Tax Taxes of Tax Taxes - ------------------------------------------------------------------------------------------------------------------------------------ Taxes at statutory rate ......................... $ 38,374 35.0% $ 14,184 35.0% $ 48,777 35.0% State income taxes, net of Federal tax benefit ............................. 6,559 5.9 3,946 9.7 8,320 6.0 Settlement of tax liability with former subsidiary .......................... (2,638) (2.4) Recapture (benefit) of investment tax credits .......................... 1,807 1.3 Foreign taxes and non- deductible foreign losses ....................... 738 .7 6,694 16.5 1,425 1.0 Amortization of goodwill ........................ 1,070 1.0 1,206 3.0 1,030 .7 Write-down of goodwill .......................... 648 .6 5,263 13.0 Pooling-related taxes and costs ................. 1,807 4.5 Other--net ...................................... 1,410 1.3 1,137 2.8 524 .4 -------- ----- -------- ----- -------- ----- Provision for income taxes .................................... $ 46,161 42.1% $ 34,237 84.5% $ 61,883 44.4% ======== ===== ======== ===== ======== =====
The components of the net deferred income tax liability (expressed in thousands of dollars) as of December 31, 1996 and 1995, were as follows: 1996 1995 ------------------------------------------------------------------ Deferred Tax Assets: Deferred income............................... $ 8,200 $ 14,387 Accrued expenses.............................. 62,904 47,125 Other liabilities............................. 24,936 13,500 Investment tax credits........................ 24,081 28,930 Alternative minimum tax credits............... 46,917 27,521 Net operating loss carryforwards.............. 58,066 120,298 -------- -------- Total deferred tax assets..................... 225,104 251,761 -------- -------- Deferred Tax Liabilities: Unbilled accounts receivable.................. 46,270 48,734 Property, plant, and equipment................ 440,293 448,334 Other......................................... 33,032 33,114 -------- -------- Total deferred tax liabilities................ 519,595 530,182 -------- -------- Net deferred tax liability.................... $294,491 $278,421 ======== ======== 36/OGDEN CORPORATION Deferred tax assets and liabilities (expressed in thousands of dollars) are presented as follows in the accompanying balance sheets: 1996 1995 ------------------------------------------------------------------- Net deferred tax liability--noncurrent......... $325,925 $310,400 Less net deferred tax asset--current........... 31,434 31,979 -------- -------- Net deferred tax liability.................... $294,491 $278,421 ======== ======== At December 31, 1996, for Federal income tax purposes, the Corporation had investment and energy tax credit carryforwards of approximately $24,081,000 and net operating loss carryforwards of approximately $144,954,000, which will expire in 2004 through 2008. Deferred Federal income taxes have been reduced by the tax effect of these amounts. 24. Leases Total rental expense amounted to $91,351,000, $93,396,000, and $77,190,000 (net of sublease income of $1,427,000, $193,000, and $328,000) for 1996, 1995, and 1994, respectively. Included in rental expense are amounts based on contingent factors (principally sales) in excess of minimum rentals amounting to $20,970,000, $21,676,000, and $15,181,000 for 1996, 1995, and 1994, respectively. Principal leases are for leaseholds, sale and leaseback arrangements on waste-to-energy facilities, trucks and automobiles, airplane, and machinery and equipment. Some of these operating leases have renewal options. The following is a schedule (expressed in thousands of dollars), by year, of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1996: 1997..................................................... $ 70,948 1998..................................................... 70,020 1999..................................................... 63,942 2000..................................................... 60,168 2001..................................................... 50,110 Later years.............................................. 310,218 -------- Total.................................................... $625,406 ======== These future minimum rental payment obligations include $100,209,000 of future nonrecourse rental payments that relate to a waste-to-energy facility, which are supported by third-party commitments to provide sufficient service revenues to meet such obligations. Also included are $75,068,000 of nonrecourse rental payments relating to a hydroelectric power generating facility operated by a special-purpose subsidiary, which are supported by contractual power purchase obligations of a third party and which are expected to provide sufficient revenues to make the rent payments. These nonrecourse rental payments (in thousands of dollars) are due as follows: 1997..................................................... $ 19,197 1998..................................................... 19,492 1999..................................................... 20,797 2000..................................................... 21,402 2001..................................................... 21,402 Later years.............................................. 72,987 -------- Total.................................................... $175,277 ======== 25. Earnings Per Share Earnings per common share were computed by dividing net income, reduced by preferred stock dividend requirements, by the weighted average of the number of shares of common stock and common stock equivalents, where dilutive, outstanding during each year. Earnings per common share, assuming full dilution, were computed on the assumption that all convertible debentures, convertible preferred stock, and stock options converted or exercised during each year or outstanding at the end of each year were converted at the beginning of each year or at the date of issuance or grant, if dilutive. This computation provided for the elimination of related convertible debenture interest and preferred dividends. The weighted-average number of shares used in computing earnings per common share was as follows: 1996 1995 1994 --------------------------------------------------------------------------- Primary............................. 49,663,000 49,385,000 43,610,000 Assuming full dilution.............. 49,953,000 49,691,000 43,939,000 OGDEN CORPORATION/37 26. Commitments and Contingent Liabilities Ogden and certain of its subsidiaries have issued or are party to performance bonds and guarantees and related contractual obligations undertaken mainly pursuant to agreements to construct and operate certain waste-to-energy, entertainment, and other facilities. In the normal course of business, they are involved in legal proceedings in which damages and other remedies are sought. 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 the Corporation entered into a 30-year facility management contract pursuant to which it agreed to advance funds to a customer, if necessary, to assist refinancing senior secured debt incurred in connection with construction of the facility. Such refinancing requirements are currently scheduled to amount to $75,000,000 at the refinancing date, which is January 1, 2001. It is expected that these arrangements will be renegotiated to provide for an Ogden obligation to purchase such senior secured debt in the amount of $95,000,000 at the end of March 2000 if the debt is not refinanced. In addition, at December 31, 1996, the Corporation has guaranteed indebtedness of $16,100,000 of an affiliate and principal tenant of this customer, which is due in September 1997. Ogden continues as guarantor of surety bonds and letters of credit totaling approximately $15,100,000 on behalf of International Terminal Operating Co. Inc. (ITO) and has guaranteed borrowings of certain customers amounting to approximately $26,700,000, as well as $10,500,000 of borrowings of joint ventures in which Ogden has equity interests. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. At December 31, 1996, capital commitments amounted to $121,900,000, which included $44,500,000 for normal replacement, modernization, and growth in Services' ($35,100,000) and Energy's ($9,400,000) operations. Also included was $74,600,000 for a coal-fired power project in The Philippines reflecting $55,200,000 for a mandatory equity contribution, $5,700,000 for contingent equity contributions, and $13,700,000 for a standby letter of credit in support of debt service reserve requirements. Funding for the mandatory equity contribution has been provided by a credit facility, which must be repaid in December 2001. The Corporation also has a $2,800,000 contingent equity contribution in an entertainment joint venture. In addition, compliance with standards and guidelines under the Clean Air Act Amendments of 1990 may require further capital expenditures of $30,000,000 during the next four years. 27. Information Concerning Business Segments Ogden classifies its business segments as Services and Energy (formerly Projects). The Services segment in 1996 includes a wide variety of services to the aviation, entertainment, and commercial real estate industries, as well as a contract manufacturing business. All of these services are provided to a wide range of customers. The Energy segment includes all of Ogden's waste-to-energy activities, its independent power business, the operation of two geothermal power stations and related well field activities and a hydroelectric power station, its water and wastewater project business, environmental consulting services, and its construction activities--all of which activities are commonly managed by Energy. In connection with Ogden's restructuring plan, the environmental business of Services was transferred to the Energy segment as of January 1, 1996. Amounts for 1995 and 1994 have been restated to reflect this transfer. In the first quarter of 1996, the environmental laboratory business of Energy was sold. In addition, Services sold the operations of W.J. Schafer Associates, Ogden Professional Services, and the Facility Services group's operations outside of New York and discontinued its asbestos abatement operations. Revenues and income from continuing operations (expressed in thousands of dollars) for the years ended December 31, 1996, 1995, and 1994, were as follows:
1996 1995 1994 ----------------------------------------------------------------------------------------- Revenues: Services ............................................ $1,306,800 $1,415,239 $1,238,705 Energy .............................................. 724,281 769,754 865,842 ---------- ---------- ---------- Total revenues ...................................... $2,031,081 $2,184,993 $2,104,547 ========== ========== ========== Income from Operations: Services ............................................ $ 45,645 $ 5,122 $ 46,185 Energy .............................................. 81,665 56,428 108,626 ---------- ---------- ---------- Total income from operations ........................ 127,310 61,550 154,811 Equity in Net Income of Investees and Joint Ventures: Services ............................................ 3,279 2,443 2,045 Energy .............................................. 325 4,423 5,638 ---------- ---------- ---------- Total ............................................... 130,914 68,416 162,494 Corporate unallocated income and expenses--net (7,843) (12,525) (12,184) Corporate interest--net ............................. (13,430) (15,365) (10,946) ---------- ---------- ---------- Consolidated Income Before Income Taxes and Minority Interest ....,,,,,,, $ 109,641 $ 40,526 $ 139,364 ========== ========== ==========
38/OGDEN CORPORATION In 1995, income from operations of Services and Energy reflects pretax charges of $36,900,000 and $32,400,000, respectively, reflecting the adoption of SFAS No. 121 and other unusual charges (see Notes 21 and 22). Services' revenues include $121,000,000, $250,300,000, and $248,500,000 from the United States government contracts for the years ended December 31, 1996, 1995, and 1994, respectively. Total revenues by segment reflect sales to unaffiliated customers. In computing income from operations, none of the following have been added or deducted: unallocated corporate expenses, nonoperating interest expense, interest income, and income taxes. A summary (expressed in thousands of dollars) of identifiable assets, depreciation and amortization, and capital additions of continuing operations for the years ended December 31, 1996, 1995, and 1994, is as follows: Depreciation Identifiable and Capital Assets Amortization Additions --------------------------------------------------------------------------- 1996 Services ................ $ 729,598 $ 37,292 $ 34,964 Energy .................. 2,668,572 77,487 28,157 Corporate ............... 199,362 484 1,070 ---------- ---------- ----------- Consolidated ............ $3,597,532 $ 115,263 $ 64,191 ========== ========== =========== 1995 Services ................ $ 813,591 $ 37,936 $ 49,940 Energy .................. 2,646,979 70,805 42,875 Corporate ............... 192,101 863 11 ---------- ---------- ----------- Consolidated ..,......... $3,652,671 $ 109,604 $ 92,826 ========== ========== =========== 1994 Services ............... $ 708,691 $ 32,009 $ 32,328 Energy ................. 2,647,975 56,710 87,297 Corporate .............. 288,220 1,826 22 ---------- ---------- ----------- Consolidated ........... $3,644,886 $ 90,545 $ 119,647 ========== ========== =========== Ogden's areas of operations are principally in the United States. Operations outside of the United States are worldwide but primarily in Europe and South America. No single foreign country or geographic area is significant to the consolidated operations. Foreign operations' revenues, income from operations, and identifiable assets were $238,500,000, $10,900,000, and $275,100,000, respectively, for 1996. 28. Supplemental Disclosure of Cash Flow Information
(Expressed in thousands of dollars) ............ 1996 1995 1994 ----------------------------------------------------------------------------------- Cash Paid for Interest and Income Taxes: Interest (net of amounts capitalized) .......... $ 134,560 $ 140,878 $ 119,188 Income taxes ................................... 20,552 9,885 8,298 Noncash Investing and Financing Activities: Conversion of preferred shares for common shares 2 4 3 Purchase of Minority Interest: Common stock issued ............................ 94,446 Adjustment to net assets for excess of purchase price over book value of net assets acquired ... 21,589 Detail of Entities Acquired: Fair value of assets acquired .................. 38,019 32,293 158,212 Liabilities assumed ............................ (21,051) (16,819) (125,808) Net cash paid for acquisitions ................. 16,968 15,474 32,404
29. Fair Value of Financial Instruments The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." The estimated fair-value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that Ogden would realize in a current market exchange. OGDEN CORPORATION/39 The estimated fair value (expressed in thousands of dollars) of financial instruments at December 31, 1996 and 1995, is summarized as follows:
1996 1995 -------------------------------------------------------------------------------------------------------------- Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value -------------------------------------------------------------------------------------------------------------- Assets: Cash and cash equivalents........................... $ 140,824 $ 140,824 $ 96,782 $ 96,782 Marketable securities--available for sale........... 13,339 13,339 Receivables......................................... 721,846 725,075 789,397 791,712 Restricted funds.................................... 310,811 310,716 313,789 315,987 Other assets........................................ 23,799 23,799 21,495 21,495 Liabilities: Long-term debt...................................... 312,937 335,819 349,013 378,730 Convertible subordinated debentures................. 148,650 142,546 148,650 137,608 Project debt........................................ 1,561,656 1,617,690 1,606,977 1,694,722 Other liabilities................................... 21,245 18,330 27,178 22,735 Off Balance-Sheet Financial Instruments: Unrealized losses on interest rate swap agreements.. 1,413 6,839 Unrealized gains on interest rate swap agreements... 670 1,103
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: For cash and cash equivalents, the carrying value of these amounts is a reasonable estimate of their fair value. The fair value of long-term unbilled receivables is estimated by using a discount rate that approximates the current rate for comparable notes. Marketable securities' fair values are based on quoted market prices or dealer quotes. The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee. The fair value of noncurrent receivables is estimated by discounting the future cash flows using the current rates at which similar loans would be made to such borrowers based on the remaining maturities, consideration of credit risks, and other business issues pertaining to such receivables. Other assets, consisting primarily of insurance and escrow deposits and other miscellaneous financial instruments used in the ordinary course of business, are valued based on quoted market prices or other appropriate valuation techniques. Fair values for short-term debt and long-term debt were determined based on interest rates that are currently available to the Corporation for issuance of debt with similar terms and remaining maturities for debt issues that are not traded or quoted on an exchange. With respect to convertible subordinated debentures, fair values are based on quoted market prices. The fair value of project debt is estimated based on quoted market prices for the same or similar issues. Other borrowings and liabilities are valued by discounting the future stream of payments using the incremental borrowing rate of the Corporation. The fair value of the Corporation's interest rate swap agreements is the estimated amount that the Corporation would receive or pay to terminate the swap agreements at the reporting date based on third-party quotations. The fair value of Ogden financial guarantees provided on behalf of ITO and customers (see Note 26) would be zero because Ogden receives no fees associated with such commitments. The fair-value estimates presented herein are based on pertinent information available to management as of December 31, 1996 and 1995. Although management is not aware of any factors that would significantly affect the estimated fair-value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 40/OGDEN CORPORATION Independent Auditors' Report Deloitte & Touche LLP Two World Financial Center New York, NY 10281 The Board of Directors and Shareholders of Ogden Corporation: We have audited the accompanying consolidated balance sheets of Ogden Corporation and subsidiaries as of December 31, 1996 and 1995 and the related statements of shareholders' equity, consolidated income and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the companies at December 31, 1996 and 1995 and the results of their operations and cash flows for each of the three years in the period ended December 31, 1996 in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, in 1995 the Corporation adopted Statement of Financial Accounting Standards No. 121 relating to long-lived assets and long-lived assets to be disposed of. In 1994 the Corporation changed its method of accounting for postemployment benefits to conform with Statement of Financial Accounting Standards No. 112. /s/ Deloitte & Touche LLP February 10, 1997 OGDEN CORPORATION/41 Ogden Corporation and Subsidiaries Report of Management Ogden's management is responsible for the information and representations contained in this annual report. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances to reflect in all material respects the substance of events and transactions that should be included and that the other information in the annual report is consistent with those statements. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions currently being accounted for. In meeting its responsibility for the reliability of the financial statements, management depends on the Corporation's internal control structure. This structure is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. In designing control procedures, management recognizes that errors or irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of such controls. Management believes that the Corporation's internal control structure provides reasonable assurance that errors or irregularities that could be material to the financial statements are prevented and would be detected within a timely period by employees in the normal course of performing their assigned functions. The Board of Directors pursues its oversight role for these financial statements through the Audit Committee, which is composed solely of nonaffiliated directors. The Audit Committee, in this oversight role, meets periodically with management to monitor their responsibilities. The Audit Committee also meets periodically with the independent auditors and the internal auditors, both of whom have free access to the Audit Committee without management present. The independent auditors elected by the shareholders express an opinion on our financial statements. Their opinion is based on procedures they consider to be sufficient to enable them to reach a conclusion as to the fairness of the presentation of the financial statements. /s/ R. Richard Ablon /s/ Philip G. Husby R. Richard Ablon Philip G. Husby Chairman of the Board, Senior Vice President, President, and Chief Financial Officer, and Chief Executive Officer Treasurer 42/OGDEN CORPORATION Ogden Corporation and Subsidiaries Quarterly Results of Operations
1996 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 ------------------------------------------------------------------------------------------------------------------------- (In thousands of dollars, except per-share amounts) Total revenues .................................................. $ 520,672 $ 546,099 $ 500,641 $ 463,669 --------- --------- --------- --------- Gross profit .................................................... $ 82,522 $ 88,751 $ 91,111 $ 85,013 --------- --------- --------- --------- Net income ...................................................... $ 9,288 $ 16,888 $ 20,388 $ 17,970 --------- --------- --------- --------- Earnings per common share ....................................... $ 0.19 $ 0.34 $ 0.41 $ 0.36 --------- --------- --------- --------- Earnings per common share--assuming full dilution ............... $ 0.19 $ 0.34 $ 0.40 $ 0.36 --------- --------- --------- --------- 1995 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 ------------------------------------------------------------------------------------------------------------------------- (In thousands of dollars, except per-share amounts) Total revenues .................................................. $ 502,408 $ 537,645 $ 588,402 $ 556,538 --------- --------- --------- --------- Gross profit .................................................... $ 85,650 $ 82,406 $ 106,547 $ 31,330 --------- --------- --------- --------- Net income ...................................................... $ 12,092 $ 10,080 $ 23,828 $ (38,556) --------- --------- --------- --------- Earnings (loss) per common share ................................ $ 0.24 $ 0.21 $ 0.48 $ (0.78) --------- --------- --------- --------- Earnings (loss) per common share--assuming full dilution ........ $ 0.24 $ 0.21 $ 0.48 $ (0.78) --------- --------- --------- ---------
Ogden Corporation and Subsidiaries Price Range of Stock and Dividend Data
1996 1995 ----------------------------------------------------------------------------------------------- High Low High Low Common: First Quarter............................... 23 7/8 19 3/8 21 1/2 18 1/2 Second Quarter.............................. 20 7/8 17 7/8 22 3/8 19 7/8 Third Quarter............................... 21 5/8 18 23 7/8 22 Fourth Quarter.............................. 20 5/8 17 5/8 24 19 7/8 ------------------------------------------------ Preferred: First Quarter............................... 128 128 120 113 1/2 Second Quarter.............................. 121 117 1/4 Not Traded Third Quarter............................... 125 1/2 125 1/2 134 3/8 134 3/8 Fourth Quarter.............................. Not Traded 139 133 5/8 ------------------------------------------------
Quarterly common stock dividends of $.3125 per share were paid to shareholders of record for the four quarters of 1996 and 1995, the dividends for the last quarters of 1996 and 1995 being paid in January of the subsequent years. Quarterly dividends of $.8376 were paid for the four quarters of 1996 and 1995 on the $1.875 preferred stock. OGDEN CORPORATION/43 -----END PRIVACY-ENHANCED MESSAGE-----