-----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, EvX8wRXYv1MpXv9QUiM0im6Mhyiugu54esjGVTqU0Eqp9nVV+UTvG5w5OQrDm2cs 3gLOBAYbipB+vj3qDH6mhQ== 0001047469-99-012108.txt : 19990330 0001047469-99-012108.hdr.sgml : 19990330 ACCESSION NUMBER: 0001047469-99-012108 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990329 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: SEC FILE NUMBER: 001-03122 FILM NUMBER: 99576652 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, 1998 OR |_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to____________________ Commission File Number 1-3122 OGDEN CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 13-5549268 (State or Other Jurisdiction of (I.R.S. Employee Identification No.) Incorporation or Organization) Two Pennsylvania Plaza, New York, N.Y. 10121 - -------------------------------------- ----------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code - (212) 868-6000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of each class Which Registered - ------------------- ---------------- Common Stock, par value New York Stock Exchange $.50 per share $1.875 Cumulative Convertible New York Stock Exchange Preferred Stock (Series A) Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES |X| NO |_| Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K. |_| The aggregate market value of registrant's voting stock, held by non-affiliates based on the New York Stock Exchange closing price as reported in the consolidated transaction reporting system as of the close of business on March 1, 1999 was as follows: Common Stock, par value $.50 per share $1,204,689,605 $1.875 Cumulative Convertible Preferred Stock (Series A) $6,279,900 The number of shares of the registrant's Common Stock outstanding as of March 1, 1999 was 49,048,469 shares. The following documents are hereby incorporated by reference into this Form 10-K: (1) Portions of the Registrant's Annual Report to Shareholders for the year ended December 31, 1998 (Parts II and IV). (2) Portions of the Registrant's 1999 Proxy Statement to be filed with the Securities and Exchange Commission (Part III). INDEX PART I PAGE - ------ ---- Item 1. Business Entertainment 1-8 Aviation 8-11 Energy 12-29 Other 29 Recent Developments 11 Other Information 30-37 Markets, Competition and General Business Conditions 30-31 Equal Employment Opportunity 31 Year 2000 Issues 31 Employee and Labor Relations 32 Environmental Regulatory Laws 32-34 Energy and Water Regulation 35-37 Item 2. Properties 38-42 Item 3. Legal Proceeding 43-44 Item 4. Submission of Matters to a Vote of Security Holders 44 Executive Officers of Ogden 44-48 PART II Item 5. Market For Ogden's Common Equity and Related Stockholder Matters 48 Item 6. Selected Financial Data 48 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 48 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48 Item 8. Financial Statements and Supplementary Data 49 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 49 PART III Item 10. Directors and Executive Officers of Ogden 49 Item 11. Executive Compensation 49 Item 12. Security Ownership of Certain Beneficial Owners and Management 49 Item 13. Certain Relationships and Related Transactions 49 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 50-55 PART I Item 1. BUSINESS Ogden Corporation, a Delaware corporation (hereinafter together with its consolidated subsidiaries referred to as "Ogden" or the "Company"), is a global company engaged in providing a wide range of operations and services through its operating groups within each of its four business segments, Entertainment, Aviation, Energy and Other. The amounts of revenue, operating profit or loss and identifiable assets attributable to each of Ogden's four business segments for each of the last three fiscal years is set forth in footnote 23. INFORMATION CONCERNING BUSINESS SEGMENTS of Ogden's 1998 Annual Report to Shareholders, certain specified portions of which are incorporated herein by reference. ENTERTAINMENT Ogden Entertainment, Inc. ("Entertainment"), directly and through joint ventures, is engaged in business activities related to the ownership and providing of, services to, entertainment attractions and leisure and gaming venues in the United States, Canada, Europe, South America and Australia. Entertainment's business operations are divided into four categories: Themed Attractions; Food and Beverage Concessions; Venue Management; and Specialty Casinos. In addition, Entertainment owns a 50% interest in the Metropolitan Entertainment Group, which is engaged in a number of activities related to the development and exhibition of entertainment products. Where services are performed on a cost-plus basis, the customer reimburses Entertainment for all acceptable reimbursable expenditures made in connection with the job and also pays a management fee, which may be a percentage of the reimbursable expenditures, a specific dollar amount, or a combination of the two. Themed Attractions Entertainment, directly and through joint ventures, operates a variety of themed entertainment attractions in the United States, Europe and South America. Entertainment's themed attractions are situated on land either owned or leased by Entertainment and are generally operated by Entertainment as principal and not as a service provider. As owner of the entertainment "product" at such locations, Entertainment is responsible for all aspects of the business, including marketing and ticket sales, day-to-day operation of the attraction and any food service or merchandising operations on the premises. Entertainment's principal operations in the themed attraction area include: Tinseltown(TM) Studios - Developed, owned and operated by Entertainment, Tinseltown(TM) is an innovative, audience-participation dinner attraction situated on a 1.25 acre parcel of land owned by Entertainment and located in Anaheim, California. As part of the operation, Entertainment also leases from the City of Anaheim adjacent land to accommodate 550 parking 1 spaces. Tinseltown(TM) commenced operation in November, 1998 and is a specially designed and constructed facility, which includes a 700-seat theatre, full service kitchen and a gift shop. Tinseltown(TM) re-creates for guests the experience of being a star, producer or other Hollywood notable attending a major televised awards show, and arriving guests walk the "red carpet" as they are greeted by paparazzi, autograph hounds and television interviewers. The two-hour experience (which includes service of a three-course dinner) features a live musical stage production. At each performance, a number of guests appear on the theatre's two 9' x 12' video screens as part of the "televised" Tinseltown Awards Show, and some are inserted into clips from motion pictures (such as "Jurassic Park", "Field of Dreams", "Jaws" and "The Blues Brothers") as they compete for Tinseltown's(TM) "Oggie", the statuette awarded for best actor and best actress performances. Top of the World - Entertainment operates the "Top of the World" visitor attraction on the 107th Floor Observation Deck at the World Trade Center in New York City. Pursuant to an eleven and one-half year lease from the Port Authority of New York and New Jersey, Entertainment commenced these operations in 1995. In the Fall of 1996, Entertainment undertook extensive renovations to the attraction, including the installation of three motion simulation theatres that take visitors on a simulated aerial sightseeing tour of New York City. The attraction, which reopened in April, 1997, attracts over 1.8 million visitors per year. Entertainment's lease with the Port Authority provides for the payment of base rent plus percentage rent on revenues in excess of certain specified levels. Silver Springs and Wild Waters - Pursuant to a long-term lease from the State of Florida, Entertainment operates Silver Springs, a nature-based attraction, and Wild Waters, an adjacent water park, located in Ocala, Florida. Silver Springs is a unique 250-acre nature preserve, which features exotic wildlife, jungle cruise glass-bottom boat rides, jeep safari rides, animal shows and exhibits, gift shops and eateries. Wild Waters, a six-acre water park adjacent to Silver Springs, features water slides, wave pools, miniature golf, and food and beverage concession areas. Silver Springs operates year-round, while Wild Waters operates from March through Labor Day weekend. Enchanted Castle - Owned and operated by Entertainment in a leased facility located in Lombard, Illinois. Enchanted Castle is an indoor family entertainment center that features a variety of mechanical and video games, miniature golf, laser tag, motion simulators and similar attractions. Enchanted Castle also features a full service casual restaurant and concession area, and a large party room area for servicing corporate groups and private parties. Enchanted Castle is operated year-round. La Rural de Palermo - La Rural is a 28-acre fairground and exhibition center located in Buenos Aires, Argentina. This facility is operated pursuant to a long-term lease by a joint venture for which Entertainment serves as managing partner and in which Entertainment owns a 50% interest. In addition to operating the fair and exhibition business on the property, the joint venture is developing a master plan for renovation of the fair ground and exhibition facilities and 2 development of an entertainment and retail complex on the site, including a multi-screen theatre. Initial construction on the renovation project began in early 1998. Jazzland - During 1998, Entertainment commenced construction on this 100-plus acre theme and ride park located in New Orleans, Louisiana. Entertainment holds a long-term lease on the Jazzland site that can be converted into fee ownership at nominal cost to Entertainment. Jazzland will consist of a number of separate areas themed around the history and cultures of New Orleans and will feature a roller coaster and a variety of other rides and attractions, restaurants and concession areas, and retail merchandise stores. Adjacent to Jazzland will be an outdoor concert facility capable of hosting concerts and other musical presentations. Jazzland is scheduled to open in the spring of 2000. Grizzly Park - Owned and operated by Entertainment and located in Montana at the main entrance to Yellowstone National Park. Grizzly Park is a nature-based attraction featuring the Grizzly Discovery Center, an indoor exhibit that showcases items of interest relating to Yellowstone and its wildlife, outdoor natural habitats containing live grizzly bears and gray wolves, and a variety of shops and restaurants. Isla Magica - Entertainment owns a 28% equity interest in Parques Tecnicultores, S.A. ("Partecsa"), which operates the Isla Magica theme park, located on a 200-acre parcel in Seville, Spain. Originally the site of the Seville Expo world's fair, Isla Magica was converted by Partecsa into a themed ride park pursuant to a 30-year lease, and reopened to the public in the spring of 1997. Isla Magica contains a number of areas themed around the history and culture of Spain, including rides, restaurants and concession areas, and retail merchandise stores. Large Format Film - Entertainment is also engaged in the production and distribution of large-format films, as well as the management and operation of theatres exhibiting such films. In 1997, Entertainment completed production on its first large-format IMAX(R) feature film, AMAZON. This film, which is owned by Entertainment, has been contracted by over 45 theatres both domestically and internationally and was nominated for an Academy Award(R) in 1998 in the category of "Best Documentary (Short Subject)". In 1998, Entertainment co-produced, with Sony Corporation of America, its second large-format film (produced in both 2D and 3D versions), MARK TWAIN'S AMERICA. Entertainment owns a 50% interest in this film, which is distributed by Sony under the terms of the co-production agreement between Sony and Entertainment. Food and Beverage Concessions - Entertainment's food and beverage operations consist of Concessions and Restaurants. Concessions - Entertainment is a leading provider of food and beverage concession services at a wide variety of public assembly facilities, including arenas, stadiums, amphitheaters, convention and exhibition centers, parks, fairgrounds and zoos. At some client locations, Entertainment also operates concessions for the sale of souvenir merchandise. The contractual arrangements governing these operations are individually negotiated, and vary widely as to terms and duration. These arrangements often require Entertainment to make an initial investment in 3 food service equipment and leasehold improvements, a cash payment to the client facility or both. In most cases, the contracts provide for a payment by Entertainment of ongoing commissions or rentals based on a percentage of gross sales or net profits, sometimes with a minimum rental or payment. Where minimum payments are required the contracts generally protect Entertainment against "force majeure" events over which Entertainment has no control, such as player strikes or lockouts, and weather or natural disaster-related disruptions in operations. Entertainment's concession service locations at client facilities currently number approximately 125, including those listed in the following table: Name Location - ---- -------- Edison International Field Anaheim, California Wrigley Field Chicago, Illinois Los Angeles Convention Center Los Angeles, California The Kingdome Seattle, Washington Veterans Stadium Philadelphia, Pennsylvania Market Square Arena Indianapolis, Indiana McNichols Arena Denver, Colorado Cobo Hall Detroit, Michigan Tempe Diablo Stadium Tempe, Arizona University of Oklahoma Stadium Norman, Oklahoma The MGM Grand Gardens Arena Las Vegas, Nevada General Motors Place Vancouver, British Columbia, Canada Mile High Stadium Denver, Colorado Victory Field Indianapolis, Indiana MCI Center Washington, D. C. Alameda County Coliseum Complex Oakland, California In addition, Entertainment has been awarded concession contracts at three new facilities scheduled to open in 2000: (i) the 20,000-seat Staples Center in California, the new home of the National Hockey League ("NHL") Los Angeles Kings and the National Basketball Association ("NBA") Los Angeles Lakers and Los Angeles Clippers; (ii) the 66,000-seat Paul Brown Stadium (football) in Cincinnati, Ohio; and the 20,000 seat Pepsi Center Arena in Denver, Colorado, the new home of the NBA's Denver Nuggets and the NHL's Colorado Avalanche. During 1998 Entertainment sold their food and beverage concession agreements at several amphitheaters to SFX Entertainment, Inc. ("SFX"). In December 1998 Entertainment and SFX entered into a new master food and beverage concessions agreement at the amphitheaters controlled by SFX whereby Entertainment was granted the right to operate the food and beverage concessions, for a ten-year term, at the Blockbuster Amphitheater in Charlotte, North Carolina; Starwood Amphitheater in Nashville, Tennessee; Desert Sky Amphitheater in Phoenix, Arizona; and Coral Sky Amphitheater in West Palm Beach, Florida. In addition, SFX granted to Entertainment the exclusive right to sell food and beverages at any 10,000-seat (or larger) amphitheater that SFX acquires within the next ten years. 4 Entertainment provides food and beverage concession services at amphitheaters throughout the United States, including those listed in the following table: Name Location - ---- -------- PNC Bank Arts Center Holmdel, New Jersey Starlake Amphitheatre Pittsburgh, Pennsylvania Fiddlers Green Amphitheatre Englewood, Colorado Sandstone Amphitheatre Kansas City, Missouri Cynthia Woods Mitchell Pavilion Woodlands, Texas Meadows Music Theatre Hartford, Connecticut Camden Amphitheatre Camden, New Jersey Polaris Amphitheatre Columbus, Ohio Nissan Amphitheatre Manassas, Virginia Molson Amphitheatre Toronto, Canada Virginia Beach Amphitheatre Virginia Beach, Virginia Entertainment also develops and operates food courts in shopping malls. Under a typical arrangement, Entertainment and the mall owner will enter into a long-term master lease giving Entertainment exclusive use of the food court area. Entertainment then enters into franchise agreements covering the individual locations within the food court with national and regional food concept owners (Burger King, Sbarro's, Nathan's, etc.). While Entertainment generally seeks to act as franchisee of such concepts, in some cases Entertainment will sublease individual locations in the food court to a third party or will itself operate such locations as one or more of Entertainment's own, in-house "branded" concepts. Entertainment currently master leases food courts at the Arizona Mills mega mall in Tempe, Arizona and the Wonderland Mall in Livonia, Michigan. Restaurants - Entertainment developed and operates two new free-standing restaurant concepts: "The Wilderness Grill" at the Ontario Mills mega mall in Ontario, California and "The Wilderness Grill - Paradise Down Under" at the Sunset Place Mall in Miami, Florida. In addition, at The Block at Orange, located in Orange, California, Entertainment recently opened its first "Ron Jon's Surf Grill" restaurant, developed by Entertainment under a license agreement with Ron Jon's Surf Shop. Under the terms of such license agreement, Entertainment has the exclusive right to develop additional Ron Jon Surf Grill units in the United States during the term of the agreement. 5 Venue Management Entertainment is a leading provider of full facility management services at arenas and other sports and Entertainment facilities in the United States, Canada, Europe and Australia. Such services generally cover all aspects of the operation, including events booking, food and beverage concessions, crowd control, parking, set-up and tear-down for events, facility maintenance and repairs, etc. Entertainment's facility management venues currently include the following: Name Location - ---- -------- Arrowhead Pond of Anaheim Anaheim, California Corel Centre Ottawa, Canada Pensacola Civic Center Pensacola, Florida Sullivan Arena Anchorage, Alaska Egan Convention Center Anchorage, Alaska Target Center Minneapolis, Minnesota The Great Western Forum Los Angeles, California Newcastle Arena Newcastle, England Manchester Evening News Arena Manchester, England Bridgewater Hall Manchester, England Stadium Australia Sydney, Australia Arena Oberhausen Oberhausen, Germany Providence Civic Center Providence, Rhode Island Bakersfield Arena Bakersfield, California Blue Cross Arena Rochester, New York Temple University Arena Philadelphia, Pennsylvania In addition, Entertainment has been awarded venue management contracts at the 100,000 square foot Charleston Area Convention and Performing Arts Center in South Carolina scheduled to open in the spring of 1999 and the Northeast Pennsylvania Arena scheduled to open in November 1999. The Corel Center, a 19,000-seat multi-purpose indoor arena in Ottawa, Canada, opened in January of 1996. Pursuant to a 30-year agreement entered into in January 1996 between Entertainment and the arena's owner (the "Owner") Entertainment provides complete facility management and concession services at this arena, which is the home of the Ottawa Senators of the National Hockey League. Under the terms of the agreement, Entertainment has agreed that the Corel Centre, under Entertainment's management, will generate a minimum amount of revenues and has agreed to advance funds, if necessary, to cover cash shortfalls. The Owner is a party to a 30-year license agreement with the owner of the Ottawa Senators, pursuant to which the Ottawa Senators play their home games at the arena. Pursuant to a 30-year management agreement entered into in June 1993 between the City of Anaheim, California and a wholly-owned subsidiary of Entertainment, Entertainment manages 6 and operates the Arrowhead Pond, a facility owned by and located within the City of Anaheim. Entertainment has agreed that the Arrowhead Pond, under Entertainment's management, will generate a minimum amount of revenues computed in accordance with the terms of the management agreement. The Arrowhead Pond is a multi-purpose facility capable of accommodating professional basketball and hockey, concerts and other attractions, and has a maximum seating capacity of approximately 19,400. Entertainment also has a 30-year lease agreement entered into in June 1993 with The Walt Disney Company (which own the NHL Anaheim Mighty Ducks) pursuant to which the team plays its home games at the arena. Entertainment owns a 50% interest in the Australian and New Zealand business of the International Facility Corporation Pty. Ltd. ("IFC"), a private facility management firm based in Brisbane, Australia. IFC is the managing general partner for all of the Entertainment/IFC joint venture accounts in Australia and New Zealand. These accounts include the Brisbane Entertainment Centre, the Newcastle Entertainment Centre, the Cairns Convention Centre, and a significant interest in Convex, operator of the Brisbane Convention and Exposition Centre. IFC is also acting as a consultant for the design and construction, and will be providing ongoing management, of Stadium Australia in Sydney, Australia. Entertainment also manages and operates movie theatres. In 1997, Entertainment entered into a 15-year agreement with the County of San Bernardino, California to manage and operate the Ultra Screen(R) theatre owned by the County and located at the Ontario Mills mega mall in Ontario, California. In 1998, Entertainment entered into a 10-year agreement with the British Film Institute to manage and operate the BFI London IMAX(R) Cinema in London, England. Also, during 1998 Entertainment and Imax Corporation opened a jointly owned IMAX(R) theater at the Arizona Mills Mall in Tempe, Arizona. Entertainment is currently pursuing additional opportunities in this area. Specialty Casinos In 1998, Entertainment purchased Iguazu Grand Hotel Resort & Casino, which is located in Argentina at the intersection of the borders of Brazil and Paraguay. Situated on 14.8 acres, this resort property features a five-star, 60-room hotel, conference center, business center, premier restaurant and casino. The casino enjoys an exclusive gaming license in the Province of Misiones in Argentina. Entertainment is currently exploring additional activities in the casino and leisure area, with an emphasis on special situations which, in management's view, represent unusual opportunities not being pursued by the major gaming companies. Of special interest are opportunities to develop or acquire casino operations that enjoy an exclusive license to operate in their geographic area, or which otherwise operate in areas of limited competition. In a related area, Entertainment also leases and operates the Fairmount Park thoroughbred and harness racetrack in Collinsville, Illinois and four off-track betting parlors in Illinois that receive telecast races from Fairmount Park, and other racing facilities. Entertainment also operates restaurants and other food and beverage services at the racetrack and the off-track parlor 7 locations. A large portion of Fairmount Park's revenue is derived from its share of the pari-mutuel pool, which can be adjusted by state legislation. Other revenue is derived from admission charges, parking, program sales and concessions. Metropolitan Entertainment Group The Metropolitan Entertainment Group, in which Entertainment owns a 50% interest, is a leading concert promoter in New York, New Jersey, Connecticut, and part of Massachusetts. Metropolitan conducts concert promotion activities, operates amphitheaters in the eastern United States, and concentrates on national and global music tours, artist management, Broadway and television productions, recording, and music publishing. Through a long-term lease, Metropolitan operates the 20,000, capacity Darien Lake Performing Arts Center located in Darien Lake, New York. Metropolitan has also established its own record label, Hybrid Recordings. AVIATION Aviation provides specialized support services to airlines and designs, finances, builds and operates major airport facilities and other aviation infrastructure projects throughout the world. Specialized support services include airport development and management; ground handling and passenger services; cargo facility development and operations; and fueling and fuel facility management. These diversified services are performed through joint ventures, consortiums, contracts with individual airlines, consolidated agreements with several airlines, and contracts with various airport authorities. As of February 1999, Aviation was present at 116 airports in 24 countries and serves more than 350 airlines. Some customers of Aviation are billed on a cost-plus or fixed-price basis. Where services are performed on a cost-plus basis, the customer reimburses Aviation for all acceptable reimbursable expenditures made in connection with the job. Many Aviation contracts may be written on a month-to-month basis or provide for a longer or indefinite term but are terminable by either party on notice varying from 30 to 180 days. During January 1998, Aeropuertos Argentina 2000, a consortium among Aviation, which has a 20% interest, and its Italian and Argentine partners, was awarded an exclusive 30-year license by the Government of Argentina to provide management services, improvements, and operations at 33 airports in Argentina. The consortium will finance and implement capital improvements and manage, operate, and commercially develop these airports. Consortium revenues will be earned from aircraft landing fees, ground handling, cargo operations, parking, advertising, terminal retail sales, and passenger departure fees. The consortium will commit $100 million in equity to the project and provide the Government of Argentina with fixed concession payments of at least $171 million per year. An 18-month phase-in schedule commenced the end of May 1998 with the takeover of the international and domestic airports in Buenos Aires - Ezeiza International Airport and Aeroparque Jorge Newbery. Substantial improvements are planned and groundbreaking for essential infrastructure development projects are anticipated to commence by May 1999. 8 During 1998, a consortium in which Aviation has a 19.9% interest, opened a second runway at the Eldorado International Airport in Bogata, Colombia. The consortium maintains both runways at Eldorado and retains all landing fees until the year 2015. During 1998, an Aviation-led consortia submitted proposals and prequalification documents necessary to participate in airport privatizations in Central America, South America and the West Indies. Aviation's ground handling services include diversified ramp operations such as aircraft loading and unloading, aircraft cleaning, aircraft maintenance, flight planning, de-icing, interline baggage transfer, push-back and towing, and passenger-related services such as terminal check-in and ticketing, VIP passenger handling, the operation of passenger lounges, and other miscellaneous services. While these services are principally conducted in the United States, global expansion by the Aviation group has resulted in providing comprehensive ground handling and passenger services at many international gateways throughout Europe, South America, the Caribbean, and Asia-Pacific. Major foreign airports where Aviation currently conducts both ground handling and passenger services include: Airport Location - ------- -------- Reina Beatrix International Airport Aruba, Netherlands Antilles Galaeo International Airport Rio de Janeiro, Brazil Arturo Marino Benitez Airport Santiago, Chile Praha Ruzyne Airport Prague, Czech Republic Hong Kong International Airport Lantau, Hong Kong Macau International Airport Taipa, Macau Mexico City International Airport Mexico City, Mexico Amsterdam Airport Schiphol Amsterdam, Netherlands Auckland International Airport Auckland, New Zealand Jorge Chavez International Airport Lima, Peru Bucharest-Otopeni Airport Bucharest, Romania Princess Juliana International Airport St. Maarten, Netherlands Antilles Simon Bolivar Airport Caracas, Venezuela During 1998, Aviation continued the expansion of its operations into several new markets throughout Asia, Europe, and South America. On July 6, 1998, Aviation began performing ground handling and passenger services at the new Hong Kong International Airport. Aviation's Hong Kong operation is part of a joint venture agreement between Aviation and Dresdner Kleinwort Benson ("DKB"), which owns a 20% interest in the joint venture. Aviation retains a majority interest and operating control of the joint venture whose operations geographically extends from India into mid-Asia and the Pacific Rim, excluding Aviation's Macau operations. Aviation is one of three license holders at the new airport for aircraft ramp services and provides ground handling, passenger services, cargo handling, loading and unloading of mail and baggage, and other related services. This operation positions Aviation for targeted growth not only in China but throughout Asia-Pacific as well. 9 Aviation increased its presence in Eastern Europe with the commencement of ground handling operations at Bucharest-Otopeni Airport in Romania. Present at this airport since late 1997, Aviation began full ground handling operations with the scheduled opening of the new terminal in July 1998. In 1998, three airports in Mexico - Puebla, Tampico, and Veracruz - were added to the group's ground handling client base. Aviation also performs passenger handling and/or other related aviation services at 15 airports throughout Mexico, 11 airports across the United States, seven airports in Germany, and four in Canada. Aviation continues to perform services at St. Maarten's Princess Juliana International Airport where its license has been extended through 2008. In Aruba, through a corporation jointly owned by Aviation and Air Aruba, Aviation provides ramp and passenger services at Reina Beatrix International Airport. Other ground handling operations are provided at the Guarulhos International Airport in Sao Paulo, Brazil; Pearson International Airport in Toronto, Canada; and Gregorio Luperon International Airport in Puerto Plata, Dominican Republic. In 1995, a consortium comprised of Aviation, Macau Aviation Services Corporation, EVA Airways, Air Macau, and several local companies and prominent businessmen, entered into a 19-year agreement, with 16 years of exclusive control, to provide ramp and cargo handling, passenger services, and aircraft line maintenance at the Macau International Airport. The consortium, of which Aviation is the managing partner with a 29% participation, provides all necessary passenger and ramp equipment and constructed a cargo warehouse and engineering facilities, an aircraft hangar, and state-of-the-art training center at the airport. The consortium's investment in infrastructure developments and ancillary equipment at Macau International Airport is approximately $40 million. Through a 75% interest in a Prague-based airport handling company, Aviation opened a new $20 million, 10,000-square meter cargo terminal in September 1998 at Praha Ruzyne Airport in Prague, Czech Republic. The Prague cargo facility is expected to position the airport as a major cargo hub within Europe. In March 1998, Aviation acquired a 50% interest in the Talma cargo operations at the Jorge Chavez International Airport and at C.F. Secada Airport, located in Lima and Iquitos, Peru, respectively. Talma is Peru's leading provider of airport handling and services for international and domestic air freight. This acquisition expands Aviation's existing operation at Jorge Chavez International to include import and export, cargo handling, and warehousing through facilities totaling 33,000 square meters. Through a joint venture with Aldeasa S.A. of Spain, Aviation provides cargo handling and warehousing services in Spain at airports located in Barcelona and Madrid. Aviation provides into-plane fueling at twenty-six (26) installations and operates fueling facilities, including storage and hydrant fueling systems for the fueling of aircraft. This operation assists airlines and airports in designing, arranging financing, and installing underground and above-ground fueling systems. Fueling operations are performed primarily in North America, including the maintenance and operation of a new fuel farm located at San Diego International Airport. Aviation provides into-plane fueling at major airports in Canada (Montreal and Toronto), the United States (Dallas/Fort Worth; Houston; Kansas City; New York's John F. Kennedy International and LaGuardia Airport; Newark; Philadelphia; and Ronald Reagan 10 Washington National Airport in Washington, D.C.), as well as Panama (Panama City) and in Puerto Rico (San Juan). Consistent with Aviation's long-term objectives, Aviation finalized the sale of its in-flight catering business in July 1998. The sale of the in-flight catering business was based on management's decision that its projected long-term growth would not provide the required levels of return. ENTERTAINMENT AND AVIATION Recent Developments During March 1999 Entertainment entered into definitive agreements to acquire the following water parks: (i) Wet 'N Wild(R), Inc. a leading water amusement park company with operations in the United States and Latin America. International franchise agreements also exist for several locations in Mexico and Brazil. (ii) Emerald Point Water Park located in Greensboro, North Carolina. Emerald Point is situated on approximately 35 acres and offers 34 rides and attractions including a large wave pool, a Skycoaster(R) ride and an artificial outdoor climbing wall. (iii) San Jose Raging Waters park, a 24-acre water park located in San Dimas, California. During the first quarter of 1999, Aviation acquired 100% of the operations of Flight Services Group, Inc. ("FSG"), a Connecticut - based company that provides corporate aircraft maintenance and management, aircraft charter, aircraft fueling, and aircraft sales brokerage services. FSG has on-site locations at Teterboro, New Jersey; Stratford, Connecticut; Norwich, New York; and West Palm Beach, Florida. During the first quarter of 1999 a consortium, of which Aviation owns a 32% interest, was awarded a 20-year concession to design, finance, and construct capital improvements at four major international airports in the Dominican Republic; Las Americas (serving the capital city of Santo Domingo); Gregorio Luperon (Puerto Plata); Arroyo Barril (Samana); and Maria Montez (Barahona). The consortium will establish a local operating company that will collect and retain airport revenues from aircraft landing and parking fees; "port" fees from service providers (ground handling, cargo operations, in-flight catering, and fueling); passenger facility charges; and all commercial revenues, rents and utility fees. 11 ENERGY Ogden's Energy segment seeks to develop, own or operate energy generating facilities in the United States and abroad that utilize a variety of fuels, as well as water and wastewater facilities that will similarly serve communities on a long-term basis. The operations of Ogden's Energy segment are conducted by Ogden Energy Group, Inc. and subsidiaries through four principal business areas: independent power; waste-to-energy; water and wastewater; and environmental consulting, engineering and construction (collectively, together with its subsidiaries, the "Energy Group"). Since the early 1980's, the Energy Group has been engaged in developing and in some cases owning energy-generating projects fueled by municipal solid waste, and providing long-term services from these projects to communities. The Energy Group is now the largest full service vendor (i.e., builder/operator) in the world for large-scale waste-to-energy projects. In addition, since 1989, the Energy Group has been engaged in developing, owning and/or operating independent power production projects. The Energy Group's involvement in the operation of water and wastewater facilities began in 1994. The Energy Group generally seeks to participate in projects in which it can make an equity investment and become the operator; its returns will be derived from equity distributions and/or operating fees. It also seeks to have a role in the development of the projects. The types of projects in which the Energy Group seeks to participate sell the electrical power services they generate, or the waste or water-related services they provide, under long-term contracts or market concessions to utilities, government agencies providing power distribution, creditworthy industrial users, or local government units. For power projects utilizing a combustible fuel or geothermal sources, the Energy Group typically seeks projects which have a secure supply of fuel or geothermal brine through long-term supply arrangements or by obtaining control of the fuel source. Similarly, for water and wastewater-related services, the Energy Group seeks to operate under long-term contracts with governmental units or market concessions. The Energy Group generally looks to finance its projects using equity or capital commitments provided by it or other investors, combined with non-recourse debt for which the lender's source of payment is project revenues and assets. Consequently, the ability of the Energy Group to declare and pay cash dividends to the Company is subject to certain limitations in the project loan and other documents entered into by such project subsidiaries. In some project situations, limited support by the Energy Group or Ogden has been provided and in the future may be considered, such as operating guarantees, financial guarantees of bridge loans or other interim debt arrangements. The number of projects being pursued at any given time by the Energy Group will fluctuate. The complexities and uniqueness of international project development in particular requires that the Energy Group continually assess the likelihood of successful project financing throughout the development stage and weigh that against the expected benefits. In addition, the Energy Group may, depending upon circumstances and at the appropriate time, elect to dispose of a portion of an equity interest it may have in a project after financing. 12 The Energy Group presently has interests in projects with an aggregate generating capacity in excess of 2700 MW (gross) either operating or under construction in the United States, Central and South America, and Asia. It continues to seek to expand its ownership and operation of projects in these and other regions. The Energy Group's business is facilitated through field offices in Hong Kong; Manila, the Philippines; Taipei, Taiwan; Sao Paulo, Brazil; and Calcutta, India. Independent Power The Energy Group's independent power business is conducted by its wholly-owned subsidiary, Ogden Energy, Inc. ("OEI"). OEI develops, operates and/or invests in independent (i.e., non-utility) energy generation ("Independent Power Production" or "IPP") projects which sell their output to utilities, electricity distribution companies or industrial consumers in the United States and abroad. The activities of this group do not include the development of generating facilities fueled by municipal solid waste, which are conducted by the waste-to-energy group, discussed below. Where possible, the Energy Group attempts to sell electricity under long-term power sales contracts. The Energy Group attempts to structure the revenue provisions of such power sales contracts such that the revenue components of such contracts correspond, as effectively as possible, to the projects' cost structure (including changes therein due to inflation and currency fluctuations) of building, financing, operating and maintaining the projects. On many of its projects, the Energy Group performs operation and maintenance services on behalf of the project owner. While all operation and maintenance contracts are different, the Energy Group typically seeks to perform these services on a cost-plus-fixed-fee basis, with a bonus and limited penalty payment mechanism related to specified benchmarks of plant performance. (a) Facilities Under Construction. o Quezon, the Philippines. A consortium, of which the Energy Group is a 26% member, has a 500 MW (gross) coal-fired electric generating facility in the Republic of the Philippines (the "Quezon Project"). Construction is expected to be completed during the third quarter, 1999. The other members of the consortium are affiliates of International Generating Company, an affiliate of Bechtel Enterprises, Inc., an affiliate of General Electric Capital Corporation, and PMR Limited Co., a Philippines partnership. The consortium entered into a power purchase agreement with Manila Electric Company ("Meralco"), the largest electric distribution company in the Philippines, which serves the area surrounding and including metropolitan Manila. Under a long-term agreement, Meralco is obligated to take or pay for stated minimum annual quantities of electricity produced by the facility on terms and at prices set forth in the agreement. The consortium has entered into contracts for the supply of coal at stated prices for a portion of the term of the power purchase agreement. 13 The turnkey contractors are affiliates of Bechtel Enterprises, Inc. The Energy Group will operate the Quezon Project on behalf of the consortium under a long-term contract. The Energy Group will receive certain limited amounts of revenue from the Quezon Project during construction. Operating revenue is expected to commence upon commercial operation, projected for the fourth quarter of 1999. o Haripur, Bangladesh. In 1998, the Energy Group 982122879acquired an equity interest in a barge-mounted 122 MW diesel/natural gas fired facility located near Haripur, Republic of Bangladesh. This project is under construction, and commercial operation is expected in June, 1999. The project will be operated by the Energy Group. The Energy Group will own approximately 45% of the project company equity if it exercises its options to acquire the project company's 982123084stock. An affiliate of El Paso Energy Corporation will own 50% of such equity, and the remaining interests will be held by Wartsila NSD North America, Inc. and/or the local developer. The electrical output of the project will be sold to the Bangladesh Power Development Board (the BPDB) pursuant to a long-term agreement. That agreement also obligates the BPDB to supply all of the natural gas requirements of the project. The BPDB's obligations under agreement are guaranteed by the Government of Bangladesh. (b) Operating Facilities. The Energy Group's operating IPP projects utilize a variety of energy sources: water (hydroelectric), natural gas, coal, geothermal energy, wood waste, landfill gas, and diesel fuel. o Domestic Projects o Geothermal Energy. The Energy Group has interests in two geothermal facilities in Southern California, the Heber and SIGC facilities, with a combined gross generating capacity of 100 MW. These facilities are both leaseholds, with the Energy Group as the sole lessee of the SIGC project and holding a 50% partnership interest in the Heber project lessee. The Energy Group operates these facilities. The Energy Group also owns a 50% partnership interest in a geothermal resource, which is adjacent to and supplies fluid to both geothermal facilities. The electricity from both projects is sold under long-term contracts with Southern California Edison. The Energy Group also owns a 50% partnership interest in Mammoth-Pacific, L.P., which owns three geothermal power plants with a gross capacity of 40 MW, located on the eastern slopes of the Sierra Nevada Mountains at Casa Diablo Hot Springs, California. The projects have contractual rights to the geothermal brine resource for a term not less than the term of the power contracts. All three projects sell electricity to Southern California Edison under long-term contracts. 14 o Hydroelectric. The Energy Group owns 50% equity interests in three run-of-river hydroelectric projects which generate a total of 30 MW: Bangor Pacific Hydroelectric Project ("Bangor"), Koma Kulshan Hydroelectric Project ("Koma Kulshan") and Weeks Falls Hydroelectric Project ("Weeks Falls"). The Bangor facility is in Maine; the other two, in Washington State. Bangor sells its electricity to Bangor-Hydro Electric Company under a long-term contract, while Koma Kulshan and Weeks Falls each sell electricity to Puget Sound Power & Light Company under long-term contracts. The Energy Group is seeking a buyer for the Bangor project; any such sale is not expected to be material to the Energy Group's business. The Catalyst New Martinsville, West Virginia project, is a 40 MW run-of-river project which is operated through a subsidiary. The Energy Group is the lessee. The output is sold under a long-term contract with Monongahela Power Company. o Waste Wood. The Energy Group owns 100% interests in three waste wood fired electric power plants in California: Burney Mountain Power Station, Mount Lassen Power Station and Pacific Oroville Power Station. A fourth, Pacific Ultrapower Chinese Station Power Station, is owned by a partnership in which the Energy Group holds a 50% interest. Generally, fuel supply is procured from local sources through a variety of short-term waste wood supply agreements. The four projects have a gross capacity of 67 MW. All four projects sell electricity to Pacific Gas & Electric Company under long-term contracts. o Landfill Gas. The Energy Group owns and operates eight landfill gas projects which produce electricity by burning methane gas produced by the anaerobic digestion of the solid waste contained in sanitary landfills. Seven of the projects are located in California, and one is located in Maryland. The eight projects have a gross capacity of 43 MW. All sell electricity generated to local utilities, under contracts having varying lengths, the longest expiring in 2011. o Natural Gas. The Energy Group's domestic natural gas project is the operation by the Energy Group of the Brandywine, Maryland facility, a 240 MW facility whose output is sold to Potomac Electric Power Company. This project is owned by an affiliate of Panda Energy, and the Energy Group's contract for operations will expire in the fourth quarter of 1999, unless renewed by Panda Energy at that time. 15 o International Projects o Hydroelectric. The Energy Group has ownership interests in the Don Pedro project and the Rio Volcan project in Costa Rica through an equity investment in Energia Global, Inc. ("EGI"). Don Pedro and Rio Volcan are leased by EGI and operated by the Energy Group under long-term contracts. The electric output from both of these facilities is sold to Instituto Costarricense de Electricidad, a local utility. o Coal. The Energy Group has majority equity interests in four coal-fired cogeneration facilities in three different provinces in the Peoples Republic of China. These projects are operated, in each case, by an affiliate of the minority equity stakeholder in the projects. Parties holding minority positions in the projects include a private company, a local government enterprise and in the remaining two cases, affiliates of the local municipal government. A majority of the electrical output of the projects is sold to the relevant local Municipal Power Bureau and steam is sold to various host industrial facilities, both pursuant to long-term power and steam sales agreements. o Natural Gas. The Energy Group owns an interest in Empresa Valle Hermoso ("EVH") which was formed by the Bolivian government as part of the capitalization of the government-owned utility ENDE. EVH owns and operates 215 MW of gas-fired generating capacity. The Energy Group also participates in a joint venture that supplies EVH with management services support. The Energy Group executed definitive agreements to acquire ownership interests in two 122 MW gas-fired combined cycle facilities in Thailand: the Sahacogen facility and the Rojana Power facility. Both facilities, which are expected to commence operations in the second quarter of 1999, will sell power under long-term contracts to adjacent industrial parks, and the excess will be sold into the national power grid. The Energy Group will acquire a 74% ownership interest in the Sahacogen facility, and a 25% ownership interest the Rojana Power facility. Both facilities will be operated under the supervision of the Energy Group. As part of these agreements, the Energy Group also will acquire an operating company which currently operates a third gas-fired facility in Thailand, the Gulf Co-Generation facility. This facility has a gross capacity of 110 MW, and sells its output to an adjacent industrial park and into the national power grid. o Diesel. The Energy Group has ownership interests in three diesel fuel facilities in the Philippines. The Bataan Cogeneration project is a 65 MW facility that has a long-term contract to sell its electrical output to the National Power Corporation (with which it also has entered into a 16 fuel management agreement for fuel supply) and the Bataan Export Processing Zone Authority. The Island Power project is a 7 MW facility that has a long-term power contract with the Occidental Mindoro Electric Cooperative. Both projects are operated by the Energy Group. In 1998, the Energy Group executed definitive agreements for the acquisition of 100% of the stock of a Philippine company that owns and operates a 65 MW diesel fired electric generating facility located in the province of Cavite, the Philippines. This project sells a portion of its energy and capacity to the National Power Corporation and a portion to the Cavite Export Processing Zone Authority pursuant to long-term power purchase agreements. This acquisition was completed in February, 1999. c) Project Summaries. Certain information with respect to the Energy Group's IPP projects as of March 1, 1999 is summarized in the following table: IPP PROJECTS Date of Acquisition/ Commencement In Operation Location Size Nature of Interest of Operations - ------------ -------- ---- ------------------ ------------- A. Hydroelectric 1. New Martinsville West Virginia 40MW Lessee/Operator 1991 2. Rio Volcan Costa Rica 16MW Part Owner/Operator 1997 3. Don Pedro Costa Rica 16MW Part Owner/Operator 1996 4. Bangor(1) Maine 13MW Part Owner/Operator 1997 5. Koma Kulshan(1) Washington 12MW Part Owner 1997 6. Weeks Falls(1) Washington 5MW Part Owner 1997 B. Geothermal 1. Heber (2)(3) California 52MW Lessee/Operator 1989 2. SIGC (3) California 48MW Lessee/Operator 1994 3. Mammoth G1(1) California 10MW Part Owner/Operator 1997 4. Mammoth G2(1) California 15MW Part Owner/Operator 1997 5. Mammoth G3(1) California 15MW Part Owner/Operator 1997 17 C. Natural Gas 1. Empresa Valle Bolivia 215MW Part Owner/ 1995 Hermoso (4) Operations Mgmt. 2. Brandywine Maryland 240MW Operator 1996 3. Sahacogen Thailand 122MW Owner 1999 4. Rojana Thailand 122MW Owner 1999 5. Gulf Co. Generation Thailand 110MW Operator 1999 D. Coal 1. Lin'an(5) China 24MW Part Owner 1997 2. Huantai(5) China 24MW Part Owner 1997 3. Taixing(5) China 24MW Part Owner 1997 4. Yanjiang(5) China 24MW Part Owner 1997 E. Diesel 1. Island Power Philippines 7MW Part Owner/ 1996 Corporation(6) Operator 2. Bataan Philippines 65MW Owner/Operator 1996 Cogeneration 3. Magellan Philippines 65MW Owner/Operator 1998 F. Waste Wood 1. Burney California 11.4MW Owner/Operator 1997 2. Chinese(1) California 25.6MW Part Owner 1997 3. Mount Lassen California 11.4MW Owner/Operator 1997 4. Oroville California 18.7MW Owner/Operator 1997 G. Landfill Gas 1. Gude Maryland 3MW Owner/Operator 1997 2. Otay California 3.7MW Owner/Operator 1997 18 3. Oxnard California 5.6MW Owner/Operator 1997 4. Penrose California 10MW Owner/Operator 1997 5. Salinas California 1.5MW Owner/Operator 1997 6. Santa Clara California 1.5MW Owner/Operator 1997 7. Stockton California 0.8MW Owner/Operator 1997 8. Toyon California 10MW Owner/Operator 1997 Under Construction: 1. Quezon (7) Philippines 500MW Part Owner/Operator 1999(est.) 2. Haripur (8) Bangladesh 122MW Part Owner/Operator 1999(est.) -------- Total 2015.4MW ======== Notes (1) The Energy Group has a 50% ownership interest in the project. (2) The Energy Group is a 50% partner in the project entity which leases the facility from a third-party lessor. The lease expires in 2000 and is subject to a 15-year renewal at the option of the Energy Group and its joint venture partner. (3) The Energy Group is a 50% partner of the lessee of the resource supplying fluid to the project, and the lessor is the same third-party that leases the Heber project to that project entity. (4) The Energy Group owns an approximate 24% interest in a consortium that purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by Bolivian pension funds. (5) The Energy Group has a 60% ownership interest in this project. (6) The Energy Group has an approximately 40% ownership interest in this project. (7) The Energy Group has an approximately 26% ownership interest in the project. (8) The Energy Group has a 23% ownership interest in this project, which may increase to an approximately 45% interest, depending upon the exercise of certain options by the Energy Group and other project owners. In addition, this project is capable of operating through combustion of diesel oil in addition to natural gas. 19 (d) Other Development Efforts. The Energy Group is actively pursuing a number of projects, some of which have achieved significant development milestones such as executed power purchase agreements, or receipt of key governmental approvals. Included in this category is the development of a 500 MW gas combined cycle merchant plant to be located at the same site as the Energy Group's existing Burney facility in Shasta County, California. As with all development efforts, however, there are in each case numerous conditions to be satisfied prior to financing, some of which are not within the Energy Group's control. As such, no assurance can be given that these projects will ultimately be developed successfully. Waste-To-Energy The Energy Group's waste-to-energy operations are managed through a wholly-owned subsidiary, Ogden Waste to Energy, Inc. ("OWTE"). Waste-to-energy facilities combust municipal solid waste to make saleable energy in the form of electricity or steam. This group completed construction of its first waste-to-energy project in 1986. It currently operates 27 waste-to-energy projects at 26 locations. OWTE's subsidiaries are the owners or lessees of 17 of its waste-to-energy projects. The Energy Group has the exclusive right to market in the United States the proprietary, mass-burn technology of Martin GmbH fur Umwelt und Energietechnik ("Martin"). All of the waste-to-energy facilities the Energy Group has constructed use this Martin technology. In addition, the Energy Group operates waste-to-energy facilities using other technologies. Generally, the Energy Group provides waste-to-energy services pursuant to long-term service contracts ("Service Agreements") with local governmental units sponsoring the waste-to-energy project ("Client Communities"). Certain of its waste-to-energy facilities do not have sponsoring Client Communities. (a) Terms and Conditions of Service Agreements. Each Service Agreement is different in order to reflect the specific needs and concerns of the Client Community, applicable regulatory requirements, and other factors. The following description sets forth terms that are generally common to these agreements: o The Energy Group designs the facility, helps to arrange for financing, and then constructs and equips the facility on a fixed price and schedule basis. o The Energy Group operates the facility and generally guarantees it will meet minimum processing capacity and efficiency standards, energy production levels, and environmental standards. The Energy Group's failure to meet these guarantees or to otherwise observe the material terms of the Service Agreement (unless caused by the Client Community or by events beyond its control ("Unforeseen Circumstances")) may result in liquidated damages being charged to the Energy Group or, if the breach is substantial, continuing and unremedied, the termination of the Service Agreement. In the case of such Service Agreement termination, 20 the Energy Group may be obligated to discharge project indebtedness. o The Client Community is generally required to deliver minimum quantities of municipal solid waste ("MSW") to the facility and is obligated to pay a service fee for its disposal, regardless of whether that quantity of waste is delivered to the facility. The service fee escalates to reflect indices of inflation. In many cases the Client Community must also pay for other costs, such as insurance, taxes, and transportation of the residue to the disposal site. If the facility is owned by the Energy Group, the Client Community also pays as part of the Service Fee an amount equal to the debt service due to be paid on the bonds issued to finance the facility. Generally, expenses resulting from the delivery of unacceptable and hazardous waste on the site are also borne by the Client Community. In addition, the contracts generally require that the Client Community pay increased expenses and capital costs resulting from Unforeseen Circumstances, subject to limits which may be specified in the Service Agreement. o The Client Community usually retains a portion of the energy revenues (generally 90%) generated by the facility, with the balance paid to the Energy Group. (b) Other Arrangements for Providing Waste-to-Energy Services. The Energy Group owns one facility that is not operated pursuant to a Service Agreement with a Client Community. The Energy Group may undertake additional such projects in the future. In such projects, the Energy Group generally assumes the project debt and risks relating to waste availability and pricing, risks relating to the continued performance of the electricity purchaser, as well as risks associated with Unforeseen Circumstances. In these projects, the Energy Group generally retains all of the energy revenues from sales of power to utilities or industrial power users and disposal fees for waste accepted at these facilities. Accordingly, the Energy Group believes that such projects carry both greater risks and greater potential rewards than projects in which there is a Client Community. In addition, the Energy Group has recently undertaken, together with two Client Communities, restructuring of its waste-to-energy projects in response to the demise of certain local laws permitting municipalities to require delivery of waste to specific facilities. One of these restructurings, in Union County, New Jersey, is final. The other, in Warren County, New Jersey, is in progress. In Union County, the facility has been leased to the Energy Group, and the Client Community has agreed to deliver approximately 50% of the facility's capacity on a put-or-pay basis. The balance of facility capacity will be marketed by the Energy Group, at its risk. The Company provided limited credit support in the form of an operating performance guaranty, as well as a rent guaranty supporting one series of subordinated bonds. In Warren County, the Energy Group has agreed to market the facility's capacity, at its risk, in a restructuring plan that includes State assistance with debt retirement. The Warren 21 County restructuring is subject to several conditions precedent, some of which are beyond the control of the Energy Group, notably the securing of State funds. While some funds are currently available to the State that could be used in connection with the Warren restructuring, state legislation has been introduced that would create a source of additional funding for payment of project debt. There can be no assurance, however, that an acceptable contractual and legislative resolution will be achieved. If such a resolution cannot be achieved, the Warren County Client Community may be forced to default on its obligations, including obligations to bondholders, in which case a restructuring would need to be addressed between the Energy Group and the project's lenders and credit enhancement providers. The State of New Jersey continues to publicly state that it will not allow a bond default to occur. The Energy Group may consider additional such restructuring in the future. (c) Project Financing. Financing for the Energy Group's domestic projects is generally accomplished through the issuance of tax-exempt and taxable revenue bonds issued by or on behalf of the Client Community. If the facility is owned by the Energy Group subsidiary the Client Community loans the bond proceeds to the subsidiary to pay for facility construction, and pays to the subsidiary amounts necessary to pay debt service. For such facilities, project-related debt is included as a liability in Ogden's consolidated financial statements. Generally, such debt is secured by the revenues pledged under the respective indenture and is collateralized by the assets of the Energy Group subsidiary and otherwise provides no recourse to Ogden, subject to construction and operating performance guarantees and commitments. (d) OWTE Projects. Certain information with respect to projects as of March 1, 1999 is summarized in the following table: 22 WASTE-TO-ENERGY PROJECTS Boiler Commencement Units Tons per Day Units of Operations - ----- ------------ ----- ------------- Tulsa, OK (I) (1) 750 2 1986 Marion County, OR 550 2(2) 1987 Hillsborough County, FL (3) 1,200 3(2) 1987 Tulsa, OK (II) (1)(4) 375 1 1987 Bristol, CT 650 2(2) 1988 Alexandria/Arlington, VA 975 3 1988 Indianapolis, IN 2,362 3(2) 1988 Hennepin County, MN (1)(5) 1,000 2 1989 Stanislaus County, CA 800 2 1989 Babylon, NY 750 2(2) 1989 Haverhill, MA 1,650 2 1989 Warren County, NJ (5) 400 2 1988 Kent County, MI (3) 625 2(2) 1990 Wallingford, CT (5) 420 3(2) 1989 Fairfax County, VA 3,000 4(2) 1990 Huntsville, AL (3) 690 2(2) 1990 Lake County, FL 520 2(2) 1991 Lancaster County, PA (3) 1,200 3(2) 1991 Pasco County, FL (3) 1,050 3(2) 1991 Huntington, NY (6) 750 3(2) 1991 Hartford, CT (3)(7)(8) 2,000 3 1987 Detroit, MI (1)(8) 3,300 3 1991 Honolulu, HI (1)(8) 2,160 2 1990 Union County, NJ (3) 1,440 3 1994 Lee County, FL (3) 1,200 2(2) 1994 Onondaga County NY (6) 990 3 1995 Montgomery County, MD (3) 1,800 3(2) 1995 ------ Total 32,607 ====== - ---------- (1) Facility is owned by an owner/trustee pursuant to a sale/leaseback arrangement. (2) Facility has been designed to allow for the addition of another unit. (3) Facility is owned by the Client Community. (4) Phase II of the Tulsa facility, which was financed as a separate project, expanded the capacity of the facility from two to three units. (5) Energy Group subsidiaries were purchased after completion, and use a mass-burn technology that is not the Martin Technology. (6) Owned by a limited partnership in which the limited partners are not affiliated with Ogden. (7) Under contracts with the Connecticut Resource Recovery Authority and Northeast Utilities, the Energy Group operates only the boiler and turbine for this facility. 23 (8) Operating contracts where acquired after completion. Facility uses a refuse-derived fuel technology and does not employ the Martin Technology. In addition, during 1998 the Energy Group closed down one non-Martin waste-to-energy facility. This facility was not material to the Energy Group's business. (e) Technology. The principal feature of the Martin Technology is the reverse-reciprocating stoker grate upon which the waste is burned. The patent for the basic stoker grate technology used in the Martin Technology expired in 1989. The Energy Group believes that unexpired patents on other portions of the Martin Technology and other proprietary know-how would limit the ability of other companies to effectively use the basic stoker grate technology in competition with the Energy Group. There are several unexpired patents related to the Martin Technology including: (i) Grate Bar for Grate Linings, especially in Incinerators - expires, 1999; (ii) Method and Arrangement for Reducing NOx Emissions from Furnaces - expires 2000; (iii) Method and Apparatus for Regulating the Furnace Output of Incineration Plants - expires 2007; (iv) Method for Regulating the Furnace Output in Incineration Plants - expires 2008; and (v) Feed Device with Filling Hopper and Adjoining Feed Chute for Feeding Waste to Incineration Plants - expires 2008. More importantly, the Energy Group believes that it is Martin's know-how and worldwide reputation in the waste-to-energy field, and the Energy Group's know-how in designing, constructing and operating waste-to-energy facilities, rather than the use of patented technology, that is important to the Energy Group's competitive position in the waste-to-energy industry in the United States. Ogden does not believe that the expiration of the patent covering the basic stoker grate technology or patents on other portions of the Martin Technology will have a material adverse effect on Ogden's financial condition or competitive position. The Energy Group believes that mass burn technology is now the predominant technology used for the combustion of solid waste. Overall, there are several other mass-burn technologies available in the market including those of Von Roll, W+E, Takuma, Volund, Steinmueller, Deutsche Babcock, Lurgi, and Detroit Stoker. Martin and other vendors seek to implement improvements and modifications to its technology in order to maintain their competitive position with non-mass burn technologies. The Energy Group believes that the Martin technology is a proven and reliable mass burn technology, and that its association with Martin has created significant name recognition and value for the Energy Group's domestic waste-to-energy business. The Energy Group's efforts internationally have not been technology-specific. (f) The Cooperation Agreement. Under an agreement between Martin and an Ogden affiliate (the "Cooperation Agreement"), the Energy Group has the exclusive rights to market the proprietary technology (the "Martin Technology") of Martin in the United States, Canada, Mexico, Bermuda, certain Caribbean countries, most of Central and South America, and Israel. Martin is obligated to assist the Energy Group in installing, operating, and maintaining facilities incorporating the Martin Technology. The 15 year term of the Cooperation Agreement renews automatically each year unless notice of termination is given, in which case the Cooperation Agreement would terminate 15 years after such notice. Additionally, the Cooperation Agreement may be terminated by either party if the other fails to remedy its material default within 90 days of notice. The 24 Cooperation Agreement is also terminable by Martin if there is a change of control (as defined in the Cooperation Agreement) of Ogden Martin Systems, Inc. Termination would not affect the rights of the Energy Group to design, construct, operate, maintain, or repair waste-to-energy facilities for which contracts have been entered into or proposals made prior to the date of termination. (g) Other Development Efforts. The Energy Group has no commitments in its waste-to-energy backlog as of December 31, 1998. Water And Wastewater The Energy Group's water and wastewater business is conducted through Ogden Water Systems, Inc. ("OWS"). OWS's mission is to develop, design, construct, maintain, operate and, in some cases, own, water and wastewater treatment facilities and distribution and collection networks in the United States, the Middle East, Latin America and elsewhere. OWS is an outgrowth of Ogden Yorkshire Water Company ("OYWC"), which was a joint venture between the Energy Group and a British water utility, Yorkshire Water PLC. In 1996 Yorkshire Water PLC determined that it needed to refocus its efforts on its core business in the United Kingdom, and terminated its ownership interest in OYWC and its projects. In the United States, the Energy Group seeks to participate in water projects in which, under contracts with municipalities, it privatizes water and/or wastewater facilities, agrees to build new or substantially augment existing facilities and agrees to operate and maintain the facilities under long-term contracts. In addition, Energy Group currently has contracts with four communities in New York State for the operation of facilities in which it has no ownership or long-term leasehold interest. In countries other than the United States, the Energy Group is seeking water and wastewater opportunities in which it will provide services to municipalities in which it can own an equity interest in facilities under a concession that grants it the right to provide service to, and collect revenues from, consumers. The Energy Group believes that the lack of creditworthiness of some non-U.S. municipalities, which may result from their limited ability to raise revenues or from other causes, makes the collection of tariffs from the consumer a more secure source of revenue. In circumstances where the creditworthiness of a sponsoring municipality is adequate to support a limited recourse financing, the Energy Group may provide services to and collect fees from municipal entities or other governmental agencies. Under contractual arrangements, the Energy Group may be required to warrant certain levels of performance and may be subject to financial penalties or termination if it fails to meet these warranties. The Energy Group may be required to guarantee the performance of OWS. OWS seeks not to take responsibility for conditions that are beyond its control. (a) Water and Wastewater Projects. The Energy Group operates and maintains wastewater treatment facilities for four small municipalities in New York State. Such facilities together process approximately 12.8 million gallons per day ("mgd"). 25 (b) Projects Under Construction. The Energy Group entered into a Water Facilities Services Agreement with The Governmental Utility Services Corporation (the "GUSC") of the City of Bessemer, Alabama in 1997. The Agreement provides that the Energy Group will design, construct, operate and maintain a 25 mgd potable water treatment facility and associated transmission and pumping equipment, which will supply water to residents and businesses in Bessemer, Alabama, a suburb of Birmingham. The Energy Group will be compensated on a fixed price basis for design and construction of the facility, and will be paid a fixed fee plus passthrough costs for delivering processed water to the City's water distribution system. GUSC closed on its financing in 1998, and the Energy Group commenced design and construction shortly thereafter. Construction completion is expected during the second quarter of 2000. (c) Other Development Efforts. The Energy Group currently has no other commitments in its water and wastewater backlog. A consortium of which it is a member has, however, received a project award with respect to a 32 year concession serving a population in excess of 700,000 in the City of Muscat, the capital of the Sultanate of Oman. The project encompasses taking over the existing wastewater treatment and collection facilities in Muscat, as well as the construction and operation of new wastewater infrastructure. The infrastructure capital program would be phased in over several years, with the first phase projected to require approximately $250 million in new construction. The Energy Group's role would be as operator on behalf of a joint venture to be formed. The joint venture's arrangement with the government would be on a Build/Own/Operate/Transfer basis, and some equity capital, expected to be approximately $15 million, would be required of the Energy Group. The implementation of the Muscat project remains subject to several conditions precedent, many of which are beyond the control of the Energy Group. The Energy Group is targeting other similar projects internationally, all of which are in preliminary stages of negotiation or competitive procurement. Environmental Consulting And Engineering The Energy Group's environmental consulting services are provided through Ogden Environmental and Energy Services Co., Inc. ("OEES") which provides a comprehensive range of environmental, infrastructure and energy consulting, engineering and design services to industrial and commercial companies, electric utilities and governmental agencies. These services include analysis and characterization, remedial investigations, engineering and design, data management, project management, regulatory assistance and remedial construction as well as concrete and civil construction projects which are provided to a variety of clients in the public and private sectors in the United States and abroad. Principal clients include major Federal agencies, particularly the Department of Defense, as well as major corporations in the chemical, petroleum, transportation, public utility and health care industries and Federal and state regulatory authorities. United States Government contracts may be terminated, in whole or in part, at the convenience of the government or for cause. In the event of a convenience termination, the government is obligated to pay the costs incurred under the contract plus a fee based upon work completed. 26 Professional environmental engineering services, including program management, environmental analysis, and restoration continues to be provided by OEES to the United States Navy CLEAN Program (Comprehensive Long Term Environmental Action Navy) pursuant to a 10-year contract awarded during 1991. Thus far OEES has provided these services at Navy bases in Hawaii, Guam, Japan, Hong Kong, the Philippines, Australia and Korea. OEES also continues to provide consulting and design services nationally to the U.S. Navy, Air Force, National Guard Bureau and U.S. Army Corps of Engineers on a wide variety of projects. International Business Development The Energy Group develops projects in many countries, and in doing so seeks to implement its strategy for the development of its business in selected international markets where private development is encouraged. It seeks to do so by focusing on a limited number of opportunities which can be developed in conjunction with local and international partners. Offices have been established in Hong Kong, Manila, Sao Paulo, Calcutta and Taipei in order to service foreign projects. Opportunities in foreign countries for the services provided by the Energy Group are highly dependent upon the elimination of historic legal and political barriers to the participation of foreign capital and foreign companies in the financing, construction, ownership and operation of infrastructure facilities. The development, construction, ownership and operation of facilities in foreign countries entails significant political and financial uncertainties and other structuring issues that typically are not involved in such activities in the United States. These risks include unexpected changes in electricity tariffs, conditions in financial markets, currency exchange rate fluctuations, currency repatriation restrictions, currency inconvertibility, unexpected changes in laws and regulations, political, economic or military instability, civil unrest and expropriation. Such risks have the potential to cause substantial delays or material impairment to the value of the project being developed or business being operated. Many of the countries in which the Energy Group is or intends to be active are lesser developed countries or developing countries. The financial condition and creditworthiness of the potential purchasers of power and services provided by the Energy Group (which may be a governmental or private utility or industrial consumer) or of the suppliers of fuel for projects in these countries may not be as strong as those of similar entities in developed countries. The obligations of the purchaser under the power purchase agreement, the service recipient under the related service agreement and the supplier under the fuel supply agreement generally are not guaranteed by any host country or other creditworthy governmental agency. Whenever such governmental guarantees are not available, the Energy Group undertakes a credit analysis of the proposed power purchaser or fuel supplier. It also seeks, to the extent practicable, to cause such parties to adequately secure the performance of their obligations through contractual commitments and, where necessary, through the provision by such entities of financial instruments such as letters of credit or arrangements regarding the escrowing of the receivables of such parties in the case of power purchasers. 27 The Energy Group's IPP and waste-to-energy projects in particular are dependent on the reliable and predictable delivery of fuel meeting the quantity and quality requirements of the project facilities. The Energy Group will typically seek to negotiate long-term contracts for the supply of fuel with creditworthy and reliable suppliers. However, the reliability of fuel deliveries may be compromised by one or more of several factors that may be more acute or may occur more frequently in developing countries than in developed countries, including a lack of sufficient infrastructure to support deliveries under all circumstances, bureaucratic delays in the import, transportation and storage of fuel in the host country, customs and tariff disputes and local or regional unrest or political instability. In most of the projects in which the Energy Group participates internationally, it seeks, to the extent practicable, to shift the consequences of interruptions in the delivery of fuel, whether due to the fault of the fuel supplier or due to reasons beyond the fuel supplier's control, to the electricity purchaser or service recipient by securing a suspension of its operating responsibilities under the applicable agreements and an extension of its operating concession under such agreements and/or, in some instances, by requiring the energy purchaser or service recipient to continue to make payments in respect of fixed costs. In order to mitigate the effect of short-term interruptions in the supply of fuel, the Energy Group endeavors to provide on-site storage of fuel in sufficient quantities to address such interruptions. Payment for services that the Energy Group provides will often be made in whole or part in the domestic currencies of the host countries. Conversion of such currencies into U.S. dollars generally is not assured by a governmental or other creditworthy country agency, and may be subject to limitations in the currency markets, as well as restrictions of the host country. In addition, fluctuations in value of such currencies against the value of the U.S. dollar may cause the Energy Group's participation in such projects to yield less return than expected. Transfer of earnings and profits in any form beyond the borders of the host country may be subject to special taxes or limitations imposed by host country laws. The Energy Group seeks to participate in projects in jurisdictions where limitations on the convertibility and expatriation of currency have been lifted by the host country and where such local currency is freely exchangeable on the international markets. In most cases, components of project costs incurred or funded in the currency of the United States are recovered without risk of currency fluctuation through negotiated contractual adjustments to the price charged for electricity or service provided. This contractual structure may cause the cost in local currency to the project's power purchaser or service recipient to rise from time to time in excess of local inflation, and consequently there is risk in such situations that such power purchaser or service recipient will, at least in the near term, be less able or willing to pay for the project's power or service. Due to the fact that many of the countries in which the Energy Group is or intends to be active are lesser developed countries or developing countries, the successful development of a project or projects may be adversely impacted by economic changes in such countries or by changes in government support for such projects. Adverse economic changes may, and have, resulted in initiatives (by local governments alone or at the request of world financial institutions) to reduce local commitments to pay long-term obligations in US dollars or US dollar equivalents. There is therefore risk that the Energy Group's development efforts in such countries may from time to time be adversely affected by such changes on a temporary or long-term basis. 28 In addition, the Energy Group will generally participate in projects which provide services that are treated as a matter of national or key economic importance by the laws and politics of many host countries. There is therefore risk that the assets constituting the facilities of these projects could be temporarily or permanently expropriated or nationalized by a host country, or made subject to local or national control. The Energy Group will seek to manage and mitigate these risks through all available means that it deems appropriate. They will include: political and financial analysis of the host countries and the key participants in each project; guarantees of relevant agreements with creditworthy entities; political risk and other forms of insurance; participation by international finance institutions, such as affiliates of the World Bank, in financing of projects in which it participates; and joint ventures with other companies to pursue the development, financing and construction of these projects. OTHER During 1997 and early 1998 Ogden substantially completed the disposition of its non-core businesses, principally through the sale of the remaining Facility Services operations (New York Region) which provided facility management, maintenance, janitorial and manufacturing support services and the sale of the Charlotte, North Carolina, Binghamton, New York and Cork, Ireland operations of Atlantic Design Company, Inc. Atlantic Design continues to provide contract manufacturing at its remaining facility located in Reynosa, Mexico near the boarder with McAllen, Texas. Applied Data Technology, Inc. ("ADTI"), located in San Diego, California, is a leading supplier of air combat maneuvering instrumentation systems and after-action reporting and display systems. ADTI's range systems are installed at Navy and Air Force aircraft training ranges to facilitate air-to-air combat exercises and monitor, record and graphically display the exact maneuvers of the aircraft on the ranges and simulate the various weapons systems aboard the aircraft. These range automated systems are used by the U.S. Navy and Air Force to train pilots for combat conditions and by the Department of Defense in training pilots to avoid "friendly fire" incidents. 29 OTHER INFORMATION MARKETS, COMPETITION AND GENERAL BUSINESS CONDITIONS Ogden's Entertainment, Aviation and Energy segments businesses can be adversely affected by general economic conditions, war, inflation, adverse competitive conditions, governmental restrictions and controls, natural disasters, energy shortages, weather, the adverse financial condition of customers and suppliers, various technological changes and other factors over which Ogden has no control. The Energy Group's independent power business faces a domestic market that is expected to change substantially in the years ahead from a mature, highly regulated and uncompetitive market for energy services to a less regulated and more competitive market as utilities restructure for deregulation and termination of their traditional monopolies. The international market for energy services is characterized by a large demand and much competition for projects within a relatively immature market framework. The domestic market for the Energy Group's waste-to-energy services has largely matured and is now heavily regulated. New opportunities for domestic projects are expected to be scarce for the foreseeable future. This reflects a number of factors that adversely affected communities' willingness to make long-term capital commitments to waste disposal projects, including: declining prices at which energy can be sold, and low alternative disposal costs. Another factor adversely affecting the demand for new waste-to-energy projects, as well as having an impact on existing projects, was a 1994 United States Supreme Court decision invalidating state and local laws and regulations mandating that waste generated within a given jurisdiction be taken to a designated facility. The invalidation of such laws has created pressure on Client Communities as well as the Energy Group to lower costs or restructure contractual arrangements in order to continue to attract waste supplies and ensure that revenues are sufficient to pay for all project costs. See Waste to Energy, "Other Arrangements for Providing Waste-to-Energy Services". Foreign demand for waste to energy projects is expected to exist only in unique circumstances where other disposal options are unavailable or unusually costly. The Energy Group's water and wastewater business faces an immature but developing domestic market for private water and wastewater services, and, like energy, a large foreign demand within an immature marketplace. Competition for business is intense in all the domestic and foreign markets in which Ogden conducts or intends to conduct its businesses and its businesses are subject to a variety of competitiveness and market influences, which are different for each of its three principal businesses. The economic climate can adversely affect several of Ogden's operations, including, 30 but not limited to, domestic and foreign government regulations, fewer airline flights and flight cancellations in the Aviation group and reduced event attendance in its Entertainment group. In addition, disputes between owners of professional sports organizations and the professional players of such organizations have affected and may continue to affect the operations of the Entertainment group. Ogden's Entertainment, Aviation and Energy groups expend substantial amounts for the development of new businesses, some of which expenditures are capitalized. The financial support required to undertake some of these activities comes from Ogden. Beyond staffing costs, expenditures can include the costs of contract and site acquisition, feasibility and environmental studies, technical and financial analysis, and in some cases the preparation of extensive proposals in response to public or private requests for proposals. Development of some projects by the Entertainment, Aviation and Energy groups involves substantial risks which are not within their control. Success of a project may depend upon obtaining in a timely manner acceptable contractual arrangements and financing, appropriate sites, acceptable licenses, environmental permits and governmental approvals. Even after the required contractual arrangements are achieved, implementation of the project often is subject to substantial conditions that may be outside the control of the group. If development opportunities in which Ogden's businesses are involved are no longer viewed as viable, any capitalized costs are written off as an expense. In some, but not all, circumstances, the applicable Entertainment, Aviation or Energy group will make contractual arrangements for the partial recovery of development costs if the project fails to be implemented for reasons beyond its control. EQUAL EMPLOYMENT OPPORTUNITY In recent years, governmental agencies (including the Equal Employment Opportunity Commission) and representatives of minority groups and women have asserted claims against many companies, including some Ogden subsidiaries, alleging that certain persons have been discriminated against in employment, promotions, training, or other matters. Frequently, private actions are brought as class actions, thereby increasing the practical exposure. In some instances, these actions are brought by many plaintiffs against groups of defendants in the same industry, thereby increasing the risk that any defendant may incur liability as a result of activities which are the primary responsibility of other defendants. Although Ogden and its subsidiaries have attempted to provide equal opportunity for all of its employees, the combination of the foregoing factors and others increases the risk of financial exposure. YEAR 2000 ISSUES See discussion on Ogden's Year 2000 issues set forth on page 23 of Management's Discussion and Analysis of Consolidated Operations of Ogden's 1998 Annual Report to Shareholders, certain specified portions of which are incorporated herein by reference. 31 EMPLOYEE AND LABOR RELATIONS As of March 1, 1999, Ogden and its subsidiaries had approximately 21,970 U.S. and foreign employees. Certain employees of Ogden are employed pursuant to collective bargaining agreements with various unions. During 1998 Ogden successfully renegotiated collective bargaining agreements in certain of its business sectors with no strike-related loss of service. Ogden considers relations with its employees to be good and does not anticipate any significant labor disputes in 1999. ENVIRONMENTAL REGULATORY LAWS (a) Domestic. Ogden's business activities in the United States are pervasively regulated pursuant to Federal, state and local environmental laws. Federal laws, such as the Clean Air Act and Clean Water Act, and their state counterparts, govern discharges of pollutants to air and water. Other federal, state, and local laws, comprehensively govern the generation, transportation, storage, treatment, and disposal of solid waste, and also regulate the storage and handling of petroleum products, including hazardous waste (such laws and the regulations thereunder, "Environmental Regulatory Laws"). The Environmental Regulatory Laws and other federal, state, and local laws, such as the Comprehensive Environmental Response Compensation and Liability Act ("CERCLA") (collectively, "Environmental Remediation Laws"), make Ogden potentially liable on a joint and several basis for any environmental contamination which may be associated with the Aviation group's activities (including fueling) and the activities at sites, including landfills, which the Energy Group's subsidiaries have owned, operated, or leased or at which there has been disposal of residue or other waste handled or processed by such subsidiaries or at which there has been disposal of waste generated by the Aviation groups activities. Through its subsidiaries, the Energy Group leases and operates a landfill in Haverhill, Massachusetts, and leases a landfill in Bristol, Connecticut, in connection with its projects at those locations. Some state and local laws also impose liabilities for injury to persons or property caused by site contamination. Some Service Agreements provide for indemnification of the operating subsidiaries from some such liabilities. The Environmental Regulatory Laws require that many permits be obtained before the commencement of construction and operation of waste-to-energy, independent power and water and wastewater projects. There can be no assurance that all required permits will be issued, and the process of obtaining such permits can often cause lengthy delays, including delays caused by third-party appeals challenging permit issuance. Failure to meet conditions of these permits or of the Environmental Regulatory Laws and the corresponding regulations can subject an Operating Subsidiary to regulatory enforcement actions by the appropriate governmental unit, which could include monetary penalties, and orders requiring certain remedial actions or limiting 32 or prohibiting operation. Ogden's Aviation fueling activities also must comply with various regulatory and permitting requirements and can be subject to regulatory enforcement actions. To date, Ogden has not incurred material penalties, been required to incur material capital costs or additional expenses, nor been subjected to material restrictions on its operations as a result of violations of environmental laws, regulations, or permits. The Environmental Regulatory Laws and Federal and state governmental regulations and policies governing their enforcement are subject to revision. New technology may be required or stricter standards may be established for the control of discharges of air or water pollutants for storage and handling of petroleum products or for solid or hazardous waste or ash handling and disposal. Thus, as new technology is developed and proven, it may be required to be incorporated into new facilities or major modifications to existing facilities. This new technology may often be more expensive than that used previously. The Clean Air Act Amendments of 1990 required EPA to promulgate New Source Performance Standards ("NSPS") and Emission Guidelines ("EG") applicable to new and existing municipal waste combustion units for particulate matter (total and fine), opacity, sulfur dioxide, hydrogen chloride, oxides of nitrogen, carbon monoxide, dioxins and dibenzofurans. The NSPS and EG, which were issued in final form in 1995, will require capital improvements or operating changes to most of the waste-to-energy facilities operated by OWTE to control emissions of nitrogen oxides, organics, mercury and acid gases. The timing and cost of the modifications required at OWTE facilities will depend on the provisions of implementing regulations that states must adopt and EPA approve. The deadline for states to submit their implementing regulations originally was December 19, 1996. However, the requirement that all states submit implementing regulations became the subject of protracted litigation and appeals, and most states suspended preparation of their implementation plans as a result. Following rulings by the courts, EPA issued a final rule which slightly revised the emission limits for NOX, CO, SO2, HCl, dioxin, cadmium, and lead, tightening all but the NOX limit. While the compliance deadline for the 1995 NSPS and EG remains December 19, 2000, the deadline for these seven revised limits is August 26, 2002. As a practical matter the capital and operating changes necessary to meet them is very nearly identical to that needed to achieve the prior NSPS and EG limits. OWTE anticipates that projects to install all new equipment needed to achieve the applicable new limits under the NSPS and EG will be undertaken in a single effort, to be completed by December 19, 2000. The costs to meet new rules for existing facilities owned by Client Communities generally will be borne by the Client Communities. For projects owned or leased by Ogden and operated under a Service Agreement, the Client Community has the obligation to fund such capital improvements, to which Ogden may be required to make an equity contribution. In certain cases, Ogden is required to fund the full cost of these capital improvements at those facilities that are either not operated pursuant to a Service Agreement or whose Service Agreement does not require the costs to be borne by the Client Community. The Company estimates that its commitments for these capital improvements will total approximately $54 million during 1999 and 2000 (including amounts which would be required if certain Service Agreement amendments are 33 finalized). Only moderate additional costs are likely to be incurred during 2001 and 2002. OWTE believes that most costs incurred to meet EG and operating permit requirements at facilities it operates may be recovered from Client Communities and other users of its facilities through increased service fees permitted under applicable contracts. Such increased service fees will be paid for either out of their general revenues or by increasing fees charged to facility users by the Client Community. Because of the reluctance or inability of some municipalities to increase taxes, or tipping fees if the market may not bear the increase without some loss of waste deliveries, Client Communities may seek to have OWTE subsidize the cost, or modify its contractual relationship. Domestic drinking water facilities developed in the future by OWS will be subject to regulation of water quality by the EPA under the Federal Safe Drinking Water Act and by similar state laws. Domestic wastewater facilities are subject to regulation under the Federal Clean Water Act and by similar state laws. These laws provide for the establishment of uniform minimum national water quality standards, as well as governmental authority to specify the type of treatment processes to be used for public drinking water. Under the Federal Clean Water Act, OWS may be required to obtain and comply with National Pollutant Discharge Elimination System permits for discharges from its treatment stations. Generally, under its current contracts, the client community is responsible for fines and penalties resulting from the delivery to OWS's treatment facilities of water not meeting standards set forth in those contracts. The Environmental Remediation Laws prohibit disposal of hazardous waste other than in small, household-generated quantities at OWTE's municipal solid waste facilities. The Service Agreements recognize the potential for improper deliveries of hazardous wastes and specify procedures for dealing with hazardous waste that is delivered to a facility. Although certain Service Agreements require the Operating Subsidiary to be responsible for some costs related to hazardous waste deliveries, to date, no Operating Subsidiary has incurred material hazardous waste disposal costs. (b) International. Among the Energy Group's objectives is providing energy generating and other infrastructure through environmentally protective project designs, regardless of the location of a particular project. This approach is consistent with the increasingly stringent environmental requirements of multilateral financing institutions, such as the World Bank, and also with the Energy Group's experience in domestic waste-to-energy projects, where environmentally protective facility design and performance has been required. The laws of other countries also may require regulation of emissions into the environment, and provide governmental entities with the authority to impose sanctions for violations, although these requirements are generally not as rigorous as those applicable in the United States. Compliance with environmental standards comparable to those of the United States may be conditions to the provision of credit by multilateral banking agencies as well as other lenders or credit providers. As with domestic project development, there can be no assurance that all required permits will be issued, and the process can often cause lengthy delays. 34 ENERGY AND WATER REGULATIONS The Energy Group's domestic businesses are subject to the provisions of federal, state and local energy laws applicable to their development, ownership and operation of their domestic facilities, and to similar laws applicable to their foreign operations. Federal laws and regulations govern transactions with utilities, the types of fuel used and the power plant ownership. State regulatory regimes govern rate approval and other terms under which utilities purchase electricity from independent power producers, except to the extent such regulation is pre-empted by federal law. Pursuant to Federal Public Utility Regulatory Policies Act ("PURPA"), the Federal Energy Regulatory Commission ("FERC") has promulgated regulations that exempt qualifying facilities (facilities meeting certain size, fuel and ownership requirements, or "QFs") from compliance with certain provisions of the Federal Power Act ("FPA"), the Public Utility Holding Company Act of 1935 ("PUHCA"), and certain state laws regulating the rates charged by, or the financial and organizational activities of, electric utilities. PURPA was enacted in 1978 to encourage the development of cogeneration facilities and other facilities making use of non-fossil fuel power sources, including waste-to-energy facilities. The exemptions afforded by PURPA to qualifying facilities from regulation under the FPA and PUHCA and most aspects of state electric utility regulation are of great importance to the Energy Group and its competitors in the waste-to-energy and independent power industries. Except with respect to waste to energy facilities with a net power production capacity in excess of thirty megawatts (where rates are set by FERC), state public utility commissions must approve the rates, and in some instances other contract terms, by which public utilities purchase electric power from QFs. PURPA requires that electric utilities purchase electric energy produced by QFs' at negotiated rates or at a price equal to the incremental or "avoided" cost that would have been incurred by the utility if it were to generate the power itself or purchase it from another source. PURPA does not expressly require public utilities to enter into long-term contracts. Under PUHCA, any entity owning or controlling ten percent or more of the voting securities of a "public utility company" or company which is a "holding company" of a public utility company is subject to registration with the Securities and Exchange Commission (the "SEC") and regulation by the SEC unless exempt from registration. Under PURPA, most projects that satisfy the definition of a "qualifying facility" are exempt from regulation under PUHCA. Under the Energy Policy Act of 1992, projects that are not QFs under PURPA but satisfy the definition of an "exempt wholesale generator" ("EWG") are not deemed to be public utility companies under PUHCA. Finally, projects that satisfy the definition of "foreign utility companies" are exempt from regulation under PUHCA. The Energy Group believes that all of its projects involved in the generation, transmission and/or distribution of electricity, both domestically and internationally, will qualify for an exemption from PUHCA and that it is not and will not be required to register with the SEC. 35 In the past there has been consideration in the U.S. Congress of legislation to repeal PURPA entirely, or at least to repeal the obligation of utilities to purchase power from QFs. It is likely that similar legislation will be introduced in the current Congress. There is strong support for grandfathering existing QF contracts if such legislation is passed. Various bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both independents and vertically integrated utilities to acquire electric assets throughout the United States that are geographically widespread, eliminating the current requirement that the utility's electric assets be capable of physical integration. Also, registered holding companies would be free to acquire non-utility businesses, which they may not do now, with certain limited exceptions. With the repeal of PURPA or PUHCA, competition for independent power generators from vertically integrated utilities would likely increase. In addition, the FERC, many state public utility commissions and Congress have implemented or are considering a series of proposals to restructure the electric utility industry in the United States to permit utility customers to choose their utility supplier in a competitive electric energy market. The FERC has issued a series of orders requiring utilities to offer wholesale customers and suppliers open access on their transmission lines on a comparable basis to the utilities' own use of the line. All public utilities have already filed "open access" tariffs to implement this requirement. As the trend toward increased competition continues, the utilities contend that they are entitled to recover from departing customers their fixed costs that will be "stranded" by the ability of their wholesale customers (and perhaps eventually, their retail customers) to choose new electric power suppliers. These include the costs utilities are required to pay under many QF contracts which the utilities view as excessive when compared with current market prices. Many utilities are therefore seeking ways to lower these contract prices, or rescind or buy out these contracts altogether, out of concern that their shareholders will be required to bear all or part of such "stranded" costs. Regulatory agencies to date have recognized the continuing validity of approved power purchase agreements, and have rejected attempts by some utilities to abrogate these contracts. At the same time, regulatory agencies have encouraged renegotiations of power contracts where rate payer savings can be achieved as a result. The Energy Group anticipates that the regulatory impetus to restructure "above market" power purchase agreements will continue in many of the jurisdictions where it owns or operates generating facilities. Future U.S. electric rates may be deregulated in a restructured U.S. electric utility industry and increased competition may result in lower rates and less profit for U.S. electricity sellers developing new projects. Falling electricity prices and uncertainty as to the future structure of the industry can be expected to inhibit United States utilities from entering into long-term power purchase contracts. On the other hand, deregulation could open up markets for the sale of electricity previously available only to regulated utilities. The Energy Group presently has, and intends to continue to acquire, ownership and operating interests in projects outside the United States. Most countries have expansive systems for the regulation of the power business. These generally include provisions relating to ownership, licensing, rate setting and financing of generating and transmission facilities. OWS's business may be subject to the provisions of state, local and, in the case of foreign operations, national utility laws applicable to the development, ownership and operation 36 of water supply and wastewater facilities. Whether such laws apply depends upon the local regulatory scheme as well as the manner in which OWS provides its services. Where such regulations apply, they may relate to rates charged, services provided, accounting procedures, acquisitions and other matters. In the United States, rate regulations have typically been structured to provide a predetermined return on the regulated entities investments. In other jurisdictions, the trend is towards periodic price reviews comparing rates to anticipated capital and operating revenues. The regulated entity benefits from efficiencies achieved during the period for which the rate is set. 37 Item 2. PROPERTIES Ogden's executive offices are located at Two Pennsylvania Plaza, New York, New York 10121, pursuant to a lease that expires on April 30, 2008, subject to an option by Ogden to renew the lease for an additional five years. Ogden Services Corporation also owns a 12,000 square-foot warehouse and office facility located in Long Island City, New York. (a) Entertainment The executive offices for the Entertainment group are located at Two Pennsylvania Plaza, New York, New York. The Entertainment group owns and leases buildings in various areas in the United States and several foreign countries, that house office and warehousing operations. The leases range from a month-to-month term to as long as five years. Entertainment also leases or owns the following facilities: Nature of Location Site Use Size Interest - -------- -------- ---- -------- Collinsville, IL Fairmount Race Track 150 - acres Lease (1) East St. Louis, IL Fairmount 148 - acres Owns West Yellowstone, Montana Grizzly Park 25 - acres Owns Ocala, Florida Silver Springs 256 - acres Lease (2) Lombard, IL Enchanted Castle 42,500 sq. ft. Lease (3) Anaheim, CA Tinseltown(TM) Studios 1.25 - acres Owns New York, NY Observation Deck, 107th Floor Lease (4) World Trade Center New Orleans, LA Jazzland 160 - acres Lease (5) Buenos Aires, Argentina La Rural 28 - acres Lease (6) Province of Missions, Iguazu Grand Hotel Argentina Resort & Casino 15 - acres Owns (1) Expires in 2017. (2) Expires in 2008. (3) Expires in 2006. (4) Expires in 2009. (5) A 99 year lease convertible into fee ownership at Entertainment's option. (6) Expires 2026. (b) Aviation The executive offices for the Aviation group are located at Two Pennsylvania Plaza, New York, New York. Aviation manages its global ground handling business from leased space at 38 four regional offices: Hong Kong (Asia-Pacific); Miami, Florida (Central & South America/Mexico/Caribbean); Amsterdam/Schiphol, Netherlands (Europe); and Irving, Texas (United States & Canada). To conduct its ground handling, passenger services, and cargo operations, Aviation leases office, terminal, and ramp space at the many airports around the globe where Aviation provides these services, and owns several minor storage and maintenance facilities located in Santiago, Chile; Auckland, New Zealand; and at St. Maarten in the Netherlands Antilles. Aviation's fueling business leases fueling installations located at various airports in the United States and Canada. Through a joint venture company, Aviation owns a newly constructed, state-of-the-art air cargo terminal at Praha Ruzyne Airport in Prague, Czech Republic. With a design capacity to handle 100,000 metric tons of air cargo per year, the warehouse encompasses 10,000 square meters of operational and storage space. At Newark Airport in New Jersey, Aviation owns a building and land that was previously used in support of its in-flight catering food service operation. Aviation's recently acquired Flight Services Group, Inc. leases corporate office space in Stratford, CT. This operations also leases office and hangar space at the Palm Beach International Airport, West Palm Beach, FL, Lt. Warren E. Eaton Airport, Norwich, NY and the Teterboro Airport in Teterboro, NJ, and owns an 11,000 square foot hangar at the Sikorsky Memorial Airport in Stratford, CT. (c) Energy The principal executive offices of Ogden Energy Group, Inc. are located in Fairfield, New Jersey, in an office building located on a 5.4 acre site owned by Ogden Projects, Inc. It also leases approximately 47,000 square feet of office space in Fairfax, Virginia. The following table summarizes certain information relating to the locations of the properties owned or leased by Ogden Energy Group, Inc. or its subsidiaries as of March 1, 1999.
Approximate Site Size Location in Acres Site Use Nature of Interest(1) - -------- -------- -------- --------------------- 1. Fairfield, New Jersey 5.4 Office space Own 2. Marion County, Oregon 15.2 Waste-to-energy facility Own 3. Alexandria/Arlington, Virginia 3.3 Waste-to-energy facility Lease 4. Bristol, Connecticut 18.2 Waste-to-energy facility Own 5. Bristol, Connecticut 35.0 Landfill Lease 6. Indianapolis, Indiana 23.5 Waste-to-energy facility Lease
39
Approximate Site Size Location in Acres Site Use Nature of Interest(1) - -------- -------- -------- --------------------- 7. Stanislaus County, California 16.5 Waste-to-energy facility Lease 8, Babylon, New York 9.5 Waste-to-energy facility Lease 9. Haverhill, Massachusetts 12.7 Waste-to-energy facility Lease 10. Haverhill, Massachusetts 16.8 RDF processing facility Lease 11. Haverhill, Massachusetts 20.2 Landfill Lease 12. Lawrence, Massachusetts 11.8 RDF power plant (closed) Own 13. Lake County, Florida 15.0 Waste-to-energy facility Own 14. Wallingford, Connecticut 10.3 Waste-to-energy facility Lease 15. Fairfax County, Virginia 22.9 Waste-to-energy facility Lease 16. Montgomery County, 35.0 Waste-to-energy facility Lease Maryland 17. Huntington, New York 13.0 Waste-to-energy facility Lease 18. Warren County, New Jersey 19.8 Waste-to-energy facility Lease 19. Hennepin County, Minnesota 14.6 Waste-to-energy facility Lease 20. Tulsa, Oklahoma 22.0 Waste-to-energy facility Lease 21. Onondaga County, New York 12.0 Waste-to-energy facility Lease 22. New Martinsville, W. VA N/A Hydroelectric Power Generating Lease 23. Heber, California N/A Geothermal Power Plant Lease 24. Heber, California N/A Geothermal Power Plant Lease 25. Bataan, Philippines 3,049 sq. meters Diesel Power Plant Lease 26. Zhejiang Province, N/A Coal-fired Land Use Right Peoples Republic of Cogeneration Facility reverts to China China Joint Venture Partner Upon termination of Joint Venture Agreement.
40
Approximate Site Size Location in Acres Site Use Nature of Interest(1) - -------- -------- -------- --------------------- 27. Shandong Province, N/A Coal-fired Land Use Right Peoples Republic of Cogeneration Facility reverts to China Joint China Venture Partner upon termination of Joint Venture Agreement. 28. Jiangsu Province, N/A Coal-fired Land Use Right Peoples Republic of Cogeneration Facility reverts to China Joint China Venture Partner upon termination of Joint Venture Agreement 29. Jiangsu Province, N/A Coal-fired Land Use Right Peoples Republic of Cogeneration Facility reverts to China Joint China Venture Partner upon termination of Joint Venture Agreement 30. Casa Diablo Hot Springs, 1,510 Geothermal Projects Land Use Rights from California Geothermal Resource Lease 31. Rockville, Maryland N/A Landfill Gas Project Lease 32. San Diego, California N/A Landfill Gas Project Lease 33. Oxnard, California N/A Landfill Gas Project Lease 34. Sun Valley, California N/A Landfill Gas Project Lease 35. Salinas, California N/A Landfill Gas Project Lease 36. Santa Clara, California N/A Landfill Gas Project Lease 37. Stockton, California N/A Landfill Gas Project Lease 38. Los Angeles, California N/A Landfill Gas Project Lease 39. Burney, California 40 Wood Waste Project Lease 40. Jamestown, California 26 Wood Waste Project Own (50%) 41. Westwood, California 60 Wood Waste Project Own 42. Oroville, California 43 Wood Waste Project Lease 43. Penobscot County, Maine N/A Hydroelectric Project Own (50%) 44. Whatcom County, Washington N/A Hydroelectric Project Own (50%)
41
Approximate Site Size Location in Acres Site Use Nature of Interest(1) - -------- -------- -------- --------------------- 45. Weeks Falls, Washington N/A Hydroelectric Project Lease 46. Haripur, Bangladesh 4.6 Gas/Diesel Project Lease 47. Cavite, Philippines 13,122 Diesel Lease sq. meters 48. Chonburi, Thailand 5.92 Gas Project Own 49. Ayutthya, Thailand 6.95 Gas Project Own
- ---------- (1) All ownership or leasehold interests are subject to material liens in connection with the financing of the related project, except those listed above under items 1, 12, 26-29, and 31-42. In addition, all leasehold interests extend at least as long as the term of applicable project contracts, and several of the leasehold interests are subject to renewal and/or purchase options. 42 Item 3. LEGAL PROCEEDINGS The Company has various legal proceedings involving matters arising in the ordinary course of business. The Company does not believe that there are any pending legal proceedings other than ordinary routine litigation incidental to its business to which the Company or any of its subsidiaries is a party or to which any of their property is subject, the outcome of which would have a material adverse effect on the Company's consolidated financial statements. The Company conducts regular inquiries of its subsidiaries regarding litigation and environmental violations which include determining the nature, amount and likelihood of liability for any such claims, potential claims or threatened litigation. In the ordinary course of its business, the Company may become involved in Federal, state, and local proceedings relating to the laws regulating the discharge of materials into the environment and the protection of the environment. These include proceedings for the issuance, amendment, or renewal of the licenses and permits pursuant to which a Company subsidiary operates. Such proceedings also include actions brought by individuals or local governmental authorities seeking to overrule governmental decisions on matters relating to the subsidiaries' operations in which the subsidiary may be, but is not necessarily, a party. Most proceedings brought against the Company by governmental authorities or private parties under these laws relate to alleged technical violations of regulations, licenses, or permits pursuant to which a subsidiary operates. The Company believes that such proceedings will not have a material adverse effect on the Company's consolidated financial position or results of operations. The Company's operations are subject to various Federal, state and local environmental laws and regulations, including the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and Resource Conservation and Recovery Act (RCRA). Although the Company operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, the Company believes that it is in substantial compliance with existing environmental laws and regulations. In connection with certain previously divested operations, the Company may be identified, along with other entities, as being among potentially responsible parties responsible for contribution for costs associated with the correction and remediation of environmental conditions at various hazardous waste disposal sites subject to CERCLA. In certain instances the Company may be exposed to joint and several liability for remedial action or damages. The Company's ultimate liability in connection with such environmental claims will depend on many factors, including its volumetric share of waste, the total cost of remediation, the financial viability of other companies that also sent waste to a given site and its contractual arrangement with the purchaser of such operations. The potential costs related to all of the foregoing matters and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, 43 the uncertain level of insurance or other types of recovery, and the questionable level of the Company's responsibility. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that currently required remediation and continuing compliance with environmental laws will not have a material adverse effect on the Company's consolidated financial position or results of operations. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the security holders of Ogden during the fourth quarter of 1998. EXECUTIVE OFFICERS OF OGDEN Set forth below are the names, ages, positions and offices held and years appointed, of all "executive officers" (as defined by Rule 3b-7 of the Securities Exchange Act of 1934) of Ogden as of March 1, 1999:
CONTINUALLY AN OGDEN POSITION AND OFFICE EXECUTIVE OFFICER NAME HELD AGE AS OF 3/1/99 SINCE ---- ---- ---------------- ----- R. Richard Ablon Chairman of the 49 1987 Board, President & Chief Executive Officer Scott G. Mackin Executive Vice 42 1992 President Jesus Sainz Executive Vice 55 1998 President Raymond E. Senior Vice 44 1998 Dombrowski, Jr. President and Chief Financial Officer Lynde H. Coit Senior Vice 44 1991 President and General Counsel
44
CONTINUALLY AN OGDEN POSITION AND OFFICE EXECUTIVE OFFICER NAME HELD AGE AS OF 3/1/99 SINCE ---- ---- ---------------- ----- Rodrigo Arboleda Senior Vice 58 1995 President, Business Development, Latin America David L. Hahn Senior Vice 47 1995 President, Aviation Quintin G. Marshall Senior Vice 37 1995 President, Corporate Development Gary D. Perusse Senior Vice 50 1996 President, Risk Management Peter Allen Senior Vice President 62 1998 Bruce W. Stone Executive Vice 51 1997 President for Waste-to-Energy Operations and Managing Director-Ogden Energy Group, Inc. B. Kent Burton Vice President, 47 1997 Policy and Communications Alane G. Baranello Vice President, 39 1998 Human Resources
45
CONTINUALLY AN OGDEN POSITION AND OFFICE EXECUTIVE OFFICER NAME HELD AGE AS OF 3/1/99 SINCE ---- ---- ---------------- ----- Peter Cain Vice President, 41 1997 Finance and Treasurer Robert M. DiGia Vice President, 74 1965 Controller and Chief Accounting Officer Kathleen Ritch Vice President and 56 1981 Secretary
There is no family relationship by blood, marriage or adoption (not more remote than first cousins) between any of the above individuals and any Ogden director. The term of office of all officers shall be until the next election of directors and until their respective successors are chosen and qualified. There are no arrangements or understandings between any of the above officers and any other person pursuant to which any of the above was selected as an officer. The following briefly describes the business experience, the principal occupation and employment of the foregoing Executive Officers during the past five years: R. Richard Ablon has been President and Chief Executive Officer of Ogden for more than the last five years and Chairman of the Board since May, 1996. Scott G. Mackin, has served as Executive Vice President of Ogden since 1997 and for more than the last five years has served as President and Chief Operating Officer of Ogden Energy Group, Inc. Jesus Sainz served as an Ogden director from 1994 until January 1, 1998. On January 15, 1998 he was appointed Executive Vice President of Ogden. For more than five years prior to 1997, Mr. Sainz served as Executive Vice Chairman of a private Spanish company which he created in 1984 which holds interests in companies operating in such fields as foreign trade, fast food and real estate. 46 Raymond E. Dombrowski, Jr. was appointed Senior Vice President and Chief Financial Officer of Ogden on September 17, 1998. From 1997 until he joined Ogden he served as General Attorney, Finance, Bell Atlantic Headquarters, responsible for all domestic and international finance transactions. Between 1994 and 1997 Mr. Dombrowski served as Counsel, Treasury and Finance, Bell Atlantic Headquarters, with responsibilities in the area of structuring, negotiating and documenting sensitive financing structures. Lynde H. Coit has been a Senior Vice President and General Counsel of Ogden for more than the last five years. Rodrigo Arboleda was appointed Senior Vice President of Ogden in January 1995. For more than the last five years he served as Ogden's Senior Vice President-Business Development-Latin America operations. David L. Hahn was appointed Senior Vice President, Business Development, Asia in January 1995 and since 1997 he has served as Ogden's Senior Vice President, Aviation and Chief Operating Officer of Ogden's Aviation segment. Prior to 1995 he served as Vice President-Marketing of Ogden Services Corporation. Quintin G. Marshall was appointed Senior Vice President - Corporate Development of Ogden on January 16, 1997. From October 1995 to January 1997 he served as Ogden's Vice President - Investor Relations. From May 1993 to October 1995 he served as Managing Director of CDA Investment Technologies, a division of Thomson Financial. Gary D. Perusse was appointed Senior Vice President - Risk Management in September, 1996. Prior thereto he had served as Director - Risk Management of Ogden for more than five years. Peter Allen has served as a Senior Vice President of Ogden since January 1998 and as Senior Vice President and General Counsel of Ogden Services segment for more than the last five years. Bruce W. Stone was designated an Executive Officer of Ogden in 1997. Mr. Stone served as Co-President and Chief Operating Officer of Ogden Projects, Inc. and the Energy Group between October 5, 1990 and January 29, 1991. He currently serves as Executive Vice President and Managing Director of Ogden Energy Group, Inc., a position he has held since January 29, 1991. B. Kent Burton has served as Vice President - Policy and Communications of Ogden since May 1997 and for more than the last five years as Senior Vice President of the Ogden Energy Group, Inc. in political affairs and lobbying activities. 47 Alane G. Baranello was appointed Vice President, Human Resources of Ogden on May 20, 1998. Between 1993 and May 1998 she served as Ogden's Director, Human Resources. Peter Cain has served in various financial capacities as a senior officer of many of Ogden's major subsidiaries for more than the last five years. He served as Ogden's Vice President of Finance since 1997 and was appointed Ogden's Treasurer in 1998. Robert M. DiGia has been Vice President, Controller and Chief Accounting Officer of Ogden for more than the past five years. Kathleen Ritch has been Vice President and Secretary of Ogden for more than the past five years. PART II Item 5. MARKET FOR OGDEN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The principal U.S. market for Ogden's common stock and $1.875 cumulative convertible preferred stock is the New York Stock Exchange, Inc. (the "NYSE"). As of March 1, 1999, the approximate number of record holders of Ogden common stock was 6,614. Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Page 48 of Ogden's 1998 Annual Report to Shareholders. The prices set forth therein are as reported on the consolidated transaction reporting system of the NYSE. Item 6. SELECTED FINANCIAL DATA Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Page 25 of Ogden's 1998 Annual Report to Shareholders. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Pages 20 through 24 of Ogden's 1998 Annual Report to Shareholders. Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Pursuant to General Instruction (G)2, the information called for by this item is hereby incorporated by reference from page 23 of Ogden's 1998 Annual Report to Shareholders. 48 Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Pages 26 through 45 and Page 48 of Ogden's 1998 Annual Report to Shareholders. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not Applicable. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF OGDEN Pursuant to General Instruction G (3), the information regarding directors called for by this item is hereby incorporated by reference from Ogden's 1999 Proxy Statement to be filed with the Securities and Exchange Commission. The information regarding officers called for by this item is included at the end of Part I of this document under the heading "Executive Officers of Ogden." Item 11. EXECUTIVE COMPENSATION Pursuant to General Instruction G (3), the information called for by this item is hereby incorporated by reference from Ogden's 1999 Proxy Statement to be filed with the Securities and Exchange Commission. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Pursuant to General Instruction G (3), the information called for by this item is hereby incorporated by reference from Ogden's 1999 Proxy Statement to be filed with the Securities and Exchange Commission. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Pursuant to General Instruction G (3), the information called for by this item is hereby incorporated by reference from Ogden's 1999 Proxy statement to be filed with the Securities and Exchange Commission. 49 Part IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Listed below are the documents filed as a part of this report: 1). All financial statements contained on pages 26 through 45 and the Independent Auditors' Report on page 46 of Ogden's 1998 Annual Report to Shareholders are incorporated herein by reference. 2). Financial statement schedules as follows: (i) Schedule II - Valuation and Qualifying Accounts for the years ended December 31, 1998, 1997 and 1996. 3). Those exhibits required to be filed by Item 601 of Regulation S-K: EXHIBITS 2.0 Plans of Acquisition, Reorganization, Arrangement, Liquidation or Succession. 2.1 Agreement and Plan of Merger, dated as of October 31, 1989, among Ogden, ERCI Acquisition Corporation and ERC International, Inc.* 2.2 Agreement and Plan of Merger among Ogden Corporation, ERC International, Inc., ERC Acquisition Corporation and ERC Environmental and Energy Services Co., Inc., dated as of January 17, 1991.* 2.3 Amended and Restated Agreement and Plan of Merger among Ogden Corporation, OPI Acquisition Corp. and Ogden Projects, Inc., dated as of September 27, 1994.* 3.0 Articles of Incorporation and By-laws. 3.1 Ogden's Restated Certificate of Incorporation as amended.* 3.2 Ogden's By-Laws, as amended through April 8, 1998.* 4.0 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of June 1, 1987, and Offering Memorandum dated June 12, 1987, relating to U.S. $85 million Ogden 6% Convertible Subordinated 50 Debentures, Due 2002.* 4.2 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of October 15, 1987, and Offering Memorandum, dated October 15, 1987, relating to U.S. $75 million Ogden 5-3/4% Convertible Subordinated Debentures, Due 2002.* 4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to The Bank of New York, Trustee, relating to Ogden's $100 million debt offering.* 10.0 Material Contracts 10.1(a) U.S. $95 million Term Loan and Letter of Credit and Reimbursement Agreement among Ogden, the Deutsche Bank AG, New York Branch and the signatory Banks thereto, dated March 26, 1997.* 10.1(b) $200 million Credit Agreement among Ogden, The Bank of New York as Agent and the signatory Lenders thereto, dated as of June 30, 1997.* 10.2 Rights Agreement between Ogden Corporation and Manufacturers Hanover Trust Company, dated as of September 20, 1990 and amended August 15, 1995 to provide The Bank of New York as successor agent.* 10.3 Executive Compensation Plans and Agreements. (a) Ogden Corporation 1990 Stock Option Plan.* (i) Ogden Corporation 1990 Stock Option Plan as Amended and Restated as of January 19, 1994.* (ii) Amendment adopted and effective as of September 18, 1997.* (b) Ogden Services Corporation Executive Pension Plan.* (c) Ogden Services Corporation Select Savings Plan.* (i) Ogden Services Corporation Select Savings Plan Amendment and Restatement as of January 1, 1995.* (ii) Amendment Number One to the Ogden Services Corporation Select Savings Plan as amended and Restated January 1, 1995, effective January 1, 1998.* 51 (d) Ogden Services Corporation Select Savings Plan Trust.* (i) Ogden Services Corporation Select Savings Plan Trust Amendment and Restatement dated as of January 1, 1995.* (e) Ogden Services Corporation Executive Pension Plan Trust.* (f) Changes effected to the Ogden Profit Sharing Plan effective January 1, 1990.* (g) Ogden Corporation Profit Sharing Plan.* (i) Ogden Profit Sharing Plan as amended and restated January 1, 1991 and as in effect through January 1, 1993.* (ii) Ogden Profit Sharing Plan as amended and restated effective as of January 1, 1995.* (h) Ogden Corporation Core Executive Benefit Program.* (i) Ogden Projects Pension Plan.* (j) Ogden Projects Profit Sharing Plan.* (k) Ogden Projects Supplemental Pension and Profit Sharing Plans.* (l) Ogden Projects Core Executive Benefit Program.* (m) Form of amendments to the Ogden Projects, Inc. Pension Plan and Profit Sharing Plans effective as of January 1, 1994.* (i) Form of Amended Ogden Projects, Inc. Profit Sharing Plan, effective as of January 1, 1994.* (ii) Form of Amended Ogden Projects, Inc. Pension Plan, effective as of January 1, 1994.* (n) Ogden Corporation Amended and Restated CEO Formula Bonus Plan. Transmitted herewith as Exhibit 10.3(n). 52 (o) Ogden Key Management Incentive Plan.* 10.4 Employment Agreements (a) Employment Agreement between Ogden and Lynde H. Coit dated March 1, 1999. Transmitted herewith as Exhibit 10.4(a). (b) Employment Agreement between Ogden and R.Richard Ablon dated as of January 1, 1998.* (c) Termination Agreement between Ogden and Philip G. Husby, Senior Vice President and CFO, dated as of September 17, 1998.* (d) Employment Agreement between Ogden and Ogden's Chief Accounting Officer dated as of December 18, 1991.* (e) Employment Agreement between Scott G. Mackin, Executive Vice President and Ogden Corporation dated as of October 1, 1998.* (f) Employment Agreement between David L. Hahn and Ogden Corporation, dated December 1, 1995.* i. Letter Amendment to Employment Agreement between Ogden Corporation and David L. Hahn, Senior Vice President, Aviation, effective as of October 1, 1998.* (g) Employment Agreement between Ogden Services Corporation and Rodrigo Arboleda dated January 1, 1997.* i. Letter Amendment to Employment Agreement between Ogden and Rodrigo Arboleda, Senior Vice President, effective as of October 1, 1998.* (h) Employment Agreement between Ogden Projects, Inc. and Bruce W. Stone dated June 1, 1990.* (i) Employment Agreement between Ogden Corporation and Quintin G. Marshall, dated October 30, 1996.* i. Letter Amendment to Employment Agreement between Ogden and Quintin G. Marshall, Senior Vice President-Corporate Development, effective as of October 1, 1998.* 53 (j) Employment Agreement between Ogden Corporation and Jesus Sainz, effective as of January 1, 1998.* i. Letter Amendment to Employment Agreement between Ogden and Jesus Sainz, Executive Vice President, effective October 1, 1998.* (k) Employment Agreement between Alane Baranello, Vice President-Human Resources and Ogden dated October 28, 1996.* i. Letter Amendment to Employment Agreement between Ogden and Alane Baranello, Vice President-Human Resources dated October 13, 1998.* (l) Employment Agreement between Peter Allen, Senior Vice President and Ogden, dated July 1, 1998.* (m) Employment Agreement between Ogden and Raymond E. Dombrowski, Jr., Senior Vice President and Chief Financial Officer, dated as of September 21, 1998. Transmitted herewith as Exhibit 10.4(m). 10.5 First Amended and Restated Ogden Corporation Guaranty Agreement made as of January 30, 1992 by Ogden Corporation for the benefit of Mission Funding Zeta and Pitney Bowes Credit Corporation.* 10.6 Ogden Corporation Guaranty Agreement as of January 30, 1992 by Ogden Corporation for the benefit of Allstate Insurance Company and Ogden Martin Systems of Huntington Resource Recovery Nine Corporation.* 11 Ogden Corporation and Subsidiaries Detail of Computation of Earnings Applicable to Common Stock for the years ended December 31, 1998, 1997 and 1996.* 13 Those portions of the Annual Report to Stockholders for the year ended December 31, 1998, which are incorporated herein by reference. Transmitted herewith as Exhibit 13. 21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21. 23 Consent of Deloitte & Touche LLP. Transmitted herewith as Exhibit 23. 27 Financial Data Schedule (EDGAR Filing Only). 54 * Incorporated by reference as set forth in the Exhibit Index of this Annual Report on Form 10-K. (b) No Reports on Form 8-K were filed by Ogden during the fourth quarter of 1998. A Form 8-K Report was filed on March 12, 1999 and is incorporated herein by reference. 55 SIGNATURES Pursuant to the requirements of Section 13 and 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OGDEN CORPORATION Date: March 11, 1999 By /s/ R. Richard Ablon ------------------------- R. Richard Ablon Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. SIGNATURE TITLE /s/ R. Richard Ablon President, Chief Executive Officer, - ------------------------------------ Chairman of the Board and Director R. RICHARD ABLON /s/ Raymond E. Dombrowski, Jr. Senior Vice President and Chief - ------------------------------------ Financial Officer RAYMOND E. DOMBROWSKI, JR. /s/ Robert M. DiGia Vice President, Controller and Chief - ------------------------------------ Accounting Officer ROBERT M. DIGIA Director - ------------------------------------ DAVID M. ABSHIRE /s/ Anthony J. Bolland Director - ------------------------------------ ANTHONY J. BOLLAND /s/ George L. Farr Director - ------------------------------------ GEORGE L. FARR /s/ Norman G. Einspruch Director - ------------------------------------ NORMAN G. EINSPRUCH /s/ Jeffrey F. Friedman Director - ------------------------------------ JEFFREY F. FRIEDMAN /s/ Attallah Kappas Director - ------------------------------------ ATTALLAH KAPPAS Director - ------------------------------------ TERRY ALLEN KRAMER /s/ Judith D. Moyers Director - ------------------------------------ JUDITH D. MOYERS Director - ------------------------------------ HOMER A. NEAL /s/ Robert E. Smith Director - ------------------------------------ ROBERT E. SMITH /s/ Helmut F.O. Volcker Director - ------------------------------------ HELMUT F.O. VOLCKER INDEPENDENT AUDITORS' REPORT The Board of Directors and Shareholders of Ogden Corporation: We have audited the consolidated financial statements of Ogden Corporation and subsidiaries as of December 31, 1998 and 1997, and for each of the three years in the period ended December 31, 1998, and have issued our report thereon dated February 9, 1999; such consolidated financial statements and report are included in your 1998 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the financial statement schedule of Ogden Corporation and subsidiaries, listed in Item 14. This financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all materials respects the information set forth therein. /s/ Deloitte & Touche LLP New York, New York February 9, 1999
SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1998 - ------------------------------------------------------------------------------------------------------------------------------------ COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS --------------------------- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND CHARGED TO END OF DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD - ------------------------------------------------------------------------------------------------------------------------------------ Allowances deducted in the balance sheet from the assets to which they apply: Doubtful receivables -- current $20,207,000 $ 9,490,000 $6,786,000 (E) $ 3,688,000 (A) $30,595,000 2,200,000 (C) Doubtful receivables -- noncurrent 3,000,000 3,000,000 (A) 0 Deferred charges on projects 10,741,000 2,609,000 280,000 (D) 13,070,000 ------------------------------------------------------------------------------ TOTAL $33,948,000 $ 12,099,000 $6,786,000 $ 9,168,000 $43,665,000 ============================================================================== Allowances not deducted: Estimated cost of disposal of assets $ 296,000 $ 296,000 (B) $ -- Provision for restructuring 1,141,000 867,000 (B) 274,000 Reserves relating to tax indemnification and other contingencies in connection with the sale of limited partnership interests in and related tax benefits of a waste-to-energy facility 3,000,000 2,700,000 (C) 300,000 Other 5,052,000 $ 100,000 1,864,000 (B) 2,282,000 1,006,000 (C) ------------------------------------------------------------------------------ TOTAL $ 9,489,000 $ 100,000 $ 6,733,000 $ 2,856,000 ==============================================================================
NOTES: (A) Write-offs of receivables considered uncollectible. (B) Payments charged to allowances. (C) Reversal of provisions no longer required. (D) Write off of deferred charges. (E) Provision of Company purchased during 1998.
SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1997 - ------------------------------------------------------------------------------------------------------------------------------------ COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS --------------------------- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND CHARGED TO END OF DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD - ------------------------------------------------------------------------------------------------------------------------------------ Allowances deducted in the balance sheet from the assets to which they apply: Doubtful receivables -- current $38,275,000 $ 3,485,000 $14,009,000 (A) $20,207,000 1,544,000 (D) 6,000,000 (C) Doubtful receivables -- noncurrent 6,000,000 3,000,000 (C) 3,000,000 Deferred charges on projects 8,638,000 6,707,000 4,604,000 (E) 10,741,000 ------------------------------------------------------------------------------ TOTAL $52,913,000 $ 10,192,000 $29,157,000 $33,948,000 ============================================================================== Allowances not deducted: Estimated cost of disposal of assets $ 863,000 $ 567,000 (B) $ 296,000 Provision for restructuring 2,507,000 1,213,000 (B) 1,141,000 153,000 (C) Reserves relating to tax indemnification and other contingencies in connection with the sale of limited partnership interests in and related tax benef its of a waste-to-energy facility 3,000,000 3,000,000 Other 6,893,000 $ 2,832,000 2,273,000 (B) 5,052,000 1,900,000 (C) 500,000 (F) ------------------------------------------------------------------------------ TOTAL $13,263,000 $ 2,832,000 $ 6,606,000 $ 9,489,000 ==============================================================================
Notes: (A) Write-offs of receivables considered uncollectible. (B) Payments charged to allowances. (C) Reversal of provisions no longer required. (D) Allowance of company sold during 1997. (E) Write-off of deferred charges. (F) Write-off to other accounts.
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 benef its of a waste-to-energy facility 3,000,000 3,000,000 Other 9,371,000 3,743,000 6,221,000 (D) 6,893,000 ------------------------------------------------------------------------------ TOTAL $33,660,000 $ 4,425,000 $24,822,000 $13,263,000 ==============================================================================
Notes: (A) Recoveries of amounts previously written ofL (B) Write-offs of receivables considered uncollectible. (C) Payments charged to allowances. (D) Reversal to operating costs of provisions no longer required. EXHIBIT INDEX
Exhibit No. Description of Document Filing Information - ----------- ----------------------- ------------------ 2 Plans of Acquisition, Reorganization Arrangement, Liquidation or Succession. 2.1 Agreement and Plan of Merger, dated as Filed as Exhibit 2 to Ogde's Form of October 31, 1989, among Ogden, ERCI S-4 Registration Statement File No. Acquisition Corporation and ERC 33-32155, and incorporated herein International Inc. by reference. 2.2 Agreement and Plan of Merger among Filed as Exhibit (10)(x) to Ogden's Ogden Corporation, ERC International Form 10-K for the fiscal year ended Inc., ERC Acquisition Corporation and December 31, 1990 and incorporated ERC Environmental and Energy Services herein by reference. Co., Inc. dated as of January 17, 1991. 2.3 Amended and Restated Agreement and Filed as Exhibit 2 to Ogden's Form Plan of Merger among Ogden S-4 Registration Statement File No. Corporation, OPI Acquisition 33-56181 and incorporated herein by Corporation sub. and Ogden Projects, reference. Inc. dated as of September 27, 1994. 3 Articles of Incorporation and By-Laws. 3.1 Ogden Restated Certificate of Filed as Exhibit (3)(a) to Ogden's Incorporation as amended. Form 10-K for the fiscal year ended December 31, 1988 and incorporated herein by reference. 3.2 Ogden By-Laws, as amended. Filed as Exhibit 3.2 to Ogden's Form 10-Q for the quarterly period ended March 31, 1998 and incorporated herein by reference.
4 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between Ogden Filed as Exhibits (C)(3) and (C)(4) and Bankers Trust Company, dated as of to Ogden's Form 8-K filed with the June 1, 1987 and Offering Memorandum Securities and Exchange Commission dated June 12, 1987, relating to U.S. on July 7, 1987 and incorporated $85 million Ogden 6% Convertible herein by reference. Subordinated Debentures, Due 2002. 4.2 Fiscal Agency Agreement between Ogden Filed as Exhibit (4) to Ogden's and Bankers Trust Company, dated as of Form S-3 Registration Statement October 15, 1987, and Offering filed with the Securities and Memorandum, dated October 15, 1987, Exchange Commission on December 4, relating to U.S.$75 million Ogden 5 3/4% 1987, Registration No. 33-18875, Convertible Subordinated Debentures, and incorporated herein by Due 2002. reference. 4.3 Indenture dated as of March 1, 1992 Filed as Exhibit (4)(C) to Ogden's from Ogden Corporation to The Bank of Form 10-K for fiscal year ended New York, Trustee, relating to Ogden's December 31, 1991, and incorporated $100 million debt offering. herein by reference. 10 Material Contracts 10.1(a) U.S. $95 million Term Loan and Letter Filed as Exhibit 10.6 to Ogden's of Credit and Reimbursement Agreement Form 10-Q for the quarterly period among Ogden, the Deutsche Bank AG, New ended March 31, 1997 and York Branch and the signatory Banks incorporated herein by reference. thereto, dated March 26, 1997. 10.1(b) $200 million Credit Agreement among Filed as Exhibit 10.1(i) to Ogden's Ogden, The Bank of New York as Agent Form 10-Q for the quarterly period and the signatory Lenders thereto, ended June 30, 1997 and dated as of June 30, 1997. incorporated herein by reference. 10.2 Rights Agreement between Ogden Filed as Exhibit (10)(h) to Ogden's
Corporation and Manufacturers Hanover Form 10-K for the fiscal year ended Trust Company, dated as of September December 31, 1990 and incorporated 20, 1990 and amended August 15, 1995 herein by reference. to provide The Bank of New York as successor agent. 10.3 Executive Compensation Plans. (a) Ogden Corporation 1990 Stock Filed as Exhibit (10)(j) to Ogden Option Plan. Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (i) Ogden Corporation 1990 Filed as Exhibit 10.6(b)(i) to Stock Option Plan as Ogden's Form 10-Q for the quarterly Amended and Restated as period ended September 30, 1994 and of January 19, 1994. incorporated herein by reference. (ii) Amendment adopted and Filed as Exhibit 10.7(a)(ii) to effective as of Ogden's Form 10-K for the fiscal September 18, 1997. year ended December 31, 1997 and incorporated herein by reference. (b) Ogden Services Corporation Filed as Exhibit (10)(k) to Ogden's Executive Pension Plan. Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (c) Ogden Services Corporation Filed as Exhibit (10)(l) to Ogden Select Savings Plan. Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (i) Ogden Services Filed as Exhibit 10.7(d)(I) to Corporation Select Ogden's Form 10-K for the fiscal Savings Plan Amendment year ended December 31, 1994 and and Restatement as of incorporated herein by reference. January 1, 1995.
(ii) Amendment Number One Filed as Exhibit 10.7(c)(ii) to to the Ogden Services Ogden's Form 10-K for the fiscal Corporation Select year ended December 31, 1997 and Savings Plan as Amended incorporated herein by reference. and Restated January 1, 1995, effective January 1, 1998. (d) Ogden Services Corporation Filed as Exhibit (10)(m) to Ogden's Select Savings Plan Trust. Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (i) Ogden Services Filed as Exhibit 10.7(e)(i) to Corporation Select Ogden's Form 10-K for the fiscal Savings Plan Trust year ended December 31, 1994 and Amendment and incorporated herein by reference. Restatement as of January 1, 1995. (e) Ogden Services Corporation Filed as Exhibit (10)(n) to Ogden's Executive Pension Plan Trust. Form 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (f) Changes effected to the Ogden Filed as Exhibit (10)(o) to Ogden's Profit Sharing Plan effective Form 10-K for the fiscal year ended January 1, 1990. December 31, 1990 and incorporated herein by reference. (g) Ogden Corporation Profit Filed as Exhibit 10.8(p) to Ogden's Sharing Plan. Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (i) Ogden Profit Sharing Filed as Exhibit 10.8(p)(i) to Plan as amended and Ogden's Form 10-K for fiscal year restated January 1, ended December 31, 1993 and incorporated 1991
and as in effect herein by reference. through January 1, 1993. (ii) Ogden Profit Sharing Filed as Exhibit 10.7(p)(ii) to Plan as amended and Ogden's Form 10-K for fiscal year restated effective as ended December 31, 1994 and of January 1, 1995. incorporated herein by reference. (h) Ogden Corporation Core Filed as Exhibit 10.8(q) to Ogden's Executive Benefit Program. Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (i) Ogden Projects Pension Plan. Filed as Exhibit 10.8(r) to Ogden's Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (j) Ogden Projects Profit Sharing Filed as Exhibit 10.8(s) to Ogden's Plan. Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (k) Ogden Projects Supplemental Filed as Exhibit 10.8(t) to Ogden's Pension and Profit Sharing Form 10-K for fiscal year ended Plans. December 31, 1992 and incorporated herein by reference. (l) Ogden Projects Core Executive Filed as Exhibit 10.8(v) to Ogden's Benefit Program. Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (m) Form of amendments to the Filed as Exhibit 10.8(w) to Ogden's Ogden Projects, Inc. Pension Form 10-K for fiscal year ended Plan and Profit Sharing Plans December 31, 1993 and incorporated effective as of January 1, herein by reference. 1994.
(i) Form of amended Ogden Filed as Exhibit 10.7(w)(i) to Projects Profit Sharing Ogden's Form 10-K for fiscal year Plan effective as of ended December 31, 1994 and January 1, 1994. incorporated herein by reference. (ii) Form of amended Ogden Filed as Exhibit 10.7(w)(ii) to Projects Pension Plan, Ogden's Form 10-K for fiscal year effective as of January ended December 31, 1994 and 1, 1994. incorporated herein by reference. (n) Ogden Corporation Amended and Transmitted herewith as Exhibit Restated CEO Formula Bonus Plan. 10.3(n). (o) Ogden Key Management Incentive Plan. Filed as Exhibit 10.7(p) to Ogden's Form 10-K for fiscal year ended December 31, 1997 and incorporated herein by reference. 10.4 Employment Agreements (a) Employment Agreement between Transmitted herewith as Exhibit Ogden and Lynde H. Coit dated 10.4(a). March 1, 1999. (b) Employment Agreement between Filed as Exhibit 10.3(h) to Ogden's R. Richard Ablon and Ogden Form 10-Q for the quarterly period dated as of January 1, 1998. ended June 30, 1998 and incorporated herein by reference. (c) Termination Agreement between Filed as Exhibit 10.8(c) to Ogden's Ogden and Philip G. Husby, Form 10-Q for the quarterly period Senior Vice President and CFO ended September 30, 1998 and dated as of September 17, 1998. incorporated herein by reference. (d) Employment Agreement between Filed as Exhibit 10.2(q) to Ogden's Ogden Corporation and Ogden's Form 10-K for fiscal year ended Chief Accounting Officer dated December 31, 1991 and incorporated as of December 18, 1991. herein by reference.
(e) Employment Agreement between Filed as Exhibit 10.8(e) to Ogden's Scott G. Mackin, Executive Form 10-Q for quarterly period Vice President and Ogden ended September 30, 1998 and Corporation, dated as of incorporated herein by reference. October 1, 1998. (f) Employment Agreement between Filed as Exhibit 10.8(i) to Ogden's Ogden Corporation and David L. Form 10-K for fiscal year ended Hahn, dated December 1, 1995. December 31, 1995 and incorporated herein by reference. i Letter Amendment to Filed as Exhibit 10.8(f)i. to Employment Agreement Ogden's Form 10-Q for quarterly between Ogden period ended September 30, 1998 and Corporation and David incorporated herein by reference. L. Hahn, Senior Vice President, dated as of October 1, 1998. (g) Employment Agreement between Filed as Exhibit 10.8(j) to Ogden's Ogden Corporation and Rodrigo Form 10-K for fiscal year ended Arboleda, dated January 1, December 31, 1996 and incorporated 1997. herein by reference. i. Letter Amendment Filed as Exhibit 10.8(g)(i) to to Employment Agreement Ogden's Form 10-Q for quarterly between Ogden period ended September 30, 1998 and and Rodrigo Arboleda, incorporated herein by reference. Senior Vice President, effective as of October 1, 1998. (h) Employment Agreement Filed as Exhibit 10.8(k) to Ogden's between Ogden Projects, Inc. Form 10-K for fiscal year ended and Bruce W. Stone, dated June December 31, 1996 and incorporated 1, 1990. herein by reference. (i) Employment Agreement Filed as Exhibit 10.8(l) to Ogden's
between Ogden Corporation and Form 10-K for fiscal year ended Quintin G. Marshall, dated December 31, 1996 and incorporated October 30, 1996. herein by reference. i. Letter Amendment to Filed as Exhibit 10.8(i)i. to Employment Agreement Ogden's Form 10-Q for the quarter between Ogden ended September 30, 1998 and and Quintin G. incorporated herein by reference. Marshall, Senior Vice President, Corporate Development, effective as of October 1, 1998. (j) Employment Agreements between Filed as Exhibit 10.8(m) to Ogden's Ogden and Jesus Sainz, Form 10-K for the fiscal year ended effective as of January 1, 1998. December 31, 1997 and incorporated herein by reference. i. Letter Amendment to Filed as Exhibit 10.8(j)i. to Employment Agreement Ogden's Form 10-Q for the quarter between Ogden and Jesus ended September 30, 1998 and Sainz, Executive Vice incorporated herein by reference. President, effective as of October 1, 1998. (k) Employment Agreement between Filed as Exhibit 10.3(m) to Ogden's Alane Baranello, Vice President Form 10-Q for the quarterly period - Human Resources and Ogden ended June 30, 1998 and dated October 28, 1996. incorporated herein by reference. i. Letter Amendment to Filed as Exhibit 10.8(k)i. to Employment Agreement Ogden's Form 10-Q for the quarterly between Ogden period ended September 30, 1998. and Alane Baranello, Vice President-Human Resources, dated October 13, 1998. (l) Employment Agreement Filed as Exhibit 10.3(l) to Ogden's
between Ogden and Peter Allen, Form 10-Q for the quarterly period Senior Vice President, dated ended June 30, 1998. July 1, 1998. (m) Employment Agreement between Transmitted herewith as Exhibit Ogden and Raymond E. 10.4(m). Dombrowski, Jr., Senior Vice President and CFO, dated as of September 21, 1998. 10.5 First Amended and Restated Ogden Filed as Exhibit 10.3(b)(i) to Corporation Guaranty Agreement Ogden's Form 10-K for fiscal made as of January 30, 1992 by year ended December 31, 1991 Ogden Corporation for the benefit and incorporated herein by of Mission Funding Zeta and reference. Pitney Bowes Credit. 10.6 Ogden Corporation Guaranty Filed as Exhibit 10.3(b)(iii) Agreement made as of January to Ogden's Form 10-K for 30,1992 by Ogden Corporation for fiscal year ended December 31, the benefit of Allstate Insurance 1991 and incorporated herein Company and Ogden Martin Systems by reference. of Huntington Resource Recovery Nine Corp. 11 Ogden Corporation and Filed as part of Ogden's Subsidiaries Detail of Annual Report to Shareholders Computation of Earnings on page 42 thereof which is Applicable to Common Stock for filed as Exhibit 13 to Ogden's the years ended December 31, Form 10-K for fiscal year 1998, 1997 and 1996. ended December 31, 1998 and incorporated herein by reference. 13 Those portions of the Annual Transmitted herewith as Report to Stockholders for the Exhibit 13. year ended December 31, 1998, which are incorporated herein by reference. 21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21. 23 Consent of Deloitte & Touche LLP. Transmitted herewith as Exhibit 23. 27 Financial Data Schedule. Transmitted herewith as Exhibit 27.
EX-10.3(N) 2 AMENDED AND RESTATED CEO FORMULA BOUNUS PLAN EXHIBIT 10.3(n) AMENDED AND RESTATED CEO FORMULA BONUS PLAN 1. PURPOSE: The purpose of the CEO Formula Bonus Plan (the "Plan") is to provide the CEO with an additional incentive to enhance and improve the performance of the Company as well as to meet the requirements of qualified performance-based compensation under Section 162(m) of the Internal Revenue Code of 1986, as amended (the "Code"), and Regulation 162(m) of the Code and preserve the deduction for compensation in excess of $1.0 million paid to the CEO. 2. DEFINITIONS: (a) "Bonus" shall be in the amount approved by the Committee and payable to the CEO in accordance with the Plan, which amount shall not exceed the Maximum Bonus for each Measurement Year. (b) "Maximum Bonus" shall mean $4,000,000. (c) "CEO" means the Chief Executive Officer of Ogden Corporation ("Ogden"). (d) "Committee" means the Compensation Committee of the Ogden Board of Directors comprised of "outside directors" within the meaning of Section 162(m) of the Code. (e) "Company" means Ogden and its subsidiaries. (f) "Designated Beneficiary" means the Participant's spouse who shall receive any payments due to the Participant under the Plan upon the Participant's death. If the spouse is not living, the Designated Beneficiary shall be the Participant's estate. (g) "Disability" is defined as a condition entitling the Participant to benefits under the Company's long-term disability plan or policy applicable to the CEO. (h) "Effective Date" shall be January 1, 1999. (i) "Measurement Year" means each calendar year period over which the Company's ROE Performance is measured. (j) "Participant" means the CEO who is eligible to receive a Bonus under the Plan. (k) "Pre-Tax Income" for any Measurement Year is the amount of consolidated income from continuing operations before income taxes and minority interest as of the December 31 occurring in such Measurement Year as reported in the Company's Statements of Consolidated Income. (l) "Pre-Tax ROE Performance Level" for any Measurement Year means the Company's Pre-Tax Income achieved in any such Measurement Year divided by the Company's Shareholders' Equity for such Measurement Year. (m) "Shareholders' Equity" for any Measurement Year is equal to the total shareholders equity as of the December 31 occurring in the immediately preceding calendar year, as reported in the Company's Statement of Shareholders' Equity. (n) "Target Bonus" for any Measurement Year shall be equal to the Participant's base salary as determined by the Committee prior to the Measurement Year and which becomes effective as of March 1 of the Measurement Year. 3. ELIGIBILITY: Participation in the Plan will be limited to the CEO. 4. BONUS FORMULA: The Participant will be eligible for an annual cash Bonus with respect to each Measurement Year based upon the Company's Pre-Tax ROE Performance Level attained in such Measurement Year. The amount of each Bonus shall be equal to a portion of the Target Bonus which amount cannot exceed the Maximum Bonus. For each Pre-Tax ROE Performance Level, the amount of any Bonus payable, not to exceed the Maximum Bonus, is designated in the following table: ================================================================================ Pre-Tax ROE Performance Level % of Target Bonus - -------------------------------------------------------------------------------- < 13% 0 13% to under 17% 75% 17% to under 21% 100% 21% to under 25% 125% 25% or greater 150% ================================================================================ 3. AWARD DETERMINATION: The annual Bonus amount to be awarded under the Plan will be determined by the Committee based on the actual Pre-Tax ROE Performance Level in the Measurement Year. Following December 31 of each Measurement Year, the Committee will certify in writing to the Pre-Tax ROE Performance Level achieved after the completion and audit of the Company's annual financial statements. Such certification shall be included in the minutes of the Committee. 4. MODIFICATION OF AWARDS BASED ON INDIVIDUAL PERFORMANCE: The Participant's Bonus award as determined by the Pre-Tax ROE Performance Level may be reduced based on the Committee's evaluation of other factors related to the Participant's and Company's overall performance. 5. TIMING AND PAYMENT OF AWARDS: Payment of any Bonus under the Plan will be made after completion of each Measurement Year as soon as practical following Certification by the Committee of the Company's Pre-Tax ROE Performance Level and final approval of the Bonus by the Committee. 6. DISABILITY OR DEATH: In the event of the Participant's Disability or Death during a Measurement Year, the full Bonus earned for the Measurement Year and approved by the Committee will be paid to the Participant or Designated Beneficiary, as the case may be, as if the Participant had remained active throughout the Measurement Year. In the event of the Participant's death after the death of a Measurement Year but prior to the payment of any Bonus earned for such Measurement year such Bonus shall be paid to the Participant's Designated Beneficiary. 7. TERMINATION OF EMPLOYMENT: In the event the Participant's employment is terminated by Ogden during a Measurement Year for any reason other than for cause, as determined by the Committee or if the Participant has an employment agreement with Ogden, as set forth in such employment agreement, the full Bonus earned for the Measurement Year and approved by the Committee will be paid as if the Participant had remained employed throughout the Measurement Year. 8. ADMINISTRATION: The Plan will be administered by the Committee. The Committee retains the discretion to change the Pre-Tax ROE Performance Levels under the Bonus Formula, as set forth in the table in Paragraph 4. above, prior to the start of any Measurement Year and while the outcome is still uncertain. The Committee may reduce the Bonus payable under the Plan in any Measurement Year. The Committee reserves the right to terminate the Plan at any time or to amend the Plan in any respect; provided that no amendment shall be made which would cause payments pursuant to this Plan to fail to qualify for the exemption from the limitations of Section 162(m) and Regulation 162(m) of the Code provided by Section 162(m)(4)(C) of the Code. No Plan amendment or termination will alter the Participant's right to a Bonus for a Measurement Year already in progress with the exception of the 1999 Measurement Year. The Plan shall terminate and become null and void if it is not approved by the Ogden shareholders at the 1999 Annual Meeting in accordance with the requirements of Section 162(m)(4)(C) and Regulation 162(m)of the Code. 9. MISCELLANEOUS: (a) The right of the Participant to any payment hereunder shall not be assigned, transferred, pledged or encumbered. (b) This Plan and all rights hereunder shall be subject to any and all governmental laws, regulations and approvals that may exist from time to time and shall be interpreted in accordance with the laws of the state of New York. (c) All payments required to be paid hereunder shall be subject to any required Federal, state, local and other applicable withholdings or deductions. (d) Nothing contained in the Plan shall confer upon the Participant any right with respect to the continuation of the Participant's employment by the Company or interfere in any way with the right of the Company at any time to terminate such employment or to increase or decrease the base salary of the Participant from the rate in effect at the commencement of a Measurement Year, except that at no time shall the Bonus be greater than the Maximum Bonus. EX-10.4(A) 3 EMPLOYMENT AGREEMENT B/W LYNDE COIT EXHIBIT 10.4(a) EMPLOYMENT AGREEMENT OGDEN CORPORATION (the "Company") and LYNDE H. COIT ("Executive") agree to enter into this EMPLOYMENT AGREEMENT dated as of March 1, 1999, as follows: 1. Employment. The Executive is currently employed by the Company pursuant to a letter employment agreement dated January 30, 1990 which the Company and Executive hereby terminate and enter into this new agreement on such terms and conditions as set forth herein. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company, upon the terms and subject to the conditions set forth in this Agreement. 2. Employment Term. The period of Executive's employment under this Agreement shall begin as of March 1, 1999 (the "Effective Date") and shall continue until terminated in accordance with Section 5 below (the "Employment Term"). 3. Duties and Responsibilities. (a) The Company will employ Executive as its Senior Vice President and General Counsel. In such capacity, Executive shall perform the customary duties and have the customary responsibilities of such position and such other duties as may be assigned to Executive from time to time by the Company's President and Chief Executive Officer or by the Company's Board of Directors (the "Board"). (b) Executive agrees to faithfully serve the Company, devote his full working time, attention and energies to the business of the Company its subsidiaries and affiliated entities, and perform the duties under this Agreement to the best of his abilities. Executive may perform services without direct compensation therefor in connection with the management of personal investments, or in connection with charitable or civic organizations. The Executive shall be excused from rendering his service during reasonable vacation periods and during other reasonable temporary absences as may be authorized by the Board of Directors of the Company. (c) Executive agrees (i) to comply with all applicable laws, rules and regulations, and all requirements of all applicable regulatory, self-regulatory, and administrative bodies; (ii) to comply with the Company's Policy of Business Conduct; and (iii) not to engage in any other business or employment without the written consent of the Company except as otherwise specifically provided herein. 4. Compensation and Benefits. (a) Base Salary. During the Employment Term, the Company shall pay Executive a base salary at the annual rate of $290,000 per year or such higher rate as may be determined from time to time by the Board ("Base Salary"). Such Base Salary shall be paid in accordance with the Company's standard payroll practice for senior executives. (b) Annual Incentive Bonus. During the Employment Term, the Executive will be eligible for an annual incentive bonus in such amount as may be determined by the Board. (c) Expense Reimbursement. The Company shall promptly reimburse Executive for the ordinary and necessary business expenses incurred by Executive in the performance of the duties under this Agreement in accordance with the Company's customary practices applicable to senior executives, provided that such expenses are incurred and accounted for in accordance with the Company's policy. (d) Other Benefit Plans, Fringe Benefits and Vacations. Executive shall be eligible to participate in or receive benefits under any pension plan, profit sharing plan, 401(k) plan, non-qualified deferred compensation plan, medical and dental benefits plan, life insurance plan, short-term and long-term disability plans, incentive compensation plans, vacations, or any other fringe benefit plan, generally made available by the Company to senior executives. Except as otherwise provided in this Agreement, any such participation shall be in accordance with the provisions of such plans and nothing contained in this Agreement is intended to, or shall be deemed to, affect adversely any of Executive's rights as a participant under any such plans. Nothing herein shall prevent the Board from modifying or discontinuing any benefit plan on a consistent and non-discriminatory basis applicable to all such executives. 5. Termination of Employment. Executive's employment under this Agreement may be terminated under the following circumstances: (a) Death. Executive's employment shall terminate upon Executive's death. (b) Total Disability. The Company may terminate Executive's employment upon his becoming "Totally Disabled". For purposes of this Agreement, Executive shall be "Totally Disabled" if he is physically or mentally incapacitated so as to render him incapable of performing his usual and customary duties under this Agreement. Executive's receipt of disability benefits under the Company's long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement. (c) Termination by the Company for Cause. The Company may terminate Executive's employment for "Cause". Such termination shall be effective as of the date specified in the written Notice of Termination provided to Executive. Termination of employment by the Company for Cause shall be deemed to have occurred only if such termination directly results from: (A) an act or acts of dishonesty on Executive's part constituting a felony; (B) Executive's willful and continued failure to devote the time, attention, and effort necessary to substantially perform his duties as an executive officer of the Company in a manner consistent with Executive's past performance (other than any such failure resulting from Executive's 2 incapacity due to physical or mental illness or total disability), after a demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed his duties and Executive is given a reasonable time after such demand substantially to perform his duties; (C) gross misconduct or gross negligence in connection with the business of the Company or an affiliate which has a material adverse effect on the Company and its subsidiaries, taken as a whole; or (D) a material breach of any of the covenants set forth in Section 7 hereof. (d) Termination by the Company without Cause. The Company may terminate Executive's employment under this Agreement without Cause thirty (30) days after providing Notice of Termination to Executive. (e) Termination by Executive. Executive may terminate his employment under this Agreement at any time after providing Notice of Termination to the Company. Such Notice shall state whether the Executive's termination is for "Good Reason". Termination of employment by Executive for Good Reason shall be deemed to have occurred, if Executive provides the Notice of Termination within 60 days after the occurrence of any of the following: (i) A change in Executive's responsibilities, status, title, or position, which, in Executive's reasonable judgment, represents a diminution of Executive's responsibilities, status, title, or position offices, or any removal of Executive from, or any failure to re-elect Executive to, any of such titles, offices, or positions, provided that this clause shall not apply if Executive's employment is terminated as a result of: (A) Executive's death, (B) Executive's Total Disability in accordance with Section 5(b), (C) Cause in accordance with Section 5(c), or (D) Executive's voluntary termination in accordance with this Section 5(e) other than for Good Reason. (ii) A reduction by the Company in Executive's Base Salary. (iii) The failure by the Company to pay any material amount of current compensation owing to Executive, or any material amount of compensation deferred under any plan, agreement or arrangement of or with the Company owing to Executive, within 20 days after the Executive makes written demand for such amount. (iv) The failure by the Company to obtain an assumption (in form and substance reasonably satisfactory to the Executive, except in the case of a merger or consolidation which does not constitute a Change in Control for which no separate assumption is necessary) of the obligations of the Company under this Agreement by any successor to the Company. (v) Any "Change in Control" of the Company as defined in Appendix A to this Agreement. (f) Notice of Termination. Any termination of Executive's employment by the Company or by Executive (other by reason of Executive's death) shall be communicated by written Notice of Termination to the other party in accordance with Section 16 below. For purposes of this Agreement, a "Notice of Termination" shall mean a notice in writing which shall indicate the specific termination provision in this Agreement relied upon to terminate Executive's 3 employment and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (g) Termination Date. Termination Date means (i) if Executive's employment is terminated because of his death, the date of death, or (ii) if employment is terminated for any other reason, the date specified in the Notice of Termination. 6. Compensation Following Termination of Employment. (a) Termination by Reason of Death. In the event that Executive's employment is terminated by reason of Executive's death, the Company shall pay the following amounts to Executive's beneficiary or estate: (i) Earned But Unpaid Compensation. Any accrued but unpaid Base Salary for services rendered to the date of death, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to the date of death. (ii) Lump Sum Payment. An amount equal to the Base Salary (at the rate in effect as of the date of Executive's death) which would have been payable to Executive if Executive had continued in employment until the last day of the month in which Executive's death occurs. Such amount shall be paid in a single lump sum cash payment within 30 days after Executive's death. (iii) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof as determined and paid in accordance with the terms of such plans, policies and arrangements. (b) Termination by Reason of Total Disability. In the event that Executive's employment is terminated by reason of Executive's Total Disability prior to the last day of the Employment Term as determined in accordance with Section 5(b), the Company shall pay the following amounts to Executive: (i) Earned But Unpaid Compensation. Any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the Termination Date. (ii) Continuation of Base Salary. An amount equal to (A) the Base Salary (at the rate in effect as of the date of Executive's Total Disability) which would have been payable to Executive if Executive had continued in active employment until the end of the 12-month period following Executive's Termination Date, or such longer period as may be determined by the Board, (B) reduced by amount of disability insurance benefits payable to Executive during such period under any employer-paid disability insurance plan. Payment shall be made at the same time and in the same manner as such compensation would have been paid if Executive had remained in active employment until the end of such period. (iii) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof shall be 4 determined and paid in accordance with the terms of such plans, policies and arrangements. (c) Termination for Cause or Termination By Executive for Other Than Good Reason. In the event that Executive's employment is terminated by the Company for Cause pursuant to Section 5(c), or by Executive pursuant to Section 5(e) for other than Good Reason, the Company shall pay the following amounts to Executive: (i) Earned But Unpaid Compensation. Any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to Executive's Termination Date. (ii) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. (d) Termination By the Company Without Cause or Termination by Executive for Good Reason. Executive shall be entitled to the benefits described in this Section 6(d) in the event that Executive's employment is terminated (i) by the Company pursuant to Section 5(d) for reasons other than death, Total Disability, or Cause, or (ii) by Executive for Good Reason pursuant to Section 5(e). (i) Earned But Unpaid Compensation. The Company shall pay Executive any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to Executive's Termination Date. (ii) Lump Sum Payment. The Company shall pay Executive an amount equal to the product of five times the sum of (A) and (B) below: (A) Executive's annualized Base Salary at the highest annual rate in effect at any time prior to the Termination Date; and (B) the highest amount of annual bonus payable to Executive at any time prior to the Executive's Termination Date. This amount will be paid to Executive in a single lump sum within 30 business days after the Termination Date. (iii) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(d) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. (iv) No Mitigation Required. Executive shall not be required to mitigate the amount of any compensation provided for under this Section 6(d) by seeking other employment or otherwise, nor shall the amount of any payment provided for under this 5 Agreement be reduced by any compensation earned by the Employee as the result of employment with another employer after the Termination Date or by any other compensation. (v) Non-Competition Covenant Does Not Apply. The restrictive covenant prohibiting competitive activity set forth in Section 7(b) below shall not be applicable to Executive and shall be null and void. (e) No Other Benefits or Compensation. Except as may be provided under this Agreement, under the terms of any incentive compensation, employee benefit, or fringe benefit plan, applicable to Executive at the time of Executive's termination or resignation of employment, Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation. 7. Restrictive Covenants. (a) Protected Information. Executive recognizes and acknowledges that he will have access to various confidential or proprietary information concerning the Company and entities affiliated with the Company of a special and unique value which may include, without limitation, (i) books and records relating to operations, finance, accounting, sales, personnel and management, (ii) policies and matters relating particularly to operations such as customer service requirements, costs of providing service and equipment, operating costs and pricing matters, and (iii) various trade or business secrets, including business opportunities, marketing or business diversification plans, business development and bidding techniques, methods and processes, financial data and the like (collectively, the "Protected Information"). Executive therefore covenants and agrees that he will not at any time, either while employed by the Company or afterwards, knowingly make any independent use of, or knowingly disclose to any other person or organization (except as authorized by the Company) any of the Protected Information. (b) Competitive Activity. Executive covenants and agrees that at all times during his period of employment with the Company, and for a period of two (2) years after the date of termination of his employment by reason of (i) termination by the Company for Cause in accordance with Section 5(c) above, or (ii) termination by the Executive in accordance with Section 5(e) above for other than Good Reason, he will not, directly or indirectly, engage in, assist, or have any active interest or involvement whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor or any type of principal whatsoever, in any person, firm, or business entity which is engaged in the same business as that conducted and principally carried on by the Company on the Date of Termination and continued thereafter, without the Company's specific written consent to do so. (c) Return of Documents and Other Materials. Executive shall promptly deliver to the Company, upon termination of his employment, or at any other time as the Company may so request, all customer lists, leads and refunds, data processing programs and documentation, employee information, memoranda, notes, records, reports, tapes, manuals, drawings, blueprints, programs, and any other documents and other materials (and all copies thereof) 6 relating to the Company's business or that of its customers, and all property associated therewith, which Executive may then possess or have under his control. 8. Enforcement of Covenants. (a) Right to Injunction. Executive acknowledges that a breach of the covenants set forth in Section 7 hereof will cause irreparable damage to the Company with respect to which the Company's remedy at law for damages will be inadequate. Therefore, in the event of breach or anticipatory breach of the covenants set forth in this section by Executive, Executive and the Company agree that the Company shall be entitled to the following particular forms of relief, in addition to remedies otherwise available to it at law or equity, injunctions, both preliminary and permanent, enjoining or retraining such breach or anticipatory breach and Executive hereby consents to the issuance thereof forthwith and without bond by any court of competent jurisdiction. (b) Separability of Covenants. The covenants contained in Section 7 hereof constitute a series of separate covenants, one for each applicable State in the United States and the District of Columbia, and one for each applicable foreign country. If in any judicial proceeding, a court shall hold that any of the covenants set forth in Section 7 exceed the time, geographic, or occupational limitations permitted by applicable laws, Executive and the Company agree that such provisions shall and are hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. Executive and the Company further agree that the covenants in Section 7 shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by Executive against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants of Section 7. 9. Certain Proprietary Rights. Executive agrees to and hereby does assign to the Company all his right, title and interest in and to all inventions, whether or not patentable, which are made or conceived solely or jointly by him: (a) at any time during the term of his employment by the Company in an executive, managerial, or planning capacity (including development and sales); or (b) during the course of or in connection with his duties during the Employment Term; or (c) with the use of time or materials of the Company. Executive agrees to communicate to the Company or its representatives all facts known to him concerning such inventions, to sign all rightful papers, make all rightful oaths and generally to do everything possible to aid the Company in obtaining and enforcing proper patent protection for all such inventions in all countries and in vesting title to such inventions in all countries and in vesting title to such inventions and patents in the Company. For the purpose of this Agreement, the subject matter of any application for patent naming Employee as a sole or joint inventor filed during the course of 7 employment or within one year subsequent to the termination thereof shall be deemed to be an invention made or conceived by him during the course of his employment by the Company and assignable to the Company hereunder, unless Executive establishes by a preponderance of the evidence that such invention was made or conceived by him subsequent to termination of his employment hereunder. At the Company's request (during or after the term of this Agreement) and expense, Executive will promptly execute a specific assignment of title to the Company, and perform any other acts reasonably necessary to implement the foregoing assignment. 10. Withholding of Taxes. The Company shall withhold from any compensation and benefits payable under this Agreement all applicable federal, state, local, or other taxes. 11. Source of Payments. All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets made, to assure payment. Executive shall have no right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligations under this Agreement. To the extent that any person acquires a right to receive payments from the Company under this Agreement, such right shall be no greater than the right of an unsecured creditor of the Company and its affiliates. 12. Successor and Binding Agreement. (a) Company Successor. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled to under this Agreement if Executive had given Notice of Termination for Good Reason as of the day immediately before such succession became effective and had specified that day in the notice of termination. As used in this Agreement, "Company" shall mean the Company as defined in the first sentence of this Agreement and any successor to all or substantially all its business or assets or which otherwise becomes bound by all the terms and provisions of this Agreement, whether by the terms hereof, by operation of law or otherwise. (b) Executive's Successor. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives and successors in interest under this Agreement. (c) Facility of Payment. In the event of Executive's legal incapacity, the Company may make any payments due under this Agreement to his legal representative. In the event of Executive's death, the Company may make any payment due under this Agreement to his surviving spouse or, if none, to Executive's estate. Any payment made in accordance with this provision fully discharges the obligation of the Company therefor. 8 13. Assignment by Executive. The rights and benefits of Executive under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; provided, however, that nothing in this Section 13 shall preclude Executive from designating a beneficiary or beneficiaries to receive any benefit payable on his death. In the event of a dispute arising under this Agreement, the Company agrees to pay any and all reasonable legal fees incurred by Executive in connection therewith. 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in that State, without regard to its conflict of laws provisions. 15. Notices. Any notice, consent, request or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by registered or certified mail, return receipt requested, or by facsimile or by hand delivery, to those listed below at their following respective addresses or at such other address as each may specify by notice to the others: To the Company: Ogden Corporation Two Pennsylvania Plaza New York, New York 10121 Attention: President and Chief Executive Officer To Executive: Lynde H. Coit 66 Winthrop Drive Riverside, CT 06878 16. Miscellaneous. (a) Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (b) Separability. If any term or provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such term or provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. 9 (c) Headings. Section headings are used herein for convenience of reference only and shall not affect the meaning of any provision of this Agreement. (d) Rules of Construction. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa. (e) Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts will together constitute but one Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year set forth below. OGDEN CORPORATION EXECUTIVE By /s/ R. Richard Ablon By /s/ Lynde H. Coit ------------------------------- ------------------------- R. Richard Ablon, Lynde H. Coit President, Chief Executive Officer and Chairman of the Board Date: March 9 , 1999 Date: March 9, 1999 ------------------------------- ------------------- 10 APPENDIX A DEFINITION OF CHANGE IN CONTROL The following definition of "Change in Control" shall apply for purposes of Paragraph 5(e)(v) of the Employment Agreement between Ogden Corporation and Lynde H. Coit. Change in Control. A "Change in Control" of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: (a) Any person (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the beneficial owner, directly or indirectly, of securities of the Company, representing more than twenty-five percent (25%) of the combined voting power of the Company's then outstanding securities; (b) Individuals who, as of May 20, 1998, constitute the Board of Directors of the Company (the " Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to May 20, 1998, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) The stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, limited liability entity or similar person, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. 11 EX-10.4(M) 4 EMPLOYMENT AGREEMENT B/W RAY DOMBROWSKI EXHIBIT 10.4(m) EMPLOYMENT AGREEMENT OGDEN CORPORATION (the "Company") and RAYMOND E. DOMBROWSKI, JR. ("Executive") agree to enter into this EMPLOYMENT AGREEMENT dated as of September 21, 1998, as follows: 1. Employment. The Company hereby agrees to employ Executive, and Executive hereby agrees to be employed by the Company, upon the terms and subject to the conditions set forth in this Agreement. 2. Employment Term. The period of Executive's employment under this Agreement shall begin as of September 21, 1998 (the "Effective Date") and shall continue until terminated in accordance with Section 5 below (the "Employment Term"). 3. Duties and Responsibilities. (a) The Company will employ Executive as its Senior Vice President and Chief Financial Officer. In such capacity, Executive shall perform the customary duties and have the customary responsibilities of such position and such other duties as may be assigned to Executive from time to time by the Company's Chief Executive Officer or by the Company's Board of Directors (the "Board"). (b) Executive agrees to faithfully serve the Company, devote his full working time, attention and energies to the business of the Company its subsidiaries and affiliated entities, and perform the duties under this Agreement to the best of his abilities. Executive may perform services without direct compensation therefor in connection with the management of personal investments, legal services for family and friends which do not detract from the performance of duties hereunder or in connection with charitable or civic organizations. The Executive shall be excused from rendering his service during reasonable vacation periods and during other reasonable temporary absences as may be authorized by the Board of Directors of the Company. (c) Executive agrees (i) to comply with all applicable laws, rules and regulations, and all requirements of all applicable regulatory, self-regulatory, and administrative bodies; (ii) to comply with the Company's Policy of Business Conduct; and (iii) not to engage in any other business or employment without the written consent of the Company except as otherwise specifically provided herein. 4. Compensation and Benefits. (a) Signing Bonus. The Company shall pay the Executive a signing bonus ("Signing Bonus") in the amount of $50,000 as soon as practicable following the execution of this Agreement, but in no event sooner than thirty (30) days thereafter. In the event that the Executive's employment with the Company is either terminated by the Company for Cause pursuant to Section 5(c) or by the Executive pursuant to Section 5(e) for other than Good Reason prior to September 21, 1999, the Signing Bonus shall be repaid by the Executive to the Company. (b) Base Salary. During the Employment Term, the Company shall pay Executive a base salary at the annual rate of $300,000 per year or such higher rate as may be determined from time to time by the Board ("Base Salary"). Such Base Salary shall be paid in accordance with the Company's standard payroll practice for senior executives. (c) Annual Incentive Bonus. During the Employment Term, the Executive will be eligible for an annual incentive bonus in such amount as may be determined by the Board, provided that Executive's target incentive bonus for 1998 will be $220,000 and the minimum bonus payable to Executive for 1998 will be at least $110,000. The actual amount of the bonus will be calculated based on the Company's financial performance and Executive's achievement of pre-determined goals. (d) Initial Stock Option Grant. Executive will be granted options to purchase 50,000 shares of Ogden common stock pursuant to the Ogden Stock Option Plan. During the Employment Term, Executive also will be considered for the grant of additional stock options from year-to-year as determined by the Board. (e) Expense Reimbursement. The Company shall promptly reimburse Executive for the ordinary and necessary business expenses incurred by Executive in the performance of the duties under this Agreement in accordance with the Company's customary practices applicable to senior executives, provided that such expenses are incurred and accounted for in accordance with the Company's policy. (f) Other Benefit Plans, Fringe Benefits and Vacations. Executive shall be eligible to participate in or receive benefits under any pension plan, profit sharing plan, 401(k) plan, non-qualified deferred compensation plan, supplemental executive retirement plan, medical and dental benefits plan, life insurance plan, short-term and long-term disability plans, incentive compensation plans, vacations, or any other fringe benefit plan, generally made available by the Company to senior executives. Except as otherwise provided in this Agreement, any such participation shall be in accordance with the provisions of such plans and nothing contained in this Agreement is intended to, or shall be deemed to, affect adversely any of Executive's rights as a participant under any such plans. Nothing herein shall prevent the Board from (i) paying a bonus to Executive under any incentive plan which it adopts and in which the other executives participate or (ii) modifying or discontinuing any benefit plan on a consistent and non-discriminatory basis applicable to all such executives. (g) New York City Apartment. The Company will provide Executive (on an after-tax basis) with access to a company-provided apartment located near the Company's principal place of business in New York City selected by mutual agreement of the parties during the Employment Term. 5. Termination of Employment. Executive's employment under this Agreement may be terminated under the following circumstances: 2 (a) Death. Executive's employment shall terminate upon Executive's death. (b) Total Disability. The Company may terminate Executive's employment upon his becoming "Totally Disabled". For purposes of this Agreement, Executive shall be "Totally Disabled" if he is physically or mentally incapacitated so as to render him incapable of performing his usual and customary duties under this Agreement. Executive's receipt of disability benefits under the Company's long-term disability plan or receipt of Social Security disability benefits shall be deemed conclusive evidence of Total Disability for purpose of this Agreement. (c) Termination by the Company for Cause. The Company may terminate Executive's employment for "Cause". Such termination shall be effective as of the date specified in the written Notice of Termination provided to Executive. (i) Termination of employment by the Company for Cause shall be deemed to have occurred only if such termination directly results from: (A) an act or acts of dishonesty on Executive's part constituting a felony; (B) Executive's willful and continued failure to devote the time, attention, and effort necessary to substantially perform his duties as an executive officer of the Company in a manner consistent with Executive's past performance (other than any such failure resulting from Executive's incapacity due to physical or mental illness or total disability), after a demand for substantial performance is delivered to Executive by the Board which specifically identifies the manner in which the Board believes that Executive has not substantially performed his duties and Executive is given a reasonable time after such demand substantially to perform his duties; (C) gross misconduct or gross negligence in connection with the business of the Company or an affiliate which has a material adverse effect on the Company and its subsidiaries, taken as a whole; or (D) a material breach of any of the covenants set forth in Section 7 hereof. (ii) Executive's employment shall in no event be considered to have been terminated by the Company for Cause if the act or failure to act upon which such termination is based: (A) was done or omitted to be done as a result of bad judgment or negligence on Executive's part, or without intent of gaining therefrom directly or indirectly a profit to which Executive was not legally entitled, or as a result of Executive's good faith belief that such act or failure to act, was, and is, not opposed to the interests of the Company; or (B) is an act or failure to act in respect of which Executive meets the applicable standard of conduct prescribed for indemnification or reimbursement or payment of expenses under the By-laws of the Company or the laws of the state of its incorporation or the liability insurance covering directors and officers of the Company, in each case as in effect at the time of such act or failure to act. (d) Termination by the Company without Cause. The Company may terminate Executive's employment under this Agreement without Cause thirty (30) days after providing Notice of Termination to Executive. (e) Termination by Executive. Executive may terminate his employment under this Agreement at any time after providing Notice of Termination to the Company. Such Notice shall state whether the Executive's termination is for "Good Reason". Termination of employment by Executive for Good Reason shall be deemed to have occurred, if Executive provides the Notice of Termination within 60 days after the occurrence of any of the following: 3 (i) A change in Executive's responsibilities, status, title, or position, which, in Executive's reasonable judgment, represents a diminution of Executive's responsibilities, status, title, or position offices, or any removal of Executive from, or any failure to re-elect Executive to, any of such titles, offices, or positions, provided that this clause shall not apply if Executive's employment is terminated as a result of: (A) Executive's death, (B) Executive's Total Disability in accordance with Section 5(b), (C) Cause in accordance with Section 5(c), or (D) Executive's voluntary termination in accordance with this Section 5(e) other than for Good Reason. (ii) A reduction by the Company in Executive's Base Salary. (iii) The failure of the Company substantially to maintain and to continue Executive's participation in the Company's benefit plans (other than those plans or improvements that have expired thereafter in accordance with their original terms), or the taking of any action which would materially reduce Executive's benefits under any of such plans or deprive Executive of any material fringe benefit enjoyed by him. (iv) The failure by the Company to pay any material amount of current compensation owing to Executive, or any material amount of compensation deferred under any plan, agreement or arrangement of or with the Company owing to Executive, within 20 days after the Executive makes written demand for such amount. (v) The failure by the Company to obtain an assumption (in form and substance reasonably satisfactory to the Executive, except in the case of a merger or consolidation which does not constitute a Change in Control for which no separate assumption is necessary) of the obligations of the Company under this Agreement by any successor to the Company. (vi) Any purported termination of Executive's employment which is not effected pursuant to a Notice of Termination, and for purposes of this Agreement, no such purported termination shall be effective. (vii) Any "Change in Control" of the Company as defined in Appendix A to this Agreement. (f) Notice of Termination. Any termination of Executive's employment by the Company or by Executive (other by reason of Executive's death) shall be communicated by written Notice of Termination to the other party in accordance with Section 16 below. For purposes of this Agreement, a "Notice of Termination" shall mean a notice in writing which shall indicate the specific termination provision in this Agreement relied upon to terminate Executive's employment and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive's employment under the provision so indicated. (g) Termination Date. Termination Date means (i) if Executive's employment is terminated because of his death, the date of death, or (ii) if employment is terminated for any other reason, the date specified in the Notice of Termination. 4 6. Compensation Following Termination of Employment. (a) Termination by Reason of Death. In the event that Executive's employment is terminated by reason of Executive's death, the Company shall pay the following amounts to Executive's beneficiary or estate: (i) Earned But Unpaid Compensation. Any accrued but unpaid Base Salary for services rendered to the date of death, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to the date of death. (ii) Lump Sum Payment. An amount equal to the Base Salary (at the rate in effect as of the date of Executive's death) which would have been payable to Executive if Executive had continued in employment until the last day of the month in which Executive's death occurs. Such amount shall be paid in a single lump sum cash payment within 30 days after Executive's death. (iii) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(f) hereof as determined and paid in accordance with the terms of such plans, policies and arrangements. (b) Termination by Reason of Total Disability. In the event that Executive's employment is terminated by reason of Executive's Total Disability prior to the last day of the Employment Term as determined in accordance with Section 5(b), the Company shall pay the following amounts to Executive: (i) Earned But Unpaid Compensation. Any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement, any vacation accrued to the Termination Date. (ii) Continuation of Base Salary. An amount equal to (A) the Base Salary (at the rate in effect as of the date of Executive's Total Disability) which would have been payable to Executive if Executive had continued in active employment until the end of the 12-month period following Executive's Termination Date, or such longer period as may be determined by the Board, (B) reduced by amount of disability insurance benefits payable to Executive during such period under any employer-paid disability insurance plan. Payment shall be made at the same time and in the same manner as such compensation would have been paid if Executive had remained in active employment until the end of such period. (iii) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(f) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. (c) Termination for Cause or Termination By Executive for Other Than Good Reason. In the event that Executive's employment is terminated by the Company for Cause pursuant to Section 5(c), or by Executive pursuant to Section 5(e) for other than Good Reason, the Company shall pay the following amounts to Executive: 5 (i) Earned But Unpaid Compensation. Any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to Executive's Termination Date. (ii) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(f) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. (d) Termination By the Company Without Cause or Termination by Executive for Good Reason. Executive shall be entitled to the benefits described in this Section 6(d) in the event that Executive's employment is terminated (i) by the Company pursuant to Section 5(d) for reasons other than death, Total Disability, or Cause, or (ii) by Executive for Good Reason pursuant to Section 5(e). (i) Earned But Unpaid Compensation. The Company shall pay Executive any accrued but unpaid Base Salary for services rendered to Executive's Termination Date, any accrued but unpaid expenses required to be reimbursed under this Agreement and any vacation accrued to Executive's Termination Date. (ii) Lump Sum Payment. The Company shall pay Executive an amount equal to the product of five times the sum of (A) and (B) below: (A) Executive's annualized Base Salary at the highest annual rate in effect at any time prior to the Termination Date; and (B) the amount of annual bonus payable to Executive for the calendar year ending immediately prior to the calendar year in which the Termination Date occurs. This amount will be paid to Executive in a single lump sum within 30 business days after the Termination Date. (iii) Gross-Up Payment. In the event that any portion of the benefits payable under this Section 6(d) and any other payments and benefits under any other agreement with or plan of the Company (in the aggregate, "Total Payments") constitute an "excess parachute payment" within the meaning of Section 280G of the Internal Revenue Code (the "Code"), then the Company shall pay Executive as promptly as practicable following such determination an additional amount (the "Gross-up Payment") calculated as described below to reimburse Executive on an after tax basis for any excise tax imposed on such payments under Section 4999 of the Code. The Gross-up Payment shall equal the amount, if any, needed to ensure that the net parachute payments (including the Gross-up Payment) actually received by Executive after the imposition of federal and state income and excise taxes (including any interest or penalties imposed by the Internal Revenue Service), is equal to the amount that Executive would have netted after the imposition of federal and state income taxes had the Total Payments not been subject to the taxes imposed by Section 4999. For purposes of this calculation, it shall be assumed that Executive's tax rate will be the 6 maximum marginal federal and state income tax rate on earned income, with such maximum federal rate to be computed with regard to Section 1(a) of the Code. In the event that Executive and the Company are unable to agree as to the amount of the Gross-up Payment, if any, Executive shall select a law firm or accounting firm from among those regularly consulted (during the 12-month period immediately prior to the Termination Date) by the Company regarding federal income tax matters and such law firm or accounting firm shall determine the amount of Gross-up Payment and such determination shall be final and binding upon Executive and the Company. (iv) Other Benefits. Any benefits to which Executive may be entitled pursuant to the plans, policies and arrangements referred to in Section 4(f) hereof shall be determined and paid in accordance with the terms of such plans, policies and arrangements. (v) No Mitigation Required. Executive shall not be required to mitigate the amount of any compensation provided for under this Section 6(d) by seeking other employment or otherwise, nor shall the amount of any payment provided for under this Agreement be reduced by any compensation earned by the Employee as the result of employment with another employer after the Termination Date or by any other compensation. (vi) Non-Competition Covenant Does Not Apply. The restrictive covenant prohibiting competitive activity set forth in Section 7(b) below shall not be applicable to Executive and shall be null and void. (e) No Other Benefits or Compensation. Except as may be provided under this Agreement, under the terms of any incentive compensation, employee benefit, or fringe benefit plan, applicable to Executive at the time of Executive's termination or resignation of employment, Executive shall have no right to receive any other compensation, or to participate in any other plan, arrangement or benefit, with respect to future periods after such termination or resignation. 7. Restrictive Covenants. (a) Protected Information. Executive recognizes and acknowledges that he will have access to various confidential or proprietary information concerning the Company and entities affiliated with the Company of a special and unique value which may include, without limitation, (i) books and records relating to operations, finance, accounting, sales, personnel and management, (ii) policies and matters relating particularly to operations such as customer service requirements, costs of providing service and equipment, operating costs and pricing matters, and (iii) various trade or business secrets, including business opportunities, marketing or business diversification plans, business development and bidding techniques, methods and processes, financial data and the like (collectively, the "Protected Information"). Executive therefore covenants and agrees that he will not at any time, either while employed by the Company or afterwards, knowingly make any independent use of, or knowingly disclose to any 7 other person or organization (except as authorized by the Company) any of the Protected Information. (b) Competitive Activity. Executive covenants and agrees that at all times during his period of employment with the Company, and for a period of two (2) years after the date of termination of his employment by reason of (i) termination by the Company for Cause in accordance with Section 5(c) above, or (ii) termination by the Executive in accordance with Section 5(e) above for other than Good Reason, he will not, directly or indirectly, engage in, assist, or have any active interest or involvement whether as an employee, agent, consultant, creditor, advisor, officer, director, stockholder (excluding holding of less than 1% of the stock of a public company), partner, proprietor or any type of principal whatsoever, in any person, firm, or business entity which is engaged in the same business as that conducted and principally carried on by the Company on the Date of Termination and continued thereafter, without the Company's specific written consent to do so. (c) Return of Documents and Other Materials. Executive shall promptly deliver to the Company, upon termination of his employment, or at any other time as the Company may so request, all customer lists, leads and refunds, data processing programs and documentation, employee information, memoranda, notes, records, reports, tapes, manuals, drawings, blueprints, programs, and any other documents and other materials (and all copies thereof) relating to the Company's business or that of its customers, and all property associated therewith, which Executive may then possess or have under his control. 8. Enforcement of Covenants. (a) Right to Injunction. Executive acknowledges that a breach of the covenants set forth in Section 7 hereof will cause irreparable damage to the Company with respect to which the Company's remedy at law for damages will be inadequate. Therefore, in the event of breach or anticipatory breach of the covenants set forth in this section by Executive, Executive and the Company agree that the Company shall be entitled to the following particular forms of relief, in addition to remedies otherwise available to it at law or equity, injunctions, both preliminary and permanent, enjoining or retraining such breach or anticipatory breach and Executive hereby consents to the issuance thereof forthwith and without bond by any court of competent jurisdiction. (b) Separability of Covenants. The covenants contained in Section 7 hereof constitute a series of separate covenants, one for each applicable State in the United States and the District of Columbia, and one for each applicable foreign country. If in any judicial proceeding, a court shall hold that any of the covenants set forth in Section 7 exceed the time, geographic, or occupational limitations permitted by applicable laws, Executive and the Company agree that such provisions shall and are hereby reformed to the maximum time, geographic, or occupational limitations permitted by such laws. Further, in the event a court shall hold unenforceable any of the separate covenants deemed included herein, then such unenforceable covenant or covenants shall be deemed eliminated from the provisions of this Agreement for the purpose of such proceeding to the extent necessary to permit the remaining separate covenants to be enforced in such proceeding. Executive and the Company further agree that the covenants in Section 7 shall each be construed as a separate agreement independent of any other provisions of this Agreement, and the existence of any claim or cause of action by 8 Executive against the Company whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of any of the covenants of Section 7. 9. Certain Proprietary Rights. Executive agrees to and hereby does assign to the Company all his right, title and interest in and to all inventions, whether or not patentable, which are made or conceived solely or jointly by him: (a) at any time during the term of his employment by the Company in an executive, managerial, or planning capacity (including development and sales); or (b) during the course of or in connection with his duties during the Employment Term; or (c) with the use of time or materials of the Company. Executive agrees to communicate to the Company or its representatives all facts known to him concerning such inventions, to sign all rightful papers, make all rightful oaths and generally to do everything possible to aid the Company in obtaining and enforcing proper patent protection for all such inventions in all countries and in vesting title to such inventions in all countries and in vesting title to such inventions and patents in the Company. For the purpose of this Agreement, the subject matter of any application for patent naming Employee as a sole or joint inventor filed during the course of employment or within one year subsequent to the termination thereof shall be deemed to be an invention made or conceived by him during the course of his employment by the Company and assignable to the Company hereunder, unless Executive establishes by a preponderance of the evidence that such invention was made or conceived by him subsequent to termination of his employment hereunder. At the Company's request (during or after the term of this Agreement) and expense, Executive will promptly execute a specific assignment of title to the Company, and perform any other acts reasonably necessary to implement the foregoing assignment. 10. Withholding of Taxes. The Company shall withhold from any compensation and benefits payable under this Agreement all applicable federal, state, local, or other taxes. 11. Source of Payments. All payments provided under this Agreement, other than payments made pursuant to a plan which provides otherwise, shall be paid from the general funds of the Company, and no special or separate fund shall be established, and no other segregation of assets made, to assure payment. Executive shall have no right, title or interest whatever in or to any investments which the Company may make to aid the Company in meeting its obligations under this Agreement. To the extent that any person acquires a right to receive payments from the Company under this Agreement, such right shall be no greater than the right of an unsecured creditor of the Company and its affiliates. 12. Successor and Binding Agreement. (a) Company Successor. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance satisfactory to Executive, 9 expressly to assume and agree to perform this Agreement in the same manner and to the same extent as the Company would be required to perform it if no such succession had taken place. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle Executive to compensation from the Company in the same amount and on the same terms as Executive would be entitled to under this Agreement if Executive had given Notice of Termination for Good Reason as of the day immediately before such succession became effective and had specified that day in the notice of termination. As used in this Agreement, "Company" shall mean the Company as defined in the first sentence of this Agreement and any successor to all or substantially all its business or assets or which otherwise becomes bound by all the terms and provisions of this Agreement, whether by the terms hereof, by operation of law or otherwise. (b) Executive's Successor. This Agreement shall inure to the benefit of and be enforceable by Executive and his personal or legal representatives and successors in interest under this Agreement. (c) Facility of Payment. In the event of Executive's legal incapacity, the Company may make any payments due under this Agreement to his legal representative. In the event of Executive's death, the Company may make any payment due under this Agreement to his surviving spouse or, if none, to Executive's estate. Any payment made in accordance with this provision fully discharges the obligation of the Company therefor. 13. Assignment by Executive. The rights and benefits of Executive under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; provided, however, that nothing in this Section 13 shall preclude Executive from designating a beneficiary or beneficiaries to receive any benefit payable on his death. In the event of a dispute arising under this Agreement, the Company agrees to pay any and all reasonable legal fees incurred by Executive in connection therewith. 14. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York applicable to agreements made and to be performed in that State, without regard to its conflict of laws provisions. 15. Notices. Any notice, consent, request or other communication made or given in connection with this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by registered or certified mail, return receipt requested, or by facsimile or by hand delivery, to those listed below at their following respective addresses or at such other address as each may specify by notice to the others: 10 To the Company: Ogden Corporation Two Pennsylvania Plaza New York, New York 10121 Attention: General Counsel To Executive: Raymond E. Dombrowski, Jr. 120 Glenwood Road Haddonfield, New Jersey 08033 16. Miscellaneous. (a) Waiver. The failure of a party to insist upon strict adherence to any term of this Agreement on any occasion shall not be considered a waiver thereof or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. (b) Separability. If any term or provision of this Agreement is declared illegal or unenforceable by any court of competent jurisdiction and cannot be modified to be enforceable, such term or provision shall immediately become null and void, leaving the remainder of this Agreement in full force and effect. (c) Headings. Section headings are used herein for convenience of reference only and shall not affect the meaning of any provision of this Agreement. (d) Rules of Construction. Whenever the context so requires, the use of the singular shall be deemed to include the plural and vice versa. (e) Counterparts. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, and such counterparts will together constitute but one Agreement. IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year set forth below. OGDEN CORPORATION EXECUTIVE By: /s/ Alane G. Baranello /s/ Raymond E. Dombrowski, Jr. ------------------------------- ----------------------------------- Alane G. Baranello Raymond E. Dombrowski, Jr. Vice President Human Resources Date: August 28, 1998 Date: August 28, 1998 --------------- --------------- 11 APPENDIX A DEFINITION OF CHANGE IN CONTROL The following definition of "Change in Control" shall apply for purposes of Paragraph 5(e)(vii) of the Employment Agreement: Change in Control. A "Change in Control" of the Company shall be deemed to have occurred as of the first day any one or more of the following conditions shall have been satisfied: (a) Any person (other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company, or a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the beneficial owner, directly or indirectly, of securities of the Company, representing more than twenty-five percent (25%) of the combined voting power of the Company's then outstanding securities; (b) Individuals who, as of May 20, 1998, constitute the Board of Directors of the Company (the " Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to May 20, 1998, whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a person other than the Board; or (c) The stockholders of the Company approve: (i) a plan of complete liquidation of the Company; or (ii) an agreement for the sale or disposition of all or substantially all the Company's assets; or (iii) a merger, consolidation, or reorganization of the Company with or involving any other corporation, limited liability entity or similar person, other than a merger, consolidation, or reorganization that would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) at least seventy-five percent (75%) of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger, consolidation, or reorganization. EX-13 5 FINANCIALS TO A/R Ogden Corporation and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED OPERATIONS The following discussion and analysis should be read in conjunction with the Corporation's Financial Statements and Notes thereto. OPERATIONS: Revenues for 1998 were $1,692,375,000, which was 3.3% or $57,350,000 lower than the comparable period of 1997. This was primarily due to a decline of $155,814,000 in the Other segment's revenues, chiefly associated with the sales of Facility Services' New York operations in July 1997 and certain operations of Atlantic Design Company (ADC), a contract manufacturing business, in late 1997 and early 1998. The Entertainment segment's revenues were $59,633,000 higher, primarily reflecting increased activity at certain sports, amphitheatre, and convention venues and the World Trade Center, as well as the acquisition of the Enchanted Castle in late 1997 and the start-up of TinseltownTM operations in late 1998. The Aviation segment's revenues were $52,940,000 lower, primarily reflecting the sale of the domestic catering operations in the second quarter of 1998 as well as the sale of the Miami and Spanish in-flight catering businesses and certain ground handling operations in 1997. These decreases in the Aviation segment's revenues were partially offset by the gain on the sale of a 10% interest in the Hong Kong ground services company. The Energy segment's revenues were $91,771,000 higher, primarily due to the acquisition in late 1997 of Pacific Energy, Inc., and a 60% interest in four cogeneration plants in China; increased production at the Edison Bataan facility; the buyout of a waste-to-energy power sales contract; increased construction revenues associated with retrofit activity at several facilities; and an increase in Environmental consulting, engineering, and construction activity. Consolidated operating income for 1998 was $149,216,000, which was approximately 4.1% higher than the comparable period of 1997. The Entertainment segment's income from operations was $535,000 higher, primarily reflecting increased activity at the World Trade Center, convention centers, and South American operations, as well as the sale of certain contracts. These increases in Entertainment's income from operations were partially offset by the effects of the NBA lockout, start-up expenses at the TinseltownTM operation, and lower results at our Florida theme park and Aruba gaming operations. The Aviation segment's income from operations was $19,852,000 higher, primarily reflecting the gain on the sale of the domestic in-flight catering operations in June 1998 and the sale of a 10% interest in the Hong Kong ground services company. These increases in Aviation's income from operations were offset in part by reduced European operations, including the relocation of its headquarters, severance payments, and certain legal claims in 1998, and in part by the sale in 1997 of the Miami and Spanish in-flight catering businesses and certain ground services operations. The Energy segment's income from operations was $432,000 higher, chiefly associated with the acquisition in late 1997 of Pacific Energy, Inc., and a 60% interest in four cogeneration plants in China; increased activity at the Edison Bataan facility; the gain on the buyout of a power sales agreement and a contract termination agreement; as well as an increase in construction income, primarily related to increased retrofit activity. These increases were partially offset by increased development costs; reduced income at several waste-to-energy facilities, primarily due to increased maintenance costs; the amortization of the prepayment of a power sales agreement; legal settlements; and a decrease in environmental income from operations chiefly associated with the write-off of uncollectible notes receivable. The Other segment's income from operations was $3,248,000 lower, chiefly associated with the sale of certain noncore businesses and an investment in the Universal Ogden joint venture in 1997. Selling, general, and administrative expenses were $113,260,000, which was approximately 3.8% or $4,112,000 higher than 1997, primarily due to increased development costs; international office expansion; amortization of new data processing systems; as well as the settlement of certain litigation and proxy-related charges, partially offset by the sale of noncore businesses in 1997 and 1998. Debt service charges for 1998 were $1,295,000 lower than the comparable period of 1997, primarily due to lower debt outstanding. The Energy segment had three interest rate swap agreements entered into as hedges against interest rate exposure on three series of adjustable-rate project debt that resulted in additional debt service costs of $800,000 and $300,000 in 1998 and 1997, respectively. The 1998 amounts include $211,000 representing the net cost to close two of the three interest rate swap agreements that related to the refinancing of debt. The effect of these swap agreements on the weighted-average interest rate of project debt was not significant. Interest income for 1998 was $5,522,000 lower than 1997, primarily reflecting the repayment of debt by customers. Interest expense was $3,825,000 lower, chiefly associated with reduced borrowings and repayments on outstanding debt, partially offset by increased interest on notes issued in connection with the acquisition of Pacific Energy, Inc., and overseas operations. Ogden had two interest rate swap agreements covering notional amounts of $100,000,000 and $3,200,000, respectively. The first swap agreement expired on December 16, 1998, and was entered into in order to convert Ogden's fixed-rate $100,000,000, 9.25% debentures into variable-rate debt. The second swap agreement expires November 30, 2000, and was entered into to convert Ogden's $3,200,000 variable-rate debt to a fixed rate. These agreements 20 resulted in additional interest expense in 1998 and 1997 of $100,000 and $400,000, respectively. The effect of these swap agreements on the weighted-average interest rate was not significant. Equity in income of investees and joint ventures for 1998 was $16,861,000 higher than the comparable period of 1997, chiefly associated with the results of Pacific Energy, Inc., joint ventures, which included the buyout of an energy sales agreement with respect to a 50% joint venture, and increased activity at several Entertainment and Aviation joint ventures. These increases were partially offset by start-up costs of Aviation's Bogota, Colombia, joint venture operations and lower activity at Entertainment's Spanish theme park joint venture. The effective income tax rate for 1998 was 40.4%, compared with 40.6% in 1997. Note 19 to the Consolidated Financial Statements contains a detailed reconciliation of the variances from the Federal statutory income tax rate. Revenues for 1997 were $1,749,725,000, which was 13.9% or $281,400,000 lower than the comparable period of 1996. This was primarily due to a decline of $239,900,000 in the Other segment's revenues, primarily reflecting revenues of businesses sold during 1996 and 1997--namely Facility Services, W.J. Schafer Associates, Ogden Professional Services (formerly in the Technology group), and certain operations of ADC. This reduction in revenues was partially offset by the net gain on such sales as well as the gain on the 1997 sale of the Corporation's 50% equity investment in the Universal Ogden joint venture. The Entertainment segment's revenues increased $34,000,000, chiefly associated with the inclusion of full-year results for Florida Leisure, Inc., which was acquired in 1996; new accounts; and the start-up of operations of the American Wilderness Experience(TM) in the United States as well as operations in Germany and Aruba. The Aviation segment's revenues were $63,500,000 lower, primarily resulting from the 1997 sales of the Miami and Spanish in-flight catering operations and certain ground service operations, which were partially offset by the gain on the sale of such businesses as well as the sale of a 5% interest in the Hong Kong ground services company. The Energy segment's revenues were $12,000,000 lower, primarily due to reduced activity in the consulting and engineering groups, reduced construction activity, and the effect of certain favorable legal settlements in 1996. This reduction in revenues was partially offset by increased customer activity at several waste-to-energy facilities, the commencement of operations of the Independent Power group's Edison Bataan facility, and the acquisition of Pacific Energy, Inc., in September 1997. Consolidated operating income for 1997 was $143,362,000, which was approximately 16.9% or $20,700,000 higher than 1996. The Entertainment segment's income from operations was $10,300,000 higher, primarily reflecting new accounts and increased customer activity in several domestic sports and amphitheatre venues and in European operations, partially offset by development costs associated with the American Wilderness Experience(TM) project. The Aviation segment's income from operations increased $19,100,000, chiefly associated with the sales of the Miami and Spanish in-flight catering operations, a 5% interest in the Hong Kong ground services company, and certain ground services operations in 1997 and a charge in 1996 reflecting the decision to close a ground service location, which were partially offset by reduced activity in catering and European customer activity. The Energy segment's income from operations was $5,100,000 higher, primarily reflecting increased income in the Independent Power group, reflecting the acquisitions of the Edison Bataan facility in August 1996 and Pacific Energy, Inc., in September 1997. These increases were partially offset by reduced income in the Waste-to-Energy group, chiefly associated with the effect of a 1996 favorable legal settlement, which more than offset increased activity at several waste-to-energy facilities. The Other segment's income from operations decreased $16,200,000 due to the net impact of the businesses sold in 1996 and 1997 and the effect of the 1997 provision for the disposition of certain operations of ADC, partially offset by the gain on the sales in 1997 of Facility Services' operations in New York City and the Corporation's 50% equity interest in the Universal Ogden joint venture. Selling, general, and administration expenses for 1997 were $109,148,000, which was approximately 8.4% or $10,000,000 lower than 1996, chiefly associated with the sale of noncore businesses and the benefit of Ogden's restructuring activities. Debt service charges for 1997 were $4,600,000 lower than the comparable period of 1996, primarily due to lower average debt outstanding on various waste-to-energy facilities, partially offset by increased project debt associated with the Edison Bataan facility. The Energy segment had three interest rate swap agreements entered into as hedges against interest rate exposure on three series of adjustable-rate project debt that resulted in additional debt service costs of $300,000 and $700,000 for 1997 and 1996, respectively. The effect of these swap agreements on the weighted-average interest rate of project debt was not significant. Interest income for 1997 was $8,300,000 higher than 1996, chiefly associated with interest earned on increased loans to customers and joint ventures and notes receivable received in connection with the sale of various operations, as well as higher cash and cash equivalents. Interest expense was $4,700,000 21 higher, chiefly associated with borrowings relating to loans to customers, partially offset by lower borrowings on revolving credit lines. Ogden had two interest rate swap agreements covering notional amounts of $100,000,000 and $4,700,000, respectively. The first swap agreement expired on December 16, 1998, and was entered into in order to convert Ogden's fixed-rate $100,000,000, 9.25% debentures into variable-rate debt. The second swap agreement expires November 30, 2000, and was entered into in order to convert Ogden's $4,700,000 variable-rate debt to a fixed rate. These agreements resulted in additional interest expense in 1997 and 1996 of $400,000 and $200,000, respectively. The effect of these swap agreements on the weighted-average interest rate was not significant. Equity in net income of investees and joint ventures for 1997 was $1,600,000 lower, chiefly associated with the sale of the Corporation's 50% equity interest in the Universal Ogden joint venture in the first quarter of 1997 and lower income in Entertainment's overseas joint ventures, partially offset by increased earnings in Aviation's Macau joint venture as well as in connection with Energy's acquisition of Pacific Energy, Inc., and its joint ventures. The effective income tax rate for 1997 was 40.6%, compared with 42.1% in 1996. This decrease of 1.5% was due to a net reduction in the net permanent differences between book and taxable income. Note 19 to the Consolidated Financial Statements contains a more detailed reconciliation of the variances from the Federal statutory income tax rate. CAPITAL INVESTMENTS AND COMMITMENTS: During 1998, capital investments amounted to $141,200,000, of which $19,000,000, inclusive of restricted funds transferred from funds held in trust, was for Energy facilities and $122,200,000 was for normal replacement and growth in Entertainment ($73,400,000), Aviation ($31,000,000), Energy ($13,200,000), Other ($2,200,000), and Corporate ($2,400,000) operations. At December 31, 1998, capital commitments amounted to $224,735,000, which included $148,035,000 for normal replacement, modernization, and growth in Entertainment ($125,503,000), Aviation ($7,221,000), Energy ($15,200,000), and Corporate ($111,000) operations. Energy also has a commitment to pay, in 2008, $10,600,000 for a service contract extension at a waste-to-energy facility. Also included was $66,100,000 for Energy's coal-fired power project in the Philippines, a natural gas-fired power plant in Bangladesh, and an investment in a joint venture, reflecting $44,400,000 for the remaining mandatory equity contributions, $5,700,000 for contingent equity contributions, and $16,000,000 for a standby letter of credit in support of debt service reserve requirements. Funding for the remaining mandatory equity contributions is being provided through bank credit facilities, which must be repaid in June 2000 through December 2001. The Corporation also has a $24,400,000 contingent equity contribution in Entertainment ($11,400,000) and Aviation ($13,000,000) joint ventures. In addition, compliance with the standards and guidelines under the Clean Air Act Amendments of 1990 may require further Energy capital expenditures of approximately $54,000,000, including amounts that would be required if certain service agreement amendments are finalized through December 2000, subject to the final time schedules determined by the individual states in which the Corporation's waste-to-energy facilities are located. Ogden and certain of its subsidiaries have issued or are party to performance bonds and guarantees and related contractual obligations undertaken mainly pursuant to agreements to construct and operate certain waste-to-energy, entertainment, and other facilities. In the normal course of business, they are involved in legal proceedings in which damages and other remedies are sought. In connection with certain contractual arrangements, Ogden has agreed to provide a vendor with specified amounts of business over a three-year period. If these amounts are not provided, the Corporation may be liable for prorated damages of up to approximately $3,000,000. Management does not expect that these contractual obligations, legal proceedings, or any other contingent obligations incurred in the normal course of business will have a material adverse effect on Ogden's Consolidated Financial Statements. During 1994, a subsidiary of Ogden entered into a 30-year facility management contract, pursuant to which it agreed to advance funds to a customer, and if necessary, to assist the customer's refinancing of senior secured debt incurred in connection with the construction of the facility. Ogden is obligated to purchase such senior secured debt in the amount of $97,685,000 on December 30, 2002, if the debt is not refinanced prior to that time. Ogden is also required to repurchase the outstanding amount of certain subordinated secured debt of such customer on December 30, 2002. At December 31, 1998, the amount outstanding was $51,625,000. In addition, on December 31, 1998, the Corporation had guaranteed indebtedness of $19,363,000 of an affiliate and principal tenant of this customer. Subsequent to December 31, 1998, such tenant repaid $8,637,000 of indebtedness owed to Ogden, and Ogden's previous guarantees of the tenant's indebtedness were released and replaced by a guarantee of $3,284,000 of the tenant's senior secured term debt and a guarantee of up to $7,882,000 of the tenant's secured revolving debt. In addition, Ogden is obligated to purchase $19,704,000 of the tenant's secured subordinated indebtedness on January 29, 2004, if such indebtedness has not been repaid or refinanced prior to that time. 22 Ogden has guaranteed borrowings of another customer amounting to approximately $12,900,000 as well as $8,800,000 of borrowings of joint ventures in which Ogden has an equity interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. The Corporation is exposed to various market risks including changes in interest rates and foreign currency exchange rates. Since approximately 85% of the Corporation's debt is at fixed interest rates, the Corporation's exposure to interest-rate fluctuations is not material to the Consolidated Financial Statements. The Corporation has entered into financial instruments on several occasions to reduce the impact of changes in interest rates. At December 31, 1998, Ogden had two interest rate swap agreements, which are described above and in the Long-Term and Project Debt notes to the Consolidated Financial Statements. Ogden is also exposed to foreign currency risks due to changes in exchange rates. The Corporation primarily operates in Latin America, Europe, Asia, and Canada. Since the Corporation does not plan to repatriate foreign assets and considers foreign earnings to be permanently invested overseas, the exposure to changes in foreign currency exchange rates is primarily limited to cumulative translation adjustments, which have been charged to Other Comprehensive Income. Ogden does not enter into derivatives or other financial instruments for trading or speculative purposes. LIQUIDITY/CASH FLOW: Net cash provided from operating activities was $65,276,000 higher than the comparable period of 1997, primarily reflecting an increase of $198,400,000 in deferred income chiefly associated with the prepayment of a power sales agreement for a waste-to-energy facility, partially offset by the collection in 1997 of $41,700,000 relating to certain legal settlements as well as the collection of receivables relating to businesses sold. Net cash used in investing activities increased $72,708,000, primarily reflecting an increase in marketable securities available for sale of $46,169,000, reduced collections of loans to customers of $36,200,000, lower distributions from investees and joint ventures of $37,500,000, and increased capital expenditures of $24,974,000. These increases were partially offset by increased proceeds from the sale of businesses of $22,700,000 and a decrease of $42,495,000 in amounts expended for the purchase of business. Net cash used in financing activities was $37,045,000 lower, chiefly associated with a net increase in debt of $48,149,000 primarily reflecting refinancing of certain project debt and debt associated with foreign operations, a decrease of $39,487,000 in restricted funds held in trust, and a $6,242,000 increase in proceeds from the exercise of stock options. These decreases in net cash used in financing activities were partially offset by the purchase of treasury shares amounting to $56,381,000. At December 31, 1998, the Corporation had $261,119,000 in cash and cash equivalents and unused revolving credit lines of $200,000,000. In 1998, Ogden's Board of Directors increased the authorization to purchase shares of the Corporation's common stock up to a total of $200,000,000. Through January 1999, 2,182,800 shares of common stock were purchased for a total cost of $57,884,000. YEAR 2000 ISSUES: Background -- The term "Year 2000 issue" generally refers to the problems that may occur from the improper processing of date-sensitive calculations, date comparisons, and leap-year determination by computers and other machinery containing computer chips (i.e., "embedded systems"). In an effort to save expensive memory and processing time, most of the world's computer hardware and software historically used only two digits to identify the year in a date. If not corrected or replaced, many systems will fail to distinguish between the years 2000 and 1900 and will incorrectly process related date information. STATE OF READINESS -- Ogden has established a Year 2000 project plan that is actively addressing its Year 2000 issues. The project is comprised of four phases: awareness, assessment, action, and anticipation. The awareness phase included the education of the Corporation's Board of Directors, management, and staff regarding the Year 2000 issue and Ogden's strategy to address the issues. The awareness phase of the project is completed. The objective of the project's assessment phase is to inventory and assess the Year 2000 compliance of Ogden's internal information technology and embedded systems, as well as to ascertain the compliance of the products and services provided to Ogden by third parties. Ogden's internal assessment was largely completed in 1998. The assessment of third parties on which the Corporation relies for key services and products is in progress. The assessment phase is expected to be completed by the end of the first quarter of 1999, which is slightly behind the original schedule. Ogden's action phase includes the prioritization, remediation, and testing of Year 2000 solutions. The Corporation has begun the remediation of all its mission-critical systems through a series of projects with completion dates between January 1997 and October 1999. Additional corrective efforts will be initiated as assessments are finalized and the related issues prioritized. The fourth phase of Ogden's Year 2000 project, the anticipation phase, includes the development and implementation of contingency plans for key business functions that are in jeopardy of not being thoroughly tested or Year 2000 compliant on a timely basis. The anticipation phase of the project is scheduled to commence in the first quarter of 1999 and is expected to continue throughout 1999. 23 Ogden has made considerable progress toward Year 2000 compliance as a result of its initiative to improve access to business information through the implementation of common, integrated computing systems across the operations of the Corporation. This initiative commenced in 1996 with the replacement of Ogden's domestic administrative systems with PeopleSoft systems and the upgrade of associated infrastructure. The implementations of these Year 2000 compliant systems are 90% completed, with all expected to be achieved by the first quarter of 1999. Additionally, efforts are in progress to replace or upgrade the international administrative systems and a variety of key operating systems. Ogden has not deferred any specific information technology project as a result of the implementation of the Year 2000 project. COSTS -- The total costs associated with resolving the Corporation's Year 2000 issues are not expected to be material to Ogden's financial condition. Based on the assessments completed to date, the estimated costs of the Year 2000 project are $11,200,000, the majority of which will be incurred in 1999. The estimated costs will be refined as remedial plans are executed and contingency plans developed. Ogden is implementing or upgrading a number of systems (e.g., PeopleSoft), as part of its initiative to improve access to key business information. The costs of implementing those systems are not included in these estimates. RISKS -- Ogden believes that the diversity of its business and the implementation of its Year 2000 project will significantly reduce the possibility of interruptions of normal operations. Ogden believes that by the end of the first quarter of 1999, it will be able to fully determine its most reasonably likely worst-case scenarios. Based on the assessment efforts to date, Ogden does not believe that the Year 2000 issue will have a material adverse effect on the Corporation's financial condition. However, failing to resolve Year 2000 issues on a timely basis could have a material adverse effect on the Corporation's operations, although it is not possible at this time to quantify the amount of business that may be lost or the costs that may be incurred. CONTINGENCY PLANS -- Ogden's Year 2000 project strategy includes the development of contingency plans for any business functions determined to be at risk of being unable to remediate or properly test Year 2000 issues on a timely basis. While Ogden is not presently aware of any significant exposure that its systems will not be properly remediated on a timely basis, there can be no assurances that all Year 2000 remediation processes will be completed and properly tested before the year 2000 or that contingency plans will sufficiently mitigate the risk of a Year 2000 compliance problem. Ogden expects to develop and implement contingency plans starting in the first quarter of 1999. The contingency planning process is an ongoing one that will continue through 1999 as Ogden obtains relevant Year 2000 compliance information resulting from its internal remediation and testing efforts as well as from third parties. Any statements in this communication, including but not limited to the "Year 2000 Issue" discussion, which may be considered to be "forward-looking statements," as that term is defined in the Private Securities Litigation Reform Act of 1995, are subject to certain risk and uncertainties. The factors that could cause actual results to differ materially from those suggested by any such statements include, but are not limited to, those discussed or identified from time to time in the Corporation's public filings with the Securities and Exchange Commission and more generally, general economic conditions, including changes in interest rates and the performance of the financial markets; changes in domestic and foreign laws, regulations, and taxes; changes in competition and pricing environments; and regional or general changes in asset valuations. 24 Ogden Corporation and Subsidiaries SELECTED FINANCIAL DATA
- ------------------------------------------------------------------------------------------------------------------------------------ December 31, 1998 1997 1996 1995 1994 - ------------------------------------------------------------------------------------------------------------------------------------ (In thousands of dollars, except per-share amounts) TOTAL REVENUES ............................... $ 1,692,375 $ 1,749,725 $ 2,031,081 $ 2,184,993 $ 2,104,547 ------------- ------------- ------------- ------------- ------------- Income before cumulative effect of changes in accounting principles ............. 86,970 75,673 64,534 7,444 67,826 Cumulative effect of changes in accounting principles ........................ (1,520) ------------- ------------- ------------- ------------- ------------- Net income ................................... 86,970 75,673 64,534 7,444 66,306 ------------- ------------- ------------- ------------- ------------- BASIC EARNINGS PER SHARE: Income before cumulative effect of changes in accounting principles ............. 1.74 1.51 1.30 0.15 1.55 Cumulative effect of changes in accounting principles ........................ (0.03) ------------- ------------- ------------- ------------- ------------- Total ........................................ 1.74 1.51 1.30 0.15 1.52 ------------- ------------- ------------- ------------- ------------- DILUTED EARNINGS PER SHARE: Income before cumulative effect of changes in accounting principles ............. 1.70 1.49 1.28 0.15 1.51 Cumulative effect of changes in accounting principles ........................ (0.03) ------------- ------------- ------------- ------------- ------------- Total ........................................ 1.70 1.49 1.28 0.15 1.48 ------------- ------------- ------------- ------------- ------------- Total Assets ................................. 3,922,843 3,639,295 3,597,532 3,652,671 3,644,886 ------------- ------------- ------------- ------------- ------------- Long-Term Obligations ........................ 1,907,465 1,927,330 1,958,717 2,044,186 2,047,031 ------------- ------------- ------------- ------------- ------------- Shareholders' Equity ......................... 549,100 566,091 550,925 546,978 596,818 ------------- ------------- ------------- ------------- ------------- Shareholders' Equity Per Common Share ........ 11.20 11.24 11.06 11.04 12.21 ------------- ------------- ------------- ------------- ------------- Cash Dividends Declared Per Common Share ................................. 1.25 1.25 1.25 1.25 1.25 ------------- ------------- ------------- ------------- -------------
NET INCOME IN 1995 REFLECTS A NET AFTER-TAX CHARGE OF $48.9 MILLION, OR $.98 PER SHARE, DILUTED, REFLECTING THE IMPAIRMENT OF ASSETS AND OTHER CHARGES. 25 Ogden Corporation and Subsidiaries STATEMENTS OF CONSOLIDATED INCOME AND COMPREHENSIVE INCOME
- ----------------------------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1998 1997 1996 - ----------------------------------------------------------------------------------------------------------------------------------- Service revenues .............................................. $ 1,089,208,000 $ 1,133,108,000 $ 1,392,686,000 Net sales ..................................................... 512,958,000 582,134,000 621,830,000 Construction revenues ......................................... 41,025,000 3,402,000 Net gain on sale of businesses ................................ 49,184,000 34,483,000 13,163,000 --------------- --------------- --------------- Total revenues ................................................ 1,692,375,000 1,749,725,000 2,031,081,000 --------------- --------------- --------------- Operating costs and expenses .................................. 860,985,000 855,917,000 1,088,546,000 Costs of goods sold ........................................... 432,438,000 539,640,000 592,223,000 Construction costs ............................................ 36,113,000 2,196,000 Selling, administrative, and general expenses ................. 113,260,000 109,148,000 119,147,000 Debt service charges .......................................... 100,363,000 101,658,000 106,306,000 --------------- --------------- --------------- Total costs and expenses ...................................... 1,543,159,000 1,606,363,000 1,908,418,000 --------------- --------------- --------------- Consolidated operating income ................................. 149,216,000 143,362,000 122,663,000 Equity in income of investees and joint ventures .............. 18,897,000 2,036,000 3,604,000 Interest income ............................................... 17,953,000 23,476,000 15,142,000 Interest expense .............................................. (33,900,000) (37,725,000) (33,040,000) Other income (deductions) -net ................................ 864,000 (371,000) 1,272,000 --------------- --------------- --------------- Income before income taxes and minority interests ............. 153,030,000 130,778,000 109,641,000 Income taxes .................................................. (61,797,000) (53,100,000) (46,161,000) Minority interests ............................................ (4,263,000) (2,005,000) 1,054,000 --------------- --------------- --------------- NET INCOME .................................................... 86,970,000 75,673,000 64,534,000 --------------- --------------- --------------- Other Comprehensive Income, Net of Tax: Foreign currency translation adjustments ...................... (2,170,000) (8,094,000) (3,111,000) Unrealized Gains on Securities: Unrealized holding gains arising during period ................ 470,000 1,637,000 1,074,000 Less: reclassification adjustment for gains included in net income ........................................ (2,046,000) (843,000) Minimum pension liability adjustment .......................... (392,000) 241,000 195,000 --------------- --------------- --------------- Other comprehensive income .................................... (2,092,000) (8,262,000) (2,685,000) --------------- --------------- --------------- Comprehensive income .......................................... $ 84,878,000 $ 67,411,000 $ 61,849,000 --------------- --------------- --------------- --------------- --------------- --------------- Basic Earnings Per Share ...................................... $ 1.74 $ 1.51 $ 1.30 --------------- --------------- --------------- --------------- --------------- --------------- Diluted Earnings Per Share .................................... $ 1.70 $ 1.49 $ 1.28 --------------- --------------- --------------- --------------- --------------- ---------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 26 Ogden Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS
Assets December 31, 1998 1997 - ----------------------------------------------------------------------------------------------------------------------------------- Current Assets: Cash and cash equivalents ................................................................ $ 261,119,000 $ 185,671,000 Marketable securities available for sale ................................................. 44,685,000 Restricted funds held in trust ........................................................... 110,553,000 103,882,000 Receivables (less allowances: 1998, $30,595,000 and 1997, $20,207,000) ................... 394,923,000 393,185,000 Inventories .............................................................................. 31,100,000 34,235,000 Deferred income taxes .................................................................... 49,327,000 56,690,000 Other .................................................................................... 62,742,000 59,211,000 -------------- -------------- Total current assets ..................................................................... 954,449,000 832,874,000 Property, plant, and equipment--net ...................................................... 1,987,643,000 1,947,547,000 Restricted funds held in trust ........................................................... 180,922,000 206,013,000 Unbilled service and other receivables (less allowances: 1997, $3,000,000) ............... 173,630,000 174,962,000 Unamortized contract acquisition costs ................................................... 132,818,000 141,281,000 Goodwill and other intangible assets ..................................................... 130,031,000 93,847,000 Investments in and advances to investees and joint ventures .............................. 205,702,000 137,323,000 Other assets ............................................................................. 157,648,000 105,448,000 -------------- -------------- TOTAL ASSETS ............................................................................. $3,922,843,000 $3,639,295,000 -------------- -------------- -------------- -------------- - ----------------------------------------------------------------------------------------------------------------------------------- Liabilities and Shareholders' Equity - ----------------------------------------------------------------------------------------------------------------------------------- LIABILITIES: Current Liabilities: Notes payable ............................................................. $ 45,600,000 $ Current portion of long-term debt ......................................... 30,232,000 19,696,000 Current portion of project debt ........................................... 63,201,000 68,052,000 Dividends payable ......................................................... 15,403,000 15,721,000 Accounts payable .......................................................... 94,629,000 109,719,000 Federal and foreign income taxes payable .................................. 21,776,000 1,913,000 Accrued expenses, etc ..................................................... 305,942,000 267,874,000 Deferred income ........................................................... 47,991,000 42,962,000 -------------- -------------- Total current liabilities ................................................. 624,774,000 525,937,000 Long-term debt ............................................................ 391,287,000 354,032,000 Project debt .............................................................. 1,367,528,000 1,424,648,000 Deferred income taxes ..................................................... 396,648,000 383,341,000 Deferred income ........................................................... 201,563,000 20,313,000 Other liabilities ......................................................... 215,119,000 187,866,000 Minority interests ........................................................ 28,174,000 28,417,000 Convertible subordinated debentures ....................................... 148,650,000 148,650,000 -------------- -------------- TOTAL LIABILITIES ......................................................... 3,373,743,000 3,073,204,000 -------------- -------------- -------------- -------------- SHAREHOLDERS' EQUITY: Serial cumulative convertible preferred stock, par value $1.00 per share; authorized, 4,000,000 shares; shares outstanding: 42,218 in 1998 and 44,346 in 1997, net of treasury shares of 29,820 in 1998 and 1997 ................ 43,000 45,000 Common stock, par value $.50 per share; authorized, 80,000,000 shares; shares outstanding: 48,945,989 in 1998 and 50,295,123 in 1997, net of treasury shares of 4,561,963 in 1998 and 3,135,123 in 1997 ................ 24,473,000 25,147,000 Capital surplus ........................................................... 173,413,000 212,383,000 Earned surplus ............................................................ 367,984,000 343,237,000 Accumulated other comprehensive income .................................... (16,813,000) (14,721,000) -------------- -------------- Total Shareholders' Equity ................................................ 549,100,000 566,091,000 -------------- -------------- Total Liabilities and Shareholders' Equity ................................ $3,922,843,000 $3,639,295,000 -------------- -------------- -------------- --------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 27 Ogden Corporation and Subsidiaries STATEMENTS OF SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------ For the years ended December 31, 1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Shares Amounts Shares Amounts Shares Amounts - ------------------------------------------------------------------------------------------------------------------------------------ Serial Cumulative Convertible Preferred Stock, Par Value $1.00 Per Share; Authorized, 4,000,000 Shares: Balance at beginning of year ........... 74,166 $ 75,000 77,509 $ 78,000 79,289 $ 80,000 Shares converted into common stock ..... (2,128) (2,000) (3,343) (3,000) (1,780) (2,000) ------------- ------------- ------------- ------------- ------------- ------------- Total .................................. 72,038 73,000 74,166 75,000 77,509 78,000 Treasury shares ........................ (29,820) (30,000) (29,820) (30,000) (29,820) (30,000) ------------- ------------- ------------- ------------- ------------- ------------- Balance at end of year (aggregate involuntary liquidation value--1998, $851,000) .............................. 42,218 43,000 44,346 45,000 47,689 48,000 ------------- ------------- ------------- ------------- ------------- ------------- Common Stock, Par Value $.50 Per Share; Authorized, 80,000,000 Shares: Balance at beginning of year ........... 53,430,246 26,715,000 53,350,650 26,675,000 53,202,904 26,602,000 Exercise of stock options, less common stock utilized .................. 65,000 33,000 59,640 30,000 137,134 68,000 Conversion of preferred shares ......... 12,706 6,000 19,956 10,000 10,612 5,000 ------------- ------------- ------------- ------------- ------------- ------------- Total .................................. 53,507,952 26,754,000 53,430,246 26,715,000 53,350,650 26,675,000 ------------- ------------- ------------- ------------- ------------- ------------- Treasury shares at beginning of year ... 3,135,123 1,568,000 3,606,123 1,803,000 3,735,123 1,868,000 Purchase of treasury shares ............ 2,121,100 1,060,000 Exercise of stock options .............. (694,260) (347,000) (471,000) (235,000) (129,000) (65,000) ------------- ------------- ------------- ------------- ------------- ------------- Treasury shares at end of year ......... 4,561,963 2,281,000 3,135,123 1,568,000 3,606,123 1,803,000 ------------- ------------- ------------- ------------- ------------- ------------- Balance at end of year ................. 48,945,989 24,473,000 50,295,123 25,147,000 49,744,527 24,872,000 ------------- ------------- ------------- ------------- ------------- ------------- Capital Surplus: Balance at beginning of year ........... 212,383,000 202,162,000 197,921,000 Exercise of stock options, less common stock utilized ............. 16,355,000 10,228,000 4,244,000 Purchase of treasury shares ............ (55,321,000) Conversion of preferred shares ......... (4,000) (7,000) (3,000) ------------- ------------- ------------- Balance at end of year ................. 173,413,000 212,383,000 202,162,000 ------------- ------------- ------------- Earned Surplus: Balance at beginning of year ........... 343,237,000 330,302,000 328,047,000 Net income ............................. 86,970,000 75,673,000 64,534,000 ------------- ------------- ------------- Total .................................. 430,207,000 405,975,000 392,581,000 ------------- ------------- ------------- Preferred dividends--per share 1998, 1997, and 1996, $3.35 .................. 144,000 152,000 161,000 Common dividends--per share 1998, 1997, and 1996, $1.25 ........................ 62,079,000 62,586,000 62,118,000 ------------- ------------- ------------- Total dividends ........................ 62,223,000 62,738,000 62,279,000 ------------- ------------- ------------- Balance at end of year ................. 367,984,000 343,237,000 330,302,000 ------------- ------------- ------------- Cumulative Translation Adjustment--Net . (16,032,000) (13,862,000) (5,768,000) ------------- ------------- ------------- Minimum Pension Liability Adjustment ... (716,000) (324,000) (565,000) ------------- ------------- ------------- Net Unrealized Loss on Securities Available For Sale ..................... (65,000) (535,000) (126,000) ------------- ------------- ------------- Total Shareholders' Equity ............. $ 549,100,000 $ 566,091,000 $ 550,925,000 ------------- ------------- ------------- ------------- ------------- -------------
See Notes to Consolidated Financial Statements 28 Ogden Corporation and Subsidiaries STATEMENTS OF CONSOLIDATED CASH FLOWS
- --------------------------------------------------------------------------------------------------------------- For the years ended December 31, 1998 1997 1996 - --------------------------------------------------------------------------------------------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income ...................................................... $ 86,970,000 $ 75,673,000 $ 64,534,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization ................................... 114,334,000 104,377,000 115,263,000 Deferred income taxes ........................................... 18,696,000 24,975,000 20,027,000 Other ........................................................... (51,278,000) (26,015,000) (20,663,000) Management of Operating Assets and Liabilities: Decrease (Increase) in Assets: Accounts receivable ............................................. (10,475,000) 111,326,000 54,633,000 Inventories ..................................................... 2,137,000 18,916,000 (27,392,000) Other assets .................................................... (26,348,000) (5,313,000) (25,231,000) Increase (Decrease) in Liabilities: Accounts payable ................................................ (29,861,000) 7,892,000 (1,608,000) Accrued expenses ................................................ (19,401,000) (46,582,000) (1,689,000) Deferred income ................................................. 195,038,000 (3,393,000) 10,233,000 Other liabilities ............................................... 28,014,000 (19,306,000) (11,927,000) ------------- ------------- ------------- Net cash provided by operating activities ....................... 307,826,000 242,550,000 176,180,000 ------------- ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES: Entities purchased, net of cash acquired ........................ (20,717,000) (63,212,000) (16,968,000) Proceeds from sale of marketable securities available for sale .. 14,232,000 13,970,000 13,158,000 Proceeds from sale of businesses ................................ 83,817,000 61,164,000 90,946,000 Proceeds from sale of property, plant, and equipment ............ 7,074,000 4,865,000 6,803,000 Investments in Energy facilities ................................ (18,847,000) (28,459,000) (14,303,000) Other capital expenditures ...................................... (122,328,000) (87,742,000) (49,888,000) Decrease in other receivables ................................... 14,827,000 51,046,000 10,553,000 Investments in marketable securities available for sale ......... (60,139,000) (13,970,000) Distributions from investees and joint ventures ................. 12,102,000 49,605,000 Increases in investments in and advances to investees and joint ventures .............................................. (46,500,000) (68,748,000) (19,985,000) Other ........................................................... (17,710,000) ------------- ------------- ------------- Net cash provided by (used in) investing activities ............. (154,189,000) (81,481,000) 20,316,000 ------------- ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings for Energy facilities ................................ 506,518,000 57,358,000 124,272,000 Other new debt .................................................. 90,806,000 102,266,000 6,552,000 Payment of debt ................................................. (607,521,000) (217,970,000) (229,206,000) Dividends paid .................................................. (62,541,000) (62,564,000) (62,026,000) Purchase of treasury stock ...................................... (56,381,000) Decrease in funds held in trust ................................. 40,415,000 928,000 3,903,000 Proceeds from exercise of stock options ......................... 16,735,000 10,493,000 4,377,000 Other ........................................................... (5,922,000) (5,447,000) (289,000) ------------- ------------- ------------- Net cash used in financing activities ........................... (77,891,000) (114,936,000) (152,417,000) ------------- ------------- ------------- Effect of foreign currency exchange rate changes on cash and cash equivalents .................................... (298,000) (1,286,000) (37,000) ------------- ------------- ------------- NET INCREASE IN CASH AND CASH EQUIVALENTS ....................... 75,448,000 44,847,000 44,042,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................. 185,671,000 140,824,000 96,782,000 ------------- ------------- ------------- CASH AND CASH EQUIVALENTS AT END OF YEAR ........................ $ 261,119,000 $ 185,671,000 $ 140,824,000 ------------- ------------- ------------- ------------- ------------- -------------
See Notes to Consolidated Financial Statements 29 Ogden Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION, COMBINATIONS, ETC.: The Consolidated Financial Statements include the accounts of Ogden Corporation and its subsidiaries (Ogden). Companies in which Ogden has equity investments of 50% or less and has the ability to exercise significant influence are accounted for using the "Equity Method." All intercompany transactions and balances have been eliminated. In 1998, in transactions accounted for as purchases, Ogden acquired the shares of Casino Iguazu in Argentina and an environmental related construction company for a total cost of $45,500,000. The operations of these companies have been included in the accompanying financial statements from dates of acquisition. If Ogden had acquired these companies at January 1, 1997, consolidated revenues, net income, and diluted earnings per share would have been $1,727,900,000, $81,605,000, and $1.60 for 1998 and $1,794,140,000, $80,508,000, and $1.58 for 1997. In 1997, in transactions accounted for as purchases, Ogden acquired the shares of Pacific Energy, Inc., and Enchanted Castle as well as a 60% interest in four cogeneration plants in China for a total cost of $124,217,000. The operations of these companies have been included in the accompanying financial statements from dates of acquisition. If Ogden had acquired these companies at January 1, 1996, consolidated revenues, net income, and diluted earnings per share would have been $1,796,779,000, $84,169,000, and $1.64 for 1997 and $2,079,398,000, $73,187,000, and $1.45 for 1996. In December 1996, in transactions accounted for as purchases, Ogden acquired the shares of Florida Leisure, Inc., and Edison Bataan Cogeneration Corporation for a total cost of $16,968,000. The operations of these companies have been included in the accompanying financial statements from dates of acquisition. If Ogden had acquired these companies at January 1, 1996, consolidated revenues, net income, and diluted earnings per share would have been $2,033,000,000, $60,565,000, and $1.20 for 1996. In connection with Ogden's restructuring plan, the Binghamton, New York, and Cork, Ireland, operations of Atlantic Design Company (ADC), a contract manufacturing company, were sold in January 1998, and the Aviation segment's domestic in-flight catering operations were sold in June 1998; the Facility Services group's operations in New York City were sold in July 1997; and the Charlotte, North Carolina, operations of ADC were sold in September 1997. The environmental business of Ogden Environmental and Energy Services (OEES) was transferred to the Energy segment, formerly Projects, as of January 1, 1996. In the first quarter of 1996, the laboratory business of OEES as well as W.J. Schafer Associates, a unit of Ogden Technology Services, were sold. The Ogden Professional Services business, another unit of Ogden Technology Services, was sold in April 1996. In June 1996, the Facility Services group's operations outside of New York City were sold, and the asbestos abatement operations were discontinued. USE OF ESTIMATES: The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all cash balances and highly liquid investments having original maturities of three months or less. MARKETABLE SECURITIES: Marketable securities are classified as available for sale and recorded at current market value. Net unrealized gains and losses on marketable securities available for sale are credited or charged to Other Comprehensive Income (see Note 2). CONTRACTS AND REVENUE RECOGNITION: Service revenues include the fees for cost-plus contracts and other types of contracts. Both the service revenues and operating expenses exclude reimbursed expenditures of $135,444,000, $283,900,000, and $357,698,000 for the years ended December 31, 1998, 1997, and 1996, respectively. Subsidiaries engaged in governmental contracting recognize revenues from cost-plus-fixed-fee contracts on the basis of direct costs incurred plus indirect expenses and the allocable portion of the fixed fee. Revenues under time-and-material contracts are recorded at the contracted rates as the labor hours and other direct costs are incurred. Revenues under fixed-price contracts are recognized on the basis of the estimated percentage of completion of services rendered. Service revenues also include the fees earned under contracts to operate and maintain the waste-to-energy facilities and to service the facilities' debt, with additional fees earned based on excess tonnage processed and energy generation. Long-term unbilled service receivables related to waste-to-energy operations are discounted in recognizing the present value for services performed currently. Such unbilled receivables amounted to $150,389,000 and $130,388,000 at December 31, 1998 and 1997, respectively. Subsidiaries engaged in long-term construction contracting record income on the percentage-of-completion method of accounting and recognize income as the work progresses. Anticipated losses on contracts are recognized as soon as they become known. INVENTORIES: Inventories, consisting primarily of raw materials, work in progress, and finished goods, are recorded principally at the lower of first-in, first-out cost or market. PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment is stated at cost. For financial reporting purposes, depreciation is provided by the straight-line method over the estimated useful lives of the assets, which range generally from three years for computer equipment to 50 years for waste-to-energy facilities. Accelerated depreciation is generally used for Federal income tax purposes. Leasehold improvements are amortized by the straight-line method over the terms of the leases or the estimated useful lives of the improvements as appropriate. Landfills are amortized based on the quantities deposited into each landfill compared to the total estimated capacity of such landfill. Property, plant, and equipment is periodically reviewed to determine recoverability by comparing the carrying value to expected future cash flows. CONTRACT ACQUISITION COSTS: Costs associated with the acquisition of specific contracts are amortized over their respective contract terms. BOND ISSUANCE COSTS: Costs incurred in connection with the issuance of revenue bonds are amortized over the terms of the respective debt issues. 30 RESTRICTED FUNDS: Restricted funds represent proceeds from the financing and operation of waste-to-energy facilities and a power plant. Funds are held in trust and released as expenditures are made or upon satisfaction of conditions provided under the respective trust agreements. INTEREST RATE SWAP AGREEMENTS: Amounts received or paid relating to swap agreements during the year are credited or charged to interest expense or debt service charges, as appropriate. GOODWILL: Goodwill is amortized by the straight-line method over periods ranging from 15 to 40 years. RETIREMENT PLANS: Ogden and certain subsidiaries have several retirement plans covering substantially all of their employees. Certain subsidiaries also contribute to multiemployer plans for unionized hourly employees that cover, among other benefits, pensions and postemployment health care. INCOME TAXES: Ogden files a consolidated Federal income tax return, which includes all eligible United States subsidiary companies. Foreign subsidiaries are taxed according to regulations existing in the countries in which they do business. Provision has not been made for United States income taxes on distributions that may be received from foreign subsidiaries, which are considered to be permanently invested overseas. LONG-LIVED ASSETS: Ogden accounts for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of by evaluating the carrying value of its long-lived assets in relation to the operating performance and future undiscounted cash flows of the underlying businesses when indications of impairment are present. Long-lived assets to be disposed of, if any, are evaluated in relation to the net realizable value. EARNINGS PER SHARE: "Earnings per Share" is represented by net income available to common shareholders divided by the weighted-average number of common shares outstanding during the period. Diluted earnings per share reflects the potential dilution that could occur if securities or stock options were exercised or converted into common stock during the period, if dilutive (see Note 21). REPORTING ON COSTS OF START-UP ACTIVITIES: The American Institute of Certified Public Accountants (AICPA) issued Statement of Position (SOP) 98-5, "Reporting on the Costs of Start-Up Activities," in April 1998, which is effective for years beginning after December 15, 1998. This SOP establishes accounting standards for these costs and requires that they generally be expensed as incurred. The effect of the initial application of this SOP will be reported as a cumulative effect of a change in accounting principles. This SOP will be implemented as of January 1, 1999, and is not expected to have a significant effect on Ogden's future operations or financial position. ACCOUNTING FOR DERIVATIVE INSTRUMENTS: The Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," in June 1998, which is effective for fiscal years beginning after June 1999. This Statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and hedging activities. At this time, management has not determined the effect, if any, that the implementation of this Statement will have on Ogden's financial position and results of operations. COMPREHENSIVE INCOME: The Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," in June 1997, which was effective for years beginning after December 31, 1997. This Statement established standards for reporting and display of comprehensive income and its components in financial statements. Ogden adopted SFAS 130 as of January 1, 1998, and has restated prior years' presentations in the accompanying financial statements. RECLASSIFICATION: The accompanying financial statements have been reclassified to conform with the 1998 presentation. 2. INVESTMENTS IN MARKETABLE SECURITIES AVAILABLE FOR SALE At December 31, 1998 and 1997, marketable equity and debt securities held for current and noncurrent uses, such as nonqualified pension liabilities and a deferred compensation plan, are classified as current assets and long-term assets (see Note 6), respectively. Accumulated net unrealized losses on marketable equity and debt securities held for current and noncurrent uses are charged to Other Comprehensive Income. Marketable securities at December 31, 1998 and 1997 (expressed in thousands of dollars), include the following:
1998 1997 --------------------------------------------------------------------------- Market Market Value Cost Value Cost --------------------------------------------------------------------------- Classified as Current Assets: Mutual and bond funds ................. $44,685 $44,714 ------- ------- Total Classified as Current Assets .... $44,685 $44,714 ------- ------- ------- ------- Classified as Noncurrent Assets: Mutual and bond funds ................. $27,451 $27,673 $25,543 $26,495 ------- ------- ------- ------- Total Classified as Noncurrent Assets.. $27,451 $27,673 $25,543 $26,495 ------- ------- ------- ------- ------- ------- ------- -------
At December 31, 1998 and 1997, unrealized losses were $251,000 and $952,000, respectively. The deferred tax benefits on these losses at December 31, 1998 and 1997, were $186,000 and $417,000, respectively, resulting in net charges of $65,000 and $535,000, respectively, to Other Comprehensive Income. 31 Proceeds, realized gains, and realized losses from the sales of securities classified as available for sale for the years ended December 31, 1998, 1997, and 1996, were $14,232,000, zero, and zero; $13,970,000, $3,444,000, and zero; and $13,158,000, $1,455,000, and $304,000, respectively. For the purpose of determining realized gains and losses, the cost of securities sold was based on specific identification. 3. UNBILLED SERVICE AND OTHER RECEIVABLES Unbilled service and other receivables (expressed in thousands of dollars) consisted of the following:
1998 1997 --------------------------------------------------------------------------- Unbilled service receivables ....................... $150,389 $130,388 Notes receivable ................................... 23,241 44,574 -------- -------- Total .............................................. $173,630 $174,962 -------- -------- -------- --------
Long-term unbilled service receivables are for services, which have been performed for municipalities, that are due by contract at a later date and are discounted in recognizing the present value of such services. Current unbilled service receivables, which are included in Receivables, amounted to $41,822,000 and $41,357,000 at December 31, 1998 and 1997, respectively. Long-term notes receivable primarily represent loans made to the owners of entertainment and sports facilities and notes received relating to the sale of noncore businesses. 4. RESTRICTED FUNDS HELD IN TRUST Funds held by trustees include proceeds received from financing the construction of waste-to-energy facilities; debt service reserves for payment of principal and interest on project debt; lease reserves for lease payments under operating leases; capitalized interest for payment of interest during the construction period; and deposits of revenues received. Such funds are invested principally in United States Treasury bills and notes and United States government agencies securities. Fund balances (expressed in thousands of dollars) were as follows:
1998 1997 ------------------------------------------------------------------- Current Noncurrent Current Noncurrent ------------------------------------------------------------------- Construction funds ... $ 14,604 $ 3,201 Debt service funds ... 24,871 $131,873 43,423 $139,961 Revenue funds ........ 13,626 8,811 Lease reserve funds .. 10,075 14,488 9,629 5,050 Other funds .......... 47,377 34,561 38,818 61,002 -------- -------- -------- -------- Total ................ $110,553 $180,922 $103,882 $206,013 -------- -------- -------- -------- -------- -------- -------- --------
5. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment (expressed in thousands of dollars) consisted of the following:
1998 1997 ---------------------------------------------------------------------------- Land ............................................. $ 10,219 $ 7,068 Waste-to-energy facilities ....................... 1,721,018 1,720,990 Power plants ..................................... 227,311 224,120 Buildings and improvements ....................... 248,568 242,345 Machinery and equipment .......................... 354,975 312,525 Landfills ........................................ 17,959 17,618 Construction in progress ......................... 52,972 32,523 ---------- ---------- Total ............................................ 2,633,022 2,557,189 Less accumulated depreciation and amortization ... 645,379 609,642 ---------- ---------- Property, plant, and equipment--net .............. $1,987,643 $1,947,547 ---------- ---------- ---------- ----------
6. OTHER ASSETS Other assets (expressed in thousands of dollars) consisted of the following:
1998 1997 ---------------------------------------------------------------------------- Unamortized bond issuance costs .................. $ 43,420 $ 35,761 Noncurrent securities available for sale ......... 27,451 25,543 Investment at cost ............................... 17,710 Deposits on potential acquisitions ............... 13,478 Deferred financing costs ......................... 12,292 4,475 Insurance deposits ............................... 5,388 Other ............................................ 43,297 34,281 ---------- ---------- Total ............................................ $ 157,648 $ 105,448 ---------- ---------- ---------- ----------
32 7. ACCRUED EXPENSES, ETC. Accrued expenses, etc. (expressed in thousands of dollars), consisted of the following:
1998 1997 ---------------------------------------------------------------------------- Operating expenses ............................... $ 62,173 $ 51,827 Insurance ........................................ 30,046 39,489 Debt service charges and interest ................ 24,655 31,416 Municipalities' share of energy revenues ......... 36,300 28,145 Payroll .......................................... 26,016 21,834 Payroll and other taxes .......................... 22,412 19,794 Lease payments ................................... 16,038 15,243 Commissions ...................................... 8,736 7,972 Pension and profit sharing ....................... 11,960 7,383 Other ............................................ 67,606 44,771 ---------- ---------- Total ............................................ $ 305,942 $ 267,874 ---------- ---------- ---------- ----------
8. DEFERRED INCOME Deferred income (expressed in thousands of dollars) consisted of the following:
1998 1997 --------------------------------------------------------------------------------------- Current Noncurrent Current Noncurrent --------------------------------------------------------------------------------------- Power sales agreement prepayment .... $ 9,001 $ 174,328 Sale and leaseback arrangements ..... 1,523 18,876 $ 1,523 $ 20,313 Advance billings to municipalities .. 11,523 14,662 Other ............................... 25,944 8,359 26,777 --------- --------- --------- --------- Total ............................... $ 47,991 $ 201,563 $ 42,962 $ 20,313 --------- --------- --------- --------- --------- --------- --------- ---------
The gain from sale and leaseback transactions consummated in 1986 and 1987 was deferred and is being amortized as a reduction of rental expense. Advance billings to municipalities are billed one or two months prior to performance of service and are recognized as income in the period the service is provided. In 1998, Ogden received a prepayment for future energy deliveries required under a power sales agreement. This prepayment is being amortized over the life of the agreement. 9. LONG-TERM DEBT Long-term debt (expressed in thousands of dollars) consisted of the following:
1998 1997 ------------------------------------------------------------------------------ Adjustable-rate revenue bonds due 2014--2024 ........ $ 124,755 $ 124,755 9.25% debentures due 2022 100,000 100,000 6% notes due through 2000 16,699 36,186 9.96% notes due through 2008 21,827 Other long-term debt 128,006 93,091 ---------- ---------- Total $ 391,287 $ 354,032 ---------- ---------- ---------- ----------
The adjustable-rate revenue bonds are adjusted periodically to reflect current market rates for similar issues, generally with an upside cap of 15%. The average rates for this debt were 3.38% and 3.44% in 1998 and 1997, respectively. These bonds were issued under agreements that contain various restrictions, the most significant being the requirements to comply with certain financial ratios and to maintain Shareholders' Equity of at least $440,000,000. At December 31, 1998, Ogden was in compliance with all requirements and had $109,100,000 in excess of the required amount of Shareholders' Equity. Other long-term debt includes an obligation for approximately $28,400,000, representing the equity component of a sale and leaseback arrangement relating to a waste-to-energy facility. This arrangement is accounted for as a financing, has an effective interest rate of 5%, and extends through 2017. Additionally, other long-term debt includes $22,450,000 resulting from the sale of limited partnership interests in and related tax benefits of a waste-to-energy facility, which has been accounted for as a financing for accounting purposes. This obligation has an effective interest rate of 10% and extends through 2015. Long-term debt also includes $50,155,000 due to financial institutions relating to the Corporation's investment in a coal-fired power project in the Philippines, which bears interest at the Eurodollar rate plus .235% (5.5% at December 31, 1998) and matures in 2001. The remaining other debt of $27,001,000 consists primarily of debt associated with overseas entertainment and aviation facilities as well as debt acquired in the Firehole acquisition. These loans bear various interest rates and maturity dates. 33 At December 31, 1998, Ogden had one long-term interest rate swap agreement covering a notional amount of $3,200,000, which expires November 30, 2000. This swap was entered into to convert Ogden's $3,200,000 variable-rate debt to a fixed rate. Ogden pays a fixed rate of 5.83% paid on a quarterly basis and receives a floating rate of three months LIBOR on a quarterly basis. At December 31, 1998, the three-month LIBOR rate was 5.07%. The counterparty to this interest rate swap is a major financial institution. Management believes its credit risk associated with nonperformance by the counterparty is not significant. Ogden also had a swap agreement to convert its fixed-rate $100,000,000, 9.25% debentures into variable-rate debt, which expired December 16, 1998. Amounts paid on swap agreements amounted to $100,000, $400,000, and $200,000, for 1998, 1997, and 1996, respectively, and were charged to interest expense. The effect on Ogden's weighted-average borrowing rate for 1998, 1997, and 1996 was an increase of .04%, .09%, and .04%, respectively. The maturities on long-term debt (expressed in thousands of dollars) at December 31, 1998, were as follows: 1999 ........................................................... $ 30,232 2000 ........................................................... 22,132 2001 ........................................................... 59,711 2002 ........................................................... 6,058 2003 ........................................................... 5,711 Later years .................................................... 297,675 -------- Total .......................................................... 421,519 Less current portion ........................................... 30,232 -------- Total long-term debt ........................................... $391,287 ========
10. PROJECT DEBT Project debt (expressed in thousands of dollars) consisted of the following:
1998 1997 ----------------------------------------------------------------------------------------------------------- Revenue Bonds Issued by and Prime Responsibility of Municipalities: 3.3--7.3% serial revenue bonds due through 2011 ................................. $ 341,284 $ 212,368 4.25--7.625% term revenue bonds due through 2015 ................................ 557,595 745,350 Adjustable-rate revenue bonds due through 2013 .................................. 80,220 86,185 ---------- ---------- Total ........................................................................... 979,099 1,043,903 ---------- ---------- Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties: 4.0--6.6% serial revenue bonds due through 2008 ................................. 98,091 53,938 7.25--7.4% term revenue bonds ................................................... 105,871 Adjustable-rate revenue bonds ................................................... 115,428 ---------- ---------- Total ........................................................................... 98,091 275,237 ---------- ---------- Other Revenue Bonds: 4.35--5.5% serial revenue bonds due through 2015 ................................ 104,414 5.5--5.6% term revenue bonds due 2019 ........................................... 58,020 ---------- Total ........................................................................... 162,434 ---------- Other project debt .............................................................. 127,904 105,508 ---------- ---------- Total long-term project debt .................................................... $1,367,528 $1,424,648 ========== ==========
Project debt associated with the financing of waste-to-energy facilities is generally arranged by municipalities through the issuance of tax-exempt and taxable revenue bonds. The category, "Revenue Bonds Issued by and Prime Responsibility of Municipalities," includes bonds issued with respect to which debt service is an explicit component of the client community's obligation under the related service agreement. In the event that a municipality is unable to satisfy its payment obligations, the bondholders' recourse with respect to the Corporation is limited to the waste-to-energy facilities and restricted funds pledged to secure such obligations. The category, "Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties," includes bonds issued to finance two facilities for which contractual obligations of third parties to deliver waste ensure sufficient revenues to pay debt service, although such debt service is not an explicit component of the third parties' service fee obligations. The category, "Other Revenue Bonds," includes bonds issued to finance one facility for which current contractual obligations of third parties to deliver waste provide sufficient revenues to pay debt service related to that facility through 2011, although such debt service is not an explicit component of the third parties' service fee obligations. The Corporation anticipates renewing such contracts prior to 2011. 34 Payment obligations for the project debt associated with waste-to-energy facilities are limited recourse to the operating subsidiary and nonrecourse to the Corporation, subject to construction and operating performance guarantees and commitments. These obligations are secured by the revenues pledged under various indentures and are collateralized principally by a mortgage lien and a security interest in each of the respective waste-to-energy facilities and related assets. At December 31, 1998, such revenue bonds were collateralized by property, plant, and equipment, with a net carrying value of $1,439,768,000, a credit enhancement of approximately $7,868,000 for which Ogden has certain reimbursement obligations, and restricted funds held in trust of approximately $246,020,000 (see Note 4). The interest rates on adjustable-rate revenue bonds are adjusted periodically to reflect current market rates. The average adjustable rate for such revenue bonds was 5.4% and 4.35% in 1998 and 1997, respectively. Other project debt includes an obligation of a special-purpose limited partnership acquired by special-purpose subsidiaries of Ogden and represents the lease of a geothermal power plant, which has been accounted for as a financing. This obligation, which amounted to $67,211,000 at December 31, 1998, has an effective interest rate of 5.3% and extends through 2008 with options to renew for additional periods and has a fair market value purchase option at the conclusion of the initial term. Payment obligations under this lease arrangement are limited to assets of the limited partnership and revenues derived from a power sales agreement with a third party, which are expected to provide sufficient revenues to make rental payments. Such payment obligations are secured by all the assets, revenues, and other benefits derived from the geothermal power plant, which had a net carrying value of approximately $88,148,000 at December 31, 1998. Other project debt also includes $15,493,000 due to a financial institution as part of the refinancing of project debt in the category, "Revenue Bonds Issued by and Prime Responsibility of Municipalities." The debt service associated with this loan is included as an explicit component of the client community's obligation under the related service agreement. A portion of the funds was retained in the Corporation's restricted funds and is loaned to the community each month to cover the community's monthly service fees. The Corporation's repayment for the other part of the loan is limited to the extent repayment is received from the client community. This obligation has an effective interest rate of 7.05% and extends through 2005. In addition, other project debt includes $7,200,000, which is due to financial institutions and bears interest at an adjustable rate equal to the three-month LIBOR rate plus 3.5% (8.56% at December 31, 1998). The debt extends through 2001 and is secured by substantially all the assets of a diesel-fired power plant in the Philippines, which had a net carrying value of approximately $50,702,000 at December 31, 1998. Other project debt includes $38,000,000 due to financial institutions, which bears interest at an adjustable rate that was the three-month LIBOR rate plus 1.2% (6.27% at December 31, 1998). The debt extends through 2005 and is secured by substantially all the assets of a subsidiary that owns various power plants in the United States, which had a carrying value of approximately $92,931,000 at December 31, 1998, and a credit enhancement of $10,000,000. At December 31, 1998, the Corporation had one interest rate swap agreement as a hedge against interest rate exposure on certain adjustable-rate revenue bonds. The swap agreement was entered into in September 1995 and expires in January 2019. This swap agreement relates to adjustable-rate revenue bonds in the category, "Revenue Bonds Issued by and Prime Responsibility of Municipalities," and any payments made or received under the swap agreement are therefore included as an explicit component of the client community's obligation under the related service agreement. Under the swap agreement, the Corporation pays a fixed rate of 5.18% per annum on a semi-annual basis and receives a floating rate based on a defined LIBOR-based rate. At December 31, 1998, the floating rate on the swap was 2.75%. The notional amount of the swap at December 31, 1998, was $80,220,000 and is reduced in accordance with the scheduled repayments of the applicable revenue bonds. In addition, the Corporation terminated two other interest rate swap agreements during 1998. The swap agreements resulted in increased debt service expense of $824,000, including $211,000 paid to terminate two swap agreements, for the year ended December 31, 1998. The effect on Ogden's weighted-average borrowing rate was an increase of .06%, .02%, and .04% for 1998, 1997, and 1996, respectively. The counterparty to the remaining swap is a major financial institution. The Corporation believes the credit risk associated with nonperformance by the counterparty is not significant. The maturities on long-term project debt (expressed in thousands of dollars) at December 31, 1998, were as follows:
1999 ........................................................ $ 63,201 2000 ........................................................ 78,121 2001 ........................................................ 97,692 2002 ........................................................ 95,630 2003 ........................................................ 96,874 Later years ................................................. 999,211 ----------- Total ....................................................... 1,430,729 Less current portion ........................................ 63,201 ----------- Total long-term project debt ................................ $ 1,367,528 ===========
35 11. CREDIT ARRANGEMENTS At December 31, 1998, Ogden had unused revolving credit lines amounting to $200,000,000 under its principal revolving credit line at various borrowing rates including prime, the Eurodollar rate plus .225%, and certificate-of-deposit rates plus .35%. Ogden is not required to maintain compensating balances; however, Ogden pays a facility fee of 1/8 of 1% on its principal revolving credit line, which expires July 1, 2002. 12. CONVERTIBLE SUBORDINATED DEBENTURES Convertible subordinated debentures (expressed in thousands of dollars) consisted of the following:
1998 1997 ---------------------------------------------------------------------------- 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. These debentures are redeemable at Ogden's option at 100.6% of principal amount during the year commencing June 1, 1998, and at decreasing prices thereafter. The 5 3/4% convertible subordinated debentures are convertible into Ogden common stock at the rate of one share for each $41.772 principal amount of debentures. These debentures are redeemable at Ogden's option at 100% of face value. 13. PREFERRED STOCK The outstanding Series A $1.875 Cumulative Convertible Preferred Stock is convertible at any time at the rate of 5.97626 common shares for each preferred share. Ogden may redeem the outstanding shares of preferred stock at $50 per share, plus all accrued dividends. These preferred shares are entitled to receive cumulative annual dividends at the rate of $1.875 per share, plus an amount equal to 150% of the amount, if any, by which the dividend paid or any cash distribution made on the common stock in the preceding calendar quarter exceeded $.667 per share. 14. COMMON STOCK AND STOCK OPTIONS In 1986, Ogden adopted a nonqualified stock option plan (the "1986 Plan"). Under this plan, options and/or stock appreciation rights were granted to key management employees to purchase Ogden common stock at prices not less than the fair market value at the time of grant, which became exercisable during a five-year period from the date of grant. Options were exercisable for a period of ten years after the date of grant. As adopted and as adjusted for stock splits, the 1986 Plan called for up to an aggregate of 2,700,000 shares of Ogden common stock to be available for issuance upon the exercise of options and stock appreciation rights, which were granted over a ten-year period ending March 10, 1996. At December 31, 1998, all of the authorized shares of this plan had been granted. In October 1990, Ogden adopted a nonqualified stock option plan (the "1990 Plan"). Under this plan, nonqualified options, incentive stock options, and/or stock appreciation rights and stock bonuses may be granted to key management employees and outside directors to purchase Ogden common stock at an exercise price to be determined by the Ogden Compensation Committee and which become exercisable during the five-year period from the date of grant. These options are exercisable for a period of ten years after the date of grant. Pursuant to the 1990 Plan, which was amended in 1994 to increase the number of shares available by 3,200,000 shares, an aggregate of 6,200,000 shares of Ogden common stock became available for issuance upon the exercise of such options, rights, and bonuses, which may be granted over a ten-year period ending October 11, 2000; 667,000 shares were available for grant at December 31, 1998. Under the foregoing plans, Ogden issued 4,681,100 limited stock appreciation rights in conjunction with the stock options granted. These limited rights are exercisable only during the period commencing on the first day following the occurrence of any of the following events and terminate 90 days after such date: the acquisition by any person of 20% or more of the voting power of Ogden's outstanding securities; the approval by Ogden shareholders of an agreement to merge or to sell substantially all of its assets; or the occurrence of certain changes in the membership of the Ogden Board of Directors. The exercise of these limited rights entitles participants to receive an amount in cash with respect to each share subject thereto, equal to the excess of the market value of a share of Ogden common stock on the exercise date or the date these limited rights became exercisable, over the related option price. In connection with the acquisition of the minority interest of Ogden Energy Group, Inc. (OEGI), Ogden assumed the pre-existing OEGI stock option plan then outstanding and converted these options into options to acquire shares of Ogden common stock. No further options will be granted under this plan. 36 The Corporation has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for these stock option plans. Had compensation cost for the options granted in 1998, 1997, and 1996 under these plans been determined consistent with the provisions of SFAS No. 123, using the binomial option-pricing model with the following assumptions --dividend yield of 4.8%, 6.2%, and 5.7%; volatility of 27.22%, 25.84%, and 22.74%; risk-free interest rate of 5.42%, 6.43%, and 5.42%; and an expected life of 7.5 years--the effect on net income and diluted earnings per share would have been $626,000 and $0.01 for 1998, $334,000 and $0.01 for 1997, and $214,000 and zero for 1996. The weighted-average fair value of options granted during 1998, 1997, and 1996 was $3.17, $2.56, and $2.38, respectively. Information regarding the Corporation's stock option plans is summarized as follows:
Weighted- Option Average Price Exercise Per Share Outstanding Exercisable Price - --------------------------------------------------------------------------------------------- 1986 PLAN: December 31, 1995, balance ....... $14.98-$28.54 1,110,925 1,018,525 $18.89 Became exercisable ............... $22.50 23,100 Exercised ........................ $14.98 (235,425) (235,425) $14.98 ------------- ----------- ----------- ----------- December 31, 1996, balance ....... $18.31-$28.54 875,500 806,200 $19.93 Became exercisable ............... $22.50 23,100 Cancelled ........................ $28.54 (10,000) (10,000) $28.54 ------------- ----------- ----------- ----------- December 31, 1997, balance ....... $18.31-$28.54 865,500 819,300 $19.74 Became exercisable ............... $22.50 19,100 Exercised ........................ $18.32-$26.40 (217,000) (217,000) $18.92 Cancelled ........................ $22.50-$28.24 (28,000) (20,000) $27.32 ------------- ----------- ----------- ----------- December 31, 1998, balance ....... $18.31-$28.54 620,500 601,400 $19.69 ------------- ----------- ----------- ----------- 1990 PLAN: December 31, 1995, balance ....... $18.31-$23.56 3,680,800 2,336,700 $20.06 Granted .......................... $21.00-$31.50 252,500 $21.83 Became exercisable ............... $18.31-$31.50 346,800 Exercised ........................ $18.31-$21.31 (129,000) (129,000) $18.85 Cancelled ........................ $18.31-$23.56 (147,300) (84,300) $20.06 ------------- ----------- ----------- ----------- December 31, 1996, balance ....... $18.31-$31.50 3,657,000 2,470,200 $20.21 Granted .......................... $20.19 570,000 $20.19 Became exercisable ............... $18.31-$31.50 385,400 Exercised ........................ $18.31-$21.93 (471,000) (471,000) $18.62 Cancelled ........................ $18.31-$23.56 (72,000) (11,000) $21.90 ------------- ----------- ----------- ----------- December 31, 1997, balance ....... $18.31-$31.50 3,684,000 2,373,600 $20.39 Granted .......................... $25.97-$29.38 923,000 $26.29 Became exercisable ............... $20.06-$31.50 460,900 Exercised ........................ $18.31-$23.56 (538,900) (538,900) $19.05 Cancelled ........................ $20.06-$20.31 (7,500) (2,000) $20.17 ------------- ----------- ----------- ----------- December 31, 1998 ................ $18.31-$31.50 4,060,600 2,293,600 $20.56 ------------- ----------- ----------- ----------- CONVERSION OF OEGI PLAN: December 31, 1995, balance ....... $14.17-$29.46 266,561 266,561 $14.60 Exercised ........................ $14.17 (19,740) (19,740) $14.17 Cancelled ........................ $14.17 (3,360) (3,360) $14.17 ------------- ----------- ----------- ----------- December 31, 1996, balance ....... $14.17-$29.46 243,461 243,461 $14.70 Exercised ........................ $14.17 (59,640) (59,640) $14.17 Cancelled ........................ $29.46 (8,400) (8,400) $29.46 ------------- ----------- ----------- ----------- December 31, 1997, balance ....... $14.17 175,421 175,421 $14.17 Exercised ........................ $14.17 (3,360) (3,360) $14.17 ------------- ----------- ----------- ----------- December 31, 1998, balance ....... $14.17 172,061 172,061 $14.17 ------------- ----------- ----------- ----------- Total December 31, 1998 .......... $14.17-$31.50 4,853,161 3,067,061 $20.04 ============= =========== =========== ===========
37 The following table summarizes information about stock options outstanding at December 31, 1998:
Options Outstanding Options Exercisable ------------------------------------------------------ -------------------------------- Range of Number of Weighted-Average Weighted-Average Number of Weighted-Average Exercise Shares Remaining Exercise Shares Exercise Prices Outstanding Contractual Life Price Outstanding Price ----------------------------------------------------------------------------------------------------------- $14.17-$20.31 2,315,661 3.4 years $18.55 1,840,061 $18.14 $21.19-$31.50 2,537,500 6.6 years $24.08 1,227,000 $22.90 ------------- --------- --------- ------ --------- ------ $14.17-$31.50 4,853,161 5.0 years $21.43 3,067,061 $20.04 ------------- --------- --------- ------ --------- ------ ------------- --------- --------- ------ --------- ------
The weighted-average exercise price for all exercisable options at December 31, 1998, 1997, and 1996, was $20.04, $19.56, and $19.10, respectively. At December 31, 1998, there were 9,453,968 shares of common stock reserved for the exercise of stock options and the conversion of preferred shares and debentures. In 1998, Ogden's Board of Directors authorized the purchase of shares of the Corporation's common stock in an amount up to $200,000,000. Through January 1999, 2,182,800 shares of common stock were purchased at a total cost of $57,884,000. 15. PREFERRED STOCK PURCHASE RIGHTS In 1990, the Board of Directors declared a dividend of one preferred stock purchase right (Right) on each outstanding share of common stock. Among other provisions, each Right may be exercised to purchase a one one-hundredth share of a new series of cumulative participating preferred stock at an exercise price of $80, subject to adjustment. The Rights may be exercised only after a party has acquired 15% or more of the Corporation's common stock or commenced a tender offer to acquire 15% or more of the Corporation's common stock. The Rights do not have voting rights, expire October 2, 2000, and may be redeemed by the Corporation at a price of $.01 per Right at any time prior to the acquisition of 15% of the Corporation's common stock. In the event a party acquires 15% or more of the Corporation's outstanding common stock in accordance with certain defined terms, each Right will then entitle its holders (other than such party) to purchase, at the Right's then-current exercise price, a number of the Corporation's common shares having a market value of twice the Right's exercise price. At December 31, 1998, 48,945,989 Rights were outstanding. 16. FOREIGN EXCHANGE Foreign exchange translation adjustments for 1998, 1997, and 1996, amounting to $2,170,000, $8,094,000, and $3,111,000, respectively, have been charged directly to Other Comprehensive Income. Foreign exchange transaction adjustments, amounting to $750,000, $683,000, and $215,000, have been charged directly to income for 1998, 1997, and 1996, respectively. 17. DEBT SERVICE CHARGES Debt service charges for Ogden's project debt (expressed in thousands of dollars) consisted of the following:
1998 1997 1996 ----------------------------------------------------------------------------------------------- Interest incurred on taxable and tax-exempt borrowings .. $ 96,939 $ 99,284 $ 103,846 Interest earned on temporary investment of borrowings during construction, etc. ................. 4,192 3,992 4,256 --------- --------- --------- Net interest incurred ................................... 92,747 95,292 99,590 Interest capitalized during construction in property, plant, and equipment .................................... 631 485 --------- --------- --------- Interest expense--net ................................... 92,747 94,661 99,105 Amortization of bond issuance costs ..................... 7,616 6,997 7,201 --------- --------- --------- Debt service charges .................................... $ 100,363 $ 101,658 $ 106,306 --------- --------- --------- --------- --------- ---------
18. PENSION AND OTHER POSTRETIREMENT BENEFITS Ogden has retirement plans that cover substantially all of its employees. A substantial portion of hourly employees of Ogden Services Corporation participates in defined contribution plans. Other employees participate in defined benefit or defined contribution plans. The defined benefit plans provide benefits based on years of service and either employee compensation or a flat benefit amount. Ogden's funding policy for those plans is to contribute annually an amount no less than the minimum funding required by ERISA. Contributions are intended to provide not only benefits attributed to service to date but also for those expected to be earned in the future. 38 In 1992, the Corporation discontinued its policy of providing postretirement health care and life insurance benefits for all salaried employees, except those employees who were retired or eligible for retirement at December 31, 1992, or who were covered under certain company-sponsored union plans. The following table sets forth the details of Ogden's defined benefit plans' and other postretirement benefit plans' funded status and related amounts recognized in Ogden's Consolidated Balance Sheets in accordance with Statement of Financial Accounting Standards No. 132 (expressed in thousands of dollars):
Pension Benefits Other Benefits - -------------------------------------------------------------------------------------------- 1998 1997 1998 1997 - -------------------------------------------------------------------------------------------- Change in Benefit Obligation: Benefit obligation at beginning of year ...... $ 30,771 $ 27,987 $ 12,464 $ 11,195 Service cost ................................. 2,721 2,192 70 101 Interest cost ................................ 2,197 1,924 607 828 Plan amendments .............................. 382 Actuarial (gain) loss ........................ 1,048 1,038 (3,210) 756 Benefits paid ................................ (1,576) (2,370) (465) (417) -------- -------- -------- -------- Benefit obligation at end of year ............ 35,543 30,771 9,466 12,463 -------- -------- -------- -------- Change in Plan Assets: Plan assets at fair value at beginning of year 22,300 19,162 Actual return on plan assets ................. 2,183 4,448 Company contributions ........................ 1,773 1,060 465 417 Benefits paid ................................ (1,576) (2,370) (465) (417) -------- -------- -------- -------- Plan assets at fair value at end of year ..... 24,680 22,300 -------- -------- -------- -------- Reconciliation of Prepaid (Accrued) and Total Recognized: Funded status of the plan .................... (10,863) (8,471) (9,466) (12,464) Unrecognized: Net transition (asset) obligation ............ (92) (95) Prior service cost ........................... 1,150 1,331 Net (gain) loss .............................. (1,130) (1,568) (1,619) 1,387 -------- -------- -------- -------- Net amount recognized ........................ $(10,935) $ (8,803) $(11,085) $(11,077) ======== ======== ======== ======== Amounts Recognized in the Statement of Financial Position Consist of: Accrued benefit liability .................... $(12,362) $ (9,714) $(11,085) $(11,077) Intangible asset ............................. 332 478 Accumulated other comprehensive income ....... 1,095 433 -------- -------- -------- -------- Net amount recognized ........................ $(10,935) $ (8,803) $(11,085) $(11,077) ======== ======== ======== ======== Weighted Average Assumptions as of December 31: Discount rate ................................ 6.75% 7.00% 6.75% 7.00% Expected return on plan assets ............... 8.00% 8.00% Rate of compensation increase ................ 4.00% 4.50% 4.00% 4.50%
For management purposes, 9% and 8% annual rates of increase in the per capita cost of health care benefits were assumed for 1998 for covered employees under age 65 and over age 65, respectively. The rates were assumed to decrease gradually to 5.5% and 5% for employees under age 65 and over age 65, respectively, in 2005 and remain at those levels. The accumulated benefit obligation, projected benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $13,208,000, $17,259,000, and $5,757,000, respectively, as of December 31, 1998, and $10,505,000, $14,976,000, and $5,386,000, respectively, as of December 31, 1997. Contributions and costs for defined contribution plans are determined by benefit formulas based on percentage of compensation as well as discretionary contributions and totaled $8,257,000, $8,652,000, and $7,954,000 in 1998, 1997, and 1996, respectively. Plan assets at December 31, 1998, 1997, and 1996, primarily consisted of common stocks, United States government securities, and guaranteed insurance contracts. With respect to union employees, the Corporation is required under contracts with various unions to pay, generally based on hours worked, retirement, health, and welfare benefits. These multiemployer defined benefit and defined contribution plans are not controlled or administered by the Corporation. The amount charged to expense for such plans during 1998, 1997, and 1996 was $4,777,000, $16,700,000, and $26,600,000, respectively. At December 31, 1998, the Corporation has designated $15,359,000 of its marketable securities as pertaining to a nonqualified pension plan that is underfunded by $7,979,000. 39 Pension costs for Ogden's defined benefit plans and other postretirement benefit plans included the following components (expressed in thousands of dollars):
Pension Benefits Other Benefits 1998 1997 1996 1998 1997 1996 - -------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------- Components on Net Periodic Benefit Cost: Service cost $ 2,721 $ 2,192 $ 2,068 $ 70 $ 101 $127 Interest cost 2,197 1,924 1,738 607 828 806 Expected return on plan assets (1,759) (1,486) (2,580) Amortization of unrecognized: Net transition (asset) obligation 5 3 27 Prior service cost 563 525 596 Net (gain) loss 54 (45) 1,636 (204) (27) 18 ------- ------- ------- ----- ----- ---- Net periodic benefit cost $ 3,781 $ 3,113 $ 3,485 $ 473 $ 902 $951 ======= ======= ======= ===== ===== ====
Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plan. A one percentage point change in assumed health care trend rate would have the following effects:
One Percentage One Percentage Point Increase Point Decrease - -------------------------------------------------------------------------------- Effect on total service and interest cost computations $ 27,094 $ (23,768) Effect on postretirement benefit obligation $ 300,153 $(274,143)
19. INCOME TAXES The components of the provision for income taxes (expressed in thousands of dollars) were as follows:
1998 1997 1996 - -------------------------------------------------------------------------------- Current: Federal ................................ $ 25,901 $ 9,806 $14,661 State .................................. 9,424 12,195 9,048 Foreign ................................ 7,776 6,124 2,425 -------- -------- ------- Total current .......................... 43,101 28,125 26,134 -------- -------- ------- Deferred: Federal ................................ 17,665 25,288 18,984 State .................................. 1,321 (2,577) 1,043 Foreign ................................ (290) 2,264 -------- -------- ------- Total deferred ......................... 18,696 24,975 20,027 -------- -------- ------- Total provision for income taxes ....... $ 61,797 $ 53,100 $46,161 ======== ======== =======
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:
- --------------------------------------------------------------------------------------------- 1998 1997 1996 Percent Percent Percent of Income of Income of Income Amount Before Amount Before Amount Before of Tax Taxes of Tax Taxes of Tax Taxes - --------------------------------------------------------------------------------------------- Taxes at statutory rate ......... $ 53,561 35.0% $45,772 35.0% $38,374 35.0% State income taxes, net of Federal tax benefit ............. 6,984 4.6 6,252 4.8 6,559 5.9 Settlement of tax liability with former subsidiary .......... (2,638) (2.4) Taxes on foreign earnings ....... 835 .5 1,135 .9 738 .7 Amortization of goodwill ........ 841 .5 866 .6 1,070 1.0 Write-down of goodwill .......... 945 .6 1,750 1.3 648 .6 Benefit relating to sale of stock of former subsidiary ............ (3,581) (2.7) Energy credits .................. (2,511) (1.6) Other--net ...................... 1,142 .8 906 .7 1,410 1.3 -------- ---- ------- ---- ------- ---- Provision for income taxes .................... $ 61,797 40.4% $53,100 40.6% $46,161 42.1% ======== ==== ======= ==== ======= ====
40 The components of the net deferred income tax liability (expressed in thousands of dollars) as of December 31, 1998 and 1997, were as follows:
1998 1997 - -------------------------------------------------------------------------------- Deferred Tax Assets: Deferred income ................................ $ 999 $ 4,029 Accrued expenses ............................... 81,742 79,093 Other liabilities .............................. 34,271 28,325 Investment tax credits ......................... 20,813 Alternative minimum tax credits ................ 45,032 47,704 -------- -------- Total deferred tax assets ...................... 162,044 179,964 -------- -------- Deferred Tax Liabilities: Unbilled accounts receivable ................... 46,174 45,384 Property, plant, and equipment ................. 428,858 428,185 Other .......................................... 34,333 33,046 -------- -------- Total deferred tax liabilities ................. 509,365 506,615 -------- -------- Net deferred tax liability ..................... $347,321 $326,651 ======== ========
Deferred tax assets and liabilities (expressed in thousands of dollars) are presented as follows in the accompanying balance sheets:
1998 1997 - -------------------------------------------------------------------------------- Net deferred tax liability--noncurrent ............. $396,648 $383,341 Less net deferred tax asset--current ............... 49,327 56,690 -------- -------- Net deferred tax liability ......................... $347,321 $326,651 -------- -------- -------- --------
At December 31, 1998, for Federal income tax purposes, the Corporation had alternative minimum tax credit carryforwards of approximately $45,032,000 that have no expiration date. Deferred Federal income taxes have been reduced by these amounts. 20. LEASES Total rental expense amounted to $115,402,000, $100,449,000, and $91,351,000 (net of sublease income of $4,032,000, $2,113,000, and $1,427,000) for 1998, 1997, and 1996, respectively. Included in rental expense are amounts based on contingent factors (principally sales) in excess of minimum rentals amounting to $23,419,000, $23,365,000, and $20,970,000, for 1998, 1997, and 1996, respectively. Principal leases are for one waste-to-energy facility, leaseholds, sale and leaseback arrangements on waste-to-energy facilities, trucks and automobiles, airplane, and machinery and equipment. Some of these operating leases have renewal options. The following is a schedule (expressed in thousands of dollars), by year, of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1998: 1999 ............................................................... $ 95,769 2000 ............................................................... 87,183 2001 ............................................................... 83,829 2002 ............................................................... 79,997 2003 ............................................................... 78,315 Later years ........................................................ 667,381 ---------- Total .............................................................. $1,092,474 ==========
These future minimum rental payment obligations include $453,184,000 of future nonrecourse rental payments that relate to waste-to-energy facilities, of which $310,562,000 is supported by third-party commitments to provide sufficient service revenues to meet such obligations. The remaining $142,622,000 relates to a waste-to-energy facility of which the Corporation serves as operator and directly markets one half of the facility's waste disposal capacity. This facility presently generates sufficient revenues from short- and medium-term contracts to meet rental payments. The Corporation anticipates renewing the short- and medium-term contracts or entering into new contracts to generate sufficient revenues to meet those remaining future rental payments. Also included is $53,620,000 of nonrecourse rental payments relating to a hydroelectric power-generating facility operated by a special-purpose subsidiary, which are supported by contractual power purchase obligations of a third party and which are expected to provide sufficient revenues to make the rental payments. These nonrecourse rental payments (in thousands of dollars) are due as follows: 1999 ................................................................. $ 33,273 2000 ................................................................. 34,554 2001 ................................................................. 36,006 2002 ................................................................. 36,488 2003 ................................................................. 36,664 Later years .......................................................... 329,819 -------- Total ................................................................ $506,804 ========
41 21. EARNINGS PER SHARE Basic earnings per share was computed by dividing net income, reduced by preferred stock dividend requirements, by the weighted average of the number of shares of common stock outstanding during each year. Diluted earnings per share was computed on the assumption that all convertible debentures, convertible preferred stock, and stock options converted or exercised during each year or outstanding at the end of each year were converted at the beginning of each year or at the date of issuance or grant, if dilutive. This computation provided for the elimination of related convertible debenture interest and preferred dividends. The reconciliation of the income and common shares included in the computation of basic earnings per common share and diluted earnings per common share for years ended December 31, 1998, 1997, and 1996, is as follows:
1998 1997 1996 - ------------------------------------------------------------------------------------------------------------------------------------ Income Shares Per-Share Income Shares Per-Share Income Shares Per-Share (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount - ------------------------------------------------------------------------------------------------------------------------------------ Net income ....... $86,970,000 $75,673,000 $64,534,000 Less: preferred stock dividend ... 144,000 152,000 161,000 ----------- ----------- ----------- Basic Earnings Per Share ........ 86,826,000 49,836,000 $ 1.74 75,521,000 50,030,000 $ 1.51 64,373,000 49,663,000 $ 1.30 ========= ======== ======= Effect of Dilutive Securities: Stock options .... 807,000 538,000 501,000 Convertible preferred stock ............ 144,000 257,000 152,000 275,000 161,000 289,000 6% convertible debentures ....... 2,329,000 1,631,000 2,353,000 1,631,000 (A) 5 3/4% convertible debentures ....... 1,701,000 1,143,000 1,693,000 1,143,000 (A) ----------- ---------- ----------- ---------- ----------- ---------- ------- Diluted Earnings Per Share ........ $91,000,000 53,674,000 $ 1.70 $79,719,000 53,617,000 $ 1.49 $64,534,000 50,453,000 $ 1.28 =========== ========== ========= =========== ========== ======== =========== ========== =======
(A) Antidilutive Outstanding stock options to purchase common stock with an exercise price greater than the average market price of common stock were not included in the computation of diluted earnings per share. The balance of such options was 75,000 in 1998, 80,000 in 1997, and 2,100,400 in 1996. Shares of common stock to be issued, assuming conversion of convertible preferred shares, the 6% convertible debentures, and the 5 3/4% convertible debentures, were not included in computations of diluted earnings per share if to do so would have been antidilutive. The common shares excluded from the calculation were 544,000 in 1998 and 1997 and 2,175,000 in 1996 for the 6% convertible debentures and 381,000 in 1998 and 1997 and 1,524,000 in 1996 for the 5 3/4% convertible debentures. 22. COMMITMENTS AND CONTINGENT LIABILITIES Ogden and certain of its subsidiaries have issued or are party to performance bonds, guarantees, and related contractual obligations undertaken mainly pursuant to agreements to construct and operate certain waste-to-energy, entertainment, and other facilities. In the normal course of business, they are involved in legal proceedings in which damages and other remedies are sought. In connection with certain contractual arrangements, Ogden has agreed to provide a vendor with specified amounts of business over a three-year period. If these amounts are not provided, the Corporation may be liable for prorated damages of up to approximately $3,000,000. Management does not expect that these contractual obligations, legal proceedings, or any other contingent obligations incurred in the normal course of business will have a material adverse effect on Ogden's Consolidated Financial Statements. During 1994, a subsidiary of Ogden entered into a 30-year facility management contract, pursuant to which it agreed to advance funds to a customer, and if necessary, to assist the customer's refinancing of senior secured debt incurred in connection with the construction of the facility. During 1997, Ogden purchased the customer's senior secured debt in the amount of $95,000,000 using borrowed funds, which senior secured debt was subsequently sold and the borrowed funds repaid. Ogden is obligated to repurchase such senior secured debt in the amount of $97,685,000 on December 30, 2002, if such debt is not refinanced prior to that time. Ogden is also required to repurchase the outstanding amount of certain subordinated secured debt issued by such customer on December 30, 2002. The amount outstanding at December 31, 1998, was $51,625,000. In addition, at December 31, 1998, the Corporation had guaranteed indebtedness of $19,363,000 of an affiliate and principal tenant of this customer. Subsequent to December 31, 1998, such tenant repaid $8,637,000 of indebtedness owed to Ogden, and Ogden's previous guarantees of the tenant's indebtedness were released and replaced by a guarantee of $3,284,000 of the tenant's senior secured term debt and a guarantee of up to $7,882,000 of the tenant's 42 secured revolving debt. In addition, Ogden is obligated to purchase $19,704,000 of the tenant's secured subordinated indebtedness on January 29, 2004, if such indebtedness has not been repaid or refinanced prior to that time. Ogden has guaranteed borrowings of another customer amounting to approximately $12,900,000 as well as $8,800,000 of borrowings of joint ventures in which Ogden has an equity interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. At December 31, 1998, capital commitments amounted to $224,735,000, which included $148,035,000 for normal replacement, modernization, and growth in Entertainment ($125,503,000); Aviation ($7,221,000); Energy ($15,200,000); and Corporate ($111,000) operations. Also included was $66,100,000 for Energy's coal-fired power project in the Philippines, a natural gas-fired power plant in Bangladesh, and an investment in a joint venture, reflecting $44,400,000 for the remaining mandatory equity contributions, $5,700,000 for contingent equity contributions, and $16,000,000 for a standby letter of credit in support of debt service reserve requirements. Funding for the remaining mandatory equity contributions is being provided through bank credit facilities, which must be repaid in June 2000 through December 2001. Energy also has a commitment to pay, in 2008, $10,600,000 for a service contract extension at a waste-to-energy facility. The Corporation also has contingent equity contributions of $24,400,000 in Entertainment ($11,400,000) and Aviation ($13,000,000) joint ventures. In addition, compliance with the standards and guidelines under the Clean Air Act Amendments of 1990 may require further Energy capital expenditures of approximately $54,000,000 including amounts that would be required if certain service agreement amendments are finalized through December 2000, subject to the final time schedules determined by the individual states in which the Corporation's waste-to-energy facilities are located. 23. INFORMATION CONCERNING BUSINESS SEGMENTS The Entertainment segment consists principally of interests in themed attractions; live theatre; concerts; gaming; large-format theatres and films; performing artist management; recorded music and video development; food, beverage, and novelty concession operations; and facility management at arenas, stadiums, amphitheatres, civic-convention centers, and other recreational facilities. Most of these services are provided at a wide variety of public and private facilities including stadiums, convention and exposition centers, arenas, parks, amphitheatres, and fairgrounds located in the United States, Mexico, Canada, Argentina, Germany, Australia, Spain, and the United Kingdom. Entertainment also operates a racetrack and four off-track betting parlors in Illinois. The Aviation segment provides specialized support services to airlines at locations in the United States, Canada, Europe, Latin America, and the Pacific Rim. The specialized support services provided by this group include comprehensive ground handling, ramp, passenger, cargo and warehouse, and aviation fueling services. These services are performed through joint ventures, consortia, contracts with individual airlines, consolidated agreements with several airlines, and contracts with various airport authorities. The operations of Ogden's Energy segment are conducted by Ogden Energy Group, Inc., through four principal business groups--Independent Power, Waste to Energy, Water and Wastewater, and Environmental Consulting and Engineering (collectively, "Energy"). The Financial Accounting Standards Board issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," in June 1997, which is effective for years beginning after December 15, 1997. This Statement establishes standards for the way in which public business enterprises report information about operating segments in annual financial statements. Revenues and income from continuing operations (expressed in thousands of dollars) for the years ended December 31, 1998, 1997, and 1996, were as follows:
1998 1997 1996 - ----------------------------------------------------------------------------------------------------- Revenues: Entertainment .............................................. $ 485,555 $ 425,922 $ 391,933 Aviation ................................................... 310,324 363,264 426,746 Energy ..................................................... 804,043 712,272 724,281 Other ...................................................... 92,453 248,267 488,121 ----------- ----------- ----------- Total revenues ............................................. $ 1,692,375 $ 1,749,725 $ 2,031,081 =========== =========== =========== Income (Loss) from Operations: Entertainment .............................................. $ 31,080 $ 30,545 $ 20,259 Aviation ................................................... 53,867 34,015 14,940 Energy ..................................................... 100,513 100,081 94,932 Other ...................................................... (2,720) 528 16,745 ----------- ----------- ----------- Total income from operations ............................... 182,740 165,169 146,876 Equity in Net Income (Loss) of Investees and Joint Ventures: Entertainment .............................................. (3,388) (3,091) (1,196) Aviation ................................................... 2,945 3,343 1,231 Energy ..................................................... 19,251 1,605 325 Other ...................................................... 89 179 3,244 ----------- ----------- ----------- Total ...................................................... 201,637 167,205 150,480 Corporate unallocated income and expenses--net ............. (32,660) (22,178) (22,941) Corporate interest--net .................................... (15,947) (14,249) (17,898) ----------- ----------- ----------- Consolidated Income Before Income Taxes and Minority Interest ................................ $ 153,030 $ 130,778 $ 109,641 =========== =========== ===========
43 Ogden's revenues include $62,148,000, $53,600,000, and $137,600,000 from United States government contracts for the years ended December 31, 1998, 1997, and 1996, respectively. Total revenues by segment reflect sales to unaffiliated customers. In computing income from operations, none of the following has been added or deducted: unallocated corporate expenses, nonoperating interest expense, interest income, and income taxes. A summary (expressed in thousands of dollars) of identifiable assets, depreciation and amortization, and capital additions of continuing operations for the years ended December 31, 1998, 1997, and 1996, is as follows:
Identifiable Depreciation and Capital Assets Amortization Additions - -------------------------------------------------------------------------------- 1998 Entertainment ................ $ 489,995 $ 22,197 $ 73,344 Aviation ..................... 235,214 11,402 31,055 Energy ....................... 2,858,816 75,809 32,237 Other ........................ 69,621 2,242 2,167 Corporate .................... 269,197 2,684 2,372 ---------- -------- -------- Consolidated ................. $3,922,843 $114,334 $141,175 ========== ======== ======== 1997 Entertainment ................ $ 332,915 $ 14,731 $ 52,523 Aviation ..................... 191,710 13,129 19,008 Energy ....................... 2,808,571 72,835 39,967 Other ........................ 114,068 2,423 2,131 Corporate .................... 192,031 1,259 2,572 ---------- -------- -------- Consolidated ................. $3,639,295 $104,377 $116,201 ========== ======== ======== 1996 Entertainment ................ $ 300,899 $ 13,980 $ 17,618 Aviation ..................... 213,264 15,444 10,401 Energy ....................... 2,681,820 77,487 28,157 Other ........................ 203,748 6,909 6,037 Corporate .................... 197,801 1,443 1,978 ---------- -------- -------- Consolidated ................. $3,597,532 $115,263 $ 64,191 ========== ======== ========
Ogden's areas of operations are principally in the United States. Operations outside of the United States are worldwide but primarily in Europe, Latin America, Asia, and Canada. No single foreign country or geographic area is significant to the consolidated operations. A summary of revenues and identifiable assets by geographic area for the years ended December 31, 1998, 1997, and 1996 (expressed in thousands of dollars), is as follows:
1998 1997 1996 - -------------------------------------------------------------------------------- Revenues: United States .................. $1,420,526 $1,500,755 $1,792,564 Europe ......................... 107,107 125,512 139,857 Latin America .................. 84,403 75,696 58,214 Asia ........................... 58,136 19,717 5,479 Canada ......................... 22,203 28,045 34,967 ---------- ---------- ---------- Total .......................... $1,692,375 $1,749,725 $2,031,081 ========== ========== ========== Identifiable Assets: United States .................. $3,348,609 $3,252,001 $3,322,455 Europe ......................... 123,820 113,936 140,327 Latin America .................. 170,306 68,688 53,875 Asia ........................... 233,039 160,209 28,564 Canada ......................... 39,341 43,433 52,311 Other .......................... 7,727 1,028 ---------- ---------- ---------- Total .......................... $3,922,842 $3,639,295 $3,597,532 ========== ========== ==========
44 24. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Expressed in thousands of dollars) 1998 1997 1996 - -------------------------------------------------------------------------------- Cash Paid for Interest and Income Taxes: Interest (net of amounts capitalized) .......... $ 134,604 $ 145,270 $ 134,560 Income taxes ................................... 14,419 24,187 20,552 Noncash Investing and Financing Activities: Conversion of preferred shares for common shares 2 3 2 Detail of Entities Acquired: Fair value of assets acquired .................. 72,039 152,836 38,019 Liabilities assumed ............................ (51,322) (89,624) (21,051) Net cash paid for acquisitions ................. 20,717 63,212 16,968
25. FAIR VALUE OF FINANCIAL INSTRUMENTS The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS No. 107, "Disclosures About Fair Value of Financial Instruments." The estimated fair-value amounts have been determined using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that Ogden would realize in a current market exchange. The estimated fair value (expressed in thousands of dollars) of financial instruments at December 31, 1998 and 1997, is summarized as follows:
- -------------------------------------------------------------------------------------------------- 1998 1997 Carrying Estimated Carrying Estimated Amount Fair Value Amount Fair Value - -------------------------------------------------------------------------------------------------- Assets: Cash and cash equivalents ........................ $ 261,119 $ 261,119 $ 185,671 $ 185,671 Marketable securities ............................ 72,136 72,136 25,543 25,543 Receivables ...................................... 568,553 565,119 568,147 571,159 Restricted funds ................................. 291,475 290,141 309,895 309,711 Other assets ..................................... 641 641 1,116 1,116 Liabilities: Notes payable .................................... 45,600 45,600 Debt ............................................. 421,519 469,093 373,728 413,453 Convertible subordinated debentures .............. 148,650 142,581 148,650 143,342 Project debt ..................................... 1,430,729 1,539,765 1,492,700 1,563,877 Other liabilities ................................ 17,699 14,098 21,175 18,729 Off Balance-Sheet Financial Instruments: Unrealized losses on interest rate swap agreements 14,542 3,529 Unrealized gains on interest rate swap agreements 201 Guarantees ....................................... 9,190
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: For cash, cash equivalents, and marketable securities, the carrying value of these amounts is a reasonable estimate of their fair value. The fair value of long-term unbilled receivables is estimated by using a discount rate that approximates the current rate for comparable notes. The fair value of noncurrent receivables is estimated by discounting the future cash flows using the current rates at which similar loans would be made to such borrowers based on the remaining maturities, consideration of credit risks, and other business issues pertaining to such receivables. The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee. Other assets, consisting primarily of insurance and escrow deposits and other miscellaneous financial instruments used in the ordinary course of business, are valued based on quoted market prices or other appropriate valuation techniques. Fair values for notes payable and debt were determined based on interest rates that are currently available to the Corporation for issuance of debt with similar terms and remaining maturities for debt issues that are not traded on quoted market prices. With respect to convertible subordinated debentures, fair values are based on quoted market prices. The fair value of project debt is estimated based on quoted market prices for the same or similar issues. Other liabilities are valued by discounting the future stream of payments using the incremental borrowing rate of the Corporation. The fair value of the Corporation's interest rate swap agreements is the estimated amount that the Corporation would receive or pay to terminate the swap agreements at the reporting date based on third-party quotations. Ogden financial guarantees provided on behalf of customers for which Ogden receives fees are valued by discounting the future stream of payments using the incremental borrowing rate of the Corporation. The fair-value estimates presented herein are based on pertinent information available to management as of December 31, 1998 and 1997. Although management is not aware of any factors that would significantly affect the estimated fair-value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since that date, and current estimates of fair value may differ significantly from the amounts presented herein. 45 INDEPENDENT AUDITORS' REPORT Deloitte & Touche LLP Two World Financial Center New York, NY 10281 The Board of Directors and Shareholders of Ogden Corporation: We have audited the accompanying consolidated balance sheets of Ogden Corporation and subsidiaries as of December 31, 1998 and 1997, and the related statements of shareholders' equity, consolidated income and comprehensive income, and cash flows for each of the three years in the period ended December 31, 1998. These financial statements are the responsibility of the Corporation's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the companies at December 31, 1998 and 1997, and the results of their operations and cash flows for each of the three years in the period ended December 31, 1998, in conformity with generally accepted accounting principles. /s/ Deloitte & Touche LLP February 9, 1999 46 Ogden Corporation and Subsidiaries REPORT OF MANAGEMENT Ogden's management is responsible for the information and representations contained in this annual report. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances to reflect in all material respects the substance of events and transactions that should be included and that the other information in the annual report is consistent with those statements. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions currently being accounted for. In meeting its responsibility for the reliability of the financial statements, management depends on the Corporation's internal control structure. This structure is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. In designing control procedures, management recognizes that errors or irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of such controls. Management believes that the Corporation's internal control structure provides reasonable assurance that errors or irregularities that could be material to the financial statements are prevented and would be detected within a timely period by employees in the normal course of performing their assigned functions. The Board of Directors pursues its oversight role for these financial statements through the Audit Committee, which is composed solely of nonaffiliated directors. The Audit Committee, in this oversight role, meets periodically with management to monitor their responsibilities. The Audit Committee also meets periodically with the independent auditors and the internal auditors, both of whom have free access to the Audit Committee without management present. The independent auditors elected by the shareholders express an opinion on our financial statements. Their opinion is based on procedures they consider to be sufficient to enable them to reach a conclusion as to the fairness of the presentation of the financial statements. /s/ R. Richard Ablon /s/ Raymond E. Dombrowski, Jr. R. Richard Ablon Raymond E. Dombrowski, Jr. Chairman of the Board, Senior Vice President and President, and Chief Financial Officer Chief Executive Officer 47 Ogden Corporation and Subsidiaries QUARTERLY RESULTS OF OPERATIONS
1998 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 - ------------------------------------------------------------------------------------------- (In thousands of dollars, except per-share amounts) Total revenues .................................... $384,875 $472,455 $441,113 $393,932 -------- -------- -------- -------- Gross profit ...................................... $ 77,411 $102,098 $ 98,378 $ 84,952 -------- -------- -------- -------- Net income ........................................ $ 11,700 $ 27,060 $ 28,155 $ 20,055 -------- -------- -------- -------- Basic earnings per common share ................... $ 0.23 $ 0.54 $ 0.57 $ 0.41 -------- -------- -------- -------- Diluted earnings per common share ................. $ 0.23 $ 0.52 $ 0.55 $ 0.40 -------- -------- -------- --------
1997 Quarter Ended March 31 June 30 Sept. 30 Dec. 31 - ------------------------------------------------------------------------------------------- (In thousands of dollars, except per-share amounts) Total revenues .................................... $427,054 $457,914 $462,577 $402,180 -------- -------- -------- -------- Gross profit ...................................... $ 78,400 $ 91,551 $ 95,156 $ 89,061 -------- -------- -------- -------- Net income ........................................ $ 10,777 $ 20,009 $ 24,605 $ 20,282 -------- -------- -------- -------- Basic earnings per common share ................... $ 0.22 $ 0.40 $ 0.49 $ 0.40 -------- -------- -------- -------- Diluted earnings per common share ................. $ 0.21 $ 0.39 $ 0.48 $ 0.39 -------- -------- -------- --------
Ogden Corporation and Subsidiaries PRICE RANGE OF STOCK AND DIVIDEND DATA
1998 1997 - ---------------------------------------------------------------- High Low High Low Common: First Quarter ........ 29 3/4 24 1/2 22 5/8 18 3/8 Second Quarter ....... 32 1/2 26 15/16 22 19 Third Quarter ........ 28 7/8 23 24 5/8 20 3/8 Fourth Quarter ....... 28 7/16 23 5/8 28 7/16 23 5/8 ---------------------------------------- Preferred: First Quarter ........ 170 170 118 118 Second Quarter ....... 180 177 114 1/2 114 1/2 Third Quarter ........ 158 150 121 121 Fourth Quarter ....... 165 145 153 153 ----------------------------------------
Quarterly common stock dividends of $.3125 per share were paid to shareholders of record for the four quarters of 1998 and 1997, the dividends for the last quarters of 1998 and 1997 being paid in January of the subsequent years. Quarterly dividends of $.8376 were paid for the four quarters of 1998 and 1997 on the $1.875 preferred stock. 48 EX-21 6 SUBSIDIARIES EXHIBIT 21 OGDEN CORPORATION - U.S. SUBSIDIARIES LIST (See Attachment A for foreign subsidiaries list)
Domestic Co. Code/ Company % Ownership State E.I.N. - ------- ----------- ----- ------ Ogden Corporation ...................................................................................DE............13-5549268 Ogden Energy Group, Inc. (f/k/a Ogden Projects, Inc.)................................100.........DE............13-3213657 (See Attachment B for Ogden Energy Group, Inc. - U.S. and foreign subsidiaries list) Ogden Financial Services, Inc........................................................100.........DE............13-3057250 B D C Liquidating Corp............................................................100.........DE............13-2757633 Bouldin Development Corp.......................................................100.........CA............94-1695641 Greenway Insurance Company of Vermont.............................................100.........VT............13-3167991 International Terminal Operating Co., Inc......................................... 50.........DE ...........13-5628741 OFS Equity of Delaware, Inc.......................................................100.........DE............13-3495890 OFS Equity of Alexandria/Arlington, Inc........................................100.........VA............13-3495889 OFS Equity of Indianapolis, Inc................................................100.........IN............13-3495887 OFS Equity of Stanislaus, Inc..................................................100.........CA............13-3495880 Ogden Allied Maintenance Securities, Inc.......................................100.........DE............004*/51-0102045 Denver Fuel Facilities Corporation........................................100.........CO............105*/13-2694896 Kansas City International Fueling Facilities Corporation..................100.........MO............080*/13-2604290 LaGuardia Fuel Facilities Corporation.....................................100.........NY............100*/13-2660143 Lambert Field Fueling Facilities Corporation..............................100.........DE............057*/13-6116279 Love Field Fueling Facilities Corporation.................................100.........TX............058*/13-6116341 Newark Automotive Fuel Facilities Corporation.............................100.........NJ............114*/13-2806865 Philadelphia Fuel Facilities Corporation..................................100.........PA............097*/13-2671427 Ogden Management Services, Inc.......................................................100.........DE............13-2918484 OFS Equity of Babylon, Inc........................................................100.........NY............13-3543094 OFS Equity of Huntington, Inc.....................................................100.........NY............13-3543092 Ogden Services Corporation...........................................................100.........DE............141*/13-3058273 Ogden Allied Abatement & Decontamination Service, Inc.............................100.........NY............144*/13-3429112 Ogden Allied Maintenance Corporation..............................................100.........NY............010*/13-65939 Datacom Custom Manufacturing, Inc..............................................100.........NY............086*/13-2629642 (f/k/a Atlantic Design Company, Inc.) Lenzar Electro-Optics, Inc.....................................................100.........DE............175/59-3063752 Ogden Allied Payroll Services, Inc.............................................100.........NY............063*/13-6160158 Ogden Aviation Services, Inc. .................................................100.........DE............015/13-3846270 Ogden Aviation Distributing Corp. ........................................100.........NY............046*/13-1835320 Ogden Aviation Fueling Company, Inc.......................................100.........DE............012*/13-5564521 Ogden Aviation Fueling Company of Atlanta, Inc............................100.........GA............129*/13-3054674 Ogden Aviation Fueling Company of Houston, Inc............................100.........TX............068*/13-2557861 Ogden Aviation Fueling Company of St. Louis, Inc..........................100.........DE............025*/13-5665586 Ogden Aviation Fueling Company of Texas, Inc..............................100.........TX............024*/13-5661328 Ogden Aviation Fueling Company of Virginia, Inc...........................100.........DE............038*/13-1954027 Ogden Aviation Security Services, Inc.....................................100.........DE............013/13-3876173 Ogden Aviation Service Company of Colorado, Inc...........................100.........CO............104*/13-2694899 Ogden Aviation Service Company of Hawaii, Inc.............................100.........HI............107*/13-2706452 Ogden Aviation Service Company of Kansas City, Inc........................100.........MO............118*/13-2942892 Ogden Aviation Service Company of New Jersey, Inc.........................100.........NJ............003*/13-5565924 Ogden Aviation Service Company of New York, Inc...........................100.........NY............007*/13-5565925 Ogden Ground Services, Inc.............................................100.........DE............146*/23-1707864 ARA Sunset Airport Systems, Inc.....................................100.........CA............152*/95-2959114 Ogden Aviation Service Company of Pennsylvania, Inc.......................100.........PA............018*/13-2749962 Ogden Aviation Service Company of Texas, Inc..............................100.........DE............019*/13-5649342 Ogden Aviation Service Company of Washington, Inc.........................100.........DE............011*/13-5581082 Ogden Aviation Service International Corporation..........................100.........NY............006*/13-5565926 Ogden Aviation, Inc....................................................100.........DE............177/13-3634105 Ogden Aviation Security Services of Indiana, Inc.......................100.........IN............163*/13-3606125 Ogden Aviation Terminal Services, Inc.....................................100.........MA............005*/13-5565923 Ogden New York Ground Services, Inc.......................................100.........DE............13-3889795
Domestic Co. Code/ Company % Ownership State E.I.N. - ------- ----------- ----- ------ Ogden Corporation (cont'd) Ogden Services Corporation (cont'd) Ogden Allied Maintenance Corporation (cont'd) Ogden Aviation Services, Inc. (cont'd) Ogden New York Services, Inc..............................................100.........NY............020/13-5623889 Ogden Pipeline Services Corporation.......................................100.........DE............125*/13-2949046 Ogden Cisco, Inc...............................................................100.........DE............157*/13-3670141 Ogden Communications, Inc......................................................100.........DE............130/13-3793364 Ogden Facility Holdings, Inc...................................................100.........DE............13-3852102 Ogden Facility Services, Inc..............................................100.........DE............13-3773192 Ogden Allied Building & Airport Services Inc...........................100.........DE............017*/13-5618372 Ogden Allied Building Service Corporation..............................100.........DE............121*/13-2928817 Ogden Allied Maintenance Company of Hawaii, Inc........................100.........HI............090*/99-0119711 Ogden Allied Maintenance Corporation of New England....................100.........MA............009/04-2453238 Ogden Allied Maintenance Corporation of Pennsylvania, Inc..............100.........DE............014*/13-5611594 Ogden Allied Maintenance Corporation of Texas..........................100.........TX............042*/13-1987767 Ogden Allied Service Agency Corporation................................100.........DE............016*/13-5616071 Ogden Allied Window Cleaning Company, Inc..............................100.........NY............008*/13-5565941 Ogden Hawaii Company, Inc..............................................100.........HI............062*/99-0086682 Ogden Industrial Services, Inc.........................................100.........DE............143*/13-3330336 Ogden Plant Maintenance Company, Inc...................................100.........NJ............088*/13-2640359 Ogden Plant Maintenance Company of Missouri............................100.........MO............069*/13-2556007 Ogden Plant Maintenance Company of North Carolina......................100.........NC............113*/13-2761092 Ogden Asia Pacific Services, Inc..................................................100.........DE............134/13-3793247 (See Attachment A for foreign subsidiaries) Ogden Central and South America, Inc..............................................100.........DE............135/13-3793248 (See Attachment A for foreign subsidiaries) OCSA Financing Services, Inc...................................................100.........DE............PENDING Ogden Entertainment, Inc..........................................................100.........DE............001/11-2145117 Doggie Diner, Inc..............................................................100.........DE............003/92-1228666 I & S Consultants, Inc.........................................................100.........IL............/36-3241812 Jazzland, Inc..................................................................100.........DE............52-2096960 The Metropolitan Entertainment Co., Inc........................................ 50.........NJ............22-1968974 Offshore Food Service, Inc.....................................................100.........LA............027/72-0535141 Gulf Coast Catering Company, Inc..........................................100.........LA............028/13-3537164 Ogden-MEI, L.L.C............................................................... 50.........DE............13-4022873 Ogden American Food Services, Inc..............................................100.........OH............008/34-4197320 Ogden Attractions, Inc.........................................................100.........DE............/13-3934857 Ogden-Burtco Services, Inc.....................................................100.........WA............042/92-0022939 Alpine Food Products, Inc.................................................100.........WA............041/91-0760148 Ogden Facility Management of Alaska, Inc..................................100.........AK............058/92-0097503 Ogden Entertainment of Florida, Inc............................................100.........DE............ /13-3877904 Ogden Event Security Services, Inc.............................................100.........NY............011/13-3428320 Ogden Facility Management Corporation..........................................100.........NY............098/13-3282969 Ogden Facility Management Corporation of Anaheim...............................100.........CA............060/13-3526194 Ogden Facility Management Corporation of Huntington............................100.........WV............13-3852104 Ogden Facility Management Corporation of Iowa..................................100.........IA............007/13-3444248 Ogden Facility Management Corporation of Pensacola.............................100.........FL............006/13-3245048 Ogden Facility Management Corporation of West Virginia.........................100.........WV............55-0459949 Ogden Film and Theatre, Inc....................................................100.........DE............/13-3934858 Arizona Big Frames Theatres, L.L.C........................................ 50.........AZ............TBA Ogden Food Service Corporation.................................................100.........DE............023/23-0404985 Ogden Confection Corporation..............................................100.........DE............039/36-2392940 Ogden Food Service Corporation of Indiana...................................... 40.........IN............048/13-2723781
Domestic Co. Code/ Company % Ownership State E.I.N. - ------- ----------- ----- ------ Ogden Corporation (cont'd) Ogden Services Corporation (cont'd) Ogden Entertainment, Inc. (cont'd) Ogden Food Service Corporation of Kansas.......................................100.........KS............0032/13-3703705 Ogden Food Service Corporation of Milwaukee....................................100.........WI............063/13-2783130 Ogden Food Service Corporation of Texas........................................100.........TX............092/74-1310443 Ogden Food Service Corporation of Wisconsin....................................100.........WI............056/39-0912345 Ogden Leisure, Inc.............................................................100.........DE............54-0848368 Ogden Fairmount, Inc......................................................100.........DE............021/37-0912053 Ogden Fairmount Racing, Inc............................................100.........DE............PENDING Shoreline Operating Company, Inc. 100.........CA............77-0484063 Ogden Firehole Entertainment Corp.................................................100.........DE............/13-3516164 Ogden International Europe Inc. ..................................................100.........DE............164/13-88536 (See Attachment A for foreign subsidiaries) Ogden Resource Recovery Support Services, Inc.....................................100.........DE............149*/13-3560729 Ogden Plant Services of New Jersey, Inc........................................100.........NJ............176/13-3597547 Ogden Technology Services Corporation.............................................100.........DE............13-3977971 Applied Data Technology, Inc...................................................100.........CA............33-0297326 ADT Global Services, Inc. (formerly Ogden Range Services, Inc.)................100.........DE............169/13-3712961 Logistics Operations, Inc.................................................100.........VA............164/13-3977972 Ogden Support Services, Inc....................................................100.........DE............165*/13-3688521 Ogden Water Treatment Support Services, Inc.......................................100.........DE............199*/13-3807441
* For payroll/personnel, add 200 to codes of Maintenance companies only. ATTACHMENT A OGDEN CORPORATION - FOREIGN SUBSIDIARIES LIST
Domestic Co. Code/ Company % Ownership State/Country E.I.N. - ------- ----------- ------------- ------ Ogden Corporation .......................................................................................DE/U.S.A. Aeropuertos Argentina 2000 S.A........................................................28.............Argentina Compania de Desarrollo Aeropuerto Eldorado, S.A. (CODAD, S.A.)........................19.............Columbia Ogden Services Corporation...........................................................100.............DE/U.S.A..........141 Ogden Allied Maintenance Corporation..............................................100.............NY/U.S.A. Allied Aviation Service Company of Newfoundland, Ltd...........................100.............Canada............022 Atlantic Design Company, Inc...................................................100.............NY/U.S.A. Datacom de Mexico, S.A. de C.V............................................100.............Mexico Ogden Aviation Services, Inc...................................................100.............DE/U.S.A. Ogden Aviation Service Company of New York, Inc...........................100.............NY/U.S.A..........007 Ogden Ground Services, Inc.............................................100.............DE/U.S.A..........146 Ogden/Air Aruba Ground Services N.V. ............................... 49.............Aruba Ogden Facility Holdings, Inc...................................................100.............DE/U.S.A. Ogden Facility Services, Inc..............................................100.............DE/U.S.A. Ogden Servicios de Seguridad, S.A......................................100.............Costa Rica Ogden Services of Canada Inc...................................................100.............Canada............054 Cafas Inc.................................................................100.............Canada............028 Airconsol Aviation Services Ltd.- Les Services D'Aviation Airconsol Limitee..............................100.............Canada............115 Ogden Ground Services (Canada) Ltd. ................................100.............Canada............ Aircraft Services Limited.......................................100.............Canada............189 Consolidated Aviation Fueling of Toronto Limited..........................100.............Ontario...........052 Consolidated Aviation Services of Alberta Limited.........................100.............Canada............119 Ogden Allied Security Services Inc.-Services de Securite Ogden Allied Inc.100.............Canada............190 Ogden Asia Pacific Services, Inc..................................................100.............DE/U.S.A. HO/Ogden Investimentos e Transportes, Limitada................................. 51.............Macau IEA of Japan Company Ltd....................................................... 50.............Japan MASC/Ogden Aviation Services (Macau) Limited................................... 29.............Macau Ogden Asia Pacific Holding Limited.............................................100.............British Virgin Islands. Ogden Aviation (Asia Pacific) Limited....................................90.1.............British Virgin Islands Ogden Aviation (Hong Kong) Limited.....................................100.............Hong Kong Ogden Aviation Services (NZ) Limited...........................................100.............New Zealand.......156 Ogden International Facilities Corporation (Asia Pacific) Pty Ltd..............100.............Australia.........172 Ogden International Facilities Corporation (Australia) Pty Ltd............ 50.............Australia International Facilities Corporation (Cairns) Pty Ltd.....................100.............Australia International Facilities Corporation (NZ) Pty Ltd.........................100.............New Zealand.......156 International Facility Corporation (Newcastle) Ltd........................100 International Facility Corporation (Hong Kong) Pty Ltd.................... .............Hong Kong Ogden Aviation Services Limited...................................................100.............U.K.186/2176414259610 Ogden Aviation Engineering Limited.............................................100.............U.K...............188 Ogden Cargo Limited............................................................100.............U.K. Air Cargo Enterprises Limited............................................. 50.............U.K. SkyCare Limited...........................................................100.............U.K. Ogden Entertainment Services (UK) Ltd..........................................100.............U.K...............015 Ogden Ice Hockey Limited..................................................100.............U.K. Ogden Central and South America, Inc..............................................100.............DE/U.S.A. Americana Entertainment N.V.................................................... 80.............Aruba Ogden Argentina, S.A...........................................................100.............Argentina Ogden Aviation Services (Chile) Ltda........................................... 99.............Chile.............158 (1% held by Ogden Asia Pacific Services Inc.) Aviation Services Leader S.A.............................................. 80.............Chile.............185 Ogden Aviation Services Dominicana, S.A........................................ 99.............Dominican Rep. Ogden Aviation Services (Panama) Corp.......................................... 85.............Panama............171
Domestic Co. Code/ Company % Ownership State/Country E.I.N. - ------- ----------- ------------- ------ Ogden Corporation (cont'd) Ogden Services Corporation (cont'd) Ogden Central and South America, Inc. (cont'd.) Ogden Aviation Services (Venezuela), S.A. .....................................100.............Venezuela.........168 Ogden Ground Services Caracas, C.A........................................100.............Venezuela.........182 Ogden do Brazil Participacoes S/C Ltda.........................................100 ............Brazil............174 Ogden - Servicos de Atendimento Aeroterrestre Ltda. ("SERVAIR")...........100.............Brazil Ogden Alimentos Comercio e Servicoes Ltda.................................100 ............Brazil Ogden Ground Services, Inc. (St. Thomas).......................................100.............Virgin Islands....155 Ogden Ground Services de Mexico, S.A. (formerly "SEITSA").....................94.9.............Mexico............150 Ogden Peru, S.R.L..............................................................100.............Peru Ogden & Talma Aviation Services of Peru, S.A. .............................50.............Peru Ogden Saint Maarten Ground Services N.V........................................100.............Netherlands Antilles Ogden SEITSA Leasing, S.A. de C.V.............................................94.9.............Mexico............183 Compania Legir S.A.............................................................100.............100...............Uruguay Irodel, S.A....................................................................100.............100...............Uruguay Menezul, S.A...................................................................100.............100...............Uruguay Ogden Entertainment, Inc..........................................................100.............DE/U.S.A. Ogden Entertainment of Cape Town (Proprietary) Limited......................... 78.............South Africa Ogden Entertainment Services (Canada) Inc. - Services de Divertissements Ogden (Canada) Inc.............................100.............Canada............012 Ogden Gaming of Ontario, Inc..............................................100.............Canada Ogden Palladium Services (Canada) Inc.....................................100.............Canada Ogden Entertainment Services de Mexico, S.A. de C.V............................100.............Mexico Servicios de Alimentos Bebidas Especializados, S.A. de CV......................100.............Mexico Ogden International Europe Inc....................................................100.............DE/U.S.A..........164 Ogden Atlantic Design (Europe) Limited........................................100.............Ireland Ogden Holdings B.V............................................................100.............Netherlands.......166 Compania General de Sondeos CGS, S.A......................................100.............Spain.............191 Czech-Ogden Airhandling s.r.o............................................. 50.............Czech. ...........162 Ogden Aviation (Schiphol) B.V.............................................100.............Netherlands.......161 Ogden Cargo B.V........................................................100.............Netherlands Ogden Spain S.A...........................................................100.............Spain159/A07568876 Ogden Entertainment Services Portugal, S.A................................100.............Portugal..........160 Ogden Entertainment Services Spain, SA....................................100.............Spain Estadio Olimpico de Sevilla, S.A......................................15.9.............Spain Ogden Holdings (Deutschland) GmbH.........................................100.............Germany...........192 Ogden Rhino Management Company Limited....................................100.............U.K............... Graecor Beteiligungsverwaltungs GmbH......................................100.............Austria Ogden Allied Services GmbH.............................................100.............Germany...........138 Ogden Aviation Services GmbH & Co. KG..................................100.............Germany...........193 Ogden Entertainment (Oberhausen) GmbH..................................100.............Germany...........194 Ogden Tegel Verwaltungs GmbH (formerly DAN AIR Services GmbH)..........100.............Germany...........195 Tegel Aircraft Handling GmbH........................................100.............Germany...........196 Verwaltung Ogden Aviation Services GmbH ..............................100.............Germany 197 Ogden Power Agua y Energia Torre Pacheco, S.A............................83.3.............Spain Ogden Romanian Aviation Services, S.A..................................... 50.............Romania Parque Isla Magica, S.A.................................................26.12.............Spain Sezai Turkes Feyzi Akkaya Ogden Hizmet Ve Isletmecilik A.S. ("STFA Ogden Maintenance and Service Co.")............................. 50.............Turkey
ATTACHMENT B OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST
PERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc........................................................100...................Delaware..... 13-3939460 Ogden Energy Group do Brasil Ltda...........................................100(f)................Brazil.......02.310.557/0001-54 Ogden Projects, Inc.........................................................100...................Delaware.......13-3213657 Ogden Energy, Inc...........................................................100...................Delaware.......22-3405522 Ogden Madhya Pradesh Operating Private Limited...........................100...................India.......... NA Ogden Philippines Operating, Inc.........................................100...................Cayman Islands. NA . . . . . . .Ogden Energy West, Inc............................................100...................Delaware....... NA . . . . . . . . . Ogden Energy Sao Jeronimo, Inc...............................100...................Delaware....... NA . . . . . . . . . . . . .Mecaril S.A...........................................100...................Uruguay........ NA . . . . . . . . . . . . Cladox International S.A...............................100...................Uruguay........ NA . . . ............Ogden Power Corporation......................................100...................Delaware.......54-1732981 . . ......Geothermal, Inc...................................................100...................Virginia.......54-1504703 Imperial Power Services, Inc......................................100...................California.....95-3677245 New Martinsville Hydro-Operations Corporation.....................100...................West Virginia..31-1275468 Ogden Brandywine Operations, Inc..................................100...................Delaware.......54-1740297 Ogden Geothermal Operations, Inc..................................100...................Delaware.......54-1607228 Ogden Hydro Operations, Inc.......................................100...................Tennessee......52-1661862 Ogden Oil & Gas, Inc..............................................100...................Delaware.......54-1734589 Ogden Power Equity Corporation....................................100...................Delaware.......54-1504746 Catalyst New Martinsville Hydroelectric Corporation...........100...................Delaware.......13-3372123 ERC Energy, Inc...............................................100...................Delaware.......54-1523295 Ogden Heber Field Energy, Inc.................................100...................Delaware.......54-1611569 Ogden Hydro Energy, Inc.......................................100...................Delaware.......54-1606911 Ogden Power International Holdings, Inc..........................100...................Delaware.......54-1742808 Edison Bataan Cogeneration Corporation........................100...................Philippine..... NA Hidro Operaciones Don Pedro S.A...............................100...................Costa Rica..... NA Island Power Corporation...................................... 40(d)................Philippine..... NA Hungarian-American Geothermal Limited Liability Company.......37.5(g)...............Hungary........ NA LINASA Cogeneracion y Asociados, S.L.......................... 50(e) .............Spain..........B30556484 Ogden Energy India Investments Ltd............................100...................Mauritius...... NA . . . . . .Ogden Chinese Investments Ltd........................100...................Mauritius......98-0183946 . . . . . . . . Ogden Energy China (Alpha) Ltd..................100...................Mauritius......98-0183947 . . . . . . . . Ogden Energy China (Beta) Ltd...................100...................Mauritius......98-0183949 . . . . . . . . Ogden Energy China (Delta) Ltd..................100...................Mauritius......98-0183951 . . . . . . . . Ogden Energy China (Gamma) Ltd..................100...................Mauritius......98-0183952 . . .Ogden Energy of Bongaigaon Private Limited..............100...................India.......... N/A . . ........Ogden Energy India (CBM) Limited........................100...................Mauritius...... NA . . . . . .Ogden Taiwan Investments Limited.....................100...................Mauritius...... NA Ogden Energy Philippine Holdings, Inc.........................100...................Philippines.... NA OPI Quezon, Inc...............................................100...................Delaware.......13-3670144 . .Ogden Power Development - Cayman, Inc...................100...................Cayman Islands. NA Quezon Power, Inc. (new dvlpmnt co.).................... 27.5(b)..............Cayman Islands. NA (f/k/a Ogden Quezon Power, Inc.- old dvlpmnt. co.) . . . Ogden Power Development, Inc...............................100...................Delaware.......13-3662254 . .Ogden Power Development of Bolivia, Inc.................100...................Delaware.......13-3852464 OPDB, Ltd..............................................100...................Cayman Islands. NA . . . Ogden Energy Asia Pacific Limited..........................100(a)................Hong Kong...... NA (f/k/a Ogden Projects Asia Pacific Limited) Ogden Power Pacific, Inc. (f/k/a Pacific Energy).................100...................California.....95-3845189 Burney Mountain Power.......................................100...................California.....94-3149256 Mammoth Geothermal Company..................................100...................California.....95-4311279 Mammoth Power Company.......................................100...................California.....95-4484066 Mt. Lassen Power............................................100...................California.....94-3149255 Ogden Power Plant Operations................................100...................California.....95-4497795 (f/k/a Pacific Power Plant Operations) Pacific Energy Resources Incorporated.......................100...................California.....95-3499702 Pacific Geothermal Company..................................100...................California.....95-3950189 Pacific Hydropower Company..................................100...................California.....95-3734859 Pacific Oroville Power, Inc.................................100...................California.....95-3987027
Page 1 OEG Foreign subsidiaries are highlighted in bold.
PERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) Pacific Penobscot Power Company.............................100...................Maine..........85-4055394 Pacific Recovery Corporation................................100...................California.....95-4080088 Pacific Wood Fuels Company..................................100...................California.....95-4046356 Pacific Wood Services Company...............................100...................California.....95-4497794 Penstock Power Company......................................100...................California.....95-4250440 8309 Tujunga Avenue Corp....................................100...................California.....95-4130759 Ogden Rosemary Operations, Inc...................................100...................Delaware.......22-3433655 Ogden SIGC Energy, Inc...........................................100...................Delaware.......54-1742810 AMOR 14 Corporation.........................................100...................Delaware.......88-0243401 Ogden SIGC Energy II, Inc........................................100...................California.....54-1742553 Ogden SIGC Geothermal Operations, Inc............................100...................California.....54-1645557 Three Mountain Power, LLC........................................100...................Delawaare......22-3604711 Ogden Environmental and Energy Services Co., Inc............................100...................Delaware.......52-1594168 Analytical Technologies, Inc.............................................100...................Delaware.......95-3705905 G A Technical Services, Inc..........................................100...................Tennessee......62-1238177 Multiple Dynamics Corporation............................................100...................Michigan.......38-2278155 Ogden Environmental and Energy Services Co., Inc. of Ohio................100...................Ohio...........31-1357919 Ogden Environmental and Engineering Services Co., Inc....................100...................North Carolina.56-0840101 Ogden Environmental Federal Services Co., Inc............................100...................Delaware.......54-1694984 (f/k/a Ogden Environmental Services Alaska Co., Inc.) Ogden Engineering and Construction, Inc..................................100...................Florida........59-2661991 (f/k/a Ogden Remediation Services Co., Inc.) Ogden umwelt und energie systeme GmbH....................................100...................Germany........ NA IEAL energie & umwelt consult, GmbH..................................100...................Germany........ NA Olmec Insurance, Ltd.....................................................100...................Bermuda ....... NA Ogden Martin Operations of Union, LLC.......................................100(i)................New Jersey.....22-3596572 Ogden Waste to Energy, Inc..................................................100...................Delaware ......13-3871973 Ogden Energy Resource Corp...............................................100...................Delaware.......63-0837475 Ogden Martin Systems, Inc................................................100...................Delaware.......13-3162629 Ogden Engineering Services, Inc......................................100...................New Jersey.....13-3284896 Ogden Marion Land Corp...............................................100...................Oregon.........13-3369730 Ogden Martin Systems of Alexandria/Arlington, Inc....................100...................Virginia.......58-1594213 OMS Equity of Alexandria/Arlington, Inc..............................100...................Virginia.......13-3389573 Ogden Martin Systems of Babylon, Inc.................................100...................New York.......13-3246689 Ogden Martin Systems of Bristol, Inc.................................100...................Connecticut....13-3246723 Ogden Martin Systems of Clark, Inc...................................100...................Ohio...........11-3140377 OMSC One, Inc........................................................100...................Delaware.......13-3690804 OMSC Two, Inc........................................................100...................Delaware.......13-3690801 OMSC Three, Inc......................................................100...................Delaware.......13-3690806 OMSC Four, Inc.......................................................100...................Delaware.......13-3690807 Ogden Martin Systems of Fairfax, Inc.................................100...................Virginia.......13-3410434 Ogden Martin Systems of Haverhill, Inc...............................100...................Massachusetts..13-3375647 Haverhill Power, Inc.............................................100...................Massachusetts..04-2908628 LMI, Inc.........................................................100...................Massachusetts..04-2943947 Ogden Omega Lease, Inc...........................................100...................Delaware.......13-3028120 Ogden Haverhill Properties, Inc......................................100...................Massachusetts..13-3382130 Ogden Martin Systems of Hillsborough, Inc............................100...................Florida........13-3228206 Ogden Martin Systems of Huntington, Inc..............................100...................New York.......13-3394817 Ogden Martin Systems of Huntington Resource Recovery One Corp........100...................Delaware.......06-1260495 Ogden Martin Systems of Huntington Resource Recovery Two Corp........100...................Delaware.......06-1260497 Ogden Martin Systems of Huntington Resource Recovery Three Corp......100...................Delaware.......06-1260498 Ogden Martin Systems of Huntington Resource Recovery Four Corp.......100...................Delaware.......06-1260489 Ogden Martin Systems of Huntington Resource Recovery Five Corp.......100...................Delaware.......06-1260492 Ogden Martin Systems of Huntington Resource Recovery Six Corp........100...................Delaware.......13-3629151 Ogden Martin Systems of Huntington Resource Recovery Seven Corp......100...................Delaware.......13-3631168 Ogden Martin Systems of Huntsville, Inc..............................100...................Alabama........13-3456026 Ogden Martin Systems of Indianapolis, Inc............................100...................Indiana........13-3977970
Page 2 OEG Foreign subsidiaries are highlighted in bold.
PERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) Ogden Martin Systems of Kent, Inc.....................................100..................Michigan........13-3369158 NRG/Recovery Group, Inc. (f/k/a Ogden Martin Systems of Lake, Inc.)...100..................Florida.........13-3482491 Ogden Martin Systems of Lancaster, Inc................................100..................Pennsylvania....13-3408215 Ogden Martin Systems of Lawrence, Inc.................................100..................Massachusetts...13-3714674 Ogden Martin Systems of Lee, Inc......................................100..................Florida.........13-3557826 Ogden Martin Systems of Long Island, Inc..............................100..................Delaware........11-3081090 Ogden Martin Systems of Marion, Inc...................................100..................Oregon..........91-1246805 Ogden Martin Systems of Mercer, Inc...................................100..................New Jersey......13-3431734 Ogden Martin Systems of Montgomery, Inc...............................100..................Maryland........13-3547268 Ogden Martin Systems of Onondaga, Inc.................................100..................New York........13-3528458 Ogden Martin Systems of Onondaga Two Corp.............................100..................Delaware........13-3690841 Ogden Martin Systems of Onondaga Three Corp...........................100..................Delaware........13-3690843 Ogden Martin Systems of Onondaga Four Corp............................100..................Delaware........13-3690838 Ogden Martin Systems of Onondaga Five Corp............................100..................Delaware........13-3684127 OMS Onondaga Operations, Inc..........................................100..................Delaware........13-3714674 Ogden Martin Systems of Pasco, Inc....................................100..................Florida.........13-3447536 Ogden Martin Systems of San Bernardino, Inc...........................100..................California......13-3397879 Ogden Martin Systems of Stanislaus, Inc...............................100..................California......13-3315310 OMS Equity of Stanislaus, Inc.........................................100..................California......13-3436232 Ogden Martin Systems of Tampa, Inc....................................100..................Florida.........22-3603324 Ogden Martin Systems of Tulsa, Inc....................................100..................Oklahoma........13-3203172 Ogden Martin Systems of Union, Inc....................................100..................New Jersey......13-3323867 Ogden Waste to Energy, Ltd. (formerly Ogden Martin Systems, Ltd)......100..................Ontario......... NA Ogden Martin Systems of Nova Scotia, Ltd.........................100..................Nova Scotia..... NA Ogden Projects of Haverhill, Inc.........................................100..................Massachusetts...13-3522006 Ogden Wallingford Associates, Inc........................................100..................Connecticut.....13-3494166 Ogden Waste to Energy Asia Investments...................................100..................Mauritius....... NA Ogden Waste to Energy of Italy, Inc......................................100..................Delaware........22-3564096 Ambiente 2000 S.r.l...................................................40(h)................Italy........... NA Ogden Waste Treatment Services, Inc......................................100..................Delaware........13-3362679 Ogden Waste Solutions, Inc............................................100..................Delaware........22-3557169 Ogden Waste Treatment Services USA, Inc..................................100..................Delaware........13-3940678 OPW Associates, Inc......................................................100..................Connecticut.....13-3487064 OPWH, Inc................................................................100..................Delaware........13-3592054 RRS Holdings Inc.........................................................100..................Delaware........13-3697005 Michigan Waste Energy, Inc............................................100..................Delaware........06-1331600 Oahu Waste Energy Recovery, Inc.......................................100..................California......95-2638052 Ogden Projects of Hawaii, Inc.........................................100..................Hawaii..........99-0230284 Resource Recovery Systems of Connecticut, Inc.........................100..................Connecticut.....13-3696927 OPI Carmona Limited......................................................100..................Cayman Islands.. NA OPI Carmona One Limited..................................................100..................Cayman Islands.. NA Ogden Energy Engineering, Inc. (f/k/a Ogden Projects Americas, Inc.)........100..................Delaware........13-3795624 Ogden Projects Holdings, Inc................................................100..................Delaware........13-3640508 Ogden Water Holdings, Inc...................................................100..................Delaware........13-3779130 Ogden Water Systems, Inc.................................................100..................Delaware........13-3756577 Ogden Yorkshire Acquisition, Inc......................................100..................Delaware........13-3806665 Cunningham Environmental Support, Inc............................100..................New York........16-1386872 Ogden Yorkshire Water of Bessemer, Inc................................100..................Delaware........22-3405521 Ogden Yorkshire Water of Canada, Ltd..................................100..................Ontario......... NA Ogden Yorkshire Water of Taunton, Inc.................................100..................Massachusetts...22-3481731 Ogden Water Systems of Canada, Ltd. (f/k/a Ogden Projects of Hamilton, Ltd.)100..................Ontario......... NA Yorkshire USA, Inc..........................................................100(c) .............Delaware........51-0354748
Page 3 OEG Foreign subsidiaries are highlighted in bold. (a) Ogden Energy Asia Pacific Limited's stock is owned 50% by Ogden Projects, Inc. and 50% by Ogden Power Development, Inc. (b) Quezon Power, Inc (new development company) is owned 27.5% by Ogden Power Development - Cayman, Inc., and 72.5% by Quezon Generating Company, Ltd. (c) Yorkshire USA, Inc. was acquired by Ogden Projects, Inc. when Yorkshire Water terminated its involvement as a direct participant in the Venture. (d) 40% of the stock of Island Power Corporation is owned by Ogden Power International Holdings, Inc. and 60% is owned by various stockholders. (e) 50% of the stock of LINASA Cogeneracion y Asociados, S.L. is owned by Ogden Power International Holdings, Inc, and 50% is owned by Industria Jabonera Lina, S.A. (f) 50% of the stock of Ogden Energy Group do Brasil Ltda is owned by Ogden Energy Group, Inc. and 50% by Ogden Projects, Inc. Ogden Energy Group, Inc. is the Management Company. (g) 37.5% of the stock of Hungarian-American Geothermal Limited Liability Company is owned by Ogden Power International Holdings, Inc., 37.5 % is owned by Davenport Power, L.L.C. and 25% is owned by MOL Magyar Olau-es G_zipari Rt. (h) 40% of the stock of Ambiente 2000 S.r.l. is owned by Ogden Waste to Energy of Italy, Inc. and 60% is owned by Ecosesto S.p.A. (i) 99% of the stock of Ogden Martin Operations of Union LLC is owned by Ogden Projects, Inc. and 1% is owned by Ogden Waste to Energy, Inc. ATTACHMENT B OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST
COMPANY - ------- Ogden Energy Group, Inc. Ogden Energy Group do Brasil Ltda. Ogden Projects, Inc. Ogden Energy, Inc. Ogden Madhya Pradesh Operating Private Limited Ogden Philippines Operating, Inc. Ogden Energy West, Inc. .. . . . . .Ogden Energy Sao Jeronimo, Inc. .. . . . . . . . . . . . . Mecaril S.A. .. . . . . .Ogden Power Corporation Geothermal, Inc. Imperial Power Services, Inc. New Martinsville Hydro-Operations Corporation Ogden Brandywine Operations, Inc. Ogden Geothermal Operations, Inc. Ogden Hydro Operations, Inc. Ogden Oil & Gas, Inc. Ogden Power Equity Corporation Catalyst New Martinsville Hydroelectric Corporation ERC Energy, Inc. Ogden Heber Field Energy, Inc. Ogden Hydro Energy, Inc. Ogden Power International Holdings, Inc. Edison Bataan Cogeneration Corporation Hidro Operaciones Don Pedro S.A. Island Power Corporation Hungarian-American Geothermal Limited Liability Company LINASA Cogeneracion y Asociados, S.L. Ogden Energy India Investments Ltd. . . . .Ogden Chinese Investments Ltd. . . . . . . . . Ogden Energy China (Alpha) Ltd. . . . . . . . . Ogden Energy China (Beta) Ltd. . . . . . . . . Ogden Energy China (Delta) Ltd . . . . . . . . Ogden Energy China (Gamma) Ltd Ogden Energy of Bongaigaon Private Limited Ogden Energy India (CBM) Limited Ogden Taiwan Investments Limited Ogden Energy Philippine Holdings, Inc. OPI Quezon, Inc. Ogden Power Development - Cayman, Inc. Quezon Power, Inc. (new dvlpmnt co.) Ogden Power Development, Inc. Ogden Power Development of Bolivia, Inc.
Page 1 OEG Foreign subsidiaries are highlighted in bold.
PERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) . . . OPDB, Ltd. Ogden Energy Asia Pacific Limited Ogden Power Pacific, Inc. (f/k/a Pacific Energy) Burney Mountain Power Mammoth Geothermal Company Mammoth Power Company Mt. Lassen Power Ogden Power Plant Operations Pacific Energy Resources Incorporated Pacific Geothermal Company Pacific Hydropower Company Pacific Oroville Power, Inc. Pacific Penobscot Power Company Pacific Recovery Corporation Pacific Wood Fuels Company Pacific Wood Services Company Penstock Power Company 8309 Tujunga Avenue Corp. Ogden Rosemary Operations, Inc. Ogden SIGC Energy, Inc. AMOR 14 Corporation Ogden SIGC Energy II, Inc. Ogden SIGC Geothermal Operations, Inc. Three Mountain Power, LLC Ogden Environmental and Energy Services Co., Inc. Analytical Technologies, Inc. G A Technical Services, Inc. Multiple Dynamics Corporation Ogden Environmental and Energy Services Co., Inc. of Ohio Ogden Environmental and Engineering Services Co., Inc. Ogden Environmental Federal Services Co., Inc. Ogden Engineering and Construction, Inc. Ogden umwelt und energie systeme GmbH IEAL energie & umwelt consult, GmbH Olmec Insurance, Ltd. Ogden Martin Operations of Union, LLC Ogden Waste to Energy, Inc. Ogden Energy Resource Corp. Ogden Martin Systems, Inc. Ogden Engineering Services, Inc. Ogden Marion Land Corp. Ogden Martin Systems of Alexandria/Arlington, Inc.
Page 2 OEG Foreign subsidiaries are highlighted in bold.
PERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) OMS Equity of Alexandria/Arlington, Inc. Ogden Martin Systems of Babylon, Inc. Ogden Martin Systems of Bristol, Inc. Ogden Martin Systems of Clark, Inc. OMSC One, Inc. OMSC Two, Inc. OMSC Three, Inc. OMSC Four, Inc. Ogden Martin Systems of Fairfax, Inc. Ogden Martin Systems of Haverhill, Inc. Haverhill Power, Inc. LMI, Inc. Ogden Omega Lease, Inc. Ogden Haverhill Properties, Inc. Ogden Martin Systems of Hillsborough, Inc. Ogden Martin Systems of Huntington, Inc. Ogden Martin Systems of Huntington Resource Recovery One Corp. Ogden Martin Systems of Huntington Resource Recovery Two Corp. Ogden Martin Systems of Huntington Resource Recovery Three Corp. Ogden Martin Systems of Huntington Resource Recovery Four Corp. Ogden Martin Systems of Huntington Resource Recovery Five Corp. Ogden Martin Systems of Huntington Resource Recovery Six Corp. Ogden Martin Systems of Huntington Resource Recovery Seven Corp. Ogden Martin Systems of Huntsville, Inc. Ogden Martin Systems of Indianapolis, Inc. Ogden Martin Systems of Kent, Inc. NRG/Recovery Group, Inc. (f/k/a Ogden Martin Systems of Lake, Inc.) Ogden Martin Systems of Lancaster, Inc. Ogden Martin Systems of Lawrence, Inc. Ogden Martin Systems of Lee, Inc. Ogden Martin Systems of Long Island, Inc. Ogden Martin Systems of Marion, Inc. Ogden Martin Systems of Mercer, Inc. Ogden Martin Systems of Montgomery, Inc. Ogden Martin Systems of Onondaga, Inc. Ogden Martin Systems of Onondaga Two Corp. Ogden Martin Systems of Onondaga Three Corp. Ogden Martin Systems of Onondaga Four Corp. Ogden Martin Systems of Onondaga Five Corp. OMS Onondaga Operations, Inc. Ogden Martin Systems of Pasco, Inc. Ogden Martin Systems of San Bernardino, Inc.
Page 3 OEG Foreign subsidiaries are highlighted in bold.
PERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) Ogden Martin Systems of Stanislaus, Inc. OMS Equity of Stanislaus, Inc. Ogden Martin Systems of Tampa, Inc. Ogden Martin Systems of Tulsa, Inc. Ogden Martin Systems of Union, Inc. Ogden Waste to Energy, Ltd. (formerly Ogden Martin Systems, Ltd) Ogden Martin Systems of Nova Scotia, Ltd. Ogden Projects of Haverhill, Inc. Ogden Wallingford Associates, Inc. Ogden Waste to Energy Asia Investments Ogden Waste to Energy of Italy, Inc. Ambiente 2000 S.r.l. Ogden Waste Treatment Services, Inc. Ogden Waste Solutions, Inc. Ogden Waste Treatment Services USA, Inc. OPW Associates, Inc OPWH, Inc. ................. RRS Holdings Inc. Michigan Waste Energy, Inc. Oahu Waste Energy Recovery, Inc. Ogden Projects of Hawaii, Inc. Resource Recovery Systems of Connecticut, Inc. OPI Carmona Limited OPI Carmona One Limited Ogden Energy Engineering, Inc. Ogden Projects Holdings, Inc. Ogden Water Holdings, Inc. Ogden Water Systems, Inc. Ogden Yorkshire Acquisition, Inc. Cunningham Environmental Support, Inc. Ogden Yorkshire Water of Bessemer, Inc. Ogden Yorkshire Water of Canada, Ltd. Ogden Yorkshire Water of Taunton, Inc. Ogden Water Systems of Canada, Ltd. Yorkshire USA, Inc.
EX-23 7 CONSENT OF AUDITORS EXHIBIT 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statement Nos. 33-36658, 33-38489, 33-36657, 33-17558, 33-54143 and 333-19641 of Ogden Corporation on Forms S-8 of our report dated February 9, 1999, appearing or incorporated by reference in the Annual Report on Form 10-K of Ogden Corporation for the year ended December 31, 1998. /s/ Deloitte & Touche LLP New York, New York March 29, 1999 EX-27 8 FDS
5 (Replace this text with the legend) 1,000 12-MOS DEC-31-1998 JAN-01-1998 DEC-31-1998 261,119 44,685 425,518 30,595 31,100 954,449 2,633,022 645,379 3,922,843 624,774 1,907,465 0 43 24,473 524,584 3,922,843 512,958 1,692,175 432,438 987,971 0 9,490 33,900 150,030 61,797 86,970 0 0 0 86,970 1.74 1.70
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