-----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, WHPXKDKanTKzgbR4azuhUM4Zse3rCBecvS+U94D928uBbm52jfHrk98jf18SHZ6V pJBhFoje90Irv1Su0Bcf8Q== 0001047469-98-011647.txt : 19980327 0001047469-98-011647.hdr.sgml : 19980327 ACCESSION NUMBER: 0001047469-98-011647 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980326 SROS: NONE 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: 98574132 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, 1997 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 Incorporation or Organization) Identification No.) Two Pennsylvania Plaza, New York, N.Y. 10121 - ---------------------------------------- ------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number including area code - (212) 868-6100 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of each class Which Registered - ------------------- ----------------------------------- Common Stock, par value New York Stock Exchange $.50 per share $1.875 Cumulative Convertible Preferred Stock (Series A) New York Stock Exchange 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 February 27, 1998 was as follows: Common Stock, par value $.50 per share $1,350,616,712 $1.875 Cumulative Convertible Preferred Stock (Series A) $ 6,713,487 The number of shares of the registrant's Common Stock outstanding as of February 28, 1998 was 50,453,559 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, 1997 (Parts II and IV). (2) Portions of the Registrant's 1998 Proxy Statement to be filed with the Securities and Exchange Commission (Part III). INDEX PART I PAGE - ------ ---- ITEM 1. BUSINESS 1-27 Entertainment 1-7 Aviation 7-10 Energy 11-27 Other 27-28 Other Information 28-36 Markets, Competition and General Business Conditions 28-29 Equal Employment Opportunity 29-30 Employee and Labor Relations 30 Environmental Regulatory Laws 31-33 Energy and Water Regulation 33-35 Flow Control 35-36 Ash Residue 36 ITEM 2. PROPERTIES 37-40 ITEM 3. LEGAL PROCEEDING 41-42 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 42-46 Executive Officers of Ogden PART II ITEM 5. MARKET FOR OGDEN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 46 ITEM 6. SELECTED FINANCIAL DATA 46 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 46 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 46 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 47 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF OGDEN 47 ITEM 11. EXECUTIVE COMPENSATION 47 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 47 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 47 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K 47-53 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 26. Information Concerning Business Segments of Ogden's 1997 Annual Report to Shareholders, certain specified portions of which are incorporated herein by reference. The operations and services provided by the Entertainment, Aviation and Energy segments are performed through joint ventures, consortiums, partnerships and wholly-owned subsidiaries within each of the segments. Each segment provides a wide range of services to private and public facilities throughout the United States and many foreign countries. In foreign countries the development, construction, ownership and the providing of services may expose Ogden to potential risks that typically are not involved in such activities in the United States. Each group seeks to manage and mitigate these risks through political and financial analysis of the foreign country; the analysis of key participants in each operation; insurance; participation by international finance institutions; and joint ventures or consortiums with other companies. Payment for services is often made in whole or in part in the domestic currencies of the foreign country and the conversion of such currencies into U.S. dollars may not be assured by a governmental or other creditworthy foreign country agency. In addition, fluctuations in value of such currencies against the U.S. dollar may cause the operation to yield less return than expected. Also, the transfer of earnings and profits in any form beyond the borders of the foreign country may be subject to special taxes or limitations imposed by the laws of the foreign country. Some customers of the Entertainment and Aviation segments are billed on a cost-plus or fixed-price basis. Where services are performed on a cost-plus basis, the customer reimburses the appropriate segment 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. Many contracts in the Aviation group segment be written on a month-to-month basis or provide for a longer or indefinite term but are terminable by either party on notice varying from 30 to 180 days. ENTERTAINMENT Entertainment consists of owned and operated themed attractions as well as providing services to a wide variety of public and private facilities including stadiums, convention and exposition centers, arenas, parks, amphitheaters, and fairgrounds located in the United States, Canada, Germany, Australia, and the United Kingdom. The themed attraction business includes food service and merchandising. In addition, the Entertainment group operates a race track and four off-track betting parlors in Illinois. Also the Entertainment 2 group through its 50% interest in Metropolitan Entertainment Company, Inc., is involved in live theater, concerts, recorded music and video development. Entertainment offers its customers a wide range of project-development options, including an operational design review, consultation during construction, assistance with financing arrangements, as well as operations of facilities, usually in return for long-term services and concession contracts. In some cases Ogden guarantees Entertainment's performance of these contracts as well as the financing arrangements. Entertainment's American Wilderness, Zoo and Aquarium-TM- ("American Wilderness") is a nature-themed attraction concept which has targeted three sites for development, all at megamalls developed by The Mills Corporation in the United States. These nature-themed attractions are developed and operated by Entertainment and feature live animals, foliage, scents and climates, motion-simulation rides, themed retailing and restaurants. The first American Wilderness location-based entertainment concept was opened at the Ontario Mills mall in California during late October 1997. The other sites slated for development during 1998 with The Mills Corporation include Arizona Mills (Tempe, Arizona) and Grapevine Mills (Dallas, Texas). Through a long-term leasehold interest, Entertainment operates Silver Springs, a nature-based attraction, and Wild Waters, an adjacent water park, located near Ocala, Florida. Silver Springs, located on a 250-acre park, is open 365 days a year and features attractions consisting of jungle cruise boat rides, jeep safari rides, animal shows, gift shops and eateries. Wild Waters, located on a six acre park, features a variety of slides, a wave pool, miniature golf, food services and other attractions and is open March through Labor Day. During 1997 an approximate $5.0 million expansion, consisting of new attractions, exhibits, shops, restaurants and concessions, was completed at these two facilities. Grizzly Park, a nature-based entertainment center located at the entrance to Yellowstone National Park, is owned and operated by Entertainment. Within Grizzly Park are, among other attractions, the Grizzly Discovery Center, a natural habitat with grizzly bears and gray wolves, and a variety of stores and restaurants. In 1995 the Port Authority of New York and New Jersey awarded Entertainment an eleven and one-half year lease to renovate and operate the 107th Floor Observation Deck at the World Trade Center in New York City. The Observation Deck was re-opened to the public in April 1997 after being substantially renovated. The lease agreement provides that Entertainment will pay the Port Authority an annual fee plus a percentage of gross revenues above a certain level. Entertainment, through a joint venture, operates La Rural de Palermo, a 28-acre fair and exhibition center located in Buenos Aires, Argentina. The joint venture will continue the existing fair and exhibition business on the property while developing a master plan for the development of the property to include a retail, multi-screen theater and other entertainment components. Entertainment owns a 50% interest in the joint venture and serves as the 3 managing partner. As such, Entertainment directs day-to-day operations and is responsible for creating and implementing the development plan for this property. Entertainment also owns a 28% equity interest in Parques Tecnocultiroles, S.A. ("Partecsa"), a Spanish corporation based in Seville, Spain. Partecsa was awarded a 30-year contract to convert, remodel, manage and operate Isla Magica, a 200-acre theme park located in Seville, Spain, where the 1992 Exposition Fair was held. The park opened and commenced operations in June 1997. During late 1997 Entertainment commenced construction of $15 million, 40,000 square foot seat facility, to be called Tinseltown Studios-Trademark-, on a 1.25 acre parcel of land purchased from the City of Anaheim and located on the Northwest quadrant of the Anaheim Stadium parking lot. Entertainment also leased from the City property to accommodate 550 parking spaces. Tinseltown Studios-Trademark- is a newly developed audience-participation experience which will feature live entertainment and full dinner service, culminating in the Tinseltown awards ceremony, where selected members of the audience will be featured on a big screen acting opposite their favorite actors in film clips from well-known motion pictures. The site is expected to open in late 1998. During 1998 Entertainment intends to develop "Jazzland", a theme park to be located on a 100-plus acre site in New Orleans, Louisiana. The park is expected to open in 2000. "Jazzland" will be owned and operated by Entertainment and will consist of a theme park including food, beverage and merchandising operations. During late 1997 Entertainment completed the acquisition of the Enchanted Castle Family Entertainment Center - a large themed restaurant and indoor family entertainment complex located in the Chicago, Illinois area. Entertainment is also engaged in the large-format film and theater business. These large-format films are usually shown on screens six stories high in specially designed theaters. Entertainment and Toronto-based Imax Corporation have agreed to co-develop, build and operate fifteen (15) large-format IMAX-Registered Trademark- theaters domestically and internationally over the next five years. Entertainment has also formed a three-year co-production agreement with two-subsidiaries of Sony Corporation of America for several large-format films. In May 1997 Entertainment's first large-format IMAX-Registered Trademark- feature movie, AMAZON, premiered at the Ultra Screen-TM- theater adjacent to its American Wilderness attraction at Ontario, California. AMAZON has been booked into over 25 large-format theaters. In February 1998, AMAZON was nominated by the Academy of Motion Picture Arts and Sciences-Registered Trademark- for an Academy Award-Registered Trademark- in the category "Best Documentary (Short Subject)." Entertainment's next large-format film, MARK TWAIN'S AMERICA, produced under a three-year co-production and distribution agreement with the two subsidiaries of Sony Corporation of America, is scheduled for release in May 1998. Entertainment's gaming business currently consists of the operations of the 4 casino at the Americana Beach Resort in Aruba. Entertainment's focus on gaming will be primarily on international properties linked to wider entertainment endeavors. The facility management and concession arrangements under which Entertainment operates are individually negotiated and vary widely as to terms and duration. Concession contracts and leases usually provide for payment by Entertainment of commissions or rentals based on a stipulated percentage of gross sales or net profits, sometimes with a minimum rental or payment. Most of the facility management contracts are on a cost-plus-a-fee basis but a number of such contracts provide for a sharing of profits and losses between Entertainment and the facility owner. Food, beverage and novelty services are provided by Entertainment in the United States and Canada at a number of locations including those listed in the following table: NAME LOCATION ---- -------- Anaheim Stadium 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 Saint John Regional Exhibition Centre New Brunswick, Canada General Motors Place Vancouver, British Columbia Mile High Stadium Denver, Colorado Victory Field Indianapolis, Indiana MCI Center Washington, D.C. Alameda County Coliseum Complex Oakland, California During 1997: Entertainment opened its first megamall food court operation under a long term lease at Arizona Mills in Tempe, Arizona; was awarded a food and beverage contract at the Oakland-Alemeda County Coliseum Complex, a 64,400-seat stadium and a 19,200 seat arena, in California; and began its exclusive food and beverage operations at the MCI Center located in downtown Washington, D.C., a new 20,000-seat facility which serves as the home of the Washington Wizards National Basketball Association team and the Washington Capitals National Hockey League team. Entertainment provides concession services to the general seating area. In addition, Entertainment was awarded concession contracts at the following facilities scheduled to open over the next few years: the 20,000-seat Staples Center, the new home of the National Hockey League's Los Angeles Kings and the National Basketball 5 Association's Los Angeles Lakers in California (2000); and the 66,000 seat Paul Brown Stadium in Cincinnati, Ohio (2000). Entertainment provides food and beverage services at amphitheaters throughout the United States, including those listed in the following table: NAME LOCATION ---- -------- Starlake Amphitheatre Pittsburgh, PA Fiddlers Green Amphitheatre Englewood, CO Sandstone Amphitheatre Kansas City, MO Cynthia Woods Mitchell Pavilion Woodlands,TX Meadows Music Theater Hartford, CT Camden Amphitheatre Camden, NJ Polaris Amphitheatre Columbus, OH Nissan Amphitheatre Manassas, VA Molson Amphitheatre Toronto, Canada Virginia Beach Amphitheatre Virginia Beach, VA Entertainment, through long-term management agreements, operates and manages, and in some cases provides concession services, at various convention centers, arenas and public facilities including the following: NAME LOCATION ---- -------- Arrowhead Pond Anaheim, CA Corel Centre Ottawa, Canada Pensacola Civic Center Pensacola, FL Sullivan Arena Anchorage, Alaska Egan Convention Center Anchorage, Alaska Target Center Minneapolis, MN Northlands Coliseum Edmonton, Alberta The Great Western Forum Los Angeles, CA Newcastle Arena Newcastle, England NYNEX arena Manchester Manchester, England Bridgewater Hall Manchester, England Stadium Australia Sydney, Australia Arena Oberhausen Oberhausen, Germany Providence Civic Center Providence, Rhode Island In addition, Entertainment was awarded venue management contracts at the following facilities scheduled to open over the next few years: the 100,000 square foot Chareston Area Convention and Performing Arts Center in South Carolina (2000), the 10,000 - seat Bakersfield Arena & Convention Center, in Bakersfield, California, and the Victory Theatre in Evansville, Indiana (1998). 6 The Corel Centre (formerly the Ottawa Palladium), a 19,000-seat multipurpose indoor arena in Ottawa, Canada, which is owned by a third party, opened in January of 1996, and Entertainment commenced operations under a 30-year contract to provide complete facility management and concession services at this arena, which is the home of the Ottawa Senators of the National Hockey League. Pursuant to the 30-year contract, Entertainment has agreed that the Corel Centre, under Entertainment's management, will generate a minimum amount of revenues and has agreed to advance funds, if necessary, to its customer to assist in refinancing senior secured debt incurred in connection with construction of the facility. During 1997, Ogden repurchased 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 $97,679,000 on December 20, 2002, if such debt is not refinanced prior to that date. Ogden's repurchase obligation is collateralized by bank letters of credit. Ogden is also required to repurchase the outstanding amount of certain subordinated secured debt issued for such customer on December 30, 2002. The amount outstanding at December 31, 1997, was $46,562,000. In February 1998, this amount was increased to $51,624,000. During 1997, this customer purchased certain subordinated secured debt and repaid other amounts owed to Ogden in an aggregate amount of $38,900,000. In February 1998, this customer repaid an additional $7,343,000 owned to Ogden. In addition, at December 31, 1997 Ogden had guaranteed indebtedness of $20,683,000 of an affiliate and principal tenant of this customer, which indebtedness is due in September 1998. The owners of the Corel Centre are parties to a 30-year license agreement with the owner of the Ottawa Senators, pursuant to which the Ottawa Senators play their home games at the arena. Pursuant to a management agreement between the City of Anaheim, California and a wholly-owned subsidiary of Ogden, Entertainment manages and operates the Arrowhead Pond, a facility owned by and located within the City of Anaheim. Ogden has agreed that the Arrowhead Pond, under Entertainment's management, will generate a minimum amount of revenues computed in accordance with this 30-year management agreement with the City. The Arrowhead Pond is a multi-purpose facility capable of accommodating professional basketball and hockey, concerts and other attractions, and has a maximum seating capacity of approximately 19,400. Entertainment also has a 30-year lease agreement with The Walt Disney Company at the Arrowhead Pond pursuant to which the Anaheim Mighty Ducks, a National Hockey League team owned by The Walt Disney Company, plays its home games. Entertainment owns a 50% interest in the Australian and New Zealand business of the International Facility Corporation Pty Ltd. ("IFC"), a private facility management firm based in Brisbane, Australia. IFC is the managing general partner for all of the Entertainment/IFC joint venture accounts in Australia and New Zealand. These accounts include the Brisbane Entertainment Centre, the Newcastle Entertainment Centre, the Cairns Convention Centre, and a significant interest in Convex, operator of the Brisbane Convention and Exposition Centre. IFC is also acting as a consultant for the design and construction and will be providing ongoing management of the Olympic 2000 Stadium in Sydney, Australia. 7 Metropolitan Entertainment Company Inc. ("Metropolitan"), is a leading concert promoter in New York, New Jersey, Connecticut, and parts of Massachusetts in which Entertainment owns a 50% interest. Metropolitan and Entertainment, conduct concert promotion activities, operate amphitheaters in the eastern United States and concentrate on national and global music tours, artist management, Broadway and television productions, recording, and music publishing. MEG, through a long-term lease, operates the 20,000 capacity Darien Lake Performing Arts Center located in Darien Lake, New York. MEG has also established its own record label, Hybrid Recordings. Entertainment leases and operates a thoroughbred and harness racetrack and four off-track betting parlors in Illinois where it telecasts races from Fairmount Park and other racing facilities. Restaurants and other food and beverage services are provided by Entertainment at these facilities. A large portion of the track's revenue is derived from its share of the pari-mutuel pool, which can be adjusted by state legislation. Other income is derived from admission charges, parking, programs and concessions. Entertainment also provides concessions at zoos located in Seattle, Washington; Cleveland, Ohio; and Columbia, South Carolina. AVIATION The Aviation group, directly and indirectly through consortiums, joint ventures and partnerships, provides specialized support services to airlines and designs, finances, builds and operates major airport facilities and other aviation infrastructure projects throughout the world. The specialized support services provided by this group include comprehensive ground handling, ramp, passenger, cargo and warehouse, aviation fueling and in-flight catering services. These services are performed through joint ventures, consortiums, contracts with individual airlines, consolidated agreements with several airlines, and contracts with various airport authorities. The Aviation group's operations have undergone and continue to undergo review and refinement through the sale of certain under-performing operations. Ground handling services include diversified ramp operations such as baggage unloading and loading, aircraft cleaning, aircraft maintenance, flight planning, de-icing, cargo handling, warehouse operations and passenger-related services such as ticketing, check-in, passenger lounge operations, cargo/warehouse services and other miscellaneous services. While these services were principally conducted (and continue to be conducted) in the United States domestic market, global expansion by the Aviation group has resulted in providing comprehensive ground handling and related services at many international locations throughout Europe, Canada, South America, Asia and other countries. Set forth below is a sampling of major foreign airports where Aviation currently conducts ground and cargo handling operations: 8 AIRPORT LOCATION - ------- -------- Arturo Merino Benitez Airport Santiago, Chile Heathrow Airport England Schiphol International Airport Netherlands Auckland International Airport New Zealand Jorge Chavez International Airport Lima, Peru Guarulhos International Airport Sao Paulo, Brazil Galeao International Airport Rio de Janeiro, Brazil Eduardo Gomes International Airport Manaus, Brazil Pearson International Airport Toronto, Canada Mirabel Airport Montreal, Canada Simon Bolivar International Airport Caracas, Venezuela Mexico International Airport Mexico City, Mexico Hong Kong International Airport Hong Kong* Macau International Airport Macau * Expected to open in July 1998. Aviation also performs ground handling operations and other aviation related services at eight different airports throughout Germany and in the Czech Republic through a 50% interest in a Prague-based airport handling company which began construction of a new $18 million cargo facility scheduled to open by mid-1998, at Praha Ruzyne Airport in Prague, Czech Republic. During 1997 Aviation began performing ground handling services at Otopeni International Airport in Bucharest, Romania, through Ogden Romanian Aviation Services, a joint venture. Ogden 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 include the Aeroporto International Gregorio Luperon Airport in Puerto Plata, Dominican Republic; the Belo Horizonte International Airport, Brazil; eleven (11) airports in Mexico; and, through a joint venture with Aldeasa S.A. of Spain, Aviation provides cargo handling and warehousing services at airports located in Madrid and Barcelona, Spain. Aviation is in the process of finalizing arrangements to provide a range of services under a long-term license at Wattay International Airport in Vientiane, Laos; negotiating a contract to provide a complete spectrum of airport services, including all passenger, ramp and cargo services at a new international airport in Cochin, India which is scheduled to open in January 1999; and has formed a joint venture with Dresdner Kleinwort Benson ("DKB") to seek ground handling and cargo handling opportunities throughout Asia. Pursuant to the joint venture a financial subsidiary of DKB has acquired a 10% interest as of March 1, 1998 and has the right to acquire an additional 10% interest in the new venture for a total price of approximately $17 million. The joint venture will include Aviation's operations at the new Hong Kong International Airport in Hong Kong, scheduled to open in 1998. 9 Aviation will retain the majority interest and operating control of the joint venture which geographically will extend from India into mid-Asia and the Pacific Rim, excluding Aviation's existing operations in Macau. Aviation operates fueling facilities, including storage and hydrant fueling systems for the fueling of aircraft. This operation assists airlines in designing, arranging financing for, and installing underground fueling systems. These fueling operation services are principally performed in the North American market, including the maintenance and operation of a new fuel farm located at the San Diego International Airport (See the Environmental Regulatory Laws Section of this Report). Aviation operates 11 in-flight kitchens for over 85 airline customers at a number of locations, including the following: AIRPORT LOCATION ------- -------- John F. Kennedy International (3 kitchens) New York LaGuardia New York Newark International New Jersey Los Angeles International (2 kitchens) California San Francisco International California Washington Dulles International Washington, D.C. McCarren International (Las Vegas) Nevada Honolulu International Hawaii In 1995 a consortium, composed of Ogden Aviation Services, Inc., Macau Aviation Services Corporation, EVA Airways, Air Macau and several local companies and prominent businessmen, entered into a 19-year contract, with a 16-year exclusivity arrangement, to provide ramp and cargo handling, passenger services, and aircraft line maintenance service at the Macau International Airport. The consortium, of which Aviation Services is the managing partner with a 29% participation, provides all necessary passenger and ramp equipment and constructed a cargo warehouse, cargo and engineering facilities, an aircraft hangar and a state-of-the-art training center at the airport. The consortium's investment in infrastructure improvements and equipment at the Macau airport is approximately $40 million. During January 1998, a consortium, owned 28% by Ogden and 36% each by an Italian and Argentine partner, was awarded a 30-year license by the Government of Argentina to provide management services, improvements and operations at 33 airports in Argentina, including the airports located in Buenos Aires. The consortium will be required to 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. Compania de Desarrallo Aeropuerto Eldorado, S.A. ("CODAD"), a consortium of which Aviation has a 19% interest, pursuant to a 20-year concession contract awarded to 10 CODAD by the Civil Aviation Authority of Colombia, is building a new 3.8-kilometer runway at the El Dorado Airport in Bogota, Colombia at an estimated cost of $120 million. Construction, which began in 1996, is expected to be completed by July 1998. The consortium will maintain the new runway, and the pre-existing runway, for approximately 17 years in return for runway landing fees. 11 ENERGY The operations of Ogden's Energy segment are conducted by Ogden Energy Group, Inc. through four principal business areas: independent power, waste-to-energy, water and waste water and environmental consulting and engineering (collectively, the "Energy Group"). Since the early 1980's, affiliates and subsidiaries of the Energy Group have been engaged in developing and in some cases owning energy-generating projects fueled by municipal solid waste, and providing long term services from these projects to communities. The Energy Group is now the largest full service vendor (i.e., builder/operator) in the world for large scale waste-to-energy projects. In addition, since 1989, subsidiaries have been engaged in developing, owning and/or operating independent power production projects. The Company seeks to utilize the expertise gained from these activities in developing, owning or operating energy generating facilities in the United States and abroad that utilize a variety of other fuels, as well as water and wastewater facilities that will similarly serve communities on a long term basis. The Energy Group generally seeks to participate in projects in which it can make an equity investment and become the operator; its returns will be derived from equity distributions and/or operating fees. It also seeks to have a role in the development of the projects. The types of projects in which the Energy Group seeks to participate sell the electrical power services they generate, or the waste or water-related services they provide, under long term contracts or market concessions to utilities, government agencies providing power distribution, creditworthy industrial users, or local government units providing waste disposal or water and wastewater services. For power projects utilizing a combustible fuel or geothermal sources, the Energy Group 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. The Energy Group generally looks to finance its projects using equity or capital commitments provided by it or other investors, combined with nonrecourse debt for which the lender's source of payment is project revenues and assets. Consequently, the ability of the Energy Group's project subsidiaries 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. Such limitations typically permit the payment of cash dividends out of current cash flow for quarterly, semiannual or annual periods only at the end of such periods and only after payment of principal and interest on project loans due at the end of such periods, and in certain cases after providing for debt service and other reserves. In some project situations, limited support of the Energy Group or Ogden also 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 2200 MW (gross) either operating or under construction in the United States, Central and South America, China and the Philippines. 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; and Sao Paulo, Brazil. INDEPENDENT POWER The Energy Group's independent power business is conducted by its wholly-owned subsidiary, Ogden Energy, Inc. ("OEI"). OEI develops, operates and/or invests in independent (i.e., nonutility) 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 changes in the cost components of a facility (primarily fuel costs) correspond, as effectively as possible, to changes in the revenue components of the contract. A plant's revenue from a power sales contract usually consists of two components: energy payments and capacity payments. Energy payments are usually indexed to the fuel costs of the customer and to general inflation indices reasonably related to the cost structure of the operation. Capacity payments are based on either a plant's net electrical output or its available capacity. Capacity payment rates vary over the term of a power sales contract according to various schedules. Some power sales contracts permit the utility customer to dispatch the plant (i.e., direct the plant to deliver a reduced amount of electric output) within certain specified parameters. The Energy Group attempts to structure the power sales contract payments so that, even when dispatching occurs, the plant continues to receive capacity payments (which provide substantially all of the plant's debt service and profits, if any), while it receives reduced energy payments (which primarily cover the variable operating, maintenance and fuel costs associated with operating at different levels). The Energy Group attempts to provide fuel for its operating plants generally under long-term supply agreements, either through contractual arrangements between third parties and the project subsidiary or, in some instances, through acquisition of a dependable source of fuel. On many of its projects, an affiliate of 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. 13 (a) FACILITIES UNDER CONSTRUCTION. During 1996 and early 1997, the Energy Group successfully completed the development stage of its largest international project to date. A consortium, of which an Energy Group subsidiary is a 26% member, has developed and is now constructing a 480 MW (gross) coal-fired electric generating facility in the Republic of the Philippines (the "Quezon Project"). The other members of the consortium are affiliates of International Generating Company, an affiliate of Bechtel Enterprises, Inc., and PMR Limited Co., a Philippines partnership. The consortium entered into a power purchase agreement with Manila Electric Company ("Meralco"), the largest electric distribution company in the Philippines, which serves the area surrounding and including metropolitan Manila. Under the terms of the agreement, Meralco is obligated, for a period of 25 years, to 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. The power purchase agreement has been approved by the Philippines Energy Regulatory Board. The project has received an environmental clearance certificate, the primary environmental permit required for construction and operation. Total cost of development and construction of the Quezon Project is expected to be approximately $800 million. All associated financing has been obtained. The turnkey contractors, which are affiliates of Bechtel Enterprises, Inc., commenced construction of the facility on December 27, 1996, and construction is proceeding according to schedule. An Energy Group subsidiary will operate the Quezon Project on behalf of the consortium for a 25 year term from the commencement of commercial operation. 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. (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. - China In 1997, the Energy Group added four additional coal fired facilities to its portfolio through the acquisition of majority equity interests in four small 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 project. 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, respectively pursuant to long term power and steam sales agreements respectively. 14 - Ogden Power Pacific On September 30, 1997, a subsidiary of OEI successfully completed the purchase of the stock of Pacific Energy from Pacific Enterprises Energy Management Services, a wholly owned subsidiary of Southern California Gas Company. Ogden Power Pacific, Inc. ("OPPI"), the renamed entity, holds a 100% equity interest in thirteen (13) independent power project and a 50% interest in seven (7) independent power projects located in California, Washington, Maine and Maryland. The projects generate a total of 180 MW using geothermal, landfill gas, hydro and wood-waste fuel sources. OPPI owns a 50% partnership interest in Mammoth-Pacific, L.P., which owns three geothermal power plants located on the eastern slopes of the Sierra Nevada Mountains at Casa Diablo Hot Springs, California. The projects have a gross capacity of 40MW and use geothermal brine to generate electricity. 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. Bangor Pacific Hydroelectric Project ("Bangor"), Koma Kulshan Hydroelectric Project ("Koma Kulshan") and Weeks Falls Hydroelectric Project ("Weeks Falls") are three run-of-river hydroelectric projects in which OPPI owns 50% equity interests. Bangor is a 13 MW Project that is located on the Penobscot River 50 miles north of Bangor, Maine. Koma Kulshan is a 12 MW project that is located in the state of Washington about 100 miles northeast of Seattle. Weeks Falls is a 5 MW project located on the south fork of the Snoqualmie River in the Cascade Mountain region of the state of Washington. 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. OPPI 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. OPPI owns interests in four wood waste fired electric power plants in California. Three are owned 100% by OPPI affiliates, Burney Mountain Power Station, Mount Lassen Power Station and Pacific Oroville Power Station, and one, Pacific Ultrapower Chinese Station Power Station, is owned by a partnership in which an OPPI affiliate holds a 50% interest. Generally, fuel supply is procured from local sources through a variety of short term wood waste supply agreements. The four projects have a gross capacity of 67 MW using wood waste from forestry lumber mills, agriculture and urban areas. All four projects sell electricity to Pacific Gas & Electric Company under long term contracts. 15 - Other Operating Projects The Group's hydroelectric projects (other than those associated with OPPI, include the New Martinsville, West Virginia project, which is operated through a subsidiary. The output is sold under a long term contract with Monongohela Power Company. The Energy Group has an ownership interest in the Don Pedro project in Costa Rica through an equity investment in Energia Global, Inc. ("EGI"). Don Pedro is owned by EGI and is operated by a subsidiary of the Energy Group. A second hydroelectric project owned by EGI, Rio Volcan, commenced operation in 1997 and also is operated by an Energy Group subsidiary. The electric output from both of these facilities is sold to Instituto Costarricense de Electricidad, a local utility. The Energy Group's natural gas projects include; (i) the Brandywine, Maryland facility which began operation in 1996 and is operated by a subsidiary of the Energy Group, and whose output is sold to Potomac Electric Power Company; and (ii) the facility located in Bolivia, where subsidiaries of the Energy Group own an interest in Empresa Valle Hermoso ("EVH") which was formed by the Bolivian government as part of the capitalization of the government-owned utility ENDE. EVH owns and operates 215 MW of gas-fired generating capacity. A subsidiary of OEI participates in a joint venture that supplies EVH with management services support. In addition to its geothermal assets associated with OPPI, the Energy Group is the lessee of two geothermal facilities in California, both of which are operated by the Energy Group's subsidiaries, and a geothermal resource which is adjacent to and supplies fluid to both geothermal facilities. The electricity from both projects, the Heber and SIGC facilities, is sold under long-term contracts with Southern California Edison. In 1996, the Energy Group added diesel fuel facilities to its portfolio through the acquisition of equity interests in two projects in the Philippines: the Bataan Cogeneration project and the Island Power project. These projects are operated by a subsidiary of the Energy Group. The Bataan Cogeneration project has a long-term contract to sell its electrical output to the National Power Corporation (with which it also has entered into a fuel management agreement for fuel supply) and the Bataan Export Processing Zone Authority, while the Island Power project has a long-term power contract with the Occidental Mindoro Electric Cooperative. (c) PROJECT SUMMARIES. Certain information with respect to the Energy Group's IPP projects as of March 1, 1998 is summarized in the following table: 16 IPP PROJECTS
DATE OF ACQUISITION/ ENERGY COMMENCEMENT IN OPERATION: LOCATION SOURCE SIZE NATURE OF INTEREST OF OPERATIONS ------------ -------- ------ ---- ------------------ ------------- 1. New Martinsville West Virginia Hydro 40MW Lessee/Operator 1991 2. Heber (1)(2) California Geothermal 52MW Lessee/ Operator 1989 3. SIGC (2) California Geothermal 48MW Lessee/Operator 1994 4. Don Pedro Costa Rica Hydro 16MW Part Owner/Operator 1996 5. Island Power Philippines Diesel 7MW Part Owner/ 1996 Corporation(3) Operator 6. Bataan Philippines Diesel 65MW Owner/Operator 1996 Cogeneration 7. Empresa Valle Bolivia Natural Gas 215MW Part Owner/ 1995 Hermoso (4) Operations Mgmt. 8. Brandywine Maryland Natural Gas 240MW Operator 1996 9. Rio Volcan Costa Rica Hydro 16MW Part Owner/Operator 1997 10. Mammoth G1(6) California Geothermal 10MW Part Owner/Operator 1997 11. Mammoth G2(6) California Geothermal 15MW Part Owner/Operator 1997 12. Mammoth G3(6) California Geothermal 15MW Part Owner/Operator 1997 13. Gude Maryland Landfill Gas 3MW Owner/Operator 1997
17
DATE OF ACQUISITION/ ENERGY COMMENCEMENT IN OPERATION: LOCATION SOURCE SIZE NATURE OF INTEREST OF OPERATIONS ------------ -------- ------ ---- ------------------ ------------- 14. Otay California Landfill Gas 3.7MW Owner/Operator 1997 15. Oxnard California Landfill Gas 5.6MW Owner/Operator 1997 16. Penrose California Landfill Gas 10MW Owner/Operator 1997 17. Salinas California Landfill Gas 1.5MW Owner/Operator 1997 18. Santa Clara California Landfill Gas 1.5MW Owner/Operator 1997 19. Stockton California Landfill Gas .8MW Owner/Operator 1997 20. Toyon California Landfill Gas 10MW Owner/Operator 1997 21. Burney California Wood Waste 11.4MW Owner/Operator 1997 22. Chinese(6) California Wood Waste 25.6MW Part Owner 1997 23. Mount Lassen California Wood Waste 11.4 MW Owner/Operator 1997 24. Oroville California Wood Waste 18.7MW Owner/Operator 1997 25. Bangor(6) Maine Hydroelectric 13MW Part Owner/Operator 1997 26. Koma Kulshan(6) Washington Hydroelectric 12MW Part Owner 1997 27. Weeks Falls(6) Washington Hydroelectric 5MW Part Owner 1997 28. Lin'an(7) China Coal 24MW Part Owner 1997 29. Huantai(7) China Coal 24MW Part Owner 1997 30. Taixing(7) China Coal 24MW Part Owner 1997 31. Yanjiang(7) China Coal 24MW Part Owner 1997 UNDER CONSTRUCTION: 1. Quezon (5) Philippines Coal 500MW Part Owner/Operator 1999(est.)
18 NOTES - ----- (1) An OEI subsidiary is a 50% partner in the project entity which leases the facility from a third-party lessor. The lease expires in 2000 and is subject to a 15-year renewal at the OEI subsidiary's option. (2) An OEI subsidiary is a 50% partner of the lessee of the resource supplying fluid to the project, and the lessor is the same third-party that leases the Heber project to that project entity. (3) An OEI subsidiary has an approximately 40% ownership interest in this project. (4) The OEI subsidiary owns an approximately 24% interest in a consortium that purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by Bolivian pension funds. (5) An OEI subsidiary has an approximately 26% ownership interest in the project. (6) An OEI subsidiary has a 50% ownership interest in the project. (7) An OEI subsidiary has a 60% ownership interest in this project. (d) OTHER DEVELOPMENT EFFORTS. The Energy Group is actively pursuing several projects, some of which have achieved significant development milestones such as executed power purchase agreements, or receipt of key governmental approvals. As with all development efforts, however, there are in each case numerous conditions to be satisfied prior to financing, some of which are not within the Energy Group's control. As such, no assurance can be given that these projects will ultimately be developed successfully. WASTE-TO-ENERGY The Energy Group's waste-to-energy operations have been consolidated in a wholly-owned subsidiary, Ogden Waste to Energy, Inc. ("OWTE"). Waste-to-energy facilities combust municipal solid waste to make saleable energy in the form of electricity or steam. This group completed construction of its first waste-to-energy project in 1986. It currently operates 28 waste-to-energy projects at 27 locations. The Energy Group's subsidiaries are the owners or lessees of 17 of its waste-to-energy projects. OWTE has the exclusive right to market in the United States the proprietary, mass-burn technology of Martin GmbH fur Umwelt-und Energietechnik ("Martin"). All of the 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, OWTE, through subsidiaries, provides waste-to-energy services pursuant to long-term service contracts ("Service Agreements") with local governmental units 19 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: - The Energy Group subsidiary designs the facility, helps to arrange for financing, and then constructs and equips the facility on a fixed price and schedule basis. - The Energy Group subsidiary operates the facility and generally guarantees it will meet minimum processing capacity and efficiency standards, energy production levels, and environmental standards. The Energy Group subsidiary's failure to meet these guarantees or to otherwise observe the material terms of the Service Agreement (unless caused by the Client Community or by events beyond its control ("Unforeseen Circumstances")) may result in liquidated damages being charged to the Energy Group subsidiary or, if the breach is substantial, continuing and unremedied, the termination of the Service Agreement. In the case of such Service Agreement termination, the Energy Group subsidiary may be obligated to discharge project indebtedness; - 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 transportation of the residue to the disposal site. Generally, expenses resulting from the delivery of unacceptable and hazardous waste on the site are also borne by the Client Community. In addition, the Client Community is also generally responsible to pay increased expenses and capital costs resulting from Unforeseen Circumstances, subject to limits which may be specified in the Service Agreement; - Ogden Corporation typically guarantees each Energy Group subsidiary's performance under its respective Service Agreement. - The Client Community generally reimburses the Energy Group subsidiary for certain costs specified in the Service Agreement including taxes, governmental impositions (other than income taxes), certain consumables, ash disposal and utility expenses. The Client Community usually retains a portion of the energy revenues (generally 90%) generated by the facility, with the balance paid to the Energy Group subsidiary. If the facility is 20 owned by the Energy Group subsidiary, the Client Community also pays as part of the Service Fee an amount equal to the debt service due to be paid on the bonds issued to finance the facility. At most facilities, the Energy Group may earn additional fees from accepting waste from the Client Community or others utilizing the capacity of the facility, which exceeds the amount of waste committed by the Client Community. Affiliates of the Energy Group operate transfer stations in connection with some of its waste-to-energy facilities and, in connection with the Montgomery County, Maryland project, use a railway system to transport MSW and ash residue to and from the facility. In addition, affiliates lease and operate a landfill located at its Haverhill, Massachusetts, facility, and lease, but do not operate, a landfill in connection with its Bristol, Connecticut, facility. (b) OTHER ARRANGEMENTS FOR PROVIDING WASTE-TO-ENERGY SERVICES. The Energy Group owns two facilities that are not operated pursuant to Service Agreements with Client Communities and may undertake additional such projects in the future. In such projects, the Energy Group subsidiary must obtain sufficient waste under contracts with haulers or communities to ensure sufficient project revenues. In these cases, the Energy Group subsidiary is subject to risks usually assumed by the Client Community, such as those associated with Unforeseen Circumstances and the supply and price of municipal waste to the extent not contractually assumed by other parties. The Energy Group's current contracts with waste suppliers for these two facilities provide that the tipping fee charged for waste disposal service generally escalates with specified indices but otherwise is subject to limited increases in the event that costs of operation increase as a result of Unforeseen Circumstances. On the other hand, in these cases, the Energy Group subsidiary generally retains all of the energy revenues from sales of power to utilities or industrial power users and disposal fees for waste accepted at these facilities. Accordingly, the Energy Group believes that such projects carry both greater risks and greater potential rewards than projects in which there is a Client Community. (c) PROJECT FINANCING. Financing for domestic projects is generally accomplished through the issuance of a combination of tax-exempt and taxable revenue bonds issued by or on behalf of the Client Community. If the facility is owned by the Energy Group subsidiary the Client Community loans the bond proceeds to the subsidiary 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. 21 (d) OWTE PROJECTS. Certain information with respect to projects as of March 1, 1998 is summarized in the following table: WASTE-TO-ENERGY PROJECTS BOILER COMMENCEMENT UNITS TONS PER DAY UNITS OF OPERATIONS - ----- ------------ ------ ------------- Tulsa, OK (I) (1) 750 2 1986 Haverhill/Lawrence,(8) 950 1 1984 MA-RDF Marion County, OR 550 2(2) 1987 Hillsborough County, FL (3) 1,200 3(2) 1987 Tulsa, OK (II) (1)(4) 375 1 1987 Bristol, CT 650 2(2) 1988 Alexandria/Arlington, VA 975 3 1988 Indianapolis, IN 2,362 3(2) 1988 Hennepin County, MN (1)(5) 1,000 2 1989 Stanislaus County, CA 800 2 1989 Babylon, NY 750 2(2) 1989 Haverhill, MA-Mass Burn 1,650 2 1989 Warren County, NJ (5) 400 2 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, MI (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 33,565 ====== ____________________ (1) Facility is owned by an owner/trustee pursuant to a sale/leaseback arrangement. (2) Facility has been designed to allow for the addition of another unit. (3) Facility is owned by the Client Community. (4) Phase II of the Tulsa facility, which was financed as a separate project, expanded the capacity of the facility from two to three units. 22 (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 subsidiary operates only the boiler and turbine for this facility. (8) Operating contracts were acquired after completion. Facility uses a refuse-derived fuel technology and does not employ the Martin Technology. (e) TECHNOLOGY. The principal feature of the Martin Technology is the reverse-reciprocating stoker grate upon which the waste is burned. The patent for the basic stoker grate technology used in the Martin Technology expired in 1989. The Energy Group has no information that would cause it to believe that any other company uses the basic stoker grate technology that was protected by the expired patent. Moreover, the Energy Group believes that unexpired patents on other portions of the Martin technology and other proprietary know how would limit the ability of other companies to effectively use the basic stoker grate technology in competition with the Energy Group. There are several unexpired patents related to the Martin Technology including: (i) Grate Bar for Grate Linings, especially in Incinerators - expires, 1999; (ii) Method and Arrangement for Reducing NOx Emissions from Furnaces - expires 2000; (iii) Method and Apparatus for Regulating the Furnace Output of Incineration Plants - expires 2007; (iv) Method for Regulating the Furnace Output in Incineration Plants - expires 2008; and (v) Feed Device with Filling Hopper and Adjoining Feed Chute for Feeding Waste to Incineration Plants - expires 2008. More importantly, the Energy Group believes that it is Martin's know-how and worldwide reputation in the waste-to-energy field, and the Energy Group know-how in designing, constructing and operating waste-to-energy facilities, rather than the use of patented technology, that is important to the Energy Group's competitive position in the waste-to-energy industry in the United States. Ogden does not believe that the expiration of the patent covering the basic stoker grate technology or patents on other portions of the Martin Technology will have a material adverse effect on Ogden's financial condition or competitive position. The Energy Group believes that mass burn technology is now the predominant technology used for the combustion of solid waste. Overall, there are several other mass-burn technologies available in the market including those of Von Roll, W&E, Takuma, Volund, Steinmueller, Deutsche Babcock, and Detroit Stoker. In addition, other innovative non-mass burn technologies have been developed from time-to-time. Such technologies may claim reduced air emissions, but to date have been unproven on a large scale operation and appear likely to be substantially more expensive. Martin seeks to implement improvements and modifications to its technology in order to maintain its competitive position with non-mass burn technologies. However, should such technologies develop that offer competitive advantages to mass burn, the Energy Group's ability to respond in the United States would be limited by the Cooperation Agreement--see (f) below. 23 (f) THE COOPERATION AGREEMENT. Under an agreement between Martin and an Ogden affiliate (the "Cooperation Agreement"), the Energy Group's subsidiary, Ogden Projects, Inc. ("OPI") has the exclusive rights to market the proprietary technology (the "Martin Technology") of Martin in the United States, Canada, Mexico, Bermuda, certain Caribbean countries, most of Central and South America, and Israel. Martin is obligated to assist OPI in installing, operating, and maintaining facilities incorporating the Martin technology. The fifteen year term of the Cooperation Agreement renews automatically each year unless notice of termination is given, in which case the Cooperation Agreement would terminate 15 years after such notice. Additionally, the Cooperation Agreement may be terminated by either party if the other fails to remedy its material default within 90 days or notice. The Cooperation Agreement is also terminable by Martin if there is a change of control (as defined in the Cooperation Agreement) of Ogden Martin Systems, Inc. ("OMS"), a wholly-owned subsidiary of OPI or any direct or indirect parent of OMS not approved by its respective board of directors. Although termination would not affect the rights of OPI to design, construct, operate, maintain, or repair waste-to-energy facilities for which contracts have been entered into or proposals made prior to the date of termination, the loss of OPI's right to use the Martin Technology could have a material adverse effect on OPI's future business and prospects. (g) OTHER DEVELOPMENT EFFORTS. The Energy Group has no commitments in its waste-to-energy backlog as of December 31, 1997. WATER AND WASTEWATER The Energy Group's water and wastewater business is conducted through Ogden Yorkshire Water Company ("OYWC"). OYWC's mission is to develop, design, construct, maintain, operate and, in some cases, own, water and wastewater treatment facilities and distribution and collection networks in the United States, Canada, Latin America and elsewhere. Although OYWC was formed in 1994 as a joint venture with a British water utility, Yorkshire Water PLC, in 1996 Yorkshire Water PLC determined that it needed to refocus its efforts on its core business in the United Kingdom, and terminated its ownership interest in OYWC and its projects. Yorkshire Water PLC and its affiliates will, however, continue to provide by contract engineering, operations and marketing support and services to OYWC. In the United States, OYWC 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. Although in certain situations it would consider entering into operational contracts for facilities in which it has no ownership or long term leasehold interest, and presently has such contracts with three small communities in New York State, the Energy Group generally does not believe such contracts provide adequate returns. The development of the privatization market for water and wastewater projects in the United States has been hampered by certain legal constraints, primarily restrictions imposed by federal tax regulations that have historically limited the ability of municipalities to enter into long term operating contracts with private entities for facilities financed with tax exempt municipal 24 bonds. In early 1997, the Internal Revenue Service significantly relaxed these restrictions. It is expected that these changes should allow municipalities to more easily privatize existing water and wastewater systems. OYWC believes there are opportunities for projects in the United States, especially in circumstances where substantial new construction is required. In countries other than the United States, the Energy Group is seeking water and wastewater opportunities in which it will provide services to municipalities in which it can own an equity interest in water facilities under a concession that grants it the right to provide service to, and collect revenues from, consumers. The Energy Group believes that the lack of creditworthiness of non-U.S. municipalities, which may result from their limited ability to raise revenues or from other causes, makes the collection of tariffs from the consumer a more secure source of revenue. Under contractual arrangements, OYWC may be required to warrant certain levels of performance and may be subject to financial penalties or termination if it fails to meet these warranties. The Company may be required to guarantee the performance of OYWC. OYWC seeks not to take responsibility for conditions that are beyond its control. (a) WATER AND WASTEWATER PROJECTS. OYWC operates and maintains wastewater treatment facilities for three small municipalities in New York State. Such facilities cumulatively process approximately 11.8 million gallons per day ("mgd"). In addition, OYWC operates and maintains the municipal wastewater treatment facilities for several other small government and privately owned concerns that cumulatively process less than 1 mgd. All of the facilities are operated pursuant to short-term contracts. (b) OTHER DEVELOPMENT EFFORTS. A subsidiary of OYWC entered into a Water Facilities Services Agreement with The Governmental Utility Services Corporation of the City of Bessemer, Alabama in February 1997. The Agreement provides that OYWC 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. OYWC 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. The obligations of OYWC under the Agreement will be guaranteed by Ogden Energy Group. The parties' obligations under the Agreement are subject to the satisfaction of certain conditions precedent, including the issuance of bonds to fund the capital cost of the facility. The parties are working together to cause the satisfaction of these conditions precedent, and anticipate that the bonds will be issued and all other conditions precedent under the Agreement will be satisfied in the second quarter of 1998. 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 and sewage facilities in Muscat, as well as the construction and operation of new water and wastewater infrastructure. The infrastructure capital program would be phased in 25 over eight years, with the first phase projected to require approximately $250 million in new construction. OYWC's role would be as operator on behalf of a joint venture to be formed. The joint venture's arrangement with the government would be on a Build/Own/Operate/Transfer basis, and some equity capital, expected to be approximately $12 million, would be required of OYWC. The implementation of the Muscat project remains subject to several conditions precedent, many of which are beyond the control of OYWC. ENVIRONMENTAL CONSULTING AND ENGINEERING The Energy Group's environmental consulting services are provided through Ogden Environmental and Energy Services Co., Inc. ("OEES") which provides a comprehensive range of environmental, infrastructure and energy consulting, engineering and design services to industrial and commercial companies, electric utilities and governmental agencies. These services include analysis and characterization, remedial investigations, engineering and design, data management, project management, and regulatory assistance which are provided to a variety of clients in the public and private sectors in the United States and abroad. Principal clients include major Federal agencies, particularly the Department of Defense and the Department of Energy, as well as major corporations in the chemical, petroleum, transportation, public utility and health care industries and Federal and state regulatory authorities. United States Government contracts may be terminated, in whole or in part, at the convenience of the government or for cause. In the event of a convenience termination, the government is obligated to pay the costs incurred under the contract plus a fee based upon work completed. Professional environmental engineering services, including program management, environmental analysis, and restoration continues to be provided by OEES to the United States Navy CLEAN Program (Comprehensive Long Term Environmental Action Navy) pursuant to a 10-year contract awarded during 1991. Thus far OEES has provided these services at Navy bases in Hawaii, Guam, Japan, Hong Kong, the Philippines, Australia and Korea. OEES also continues to oversee the removal of storage tanks and contaminated soil from Air Force bases across the United States and in U.S. territories. 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, 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. For example, in many countries, the production, distribution and delivery of electricity has traditionally been provided by governmental or quasi-governmental agencies. Although a number of these countries have recently liberalized their laws and policies with regard 26 to the participation of private interests and foreign capital in their electric sectors, not all have done so, and not all that have done so may afford acceptable opportunities for the Energy Group. The development, construction, ownership and operation of facilities in foreign countries also exposes the Company to several potential risks that typically are not involved in such activities in the United States. Many of the countries in which the Energy Group is or intends to be active are lesser developed countries or developing countries. The financial condition and creditworthiness of the potential purchasers of power and services provided by the Energy Group (which may be a governmental or private utility or industrial consumer) or of the suppliers of fuel for projects in these countries may not be as strong as those of similar entities in developed countries. The obligations of the purchaser under the power purchase agreement, the service recipient under the related service agreement and the supplier under the fuel supply agreement generally are not guaranteed by any host country or other creditworthy governmental agency. Whenever such governmental guarantees are not available, the Energy Group undertakes a credit analysis of the proposed power purchaser or fuel supplier. It also seeks to cause such parties to adequately secure the performance of their obligations through contractual commitments and, where necessary, through the provision by such entities of financial instruments such as letters of credit or arrangements regarding the escrowing of the receivables of such parties in the case of power purchasers. The Energy Group's IPP and waste-to-energy projects in particular are dependent on the reliable and predictable delivery of fuel meeting the quantity and quality requirements of the project facilities. The Energy Group will typically seek to negotiate long-term contracts for the supply of fuel with creditworthy and reliable suppliers. 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 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 27 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 macro-economic changes in the economic environment of 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. In addition, the Energy Group will generally participate in projects which provide services that are treated as a matter of national or key economic importance by the laws and politics of many host countries. There is therefore risk that the assets constituting the facilities of these projects could be temporarily or permanently expropriated or nationalized by a host country, or made subject to martial or exigent law or control. The Energy Group will seek to manage and mitigate these risks through all available means that it deems appropriate. They will include: political and financial analysis of the host countries and the key participants in each project; guarantees of relevant agreements with creditworthy entities; political risk and other forms of insurance; participation by international finance institutions, such as affiliates of the World Bank, in financing of projects in which it participates; and joint ventures with other companies to pursue the development, financing and construction of these projects. 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 28 boarder with McAllen, Texas which operations are supported by the administrative officers located in Charlotte, North Carolina. 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. 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. Energy'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 Energy'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. Foreign demand for waste to energy projects is also expected to exist only in unique circumstances where other disposal options are unavailable or unusually costly. This reflects a number of factors that adversely affected communities' willingness to make long-term capital commitments to waste disposal projects, including: declining prices at which energy can be sold; declining alternative disposal costs; uncertainties about the impact of recycling on the waste stream; and continuing concerns arising from the Clean Air Act Amendments of 1990. Another factor adversely affecting the demand for new waste-to-energy projects was a 1994 United States Supreme Court decision invalidating state and local laws and regulations mandating that waste generated within a given jurisdiction be taken to a designated facility. See "Flow Control". Notwithstanding the decline in opportunities for new waste-to-energy facilities, OWTE believes there may be opportunities at existing facilities for expansion. Many of these factors also impact, to varying degrees, the competitiveness of the pricing established by Client Communities at OWTE's operating projects. For example, in most of the markets that OWTE currently serves, the cost of waste-to-energy services is competitive with the cost of other disposal alternatives, mainly landfilling. However, much of the landfilling done in the United States is done on a spot 29 market or through short-term contracts (less than 5 years), and the resulting price volatility means that market prices may at times be lower than prices at waste-to-energy facilities, which, like OWTE's, are typically based on long-term contracts and pricing. In addition, the cost competitiveness of operating waste-to-energy facilities also depends on the prices at which the facility can sell the energy it generates, and the additional charges that some Client Communities add to their fee structures. The Energy group's water and wastewater business faces an immature but developing domestic market for private water and wastewater services, and, like energy, a large foreign demand within an immature marketplace. 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, but not limited to, domestic and foreign government regulations, fewer airline flights, reduced in-flight meals and flight cancellations in the Aviation group and reduced event attendance in its Entertainment group. In addition, disputes between owners of professional sports organizations and the professional players of such organizations have affected and may continue to affect the operations of the Entertainment group. 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 30 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. EMPLOYEE AND LABOR RELATIONS As of March 1, 1997, Ogden and its subsidiaries had approximately 28,400 U.S. and foreign employees. Certain employees of Ogden are employed pursuant to collective bargaining agreements with various unions. During 1997 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 1998. 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. 31 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 or prohibiting operation. Ogden's Aviation groups 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 was December 19, 1996. On December 6, 1996, however, the Court of Appeals for the D.C. Circuit vacated the NSPS and EG in its decision in DAVIS COUNTY SOLID WASTE MANAGEMENT AND ENERGY RECOVERY SPECIAL SERVICES DISTRICT V. USEPA. Most states suspended preparation of their implementation plans as a result. Following a petition for reconsideration, on April 8, 1997 the Court vacated the NSPS and EG only as they apply to individual combustion units of less than 250 ton per day capacity. OWTE operates only one facility with units of this size. The NSPS and EG applicable to units greater than or equal to 250 tons per day was remanded to EPA with the direction that EPA review and modify any emission limits that were inconsistent with the Court's decisions. EPA issued a final rule that took effect on October 24, 1997 which slightly revised the emission limits for NOX, SO2, HCl, and lead, tightening all but the NOX limit. While the compliance deadline for the 1995 NSPS and EG remains as December 19, 2000, the deadline for these four revised limits is August 26, 2002. 32 States have now resumed submitting their plans for both the original and revised NSPS and EG limits. While there is technically about 21 additional months in which to achieve compliance with the revised emission limits, 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 $40 million between 1998 and 2000. Only moderate additional costs are likely to be incurred between 2000 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 OYWC will be subject to regulation of water quality by the EPA under the Federal Safe Drinking Water Act and by similar state laws. Domestic wastewater facilities are subject to regulation under the Federal Clean Water Act and by similar state laws. These laws provide for the establishment of uniform minimum national water quality standards, as well as governmental authority to specify the type of treatment processes to be used for public drinking water. Under the Federal Clean Water Act, OYWC may be required to obtain and comply with National Pollutant Discharge Elimination System permits for discharges from its treatment stations. Generally, under its current contracts, the client community is responsible for fines and penalties resulting from the delivery to OYWC's treatment facilities of water not meeting standards set forth in those contracts. The Environmental Remediation Laws prohibit disposal of hazardous waste other than in small, household-generated quantities at OWTE's municipal solid waste facilities. The Service Agreements recognize the potential for improper deliveries of hazardous wastes and specify procedures for dealing with hazardous waste that is delivered to a facility. Although certain Service Agreements require the Operating Subsidiary to be responsible for some costs related to hazardous waste deliveries, to date, no Operating Subsidiary has incurred material hazardous waste disposal costs. 33 (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. ENERGY AND WATER REGULATIONS OWTE and OEI's domestic businesses are subject to the provisions of federal, state and local energy laws applicable to their development, ownership and operation of their domestic facilities, and to similar laws applicable to their foreign operations. Federal laws and regulations govern transactions with utilities, the types of fuel used and the power plant ownership. State regulatory regimes govern rate approval and other terms under which utilities purchase electricity from independent producers, except to the extent such regulation is pre-empted by federal law. Pursuant to Federal Public Utility Regulatory Policies Act ("PURPA"), the Federal Energy Regulatory Commission ("FERC") has promulgated regulations that exempt qualifying facilities (facilities meeting certain size, fuel and ownership requirements, or "QFs") from compliance with certain provisions of the Federal Power Act ("FPA"), the Public Utility Holding Company Act of 1935 ("PUHCA"), and, except under certain limited circumstances, state laws regulating the rates charged by, or the financial and organizational activities of, electric utilities. PURPA was enacted in 1978 to encourage the development of cogeneration facilities and small facilities making use of non-fossil fuel power sources, including waste-to-energy facilities. The exemptions afforded by PURPA to qualifying facilities from the FPA and PUHCA and most aspects of state electric utility regulation are of great importance to the Energy Group and its competitors in the waste-to-energy and independent power industries. State public utility commissions must approve the rates, and in some instances other contract terms, by which public utilities purchase electric power from the Group's projects. PURPA requires that electric utilities purchase electric energy produced by 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 require public utilities to enter into long-term contracts. 34 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 public utility companies under PUHCA. Finally, projects that satisfy the definition of "foreign utility companies" are exempt from regulation under PUHCA. The Energy Group believes that all of its projects involved in the generation, transmission and/or distribution of electricity, both domestically and internationally, will qualify for an exemption from PUHCA and that it will not be required to register with the SEC. In the past there has been consideration in the U.S. Congress of legislation to repeal PURPA entirely, or at least to repeal the obligation of utilities to purchase power from QFs. It is likely that similar legislation will be introduced in the current Congress. There is strong support for grandfathering existing QF contracts if such legislation is passed, and also support for requiring utilities to conduct competitive bidding for new electric generation if the PURPA purchase obligation is eliminated. Various bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both independents and vertically integrated utilities to acquire retail utilities in the United States that are geographically widespread, as opposed to the current limitations of PUHCA which require that retail electric systems be capable of physical integration. Also, registered holding companies would be free to acquire non-utility businesses, which they may not do now, with certain limited exceptions. With the repeal of PURPA or PUHCA, competition for independent power generators from vertically integrated utilities would likely increase. In addition, the FERC, many state public utility commissions and Congress are currently studying a number of proposals to restructure the electric utility industry in the United States to permit utility customers to choose their utility supplier in a competitive electric energy market. The FERC has issued a 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. The utilities contend that they should recover from departing customers their fixed costs that will be "stranded" by the ability of their wholesale customers (and perhaps eventually, their retail customers) to choose new electric power suppliers. These include the costs utilities are required to pay under many QF contracts which the utilities view as excessive when compared with current market prices. Many utilities are therefore seeking ways to lower these contract prices, or rescind or buy out these contracts altogether, out of concern that their shareholders will be required to bear all or part of such "stranded" costs. Regulatory agencies to date have recognized the continuing validity of approved power purchase agreements. At the same time, regulatory agencies have encouraged renegotiation of power contracts where rate payer savings can be achieved as a result. 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. 35 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. OYWC's business may be subject to the provisions of state, local and, in the case of foreign operations, national utility laws applicable to the development, ownership and operation of water supply and wastewater facilities. Whether such laws apply depends upon the local regulatory scheme as well as the manner in which OYWC provides its services. Where such regulations apply, they may relate to rates charged, services provided, accounting procedures, acquisitions and other matters. In the United States, rate regulations have typically been structured to provide a predetermined return on the regulated entities investments. In other jurisdictions, the trend is towards periodic price reviews comparing rates to anticipated capital and operating revenues. The regulated entity benefits from efficiencies achieved during the period for which the rate is set. FLOW CONTROL Many states provide for local and regional solid waste planning and require that new solid waste facilities may be constructed only in conformity with these plans. Certain of these laws, sometimes referred to as legal flow control, authorize state agencies to require delivery of waste generated within their jurisdiction to designated facilities. In 1994, the United States Supreme Court held that such laws were constitutionally invalid. Federal legislation proposed to authorize flow control has not been adopted to date. The rates OWTE charges its Client Communities are generally competitive with other disposal options. Some Client Communities have experienced erosion of waste deliveries, but overall 1997 deliveries to OWTE facilities generally were consistent with 1996 levels, and higher than 1995 levels. Under most Service Agreements, the Client Community bears the economic impact of waste delivery shortfalls. Client Communities are now evaluating options to attract additional waste to facilities. Certain of these options have been tested in the federal courts and sustained. During 1997, New Jersey's system of flow control, which had been tested in the Federal courts since 1994, was finally ruled unconstitutional. This ruling, which was expected, has adversely affected the ability of OWTE's two New Jersey Client Communities (public authorities for Union County and Warren County) to continue to attract sufficient waste flows at the prices previously charged, which were among the highest in the nation. OWTE and these Client Communities have since worked cooperatively to adjust pricing in order to avoid 36 interruptions in waste flow to each Facility, while at the same time negotiating a comprehensive restructuring of the Service Agreements in order to provide a mutually acceptable long term solution. Any such solution is likely to involve two key features: the dedication of public funds to pay for significant portions of project debt; and the acceptance by OWTE of additional risk with respect to securing cash flows (either from tipping fees or energy revenues) to each Facility. As these negotiations are proceeding, state legislation has been introduced that would create a source of funding for payment of project debt service. There can be no assurance, however, that an acceptable contractual and legislative resolution will be achieved. If such a resolution cannot be achieved, these Client Communities may be forced to default on their obligations, including obligations to bondholders, in which case a restructuring would need to be addressed between the OWTE and each project's lenders and credit enhancement providers. The State of New Jersey has publicly stated that it will not allow a bond default to occur. Although it is likely that the Supreme Court's decision has adversely affected the market for new waste-to-energy facilities, other factors are believed by Ogden to be more significant for low projected market activity. SEE OTHER INFORMATION: Markets, Competition, and General Business Conditions. ASH RESIDUE In 1994, the United States Supreme Court held that municipal solid waste ash residue demonstrated by testing to possess hazardous characteristics is subject to Resource Conservation and Recovery Act's provisions for management as a hazardous waste relating to transportation, disposal and treatment downstream of the point of generation. The Supreme Court's ruling has not had a significant impact on OWTE's business. 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 and Aviation The Entertainment and Aviation groups own and lease buildings in various areas in the United States and several foreign countries which house office and warehousing operations. The leases range from a month-to-month term to as long as five years. Entertainment operates Fairmount Park racetrack pursuant to a long-term lease which expires in 2017. Fairmount Park conducts thoroughbred and harness racing on a 150-acre site located in Collinsville, Illinois, eight miles from downtown St. Louis. Entertainment also (i)owns a 148-acre site located at East St. Louis, Illinois; (ii) owns and operates Grizzly Park, a nature-based entertainment facility located on approximately 25-acres near Yellowstone National Park in West Yellowstone, Montana; and pursuant to a lease agreement with the State of Florida, which expires in 2008 has a leasehold interest in Silver Springs (a 250-acre nature-based park) and Wild Waters (a 6-acre park) featuring a variety of water slides and events, located near Ocala, Florida. Entertainment operates Fairmount Park racetrack pursuant to a long term lease which expires in 2017. Fairmount Park conducts thoroughbred and harness racing on a 150 acre site located in Collinsville, Illinois, eight miles from downtown St. Louis. Entertainment also owns a 148 acre site located at East St. Louis, Illinois. Entertainment also owns and operates Grizzly Park, a nature-based entertainment facility located on approximately 25 acres near Yellowstone National Park in West Yellowstone, Montana. Pursuant to a lease agreement with the State of Florida, which expires in 2008, Entertainment also has a leasehold interest in Silver Springs, a 250-acre nature based park, and Wild Waters, a 6-acre park featuring a variety of water slides and events. Both parks are located near Ocala, Florida. The Aviation group's fueling business leases fueling installations located at various airports in the United States and Canada. The Aviation group's in-flight food service operation facilities, aggregating approximately 600,000 square feet, are leased, except at Newark which is owned. 38 (b) Energy The principal executive offices of Ogden Energy Group, Inc. are located in Fairfield, New Jersey, in an office building located on a 5.4 acre site owned by 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, 1998.
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 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 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
39
APPROXIMATE SITE SIZE LOCATION IN ACRES SITE USE NATURE OF INTEREST(1) - -------- ----------- -------- --------------------- 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. 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, 1510 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
40
APPROXIMATE SITE SIZE LOCATION IN ACRES SITE USE NATURE OF INTEREST(1) - -------- ----------- -------- --------------------- 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%) 45. Weeks Falls, Washington N/A Hydroelectric Project Lease
_______________________ (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, 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. 41 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 statements. The Company's operations are subject to various Federal, state and local environmental laws and regulations, including the Clean Air Act, the Clean Water Act, the Comprehensive Environmental Response Compensation and Liability Act (CERCLA) and Resource Conservation and Recovery Act (RCRA). Although the Company operations are occasionally subject to proceedings and orders pertaining to emissions into the environment and other environmental violations, the Company believes that it is in substantial compliance with existing environmental laws and regulations. In connection with certain previously divested operations, the Company may be identified, along with other entities, as being among potentially responsible parties responsible for contribution for costs associated with the correction and remediation of environmental conditions at various hazardous waste disposal sites subject to CERCLA. In certain instances the Company may be exposed to joint and several liability for remedial action or damages. The Company's ultimate liability in connection with such environmental claims will depend on many factors, including its volumetric share of waste, the total cost of remediation, the financial viability of other companies that also sent waste to a given site and its contractual arrangement with the purchaser of such operations. 42 The potential costs related to all of the foregoing matters and the possible impact on future operations are uncertain due in part to the complexity of government laws and regulations and their interpretations, the varying costs and effectiveness of cleanup technologies, the uncertain level of insurance or other types of recovery, and the questionable level of the Company's responsibility. Although the ultimate outcome and expense of environmental remediation is uncertain, the Company believes that currently required remediation and continuing compliance with environmental laws will not have a material adverse effect on the Company's consolidated financial statements. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of the security holders of Ogden during the fourth quarter of 1997. EXECUTIVE OFFICERS OF OGDEN Set forth below are the names, ages, position and office held and year appointed, of all "executive officers" (as defined by Rule 3b-7 of the Securities Exchange Act of 1934) of Ogden as of March 1, 1998: CONTINUALLY AN OGDEN POSITION AND EXECUTIVE NAME OFFICE HELD AGE AS OF 3/1/98 OFFICER SINCE ---- ----------- ---------------- ------------- R. Richard Ablon Chairman of the 48 1987 Board, President & Chief Executive Officer Scott G. Mackin Executive Vice 41 1992 President Jesus Sainz Executive Vice 54 1998 President Philip G. Husby Senior Vice 51 1991 President and Chief Financial Officer Lynde H. Coit Senior Vice 43 1991 President and General Counsel 43 CONTINUALLY AN OGDEN POSITION AND EXECUTIVE NAME OFFICE HELD AGE AS OF 3/1/98 OFFICER SINCE ---- ----------- ---------------- ------------- Rodrigo Arboleda Senior Vice 57 1995 President, Business Development, Latin America David L. Hahn Senior Vice 46 1995 President, Aviation Quintin G. Marshall Senior Vice 36 1995 President, Corporate Development Gary D. Perusse Senior Vice 49 1996 President, Risk Management Peter Allen Senior Vice 61 1998 President Bruce W. Stone Executive Vice 50 1997 President for Waste- to-Energy Operations and Managing Director-Ogden Energy Group, Inc. B. Kent Burton Vice President, 46 1997 Policy and Communications Peter Cain Vice President, 40 1997 Finance and Treasurer 44 CONTINUALLY AN OGDEN POSITION AND EXECUTIVE NAME OFFICE HELD AGE AS OF 3/1/98 OFFICER SINCE ---- ----------- ---------------- ------------- Robert M. DiGia Vice President, 73 1965 Controller and Chief Accounting Officer Kathleen Ritch Vice President and 55 1981 Secretary There is no family relationship by blood, marriage or adoption (not more remote than first cousins) between any of the above individuals and any Ogden director, except that R. Richard Ablon, an Ogden director and Chairman of the Board, President and Chief Executive Officer, is the son of Ralph E. Ablon, an Ogden director. The term of office of all officers shall be until the next election of directors and until their respective successors are chosen and qualified. There are no arrangements or understandings between any of the above officers and any other person pursuant to which any of the above was selected as an officer. The following briefly describes the business experience, the principal occupation and employment of the foregoing Executive Officers during the past five years: R. Richard Ablon has been President and Chief Executive Officer of Ogden since May 1990 and Chairman of the Board since May, 1996. Scott G. Mackin, considered an Executive Officer of Ogden since 1992, was elected Executive Vice President of Ogden in 1997. He has been President and Chief Operating Officer of Ogden Energy Group, Inc., since January 1991. Jesus Sainz served as an Ogden director from 1994 until his resignation on January 1, 1998. On January 15, 1998 he was elected Executive Vice President of Ogden. Mr. Sainz also serves as Executive Vice Chairman of Trebol International, S.A., a private Spanish company which he created in 1984 which holds interests in companies operating in such fields as foreign trade, fast food, real estate, etc. Philip G. Husby has been Senior Vice President and Chief Financial Officer of Ogden for more than the past five years. 45 Lynde H. Coit has been a Senior Vice President and General Counsel of Ogden more than the past five years. Rodrigo Arboleda was elected Senior Vice President of Ogden in January 1995. Since 1992, he has served as Senior Vice President-Business Development for Latin America of Ogden Services Corporation. David L. Hahn was elected Senior Vice President, Aviation of Ogden in January 1995 and is currently Chief Operating Officer of Ogden's Aviation group. He previously served as Vice President-Marketing of Ogden Services Corporation for more than the past five years. Quintin G. Marshall was elected Senior Vice President - Corporate Development of Ogden on January 16, 1997. 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. From July 1992 to May 1993 he served as Senior Vice President at Gavin Andersen & Company, an investor relations consulting firm. From September 1986 to March 1992 he served first as Managing Director and then Co-Chief Operations Officer of Georgeson & Company, a proxy solicitation and consulting company. Gary D. Perusse was elected Senior Vice President - Risk Management in September, 1996. Prior thereto he had served as Director - Risk Management of Ogden for more than the past five years. Peter Allen has served as Senior Vice President and General Counsel of Ogden Services Corporation for more than the past five years. He was elected a Senior Vice President of Ogden in January 1998. 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 Senior Vice President of the Ogden Energy Group, Inc. since January 16, 1997 in Political Affairs and lobbying activities and was elected Vice President - Policy and Communications of Ogden in May 1997. Peter Cain has served in various financial capacities as a senior officer of many of Ogden's major subsidiaries for more than ten (10) years. He served as Ogden's Vice President of Finance since 1997 and was appointed Ogden's Treasurer in 1998. 46 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, 1998, the approximate number of record holders of Ogden common stock was 7,345. Pursuant to General Instruction G (2), the information called for by this item is hereby incorporated by reference from Page 50 of Ogden's 1997 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 26 of Ogden's 1997 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 22 through 25 of Ogden's 1997 Annual Report to Shareholders. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable. 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 47 and Page 50 of Ogden's 1997 Annual Report to Shareholders. 47 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 1998 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 1998 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 1998 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 1998 Proxy statement to be filed with the Securities and Exchange Commission. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) Listed below are the documents filed as a part of this report: 1). All financial statements contained on pages 27through 47 and the Independent 48 Auditors' Report on page 48 of Ogden's 1997 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, 1997, 1996 and 1995. 3). Those exhibits required to be filed by Item 601 of Regulation S-K: EXHIBITS 2.0 Plans of Acquisition, Reorganization, Arrangement, Liquidation or Succession. 2.1 Agreement and Plan of Merger, dated as of October 31, 1989, among Ogden, ERCI Acquisition Corporation and ERC International, Inc.* 2.2 Agreement and Plan of Merger among Ogden Corporation, ERC International, Inc., ERC Acquisition Corporation and ERC Environmental and Energy Services Co., Inc., dated as of January 17, 1991.* 2.3 Amended and Restated Agreement and Plan of Merger among Ogden Corporation, OPI Acquisition Corp. and Ogden Projects, Inc., dated as of September 27, 1994.* 3.0 Articles of Incorporation and By-laws. 3.1 Ogden's Restated Certificate of Incorporation as amended.* 3.2 Ogden's By-Laws, as amended.* 4.0 Instruments Defining Rights of Security Holders. 4.1 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of June 1, 1987, and Offering Memorandum dated June 12, 1987, relating to U.S. $85 million Ogden 6% Convertible Subordinated Debentures, Due 2002.* 4.2 Fiscal Agency Agreement between Ogden and Bankers Trust Company, dated as of October 15, 1987, and Offering Memorandum, dated October 15, 1987, relating to U.S. $75 million Ogden 5-3/4% Convertible Subordinated Debentures, Due 2002.* 4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to The 49 Bank of New York, Trustee, relating to Ogden's $100 million debt offering.* 10.0 Material Contracts 10.1 Credit Agreement by and among Ogden, The Bank of New York, as Agent and the signatory bank Lenders thereto dated as of September 20, 1993.* (i) Amendment to Credit Agreement, dated as of November 16, 1995.* 10.1(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. Filed as Exhibit 10.6 to Ogden's Form 10-Q for the quarterly period ended March 31, 1997 and incorporated herein by reference.* 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. Filed as Exhibit 10.1() to Ogden's Form 10-Q for the quarterly period ended June 30, 1997 and incorporated herein by reference.* 10.2 Stock Purchase Agreement, dated May 31, 1988, between Ogden and Ogden Projects, Inc.* 10.3 Tax Sharing Agreement, dated January 1, 1989, between Ogden, Ogden Projects, Inc. and subsidiaries, Ogden Allied Services, Inc. an subsidiaries, and Ogden Financial Services, Inc. and subsidiaries.* 10.4 Stock Purchase Option Agreement, dated June 14, 1989, between Ogden and Ogden Projects, Inc. as amended on November 16, 1989.* 10.5 Preferred Stock Purchase Agreement, dated July 7, 1989, between Ogden Financial Services, Inc. and Image Data Corporation.* 10.6 Rights Agreement between Ogden Corporation and Manufacturers Hanover Trust Company, dated as of September 20, 1990 and amended August 15, 1995 to provide The Bank of New York as successor agent.* 10.7 Executive Compensation Plans (a) Ogden Corporation 1990 Stock Option Plan.* 50 (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. Transmitted herewith as Exhibit 10.7(b)(ii). (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. Transmitted herewith as Exhibit 10.7(c)(ii). (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.* 51 (j) Ogden Projects Profit Sharing Plan.* (k) Ogden Projects Supplemental Pension and Profit Sharing Plans.* (l) Ogden Projects Employee's Stock Option Plan.* (i) Amendment, dated as of December 29, 1994 to the Ogden Projects Employees' Stock Option Plan. Transmitted herewith as Exhibit 10.7 (u)(i).* (m) Ogden Projects Core Executive Benefit Program.* (n) Form of amendments to the Ogden Projects, Inc. Pension Plan and Profit Sharing Plans effective as of January 1, 1994.* (i) Form of Amended Ogden Projects, Inc. Profit Sharing Plan, effective as of January 1, 1994. Transmitted herewith as Exhibit 10.7 (w)(i).* (ii) Form of Amended Ogden Projects, Inc. Pension Plan, effective as of January 1, 1994. Transmitted herewith as Exhibit 10.7 (w)(ii).* (o) Ogden Corporation CEO Formula Bonus Plan.* (p) Ogden Key Management Incentive Plan. Transmitted herewith as Exhibit 10.7(p). 10.8 Employment Agreements (a) Employment Letter Agreement between Ogden and Lynde H. Coit dated January 30, 1990.* (b) Employment Agreement between Ogden and R.Richard Ablon dated as of May 24, 1990.* (i) Letter Amendment Employment Agreement between Ogden and R. Richard Ablon dated as of October 11, 1990.* (c) Employment Agreement between Ogden and C. G. Caras dated as of July 2, 1990.* (i) Letter Amendment to Employment Agreement between Ogden 52 Corporation and C.G. Caras, dated as of October 11, 1990.* (ii) Termination Agreement between C.G. Caras and Ogden dated April 30, 1996.* (d) Employment Agreement between Ogden and Philip G. Husby as of July 2, 1990.* (e) Termination Letter Agreement between Maria P. Monet and Ogden dated as of October 22, 1990.* (f) Letter Agreement between Ogden Corporation and Ogden's Chairman of the Board, dated as of January 16, 1992.* (g) Employment Agreement between Ogden and Ogden's Chief Accounting Officer dated as of December 18, 1991.* (h) Employment Agreement between Scott G. Mackin and Ogden Projects, Inc. dated as of January 1, 1994.* (i) Letter Amendment to Employment Agreement between Ogden Projects, Inc. and Scott G. Mackin, dated December 20, 1996.* (i) Employment Agreement between David L. Hahn and Ogden Corporation, dated December 1, 1995.* (j) Employment Agreement between Ogden Services Corporation and Rodrigo Arboleda dated January 1, 1997.* (k) 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.* (l) Employment Agreement's between Ogden Corporation and Jesus Sainz, effective as of January 1, 1998. Transmitted herewith as Exhibit 10.8(m). 10.9 First Amended and Restated Ogden Corporation Guaranty Agreement made as of January 30, 1992 by Ogden Corporation for the benefit of Mission Funding Zeta and Pitney Bowes Credit Corporation.* 53 10.10 Ogden Corporation Guaranty Agreement as of January 30, 1992 by Ogden Corporation for the benefit of Allstate Insurance Company and Ogden Martin Systems of Huntington Resource Recovery Nine Corporation.* 11 Ogden Corporation and Subsidiaries Detail of Computation of Earnings Applicable to Common Stock for the years ended December 31, 1997, 1996 and 1995.* 13 Those portions of the Annual Report to Stockholders for the year ended December 31, 1997, which are incorporated herein by reference. Transmitted herewith as Exhibit 13. 21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21. 23 Consent of Deloitte & Touche LLP. Transmitted herewith as Exhibit 23. 27 Financial Data Schedule (EDGAR Filing Only). * INCORPORATED BY REFERENCE AS SET FORTH IN THE EXHIBIT INDEX OF THIS ANNUAL REPORT ON FORM 10-K. (b) No Reports on Form 8-K were filed by Ogden during the fourth quarter of 1997. 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 12, 1998 By /s/ R. Richard Ablon --------------------------------- R. Richard Ablon Chairman of the Board, President and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated. SIGNATURE TITLE --------- ----- /s/ R. Richard Ablon Chairman of the Board, President and Chief - ------------------------------ Executive Officer and Director R. RICHARD ABLON /s/ Ralph E. Ablon Director - ------------------------------ RALPH E. ABLON /s/ Philip G. Husby Senior Vice President and Chief Financial - ------------------------------ Officer PHILIP G. HUSBY /s/ Robert M. Digia Vice President, Controller and Chief - ------------------------------ Accounting Officer ROBERT M. DIGIA /s/ David M. Abshire Director - ------------------------------ DAVID M. ABSHIRE /s/ Norman G. Einspruch Director - ------------------------------ NORMAN G. EINSPRUCH /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/ Stanford S. Penner Director - ------------------------------ STANFORD S. PENNER /s/ Frederick Seitz Director - ------------------------------ FREDERICK SEITZ /s/ Robert E. Smith Director - ------------------------------ ROBERT E. SMITH /s/ Helmut F.o. Volcker Director - ------------------------------ HELMUT F.O. VOLCKER /s/ Abraham Zaleznik Director - ------------------------------ ABRAHAM ZALEZNIK 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, 1997 and 1996, and for each of the three years in the period ended December 31, 1997, and have issued our report thereon dated February 27, 1998, which report includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 121; such consolidated financial statements and report are included in your 1997 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedule of Ogden Corporation and subsidiaries, included in Item 14. This consolidated financial statement schedule is the responsibility of the Corporation's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Deloitte & Touche LLP New York, New York February 27, 1998
SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1995 - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS ----------------------------- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND CHARGED TO END OF DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Allowances deducted in the balance sheet from the assets to which they apply: Doubtful receivables - current $32,783,000 $ 7,204,000 $ 64,000 (A) $ 3,012,000 (B) $37,039,000 Deferred charges on projects 7,000,000 3,670,000 7,000,000 (C) 3,670,000 ---------------------------------------------------------------------------------- TOTAL $39,783,000 $10,874,000 $ 64,000 $10,012,000 $40,709,000 ================================================================================== Allowances not deducted: Provision for consolidation of facilities $ 3,400,000 $ 2,850,000 (D) 550,000 (E) Estimated cost of disposal of discontinued operations 945,000 $ 4,510,000 5,269,000 (E) $ 186,000 Estimated cost of disposal of assets 14,993,000 14,993,000 Provision for restructuring 8,200,000 2,090,000 (E) 6,110,000 Reserves relating to tax indemnification and other contingencies in connection with the sale of limited partnership interests in and related tax benefits a of waste-to-energy facility 6,000,000 3,000,000 (D) 3,000,000 Other 3,604,000 7,267,000 1,500,000 (D) 9,371,000 ---------------------------------------------------------------------------------- TOTAL $13,949,000 $34,970,000 $ 15,259,000 $33,660,000 ==================================================================================
Notes: - ------ (A) Recoveries of amounts previously written off. (B) Write-offs of receivables considered uncollectible. (C) Write-offs of unsuccessful development costs. (D) Reversal to operating costs of provisions no longer required. (E) Payments charged to allowances.
SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 1996 - ----------------------------------------------------------------------------------------------------------------------------------- COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS ----------------------------- BALANCE AT CHARGED TO BALANCE AT BEGINNING COSTS AND CHARGED TO END OF DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD - ----------------------------------------------------------------------------------------------------------------------------------- Allowances deducted in the balance sheet from the assets to which they apply: Doubtful receivables - current $37,039,000 $10,442,000 $370,000 (A) $ 9,576,000 (B) $38,275,000 Doubtful receivables-noncurrent 6,000,000 6,000,000 Deferred charges on projects 3,670,000 4,968,000 8,638,000 ---------------------------------------------------------------------------------- TOTAL $40,709,000 $21,410,000 $370,000 $ 9,576,000 $52,913,000 ================================================================================== Allowances not deducted: Estimated cost of disposal of discontinued operations $ 186,000 $ 186,000 (C) Estimated cost of disposal of assets 14,993,000 14,130,000 (C) $ 863,000 Provision for restructuring 6,110,000 $ 682,000 4,285,000 (C) 2,507,000 Reserves relating to tax indemnification and other contingencies in connection with the sale of limited partnership interests in and related tax benefits of a waste-to-energy facility. 3,000,000 3,000,000 Other 9,371,000 3,743,000 6,221,000 (D) 6,893,000 ---------------------------------------------------------------------------------- TOTAL $33,660,000 $ 4,425,000 $24,822,000 $13,263,000 ==================================================================================
Notes: - ------ (A) Recoveries of amounts previously written off. (B) Write-offs of receivables considered uncollectible. (C) Payments charged to allowances. (D) Reversal to operating costs of provisions no longer required.
SCHEDULE II OGDEN CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEAR ENDED DECEMBER 31, 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 benefits 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.
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 Ogden's Form of October 31, 1989, among Ogden, ERCI S-4 Registration Statement File No. Acquisition Corporation and ERC 33-32155, and incorporated herein by International Inc. reference. 2.2 Agreement and Plan of Merger among Ogden Filed as Exhibit (10)(x) to Ogden's Form Corporation, ERC International Inc., ERC 10-K for the fiscal year ended December Acquisition Corporation and ERC 31, 1990 and incorporated herein by Environmental and Energy Services Co., reference. Inc. dated as of January 17, 1991. 2.3 Amended and Restated Agreement and Plan Filed as Exhibit 2 to Ogden's Form S-4 of Merger among Ogden Corporation, OPI Registration Statement File No. 33-56181 Acquisition Corporation sub. and Ogden and incorporated herein by reference. Projects, 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 Form Incorporation as amended. 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 June 30, 1997 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) to and Bankers Trust Company, dated as of Ogden's Form 8-K filed with the June 1, 1987 and Offering Memorandum Securities and Exchange Commission on dated June 12, 1987, relating to U.S. July 7, 1987 and incorporated herein by $85 million Ogden 6% Convertible reference. Subordinated Debentures, Due 2002. 4.2 Fiscal Agency Agreement between Ogden Filed as Exhibit (4) to Ogden's Form S-3 and Bankers Trust Company, dated as of Registration Statement filed with the October 15, 1987, and Offering Securities and Exchange Commission on Memorandum, dated October 15, 1987, December 4, 1987, Registration No. relating to U.S.$75 million Ogden 5-3/4% 33-18875, and incorporated herein by Convertible Subordinated Debentures, Due reference. 2002. 4.3 Indenture dated as of March 1, 1992 from Filed as Exhibit (4)(C) to Ogden's Form Ogden Corporation to The Bank of New 10-K for fiscal year ended December 31, York, Trustee, relating to Ogden's $100 1991, and incorporated herein by million debt offering. reference. 10 Material Contracts 10.1 Credit Agreement by and among Ogden, The Filed as Exhibit No. 10.2 to Ogden's Bank of New York, as Agent and the Form 10-K for fiscal year ended December signatory Lenders thereto dated as of 31, 1993, and incorporated herein by September 20, 1993. reference. (i) Amendment to Credit Agreement, Filed as Exhibit 10.1(i) to Ogden's Form dated as of November 16, 1995. 10-K for fiscal year ended December 31, 1995, and incorporated herein by reference. 10.1(a) U.S. $95 million Term Loan and Letter of Filed as Exhibit 10.6 to Ogden's Form Credit and Reimbursement Agreement among 10-Q for the quarterly period ended Ogden, the Deutsche Bank AG, New York March 31, 1997 and incorporated herein Branch and the signatory Banks thereto, by reference. dated March 26, 1997. 10.1(b) $200 million Credit Agreement among Filed as Exhibit 10.1(i) to Ogden's Form Ogden, The Bank of New York as Agent and 10-Q for the quarterly period ended June the signatory Lenders thereto, dated as 30, 1997 and incorporated herein by of June 30, 1997. reference.
10.2 Stock Purchase Agreement dated May 31, Filed as Exhibit (10)(d) to Ogden's Form 1988, between Ogden and Ogden Projects, 10-K for the fiscal year ended December Inc. 31, 1989 and incorporated herein by reference. 10.3 Tax Sharing Agreement, dated January 1, Filed as Exhibit (10)(e) to Ogden's Form 1989 between Ogden, Ogden Projects, Inc. 10-K for the fiscal year ended December and subsidiaries, Ogden Allied Services, 31, 1989 and incorporated herein by Inc. and subsidiaries and Ogden reference. Financial Services, Inc. and subsidiaries. 10.4 Stock Purchase Option Agreement, dated Filed as Exhibit (10)(f) to Ogden's Form June 14, 1989, between Ogden and Ogden 10-K for the fiscal year ended December Projects, Inc. as amended on November 31, 1989 and incorporated herein by 16, 1989. reference. 10.5 Preferred Stock Purchase Agreement, Filed as Exhibit (10)(g) to Ogden's Form dated July 7, 1989, between Ogden 10-K for the fiscal year ended December Financial Services, Inc. and Image Data 31, 1989 and incorporated herein by Corporation. reference 10.6 Rights Agreement between Ogden Filed as Exhibit (10)(h) to Ogden's Form Corporation and Manufacturers Hanover 10-K for the fiscal year ended December Trust Company, dated as of September 20, 31, 1990 and incorporated herein by 1990 and amended August 15, 1995 to reference. provide The Bank of New York as successor agent. 10.7 Executive Compensation Plans. (a) Ogden Corporation 1990 Stock Option Filed as Exhibit (10)(j) to Ogden Form Plan. 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (i) Ogden Corporation 1990 Stock Filed as Exhibit 10.6(b)(i) to Ogden's Option Plan as Amended and Form 10-Q for the quarterly period ended Restated as of January 19, September 30, 1994 and incorporated 1994. herein by reference. (ii) Amendment adopted and effective Transmitted herewith as Exhibit as of September 18, 1997. 10.7(a)(ii).
(b) Ogden Services Corporation Filed as Exhibit (10)(k) to Ogden's Form Executive Pension Plan. 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (c) Ogden Services Corporation Select Filed as Exhibit (10)(l) to Ogden Form Savings Plan. 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (i) Ogden Services Corporation Filed as Exhibit 10.7(d)(I) to Ogden's Select Savings Plan Amendment Form 10-K for the fiscal year ended and Restatement as of January December 31, 1994 and incorporated 1, 1995. herein by reference. (ii) Amendment Number One to the Transmitted herewith as Exhibit Ogden Services Corporation 10.7(c)(ii). Select Savings Plan as Amended and Restated January 1, 1995, effective January 1, 1998. (d) Ogden Services Corporation Select Filed as Exhibit (10)(m) to Ogden's Form Savings Plan Trust. 10-K for the fiscal year ended December 31, 1990 and incorporated herein by reference. (i) Ogden Services Corporation Select Filed as Exhibit 10.7(e)(i) to Ogden's Savings Plan Trust Amendment and Form 10-K for the fiscal year ended Restatement as of January 1, 1995. December 31, 1994 and incorporated herein by reference. (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 Form Profit Sharing Plan effective 10-K for the fiscal year ended December January 1, 1990. 31, 1990 and incorporated herein by reference. (g) Ogden Corporation Profit Sharing Filed as Exhibit 10.8(p) to Ogden's Form Plan. 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (i) Ogden Profit Sharing Plan as Filed as Exhibit 10.8(p)(i) to Ogden's amended and restated January Form 10-K for fiscal year ended December 1, 1991 and as in effect 31, 1993 and incorporated herein by through January 1, 1993. reference. (ii) Ogden Profit Sharing Plan as Filed as Exhibit 10.7(p)(ii) to Ogden's amended and restated effective Form 10-K for fiscal year ended December as of January 1, 1995. 31, 1994 and incorporated herein by reference. (h) Ogden Corporation Core Executive Filed as Exhibit 10.8(q) to Ogden's Form Benefit Program. 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (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 Plan. Filed as Exhibit 10.8(s) to Ogden's Form 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (k) Ogden Projects Supplemental Pension Filed as Exhibit 10.8(t) to Ogden's Form and Profit Sharing Plans. 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (l) Ogden Projects Employees' Stock Filed as Exhibit 10.8(u) to Ogden's Form Option Plan. 10-K for fiscal year ended
December 31, 1992 and incorporated herein by reference. (i) Amendment dated as of December Filed as Exhibit 10.7(u)(i) to Ogden's 29, 1994, to the Ogden Form 10-K for fiscal year ended December Projects Employees' Stock 31, 1994 and incorporated herein by Option Plan. reference. (m) Ogden Projects Core Executive Filed as Exhibit 10.8(v) to Ogden's Form Benefit Program. 10-K for fiscal year ended December 31, 1992 and incorporated herein by reference. (n) Form of amendments to the Ogden Filed as Exhibit 10.8(w) to Projects, Inc. Pension Plan and Ogden's Form 10-K for fiscal year Profit Sharing Plans effective as ended December 31, 1993 and of January 1, 1994. incorporated herein by reference. (i) Form of amended Ogden Projects Filed as Exhibit 10.7(w)(i) to Ogden's Profit Sharing Plan effective Form 10-K for fiscal year ended December as of January 1, 1994. 31, 1994 and incorporated herein by reference. (ii) Form of amended Ogden Projects Filed as Exhibit 10.7(w)(ii) to Ogden's Pension Plan, effective as of Form 10-K for fiscal year ended December January 1, 1994. 31, 1994 and incorporated herein by reference. (o) Ogden Corporation CEO Formula Bonus Filed as Exhibit 10.6(w) to Ogden's Form Plan. 10-Q for the quarterly period ended September 30, 1994 and incorporated herein by reference. (p) Ogden Key Management Incentive Transmitted herewith as Exhibit 10.7(p). Plan. 10.8 Employment Agreements (a) Employment Letter Agreement between Filed as Exhibit (10)(p) to Ogden's Form Ogden and an executive officer 10-K for the fiscal year ended December dated January 30, 1990. 31, 1990 and incorporated herein by reference.
(b) Employment Agreement between R. Filed as Exhibit (10)(r) to Ogden's Form Richard Ablon and Ogden dated as of 10-K for the fiscal year ended December May 24, 1990. 31, 1990 and incorporated herein by reference. (i) Letter Amendment to Employment Filed as Exhibit (10)(r)(i) to Ogden's Agreement between Ogden Form 10-K for the fiscal year ended Corporation ad R. Richard December 31, 1990 and incorporated Ablon, dated as of October 11, herein by reference. 1991. (c) Employment Agreement between Ogden Filed as Exhibit (10)(s) to Ogden's Form and C.G. Caras dated as of July 2, 10-K for the fiscal year ended December 1990. 31, 1990 and incorporated herein by reference. (i) Letter Amendment to Employment Filed as Exhibit (10)(s)(i) to Ogden's Agreement between Ogden Form 10-K for the fiscal year ended Corporation and C.G. Caras, December 31, 1990 and incorporated dated as of October 11, 1990. herein by reference. (ii) Termination Letter Agreement Filed as Exhibit 10.8(c)(ii) to Ogden's between C.G. Caras and Ogden Form 10-K for the fiscal year ended Corporation dated April 30, December 31, 1996 and incorporated 1996. herein by reference. (d) Employment Agreement between Ogden Filed as Exhibit (10)(t) to Ogden's Form and Philip G. Husby, dated as of 10-K for the fiscal year ended December July 2, 1990. 31, 1990 and incorporated herein by reference. (e) Termination Letter Agreement Filed as Exhibit (10)(v) to Ogden's Form between Maria P. Monet and Ogden 10-K for the fiscal year ended December dated as of October 22, 1990. 31, 1990 and incorporated herein by reference. (f) Letter Agreement between Ogden Filed as Exhibit 10.2(p) to Ogden's Form Corporation and Ogden's Chairman of 10-K for fiscal year ended December 31, the Board, dated as of January 16, 1991 and incorporated herein by 1992. reference.
(g) Employment Agreement between Ogden Filed as Exhibit 10.2(q) to Ogden's Form Corporation and Ogden's Chief 10-K for fiscal year ended December 31, Accounting Officer dated as of 1991 and incorporated herein by December 18, 1991. reference. (h) Employment Agreement between Scott Filed as Exhibit 10.8(o) to Ogden's Form G. Mackin and Ogden Projects, Inc. 10-K for fiscal year ended December 31, dated as of January 1, 1994. 1993 and incorporated herein by reference. (i) Letter Amendment to Employment Filed as Exhibit 10.8(h)(i) to Ogden's Agreement between Ogden Form 10-K for fiscal year ended December Projects, Inc. and Scott G. 31, 1996 and incorporated herein by Mackin, dated December 20, reference. 1996. (i) Employment Agreement between Ogden Filed as Exhibit 10.8(i) to Ogden's Form Corporation and David L. Hahn, 10-K for fiscal year ended December 31, dated December 1, 1995. 1995 and incorporated herein by reference. (j) Employment Agreement between Ogden Filed as Exhibit 10.8(j) to Ogden's Form Corporation and Rodrigo Arboleda, 10-K for fiscal year ended December 31, dated January 1, 1997. 1996 and incorporated herein by reference. (k) Employment Agreement between Ogden Filed as Exhibit 10.8(k) to Ogden's Form Projects, Inc. and Bruce W. Stone, 10-K for fiscal year ended December 31, dated June 1, 1990. 1996 and incorporated herein by reference. (l) Employment Agreement between Ogden Filed as Exhibit 10.8(l) to Ogden's Form Corporation and Quintin G. 10-K for fiscal year ended December 31, Marshall, dated October 30, 1996. 1996 and incorporated herein by reference. (m) Employment Agreements between Ogden Transmitted herewith as Exhibit 10.8(m). and Jesus Sainz, effective as of January 1, 1998.
10.9 First Amended and Restated Ogden Filed as Exhibit 10.3(b)(i) to Ogden's Corporation Guaranty Agreement made as Form 10-K for fiscal year ended December of January 30, 1992 by Ogden 31, 1991 and incorporated herein by Corporation for the benefit of Mission reference. Funding Zeta and Pitney Bowes Credit. 10.10 Ogden Corporation Guaranty Agreement Filed as Exhibit 10.3(b)(iii) to Ogden's made as of January 30,1992 by Ogden Form 10-K for fiscal year ended December Corporation for the benefit of Allstate 31, 1991 and incorporated herein by Insurance Company and Ogden Martin reference. Systems of Huntington Resource Recovery Nine Corp. 11 Ogden Corporation and Subsidiaries Filed as part of Ogden's Annual Report Detail of Computation of Earnings to Shareholders on pages 43 and 44 Applicable to Common Stock for the years thereof which is filed as Exhibit 13 to ended December 31, 1997, 1996 and 1995. Ogden's Form 10-K for fiscal year ended December 31, 1996 and incorporated herein by reference. 13 Those portions of the Annual Report to Transmitted herewith as Exhibit 13. Stockholders for the year ended December 31, 1997, 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-10.7(A)(II) 2 EXECUTIVE COMP PLAN AMENDMENT ADOPTED & EFFECTIVE EXHIBIT 10.7(a)(ii) TO OGDEN'S 1997 FORM 10-K AMENDMENT TO OGDEN'S 1990 STOCK OPTION PLAN: - ------------------------------------------- Ogden's 1990 Stock Option Plan currently provides that in the event the employment of an employee is terminated for any reason (other than termination because of retirement, disability, cause, or death), the employee may exercise his vested options at any time during the one-year period following the date of the employee's termination. The usual and customary period of time is three to six months following such termination. Management believes that the one-year period to exercise is too long during periods when employee cutbacks are necessary and is not in line with the usual period of time found in many other plans. Therefore, management, with the concurrence of the Management Committee, recommended that the 1990 Stock Option Plan be amended to provide that the period of time to exercise an option upon an employee's termination should be shortened to three months. Following discussion, where all questions posed were answered satisfactorily, and upon motion made and seconded, it was RESOLVED, that effective as of September 18, 1997, Paragraph 4.(e)(1) of the Ogden Corporation 1990 Stock Option Plan, Amended and Restated as of January 19, 1994, is hereby amended and restated in its entirety as follows: (1) In the event that the employment of a Participant with the Company shall terminate for any reason other than Disability, Retirement, Cause or Death (i) Options granted to such Participant, to the extent that they were exercisable at the time of such termination, shall remain exercisable for a period of ninety (90) days following such termination, on which date they shall expire, and (ii) Options granted to such Participant, to the extent that they were not exercisable at the time of such termination, shall expire at the close of business on the date of such termination; provided, however, that no Option shall be exercisable after the expiration of its term;" and it was further RESOLVED, that the foregoing amendment shall apply prospectively only and will not apply retroactively to any stock option grants made prior to September 18, 1997. EX-10.7(C)(II) 3 EXEC COMP PLAN AMENDMENT #1 TO OGDEN SERVICES CORP EXHIBIT 10.7(C)(II) TO OGDEN 1997 FORM 10-K OGDEN SELECT SAVINGS PLAN CONSENT OF COMMITTEE MEMBERS IN LIEU OF MEETING The undersigned, being all of the members of the Administrative Committee of The Ogden 401(k) Plan (formerly known as the Administrative Committee of the Ogden Profit Sharing Plan) (the "Committee"), by unanimous consent in writing, without the formality of convening a meeting, do hereby severally and collectively consent to the following action: WHEREAS, effective as of October 1, 1990, the Board of Directors of Ogden Services Corporation adopted the Ogden Select Savings Plan (the "Plan") to enable certain employees of Ogden Services Corporation (the "Corporation") to defer a portion of their compensation to a later date or event; and WHEREAS, effective January 1, 1995, the Plan was amended and restated; WHEREAS, the Committee desires to amend the Plan to provide a brokerage investment option and to change the Plan's eligibility provisions; and WHEREAS, Section 7.2 of the Plan authorizes the Committee to amend the Plan, provided that such amendment does not have a material effect on the cost to the Corporation on maintaining the Plan; NOW, THEREFORE, BE IT RESOLVED, that effective January 1, 1998, Section 3.1 of the Plan, "ELIGIBILITY", is amended by adding the following sentence to the end thereof: "Participation in the Plan by the Executive shall commence on the first day of the month following or coincident with the completion of 30 days of employment with the Company." and it is FURTHER RESOLVED, that effective January 1, 1998, Section 6.2, "INVESTMENT", is amended by adding the following to the end thereof: "The Investment Committee shall not be limited or restricted to investments of a character authorized for trustees or other fiduciaries under any present or future laws. The Investment Committee is authorized to establish, on behalf of each Participant, a "brokerage option" or account, to direct the Investment Committee to purchase or sell any capital, common, and preferred stocks, corporate and governmental or other obligations, whether debt or equity, mortgages, oil, gas or mineral properties and rights, royalties, payments or other interests in such properties, put and call options, and such other investments that the Investment Committee may deem appropriate;" and it is FURTHER RESOLVED, that the proper members of the Committee be, and each of them hereby is, authorized and directed to execute and deliver all documents, and take all such other actions which, with the advice of counsel, deemed necessary or desirable to implement the purpose and intent of this and the foregoing resolutions. This instrument may be executed in one or more counterparts. IN WITNESS WHEREOF, the undersigned have executed this instrument and directed that it be filed with the minutes of the proceedings of the Committee this 21st day of January, 1998. - ----------------------------------- ----------------------------------- Alane Baranello Carl Pope ----------------------------------- J. L. Effinger EX-10.7(P) 4 EXEC COMP PLAN, OGDEN KEY MANAGEMENT INCENTIVE PLA EXHIBIT 10.7(P) TO OGDEN'S 1997 FORM 10-K KEY MANAGEMENT INCENTIVE PLAN OBJECTIVE Ogden Corporation is introducing an alternative incentive plan designed to maximize shareholder value by increasing earnings per share. PLAN DESIGN The plan establishes target incentive awards by participant such that participants receive competitive market cash compensation for budget performance on two performance measures. The two performance measures are as follows: Measure EARNINGS PER SHARE (1) relative to actual levels achieved in 1997 by Ogden Corporation and targets set for 1998. Measure INDIVIDUAL CONTRIBUTION relative to the achievement of pre-determined goals. The weights that will be applied to the two performance measures are as follows: - The earnings per share award will constitute 50% of the total award at target. - The individual contribution award will constitute 50% of the total award. The size of the earnings per share component varies based on earnings per share performance above or below target. Threshold (or minimum) performance levels have been established. No maximum performance levels have been established. The size of the individual contribution component will be determined by operating income results, business development efforts, control of operating expenses and the achievement of individual, pre-determined goals. EPS OPERATING UNIT % GOAL ACHIEVED PAYOUT (AS % OF AWARD COMPONENT) - -------------- --------------- -------------------------------- Aviation < $1.35 0 Entertainment $1.50 25% Energy $1.65 100% Corporate $1.80 150% Individual performance represents 50% of the total incentive award. The total award is the sum of the earnings per share award and individual performance. ____________________ (1) Earnings per share shall be defined as primary earnings per share reported. PLAN A 2 EXAMPLE (NEW PLAN) Ogden Executive - Entertainment Base Salary $130,000 Target Incentive $ 60,000 (50% EPS $30,000) (50% Individual Cont. $30,000) Individual contribution will be determined based on operating income, business development (if applicable), controlling operating expenses, staff development, etc.
Performance Measure Actual Performance % Goal Achieved ------------------- ------------------ --------------- Earnings Per Share $1.65 $1.65 100% Individual contribution Above Average
Incentive Award Payout ---------------------- Earnings Per Share Performance earns 100% of $30,000 $30,000 Individual Contribution $25,000 ------- TOTAL AWARD $55,000 ======= (EXISTING PLAN) PLEASE NOTE: Under the existing incentive plan, the incentive award payout is calculated as follows: Base $130,000 Target Incentive $ 40,000 (75% Operating Income $30,000) (25% Individual Performance $10,000) Performance Measure Actual Measure ------------------- -------------- Operating Income Target $31.3 Operating Income $34.3 Incentive Award Payout ---------------------- Operating Income Performance at 110% of 30,000 $33,000 Individual Performance $10,000(2) ------- Total Award $43,000 ======= ____________________ (2) May vary dependent upon individual contribution. PLAN A 3 PLAN PARTICIPANTS A total of twenty-one (21) management employees may participate in the revised incentive plan in 1997. Employees are expected to be selected to participate in the plan based upon level of responsibility and ability to impact the performance measures stated. A breakdown of suggested participants by operating units is as follows: OPERATING UNIT NUMBER OF PARTICIPANTS Entertainment Four (4) Aviation Four (4) Energy Seven (7) Corporate Six (6) EX-10.8(M) 5 EMPLOYMENT AGREEMENTS BET OGDEN & JESUS SAINZ EXHIBIT 10.8(M) --------------- CONFIDENTIAL AND LEGALLY PRIVILEGED - ------------------ AGREEMENT --------- THIS AGREEMENT, made and entered into on the 15th day of January 1998, by and between OGDEN CORPORATION, a Delaware corporation maintaining its principal office at Two Pennsylvania Plaza, New York, New York (the "Company") and Jesus Sainz, an individual now residing at Paseo Conde de los Gaitanes, 34, La Maraleja 28109, Madrid Spain ("Sainz"). WHEREAS, the Company desires to retain Sainz in an executive capacity as an Executive Vice President of the Company and Sainz desires to be retained by the Company in such capacity; and WHEREAS, the Company desires that Sainz be contracted by Ogden Spain, S.A., a wholly-owned subsidiary of the Company ("Ogden Spain") and Sainz desires to render his services to Ogden Spain. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. SERVICES/CAPACITY/TERM. (a)(i) The Company and Sainz agree to and hereby do enter into this Agreement effective as of January 1, 1998 upon the terms and conditions set forth herein, pursuant to which Sainz shall be retained in an executive capacity as Executive Vice President of the Company. (ii) Sainz will be located in Madrid Spain and will be contracted by Ogden Spain pursuant to a services agreement executed simultaneously herewith (the "Ogden Spain Agreement"), whereby Sainz will have the responsibility for developing and expanding Ogden Spain's site based entertainment opportunities in Latin America, Spain and other parts of Europe. (iii) Immediately upon execution of this Agreement the consulting arrangement between Sainz and the Company dated July 12, 1996 shall terminate and become null and void. (b) This Agreement and Sainz's contracted services under the Ogden Spain Agreement shall be effective as of January 1, 1998 and shall be for a period of three (3) years, commencing on January 1, 1998 and continuing through December 31, 2000, and from year to year thereafter, subject to the right of the Company or Sainz to terminate this Agreement and his rendering of services under the Ogden Spain Agreement as of December 31, 1998, or any subsequent December 31, by written notice given to the other party at least sixty (60) days prior to such date stating an intention to terminate this Agreement and his rendering of services under the Ogden Spain Agreement (the "Termination Date"). Termination by the Company, or Sainz, in accordance with the provisions of the preceding sentence shall not require a statement of the reason or cause for such termination and shall not be deemed a breach or violation of this Agreement by the party giving such notice. As used in this Agreement, the phrase "term of this Agreement" shall be deemed to include the period subsequent to the date hereof and prior to the Termination Date. 2. TIME AND EFFORT/ABSENCES. During the "term of this Agreement", Sainz as a professional rendering his services to Ogden Spain (a) shall devote his entire time and attention during normal business hours to the business of Ogden Spain subject to the supervision of the Board of Directors of Ogden Spain, the Company and the President and Chief Executive Officer of the Company, and (b) shall not, without the prior written consent of the Company and Ogden Spain, engage in any other business activity whether or not such business activity is pursued for gain, profit, or other pecuniary advantage, provided, however, this restriction shall not be construed to restrict Sainz from (i) serving as a member of the Board, advisory Board or any Committee of EDS Spain, S.A.; (ii) performing services as a member of the Board of Directors, Board of Trustees or the like of any non-profit entity for which Sainz receives no compensation, PROVIDED THAT, such services do not unreasonably interfere with the ability of Sainz to perform the services and discharge the responsibilities required of Sainz under this Agreement and under the Ogden Spain Agreement; and (iii) from investing Sainz's assets in such form or manner as will not require any services on the part of Sainz in the operation of the business of the entity in which such investments are made. Sainz as a professional rendering his service to Ogden Spain and as an Executive Vice President of the Company shall be excused from rendering services during reasonable vacation periods and during other reasonable temporary absences as authorized from time to time by the Board of Directors of Ogden Spain or by the President and Chief Executive Officer of the Company. 3. CORPORATE OFFICES. If elected, Sainz will serve, without additional compensation, as an officer and director (or in either capacity) of any of the Company's other subsidiaries. 4. REMUNERATION/BONUS/OTHER BENEFITS. In consideration of the services and duties to be rendered and performed by Sainz as an Executive Officer of the Company and to Ogden Spain under the Ogden Spain Agreement, Sainz shall be provided with the compensation and benefits as described below: (a) An ANNUAL REMUNERATION, payable by Ogden Spain in equal monthly or bi-weekly installments, in the amount of Three Hundred Twenty Five Thousand Dollars ($325,000) or in such greater amount as may from time to time be fixed by the Board of Directors of Ogden Spain and authorized by the Company; (b) An AUTOMOBILE ALLOWANCE payable by Ogden Spain in the amount of $700 per month; (c) An ANNUAL INCENTIVE bonus, payable by Ogden Spain in such amount as may from time to time be fixed by the Board of Directors of Ogden Spain and authorized by the Company; (d) OTHER BENEFITS. It is intended that the Company shall provide Sainz with benefits at least as favorable as benefits provided on behalf of other executives of the Company who furnish services of comparable significance, as they may exist from time to time. Such benefits presently include Group Life Insurance, Supplemental Executive Group Life Insurance, Medical and Dental Insurance, the Ogden Stock Option Plan, the Executive Pension Plan, the Ogden Select Plan, and the Ogden Profit Sharing and 401(k). Provided, however, participation in any of the foregoing plans shall be in accordance 2 with the provisions of such plans and nothing contained in this Agreement is intended to or shall be deemed to affect adversely any of Sainz's rights as a participant under any such plans. However, nothing herein shall prevent the Company from modifying or discontinuing any benefit plan on a consistent and non-discriminatory basis applicable to all such executives. 5. EXPENSES. Upon the presentation of such supporting documents and forms as the Company and Ogden Spain shall reasonably request, Sainz shall be reimbursed for out-of-pocket expenses incurred from time to time on behalf of Ogden Spain and the Company in the performance of Sainz's duties under this Agreement and the Ogden Spain Agreement. 6. MEDICAL LEAVE, REASONABLE ACCOMMODATION, TERMINATION FOR MEDICAL INCAPACITY AND DISABILITY BENEFITS. The Company and Ogden Spain agree to provide Sainz with a medical leave of absence not to exceed six (6) months in total duration in any twelve (12) month period if Sainz has a medical condition that precludes Sainz from being fully functional to perform in his duties under this Agreement and the Ogden Spain Agreement. The term "fully functional" means able to travel to and from work, be at work, perform satisfactorily all essential functions of the positions as identified herein, and otherwise meet the demands of the position and the conditions of the Ogden Spain Agreement without significant risk of substantial harm to self or others. Any leave entitlement granted by Spanish law shall run concurrently with the commencement of Sainz's six month period of leave, whether such leave is taken all at once, intermittently or on a reduced time basis. Nothing herein is intended to diminish any entitlement granted by law. If appropriate under Spanish law, Ogden Spain will support Sainz's application for disability benefits. If Sainz is not able to return to his position with Ogden Spain in a fully functional capacity at the conclusion of six months of medical leave in a twelve month period, this Agreement and the Ogden Spain Agreement may be terminated by Ogden Spain and the Company at its sole discretion, without prior notice. Unless otherwise prohibited by law, Sainz agrees that he will furnish for review by a medical professional designated by Ogden Spain, copies of his medical records pertaining to any medical condition for which he requests a medical leave of more than twelve (12) weeks in duration, return to work from any such leave, work restrictions, modification or accommodation; or Sainz or Ogden Spain and the Company believes that Sainz has a medical condition that may be causing or contributing to performance or conduct deficiencies. Sainz also agrees to authorize any health care professional from whom Sainz is receiving diagnostic evaluation, treatment or other medical care, to discuss Sainz's medical condition with the medical professional designated by Ogden Spain to receive and review Sainz's medical records. Sainz further agrees that he will undergo, at the sole expense of Ogden Spain, any medical specialty evaluation if requested to do so by Ogden Spain. Ogden Spain shall provide Sainz, if he is otherwise qualified for the position, with medically necessary accommodation if it likely will enable Sainz to be fully functional in the position and is reasonable, feasible and will not impose undue hardship on Ogden Spain's operations. The term "medically necessary" means that the accommodation has risk-avoiding or therapeutic value in accordance with scientifically valid medical principles and practice and that Sainz requires similar accommodation when performing comparable non-work functions. 3 The inability of Sainz to be fully functional in his position for medical reasons shall not constitute a breach of this Agreement or the Ogden Spain Agreement by Sainz. If this Agreement or the Ogden Spain Agreement is terminated by Ogden Spain or the Company because Sainz is not fully functional in his position for medical reasons, as provided for in this paragraph, Ogden Spain shall be obligated to continue the then existing salary of Sainz as required by Paragraph 4.(a) hereof for a period equal to the greater of (a) twelve (12) months, or (b) such longer period as may be determined by the Company and Ogden Spain, in each case, reduced by any disability insurance benefits provided for the benefit of Sainz at the expense of the Company or Ogden Spain and by and workers compensation, social security and State disability programs, if applicable. 7. DEATH/DEATH BENEFIT. In the event of the death of Sainz during the "term of this Agreement", this Agreement and the Ogden Spain Agreement shall immediately terminate and Sainz's salary in effect at such time shall continue to be paid by Ogden Spain to Sainz's designated beneficiary or, if none, to Sainz's personal representative, through the last day of the month in which such death occurs. 8. SEVERANCE PAY. If the Company or Ogden Spain gives notice to terminate this Agreement in accordance with Paragraph 1.(b) hereof or if this Agreement or the services agreement of Sainz by Ogden Spain is terminated at any time: (i) by Sainz for Good Reason (as defined in Paragraph 9.), or (ii) by the Company or Ogden Spain, for any reason OTHER THAN for Cause (as hereinafter defined), Ogden Spain will be obligated to pay to Sainz a lump-sum cash payment in an amount equal to Sainz's then existing annual remuneration plus the amount of Sainz's incentive bonus for the twelve (12) month period ending on December 31 immediately preceding the date of termination, (the "Severance Payment"). Termination of this Agreement or Sainz's rendering of services with Ogden Spain on account of Sainz's disability (in accordance with Paragraph 6. above), death or Retirement (as hereinafter defined) will not require Ogden Spain to pay and provide any Severance Payment. Also, no Severance Payment will be required if this Agreement or the services agreement of Sainz by Ogden Spain is terminated for Cause (as defined in Subparagraph (b) below) or by Sainz (other than for Good Reason as defined in Paragraph 9.) in accordance with Paragraph 1.(b) above. The Severance Payment provided herein is provided in order to reinforce and encourage the continued loyalty, attention, and dedication of Sainz to the Company's and Ogden Spain's business and affairs without the concerns which normally arise from the possibility of a loss of employment security. As used herein, the terms "Retirement" and "Cause" shall have the following meanings, respectively: (a) RETIREMENT. Termination of this Agreement or Sainz's services with Ogden Spain on account of "Retirement" shall mean termination on or after Sainz's normal retirement date in accordance with the terms of the Ogden 401(k) Plan; and (b) CAUSE. Termination of this Agreement by the Company of Sainz's services by Ogden Spain for "Cause" shall mean termination as a result of (i) the willful and continued failure by Sainz to perform substantially the services contemplated by this Agreement or the Ogden Spain Agreement (other than any such failure resulting from Sainz's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to Sainz by the Company or Ogden Spain which specifically identifies 4 the manner in which it is alleged that Sainz has not substantially performed such services, or (ii) the willful engaging by Sainz in gross misconduct which is materially and demonstrably injurious to Ogden Spain or the Company; PROVIDED THAT, no act, or failure to act, on Sainz's part shall be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that such action or omission was in, or not opposed to, the best interests of the Company, or (iii) Sainz violates the Company's Policy of Business Conduct which has been provided to him upon execution of this Agreement. It is also expressly understood that Sainz's attention to or engagement in matters not directly related to the business of Ogden Spain shall not provide a basis for termination for Cause if such attention or engagement is authorized by the terms of this Agreement and the Ogden Spain Agreement. 9. TERMINATION BY SAINZ FOR GOOD REASON. The termination by Sainz of this Agreement or his rendering of services to Ogden Spain under the Ogden Spain Agreement for "Good Reason" shall be deemed a justifiable termination of this Agreement and the Ogden Spain Agreement and shall excuse Sainz from the obligation to render services as provided in Paragraph 1(a)(i) and (ii) and Paragraph 2. hereof. As used herein, the phrase "Good Reason" shall mean: (a)(i) a change in Sainz's status, title or position as an officer of the Company in the executive capacity set forth in this Agreement or as an executive of Ogden Spain as set forth in the Ogden Spain Agreement which, in Sainz's reasonable judgment, does not represent a promotion from or enhancement of his status, title and position, or (ii) the assignment by the Board of Directors of Ogden Spain or the Company to Sainz of any duties or responsibilities which, in Sainz's reasonable judgment, are inconsistent with such status, title or position, or (iii) any removal of Sainz from or any failure to reappoint or reelect Sainz to such position, PROVIDED, however, a termination by the Company of this Agreement or Sainz's services with Ogden Spain, for Cause or on account of the disability, retirement or death of Sainz or the termination by Sainz of this Agreement or his services with Ogden Spain other than for Good Reason, shall not constitute a termination for Good Reason; (b) a reduction in Sainz's annual remuneration or a failure by Ogden Spain to pay him any installment of the annual remuneration required by Paragraph 4.(a) hereof which failure continues for a period of twenty (20) days after written notice thereof is given by Sainz to Ogden Spain; (c) the failure by the Company or Ogden Spain within ten (10) days of notice from Sainz to obtain the assumption of this Agreement and the Ogden Spain Agreement in form and substance to the reasonable satisfaction of Sainz by any successor (other than by merger or consolidation for which no separate assumption is necessary) as referred to in Paragraph 12; or (d) any refusal by the Company or Ogden Spain to allow Sainz to attend to matters or engage in activities not directly related to the business of the Company and Ogden Spain which is permitted by this Agreement and the Ogden Spain Agreement. 10. NOTICE OF TERMINATION. Any purported notice of termination of this Agreement and Sainz's services agreement with Ogden Spain shall be communicated in writing and delivered to the other party as provided in Paragraph 13. below (hereinafter a "Notice of Termination"). 11. CONFIDENTIALITY AND LIMITED COVENANT NOT TO COMPETE. 5 In connection with the performance of Sainz's duties in a position of trust and confidence, Sainz will develop or receive confidential, restricted or unpublished information involving, customer-related information, vendor-related information, copyrights, lists, data and other information, strategic planning or operating data, computer programs, financial, pricing, operating and training data or other confidential business techniques, processes, methods or information which is not generally known to the public (collectively referred to as "proprietary information"). Sainz will receive or have access to "proprietary information" which was obtained and developed through the investment of substantial amounts of money, time and effort by the Company or Ogden Spain. Sainz acknowledges and agrees that disclosure by him of "proprietary information" or its use for the benefit of any other person or entity would be injurious to Ogden Spain and the Company. Sainz also acknowledges and agrees that unless Sainz agrees to maintain the confidentiality of such "proprietary information" and to limit its use solely to the Company and Ogden Spain, Sainz would not have been offered this Agreement and had his services requested by Ogden Spain. Regardless of the cessation of Sainz's services for any reason, his obligation to continue to maintain the confidentiality of the "proprietary information" shall continue for a period of two (2) years following his Termination Date. Sainz agrees to deliver to the Company or Ogden Spain, at its request, or in any event, upon cessation of this Agreement or his services with Ogden Spain (for whatever reason and at whatever time) (a) all memoranda, notes, records, files or other documentation, whether made or compiled by Sainz alone or in conjunction with others (regardless of whether such persons are employed by the Company or Ogden Spain); (b) all "proprietary information" of the Company or Ogden Spain which is in Sainz's control or possession; and (c) copies of such information, as well as other corporate property. Regardless of cessation of this Agreement or Sainz's rendering of services and without any fee, Sainz will assist the Company or Ogden Spain in protecting all rights the Company and Ogden Spain may have to such "proprietary information". Sainz recognizes that, as a direct consequence of the materials, information and training provided to him by Ogden Spain and the Company, the access he is granted to "proprietary information" and the opportunities that he will have while an Executive Vice President of the Company and contracted by Ogden Spain to cultivate the loyalty and goodwill of customers, suppliers, vendors and other persons, it is important that Sainz refrain from engaging in activities which could result in damage to the business of Ogden Spain or the Company. Sainz further recognizes that the Company and Ogden Spain have invested considerable time and money to train its employees, in the services provided by Ogden Spain and the Company and to develop the special skills required to perform such services. Therefore, Sainz will not, during the term of this Agreement and the term of Sainz's services with Ogden Spain under the Ogden Spain Agreement and for a period of two (2) years immediately thereafter, solicit, entice, hire or otherwise seek to persuade, either directly or through any other entity, any officer, employee, consultant or agent of Ogden Spain or the Company to discontinue such relationship for any reason. During such period, Sainz will not solicit business with any customers of Ogden Spain or the Company, nor will Sainz seek to entice or persuade any sources of referral, vendors or other entities, who are then doing business with Ogden Spain or the Company to reduce, discontinue or curtail any services provided to Ogden Spain or the Company in any respect. To avoid the use of "proprietary information", Sainz agrees to refrain from engaging in competing employment either directly or indirectly on his own behalf or as an agent, consultant or employee of any partnership, corporation or other entity, in Latin America, Spain or other parts of Europe where the Company and Ogden Spain conducts business for a period of two (2) years after Sainz's rendering of services with Ogden Spain ceases (regardless of the reason for cessation of such services). Sainz further agrees with the Company and Ogden Spain that during this same period, he will not, directly or indirectly, 6 enter into or engage in the ownership, control or partnership of an entity engaged in a competing business with Ogden Spain or the Company in Latin America, or Europe. Sainz further agrees to notify the Company upon obtaining and before commencing new employment during this period and to provide the Company any reasonable information requested about his prospective employer and prospective job duties. Sainz agrees that prior to accepting new employment, he will disclose, in writing, with a copy to the Company, the existence and terms of this paragraph 11 to any prospective or subsequent employer. Sainz recognizes and agrees that ascertaining damages in the event of his breach or violation of any covenant or undertaking contained in this Agreement or the Ogden Spain Agreement would be difficult, if not impossible, and further recognizes that the various rights and duties created in this Agreement or the Ogden Spain Agreement are essential for the operation of Ogden Spain and the Company's business operations. Consequently, irreparable injury would result from any violation of this Agreement and the Ogden Spain Agreement by Sainz. Since it would be difficult, if not impossible, to compensate fully the Company or Ogden Spain by monetary damages in the event of Sainz's breach (although the Company and Ogden Spain retain the right to commence a civil action seeking monetary damages), Sainz agrees that the Company and Ogden Spain, in addition to and without limiting any other remedy or right they may have, shall have the immediate right to obtain a preliminary, and subsequently, a final injunction against Sainz, to be issued by a court of competent jurisdiction, enjoining Sainz from engaging in any breach or violation of this Agreement or the Ogden Spain Agreement. An injunction shall be issued without posting a bond that otherwise might be required. If an injunction is issued or if monetary damages are awarded against Sainz, he will reimburse the Company and Ogden Spain for the legal fees and court cost incurred in obtaining such relief (including all appeals and other proceedings). 12. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of: (a) Any successors or assigns of the Company or Ogden Spain, whether by way of a merger or consolidation, or liquidation of the Company or Ogden Spain, or by way of the Company or Ogden Spain selling all or substantially all of the assets of the Company or Ogden Spain to a successor entity; and (b) Sainz's estate, his or her executors, administrators, heirs and beneficiaries. 13. NOTICES. Any notice or other communication required under this Agreement shall be in writing, shall be deemed to have been given and received when delivered in person, or, if mailed, shall be deemed to have been given when deposited in the mail, first class, registered or certified, return receipt requested, with proper postage prepaid, and shall be addressed as follows: If to the Company or Ogden Spain addressed to: Ogden Corporation Two Pennsylvania Plaza New York, New York 10121 Attn: President and Chief Executive Officer 7 With a copy to its: Senior Vice President and General Counsel If to Sainz, addressed to: Jesus Sainz Paseo Conde de los Gaitanes, 34, La Maraleja 28109, Madrid Spain or such other address as to which any party hereto may have notified the other in writing. 14. GOVERNING LAW. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York, without regard to its conflict or choice of laws provisions to preserve the parties' intent, and the enforceability of this Agreement. Any action or proceeding brought or arising in connection with this Agreement shall be venued in the County of New York, New York State, and the parties hereto hereby submit to the jurisdiction of such courts regardless of the inconvenience of such forums. 15. ENTIRE AGREEMENT. This Agreement and the Ogden Spain Agreement contains the entire arrangement or understanding between Sainz and the Company and Ogden Spain relating to the Sainz's rendering of services to Ogden Spain and his retention as Executive Vice President of the Company. No provision of the Agreement and the Ogden Spain Agreement may be modified or amended except by an instrument in writing by or for both parties hereto. All references to paragraphs refer to paragraphs of this Agreement. 16. WAIVER. Failure of either party hereto to insist upon strict compliance by the other party with any term, covenant or condition hereof shall not be deemed a waiver of such term, covenant or condition, nor shall any waiver or relinquishment or failure to insist upon strict compliance of any right or power hereunder at any one or more times be deemed a waiver or relinquishment of such right of power at any other time or times. 17. ASSIGNMENT BY SAINZ. The rights and benefits of Sainz under this Agreement are personal to him and no such right or benefit shall be subject to voluntary or involuntary alienation, assignment or transfer; provided, however, that nothing in this Paragraph shall preclude Sainz from designating a beneficiary or beneficiaries to receive any benefit payable on his death. 18. SEVERABILITY. If for any reason any provision of this Agreement shall be held invalid, such invalidity shall not affect any other provision of this Agreement not held so invalid, and all other provisions shall to the full extent consistent with law continue in full force and effect. If any such provision shall be held invalid in part, such invalidity shall in no way affect the remaining portion of such provision not held so 8 invalid, and the remaining portion of such provision, together with all other provisions of this Agreement, shall to the full extent consistent with law continue in full force and effect. In the event that any of the provisions of paragraph 11 shall be deemed by any court of competent jurisdiction to be unenforceable because of its duration, scope, or area, it shall be deemed to be and shall be amended to conform to the scope, period of time, and geographical area which would permit it to be enforced. The court shall make such modifications as are necessary to effectuate the intent of the parties in entering into this Agreement. 19. HEADINGS. The headings of paragraphs are included solely for convenience of reference and shall not control the meaning or interpretation of any of the provisions of this Agreement. OGDEN CORPORATION By: - ----------------------------------- ------------------------------------- Jesus Sainz President, Chief Executive Officer and Chairman of the Board 9 EXHIBIT 10.8 (M) This Service Agreement is made in Madrid, Spain on this 15th day of January, 1998 and shall be effective as of January 1, 1998. BETWEEN On the one hand, Mr. R. Richard Ablon, acting for and on behalf of OGDEN SPAIN, S.A., domiciled at C/Jose Abascal, 58. 4DEG. planta Madrid, Spain. This Company is duly recorded with the Madrid Company's Registry at Volume Section ___, Sheet ___, Page___ and its Tax Identification Number is (hereinafter, "the Company"). On the other hand, Mr. Jesus Sainz, of legal age, Identity Card Number __________, domiciled at Paseo Conde de los Gaitanes, 34, La Moraleja, 28109 Madrid, Spain (hereinafter, "the Manager"). The above parties appear in their respective name and interest mutually acknowledge their legal capacity to bind themselves pursuant to the present Services Agreement. WHEREAS I. The Company is a company engaged in the development of site based entertainment opportunities in Latin America, Spain and other parts of Europe. II. The Company's interested in having the Manager render his services to the Company in the conditions hereby agreed upon as per the following. CLAUSES 1. APPOINTMENT The Manager has been appointed, has accepted and will serve the Company as Managing Director effective as of January 1, 1998 as per the resolutions of the Board of Directors of the Company to this effect, having the Board of Directors of the Company delegated in the Manager, in accordance with article 141.2 of the Corporations Act, all powers of the Board of Directors which may be delegated under Spanish law. Such appointment has been made on the basis of reciprocal confidence and trust between the parties. 2. DUTIES 2.1 The Manager will devote the whole of his working time (normal business hours of the Company and all reasonable additional hours as his duties may require, to the business of the Company. Hours worked shall depend upon the requirements of his assigned tasks and upon Company operating hours. 2.2 The Manager shall report to the Board of Directors of the Company. 2.3 The Manager will perform all reasonable duties expressly assigned to him by the Board of Directors and will be entitled to exercise the authority and powers of his position to further Company's business in the most diligent manner. The Manager shall perform his assigned duties as Manager in full compliance with statutory regulations, the provisions of the memorandum and articles of association, the Company's internal rules of procedure and the resolutions of the shareholders and the Board. The Manager shall carry out his duties at the Company's headquarters located at Madrid. The Company shall be entitled to assign the Manger other duties in line with his skills and knowledge, taking due consideration of his personal situation and both at his duty station or at other locations where he may reasonably be expected to render his services. 3. RESTRICTIVE COVENANTS While serving as Manager of the Company, the Manager shall not transact business for his own or for another's account in those business sectors in which the Company is active nor shall he have any interests in any Company which is in competition with the Company. Exempted shall be interest holdings which grant to the holder no influence over the executive bodies of a company and serving as a member of the Board, advisory Board or any Committee of EDS Spain, S.A.. The performance of such business transactions or secondary occupations, or the acceptance of supervisory board seats or similar assignments outside of the Company shall require the prior written approval of the Board. The Manager shall accept duties and assignments in which the Company has vested interest for a period to be determined in consultation with the shareholders. Contacts with suppliers, clients and other business partners may not be exploited for personal gain. 4. REMUNERATION 4.1 In accordance with the corresponding resolution of the Shareholders' Meeting of the Company, the annual fixed gross remuneration of the Manager for his services shall be Three Hundred Twenty-Five Thousand ($325,000 U.S. Dollars) payable in equivalent Pesetas, payable in arrears in twelve equal payments. The amount above referred is understood as referred to a period of a calendar year. Therefore, if the Manager joins or is terminated on a date different from the beginning or termination of the calendar year, he will obtain the amounts actually earned, proportional to the period worked during the calendar year. This remuneration will be reviewed, as the case may be, by the Shareholders' Meeting every year. 2 4.2 Moreover, the Manager shall have the opportunity of receiving an annual discretionary incentive bonus. 4.3 The Company will also provide the Manager with a monthly automobile allowance in the amount of $700 U.S. Dollars, payable in equivalent Pesetas. 4.4 The Company shall withhold from the Manager any corresponding payments for Personal Income Tax or any other tax which replaces the latter or which becomes payable by reason of the legal provision in force and it shall file the tax return for the corresponding withholding and the Manager shall pay any amount for which he is legally liable. The Manager shall be responsible for his own registration and contributions to the Social Security in accordance with the applicable laws. 4.5 The amounts referred to in Section 4.1 and 4.3 above in U.S. Dollars, shall be converted into Pesetas using the official exchange rate of the penultimate day of the month. 5. HOLIDAYS The Manager shall be entitled to be absent from duty during statutory, bank and other public holidays and for a further thirty calendar days in each calendar year to be taken at a time or times to be agreed with the Board. 6. INVENTIONS The Manager hereby agrees that the Company is entitled to all rights deriving from inventions, development, concepts, trademarks or other rights worthy of protection for which the Manager is responsible during the term of this Agreement and which are related to fields of commercial activity in which the shareholders, or the Company are in any form active. This provision shall apply regardless of the protectability of such inventions, developments, concepts, trademarks or other rights and shall be deemed duly compensated by the remuneration under Article 4 of this Agreement. The Manger shall assist in acquiring industrial property rights for the Company both in Spain and abroad. The Manager shall notify the Company in writing within four weeks after commencing the rendering of services to the Company of any inventions he made prior to this entering into force. 7. DUTY TO OBSERVE SECRECY 7.1 The Manager undertakes not to reveal or disclose any confidential or secret information of the Company, specifically trade and operating secrets which may become known to him in the course of his relationship with the Company and to observe such secrecy both during the period of this Agreement and following its termination. 7.2 If the Company obtains confidential information from a third party under an agreement including restriction on disclosure, the Manager agrees with the Company that he will not 3 infringe the restriction, either before or after his service as Managing Director, without the Company's consent. 8. TERM AND TERMINATION 8.1 This Agreement and the appointment to the position of Manager will enter into force effective as of January 1, 1998 and shall remain in force for a period of three years, and year to year thereafter, provided that the Agreement can be revoked in accordance with the legal provisions and by either the Manager or the Company as of December 31, 1998 or any subsequent December 31 by written notice given to the other party at least sixty (60) days prior to such termination. 8.2 When terminated for any reason, the Manager will immediately return to the Company all documents, correspondence, drawings and other material (including copies) belonging to the Company, which are in his possession or under his control. 9. NON-COMPETITION 9.1 Both parties agree that the Company will have the option of prohibiting the Manager once the services contract is terminated, howsoever arising, and during the period below mentioned to engage directly or indirectly as employee, officer, director, shareholder, lender, sales representatives or otherwise with any company or business competing directly with the Company in Spain in providing services which are the same or similar services to those provided by the Manager to the Company. 9.2 If the option is exercised by the Company, the non-competition clause shall apply for a period of twenty-four (24) months as of the termination of the present contract. 9.3 In the event of enforcement of this non-competition clause, the Manager, as compensation for non-competition, will receive an amount equivalent to two years remuneration and bonus. Such amount will be paid during the months in which the non-competition clause is in effect. 9.4 The option of enforceability of the non-competition clause, shall be exercised by the Company in the following thirty (30) calendar days after the termination of the present contract, howsoever arising. 9.5 In the event of enforcement of this non-competition clause, and if the Manager fails to comply with these provisions, he shall repay to the Company the indemnity which he received. 9.6 Notwithstanding the above, in the event of failure of the Manager in his obligation of non-competition, he shall pay, in addition to the amount stated in point 9.5, an additional penalty. The amount of this penalty is equal to the amount received by the Manager under clause 9.5 as provided for in Articles 1152 and 1152 of the Civil Code. 4 This shall not exclude any other indemnity to which the Company is entitled to and will not liberate the Manager of his undertaking of non-competition. 10. MISCELLANEOUS 10.1 This Agreement shall be effective as from January 1, 1998. 10.2 Any change to or waiver of any provision will not affect any others. 10.3 This Agreement will be governed by and construed in accordance with the Spanish Corporations Act and any other applicable laws. 10.4 All modifications to this Agreement will be ineffective unless put in writing and signed by both parties. 10.5 Should any provision in this Agreement be invalid, this shall not affect the validity of the remaining provisions, which shall remain in full force and effect. IN WITNESS WHEREOF, both parties have signed this Agreement in the place and on the date above written. SIGNED AS FOLLOWS: By --------------------------------- Duly authorized for and on Behalf of OGDEN SPAIN, S.A. By --------------------------------- The Manager 5 EX-13 6 THOSE PORTIONS OF THE ANNUAL REPORT TO STOCKHOLDER 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. During the past two years, Ogden disposed of most of the operations, which were not part of its core business segments--Entertainment, Aviation, and Energy. Ogden elected to change the reporting of its business segments as of January 1, 1997, and restated its prior years' presentation to conform to this revised segment reporting. Two of Ogden's core businesses formerly reported as part of the Services segment--Entertainment and Aviation--have been designated as separate business segments. All other operations formerly in the Services segment, mainly the Facility Management and Technology groups, were transferred to the Other segment except for Facility Management operations at Ogden's waste-to-energy plants and its environmental business, which have been transferred to the Energy segment. Noncore businesses scheduled for disposition are included in the Other segment. Operations: 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 businesses sold during 1996 and 1997--namely, Facility Services, W.J. Schafer Associates, and Ogden Professional Services (formerly in the Technology group) and certain operations of Atlantic Design Company (ADC), a contract manufacturing business. 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 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 services operations, which was 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 and 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 and the commencement of operations of the independent power group's Edison Bataan facility and its acquisition of Pacific Energy, Inc., in September 1997. Consolidated operating income for 1997 was $137,714,000, which was approximately 16.5% or $19,500,000 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 amphitheater venues and 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 services location, which were partially offset by reduced activity in catering and European customer activity. The Energy segment's income from operations was $4,000,000 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 1996 favorable legal settlements, 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 administrative 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 $2,800,000 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 has three interest rate swap agreements entered into as hedges against interest rate exposure on three series of adjustable-rate project debt that resulted in additional debt service 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 $3,500,000 higher, chiefly associated with borrowings relating to loans to customers, partially offset by lower borrowings on revolving credit lines. X-1 Ogden has two interest rate swap agreements covering notional amounts of $100,000,000 and $4,700,000, respectively. The first swap agreement expires on December 16, 1998, and was entered into in order to convert Ogden's fixed-rate $100,000,000, 9.25% debentures into variable-rate debt. The second swap agreement expires on 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 22 to the Consolidated Financial Statements contains a more detailed reconciliation of the variances from the Federal statutory income tax rate. Revenues for 1996 were $2,031,081,000, which was approximately 7.0% or $153,900,000 lower than the comparable period of 1995. The Other segment's revenues declined $175,800,000, primarily reflecting the sale of Facility Services' operations outside of New York City as of June 30, 1996, and certain Technology businesses sold in late 1995 and 1996 and a decrease in revenues in an air range and pilot training systems company. This decline in revenues was partially offset by increased revenues of ADC and a net gain of $13,200,000 from the disposition of certain businesses in 1996. The Energy segment's revenues declined $45,500,000, reflecting lower construction revenues of $66,500,000, primarily due to the completion of the Montgomery County (Maryland) waste-to-energy facility in August 1995 and reduced construction at the Detroit (Michigan) facility as well as a reduction of $24,200,000 due to the sale of its laboratory business in January 1996. This decline was partially offset by increased waste-to-energy services revenues of $41,300,000 reflecting a full year of commercial operations of the Onondaga County (New York) and Montgomery County facilities, which commenced operations in March and August 1995, respectively; increased activity and efficiency at other facilities; and the effect of certain legal settlements. The Aviation segment's revenues were $23,300,000 lower, chiefly associated with the sale of ground handling service operations at John F. Kennedy International Airport in 1996 and the sale of a Brazilian aviation unit in 1995. The revenue declines in the Other, Energy, and Aviation segments were partially offset by increased revenues of $90,600,000 in the Entertainment segment, primarily reflecting new contracts; increased customer activity, primarily at sports venues; the start-up of operations in Europe and Argentina; and the acquisition of Florida Leisure, Inc., in 1996. Consolidated operating income for 1996 was $118,200,000 as compared with $49,400,000 in 1995. Operating income for 1995 was reduced by charges totaling $82,800,000, which reflected the early adoption of Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"; restructuring initiatives; and other unusual losses and costs. These charges in 1995 were partially offset by a gain of $13,500,000 from the sale of a noncore business in 1995. In addition, 1996 reflects an increase of $23,200,000 in the Entertainment segment's income from operations, primarily due to new contracts, increased customer activity, a reduction of losses in European operations, the start-up of operations in Argentina, and the acquisition of Florida Leisure, Inc., in 1996. The Other segment's income from operations was $5,800,000 lower, chiefly associated with businesses that have been disposed of and reduced margins, higher operating costs, adjustment to inventories and deferred charges at ADC, and lower earnings in overseas operations, partially offset by a net gain of $13,200,000 from the disposition of certain noncore businesses included in the Other segment, namely, the sale of Facility Services' operations outside of New York City and a unit of the Technology group--Ogden Professional Services--and the discontinuance of asbestos abatement operations. The Energy segment's income from operations was $6,700,000 lower, primarily reflecting a decrease of $26,900,000 in construction income reflecting the completion of the Montgomery County facility in August 1995 and reduced activity at the Detroit facility as well as a reduction of $3,500,000 in the independent power group's income, primarily due to increased development costs and a facility shutdown for major boiler repairs, decreased energy rates at one facility, and reduced profitability at several facilities. These decreases were partially offset by an increase of $21,500,000 in waste-to-energy income, chiefly associated with the effect of certain legal settlements in 1995 and 1996 also referred to above and the effect of restructuring costs incurred in 1995. Energy has three interest rate swap agreements entered into as hedges against interest rate exposure on three series of adjustable-rate project debt that resulted in additional debt service of $700,000 in 1996 and lower debt service of $230,000 in 1995. The effect of these swap agreements on the weighted-average interest rate of project debt was not significant. X-2 Interest income for 1996 was relatively comparable with 1995. Interest expense for 1996 was $1,900,000 lower than 1995, chiefly associated with lower borrowings, lower interest rates on variable-rate debt, and a reduction of interest costs on two interest rate swap agreements covering notional amounts of $100,000,000 and $6,300,000, respectively. The first swap agreement expires on December 16, 1998, and was entered into in order to convert Ogden's fixed-rate $100,000,000, 9.25% debentures into variable-rate debt. The second swap agreement expires November 30, 2000, and was entered into in December 1995 in order to convert Ogden's $6,300,000 variable-rate debt to a fixed rate. These agreements resulted in additional interest expense of $200,000 in 1996 and $600,000 in 1995. The effect of these swap agreements on the weighted-average interest rate was not significant. Equity in net income of investees and joint ventures for 1996 was $3,300,000 lower, primarily reflecting reduced earnings in the independent power group's joint ventures due to reduced energy prices. The effective income tax rate for 1996 was 42.1%, compared with 84.5% in 1995. This decrease of 42.4% was primarily due to the effect of adopting SFAS No. 121 in 1995, which included the write-down of goodwill for which the Corporation did not receive tax benefits, as well as higher foreign tax rates and certain nondeductible foreign losses in 1995, which did not recur in 1996. Note 22 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 1997, capital investments amounted to $116,201,000 of which $28,500,000, inclusive of restricted funds transferred from funds held in trust, was for Energy facilities and $87,701,000 was for normal replacement and growth in Entertainment ($52,523,000), Aviation ($19,008,000), Energy ($11,467,000), and Corporate and Other ($4,703,000) operations. At December 31, 1997, future capital commitments amounted to $158,700,000, which included $86,100,000 for normal replacement, modernization, and growth in Entertainment ($45,200,000); Aviation ($23,200,000); Energy ($16,800,000); and Corporate and Other ($900,000) operations. Also included was $61,200,000 for Energy's coal-fired power project in the Philippines reflecting $41,800,000 for the remaining mandatory equity contributions, $5,700,000 for contingent equity contributions, and $13,700,000 for a standby letter of credit in support of debt service reserve requirements. Funding for the remaining mandatory equity contribution is being provided through a bank credit facility, which must be repaid in December 2001. The Corporation also has a $11,400,000 contingent equity contribution in an entertainment venture. In addition, compliance with standards and guidelines under the Clean Air Act Amendments of 1990 will require further Energy capital expenditures currently estimated at $40,000,000 by December 2000, subject to 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 two vendors with specified amounts of business over a three-and-a-half-year period. If these amounts are not provided, the Corporation may be liable for prorated damages of approximately $5,700,000. 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 $97,679,000 on December 30, 2002, if such debt is not refinanced prior to that time. Ogden's repurchase obligation is collateralized by bank letters of credit. 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, 1997, was $46,562,000. In February 1998, this amount was increased to $51,624,000. During 1997, this customer purchased certain subordinated secured debt and repaid other amounts owed to Ogden in an aggregate amount of $38,900,000. In February 1998, this customer repaid an additional $7,343,000 owed to Ogden. In addition, at December 31, 1997, the Corporation had guaranteed indebtedness of $20,683,000 of an affiliate and principal tenant of this customer, which indebtedness is due in September 1998. Ogden has also guaranteed borrowings of another customer amounting to approximately $14,400,000 as well as $15,500,000 of borrowings of joint ventures in which Ogden has an equity interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. X-3 In June 1997, the Financial Accounting Standards Board issued SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131, "Disclosure about Segments of an Enterprise and Related Information." The adoption of these Statements, which concern disclosure standards only, will have no impact on Ogden's consolidated results of operations, financial position, or cash flows. The Corporation adopted American Institute of Certified Public Accountants Statement of Position No. 96-1, "Environmental Remediation Liabilities," at December 31, 1996. Management has concluded that it does not have any liability or disclosure requirements as a result of adopting this Statement of Position. Liquidity/Cash Flow: Net cash provided by operating activities in 1997 was $66,400,000 higher than 1996, primarily due to the sales of businesses in 1996 and 1997 and the collection of receivables reflecting the settlement of certain matters in dispute. Net cash used in investing activities increased $101,800,000. The principal changes were a net increase of $46,200,000 in acquisitions reflecting the purchase of Pacific Energy, Inc., Enchanted Castle, and a 60% interest in four cogeneration plants in China; an increase of $52,000,000 in capital expenditures primarily in the Entertainment segment, reflecting investments in the American Wilderness Experience-TM- project and expansion projects at several other facilities, and at Aviation's cargo facility in the Czech Republic; lower proceeds of $29,800,000 received from the sale of businesses; and a decrease in other receivables of $40,500,000, primarily due to the collection of notes receivable from a customer. Net cash used in financing activities decreased $37,500,000, primarily due to an increase in net borrowings of $40,000,000. This decrease was partially offset by lower use of restricted funds held in trust of $3,000,000. Exclusive of changes in Energy facility construction activities and the contracts discussed herein, the Corporation's other types of contracts are not expected to have a material effect on liquidity. Debt service associated with project debt, which is an explicit component of a client community's obligation under its service agreement, is paid as it is billed and collected. Cash required for investing and financing activities is expected to be satisfied from operating activities; available funds, including short-term investments; proceeds from the sale of noncore businesses; proceeds from the sale of debt or equity securities; and the Corporation's unused credit facilities to the extent needed. At December 31, 1997, the Corporation had $185,671,000 in cash and cash equivalents and unused revolving credit lines of $217,000,000. In January 1998, Ogden's Board of Directors reauthorized the purchase of shares of the Corporation's common stock in an amount up to $100,000,000. Fifty thousand (50,000) shares of common stock were purchased in February 1998 for $1,372,000. In addition, in January 1998, a joint venture in which the Corporation has a 28% interest was awarded a 30-year concession contract to develop, improve, and operate 33 airports in Argentina. Ogden has a commitment of $28,000,000 for its equity contribution in this joint venture. In 1996, the Corporation started a program to upgrade its principal computer hardware and software systems. Completion of this project, scheduled for 1998, will result in the related systems being able to process information after the turn of the century. In connection with the Year 2000 problem, the Corporation is presently assessing the impact of this problem on its business, including its facility systems, its operational systems, and its overseas operations. Certain noncompliant systems are in the process of being replaced or upgraded with packaged software that is Year 2000 compliant. The Corporation intends to request third parties with whom it does business to ascertain whether they will be Year 2000 compliant. The Corporation may be adversely impacted if such third parties do not adequately address this issue. Both internal and external resources may be used in addressing Year 2000 issues. Based on information obtained to date, costs of addressing potential Year 2000 problems are not expected to have a material adverse impact on Ogden's financial position, results of operations, or cash flows. Any statements in this communication, which may be considered to be "forward looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995, are subject to certain risks and uncertainties. The factors that could cause actual results to differ materially from those suggested by any such statements include, but are not limited to, those discussed or identified from time to time in the Corporation's public filings with the Securities and Exchange Commission and more generally, general economic conditions, including changes in interest rates and the performance of the financial markets; changes in domestic and foreign laws, regulations, and taxes; changes in competition and pricing environments; and regional or general changes in asset valuations. X-4 OGDEN CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA
DECEMBER 31, -------------------------------------------------------------------- 1997 1996 1995 1994 1993 ------------ ------------ ------------ ------------ ------------ (In thousands of dollars, except per-share amounts) Total Revenues............................. $ 1,749,725 $ 2,031,081 $ 2,184,993 $ 2,104,547 $ 2,035,860 ------------ ------------ ------------ ------------ ------------ Income before cumulative effect of changes in accounting principles................. 75,673 64,534 7,444 67,826 62,130 Cumulative effect of changes in accounting principles............................... (1,520) (5,340) ------------ ------------ ------------ ------------ ------------ Net income................................. 75,673 64,534 7,444 66,306 56,790 ------------ ------------ ------------ ------------ ------------ Basic Earnings Per Share: Income before cumulative effect of changes in accounting principles................. 1.51 1.30 0.15 1.55 1.43 Cumulative effect of changes in accounting principles............................... (0.03) (0.12) ------------ ------------ ------------ ------------ ------------ Total...................................... 1.51 1.30 0.15 1.52 1.31 ------------ ------------ ------------ ------------ ------------ Diluted Earnings Per Share: Income before cumulative effect of changes in accounting principles................. 1.49 1.28 0.15 1.51 1.39 Cumulative effect of changes in accounting principles............................... (0.03) (0.11) ------------ ------------ ------------ ------------ ------------ Total...................................... 1.49 1.28 0.15 1.48 1.28 ------------ ------------ ------------ ------------ ------------ Total Assets............................... 3,639,295 3,597,532 3,652,671 3,644,886 3,340,729 ------------ ------------ ------------ ------------ ------------ Long-Term Obligations...................... 1,927,330 1,958,717 2,044,186 2,047,031 1,946,547 ------------ ------------ ------------ ------------ ------------ Shareholders' Equity....................... 566,091 550,925 546,978 596,818 486,267 ------------ ------------ ------------ ------------ ------------ Shareholders' Equity Per Common Share...... 11.24 11.06 11.04 12.21 11.15 ------------ ------------ ------------ ------------ ------------ 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 (see Notes 20 and 21 to the Consolidated Financial Statements). Net income in 1993 was reduced by $.08 per share, diluted, reflecting the retroactive effect of the increased Federal income tax rate that was enacted in August 1993 on the previous years' deferred income tax balances. X-5 OGDEN CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED INCOME
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1997 1996 1995 ---------------- ---------------- ---------------- Service revenues........................................... $ 1,133,108,000 $ 1,392,686,000 $ 1,563,748,000 Net sales.................................................. 582,134,000 621,830,000 551,345,000 Construction revenues...................................... 3,402,000 69,900,000 Net gain on sale of businesses............................. 34,483,000 13,163,000 ---------------- ---------------- ---------------- Total revenues............................................. 1,749,725,000 2,031,081,000 2,184,993,000 ---------------- ---------------- ---------------- Operating costs and expenses............................... 855,959,000 1,089,265,000 1,318,847,000 Costs of goods sold........................................ 539,640,000 592,223,000 518,457,000 Construction costs......................................... 2,196,000 41,756,000 Selling, administrative, and general expenses.............. 109,148,000 119,147,000 144,714,000 Debt service charges....................................... 107,264,000 110,055,000 111,850,000 ---------------- ---------------- ---------------- Total costs and expenses................................... 1,612,011,000 1,912,886,000 2,135,624,000 ---------------- ---------------- ---------------- Consolidated operating income.............................. 137,714,000 118,195,000 49,369,000 Equity in net income of investees and joint ventures....... 2,036,000 3,604,000 6,866,000 Interest income............................................ 23,476,000 15,142,000 15,126,000 Interest expense........................................... (32,077,000) (28,572,000) (30,491,000) Other income (deductions)-net.............................. (371,000) 1,272,000 (344,000) ---------------- ---------------- ---------------- Income before income taxes and minority interests.......... 130,778,000 109,641,000 40,526,000 Income taxes............................................... (53,100,000) (46,161,000) (34,237,000) Minority interests......................................... (2,005,000) 1,054,000 1,155,000 ---------------- ---------------- ---------------- Net income................................................. $ 75,673,000 $ 64,534,000 $ 7,444,000 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Basic Earnings Per Share................................... $ 1.51 $ 1.30 $ 0.15 ---------------- ---------------- ---------------- ---------------- ---------------- ---------------- Diluted Earnings Per Share................................. $ 1.49 $ 1.28 $ 0.15 ---------------- ---------------- ---------------- ---------------- ---------------- ----------------
See Notes to Consolidated Financial Statements X-6 OGDEN CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
DECEMBER 31, ---------------------------------- ASSETS 1997 1996 - ------ ---------------- ---------------- Current Assets: Cash and cash equivalents.................................................... $ 185,671,000 $ 140,824,000 Restricted funds held in trust............................................... 103,882,000 101,326,000 Receivables (less allowances: 1997, $20,207,000 and 1996, $38,275,000)....... 393,185,000 503,424,000 Inventories.................................................................. 34,235,000 56,566,000 Deferred income taxes........................................................ 56,690,000 31,434,000 Other........................................................................ 58,408,000 52,598,000 ---------------- ---------------- Total current assets......................................................... 832,071,000 886,172,000 Property, plant, and equipment-net........................................... 1,947,547,000 1,851,304,000 Restricted funds held in trust............................................... 206,013,000 209,485,000 Unbilled service and other receivables (less allowances: 1997, $3,000,000 and 1996, $6,000,000).......................................................... 174,962,000 218,422,000 Unamortized contract acquisition costs....................................... 136,462,000 138,777,000 Goodwill and other intangible assets......................................... 79,889,000 81,555,000 Other assets................................................................. 262,351,000 211,817,000 ---------------- ---------------- Total Assets................................................................. $ 3,639,295,000 $ 3,597,532,000 ---------------- ---------------- ---------------- ---------------- Liabilities and Shareholders' Equity - ------------------------------------ Liabilities: Current Liabilities: Current portion of long-term debt............................................ $ 19,696,000 $ 3,560,000 Current portion of project debt.............................................. 68,052,000 60,966,000 Dividends payable............................................................ 15,721,000 15,547,000 Accounts payable............................................................. 109,719,000 104,978,000 Federal and foreign income taxes payable..................................... 1,913,000 7,648,000 Accrued expenses, etc........................................................ 267,874,000 302,597,000 Deferred income.............................................................. 42,962,000 46,228,000 ---------------- ---------------- Total current liabilities.................................................... 525,937,000 541,524,000 Long-term debt............................................................... 354,032,000 309,377,000 Project debt................................................................. 1,424,648,000 1,500,690,000 Deferred income taxes........................................................ 383,341,000 325,925,000 Other liabilities............................................................ 208,179,000 212,538,000 Minority interests........................................................... 28,417,000 7,903,000 Convertible subordinated debentures.......................................... 148,650,000 148,650,000 ---------------- ---------------- Total Liabilities............................................................ 3,073,204,000 3,046,607,000 ---------------- ---------------- Shareholders' Equity: Serial cumulative convertible preferred stock, par value $1.00 per share; authorized, 4,000,000 shares; shares outstanding: 44,346 in 1997 and 47,689 in 1996, net of treasury shares of 29,820 in 1997 and 1996................. 45,000 48,000 Common stock, par value $.50 per share; authorized, 80,000,000 shares; shares outstanding: 50,295,123 in 1997 and 49,744,527 in 1996, net of treasury shares of 3,135,123 in 1997 and 3,606,123 in 1996.......................... 25,147,000 24,872,000 Capital surplus.............................................................. 212,383,000 202,162,000 Earned surplus............................................................... 343,237,000 330,302,000 Cumulative translation adjustment-net........................................ (13,862,000) (5,768,000) Pension liability adjustment................................................. (324,000) (565,000) Net unrealized loss on securities available for sale......................... (535,000) (126,000) ---------------- ---------------- Total Shareholders' Equity................................................... 566,091,000 550,925,000 ---------------- ---------------- Total Liabilities and Shareholders' Equity................................... $ 3,639,295,000 $ 3,597,532,000 ---------------- ---------------- ---------------- ----------------
See Notes to Consolidated Financial Statements X-7 OGDEN CORPORATION AND SUBSIDIARIES STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------------------------------------------------------- 1997 1996 1995 ------------------------------ ---------------------------- -------------------------- 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........................ 77,509 $ 78,000 79,289 $ 80,000 83,323 $ 84,000 Shares converted into common stock....................... (3,343) (3,000) (1,780) (2,000) (4,034) (4,000) -------------- -------------- -------------- ------------ ------------ ------------ Total......................... 74,166 75,000 77,509 78,000 79,289 80,000 Treasury shares............... (29,820) (30,000) (29,820) (30,000) (29,820) (30,000) -------------- -------------- -------------- ------------ ------------ ------------ Balance at end of year (aggregate involuntary liquidation value-1997, $894,000)................... 44,346 45,000 47,689 48,000 49,469 50,000 -------------- -------------- -------------- ------------ ------------ ------------ Common Stock, Par Value $.50 Per Share; Authorized, 80,000,000 Shares: Balance at beginning of year........................ 53,350,650 26,675,000 53,202,904 26,602,000 52,641,215 26,320,000 Exercise of stock options, less common stock utilized.................... 59,640 30,000 137,134 68,000 10,735 6,000 Shares used for pooling of interests................... 526,869 264,000 Conversion of preferred shares...................... 19,956 10,000 10,612 5,000 24,085 12,000 -------------- -------------- -------------- ------------ ------------ ------------ Total......................... 53,430,246 26,715,000 53,350,650 26,675,000 53,202,904 26,602,000 -------------- -------------- -------------- ------------ ------------ ------------ Treasury shares at beginning of year..................... 3,606,123 1,803,000 3,735,123 1,868,000 3,864,123 1,932,000 Exercise of stock options..... (471,000) (235,000) (129,000) (65,000) (129,000) (64,000) -------------- -------------- -------------- ------------ ------------ ------------ Treasury shares at end of year........................ 3,135,123 1,568,000 3,606,123 1,803,000 3,735,123 1,868,000 -------------- -------------- -------------- ------------ ------------ ------------ Balance at end of year........ 50,295,123 25,147,000 49,744,527 24,872,000 49,467,781 24,734,000 -------------- -------------- -------------- ------------ ------------ ------------ Capital Surplus: Balance at beginning of year........................ 202,162,000 197,921,000 194,496,000 Exercise of stock options, less common stock utilized.................... 10,228,000 4,244,000 2,620,000 Arising from pooling of interests................... 813,000 Conversion of preferred shares...................... (7,000) (3,000) (8,000) -------------- ------------ ------------ Balance at end of year........ 212,383,000 202,162,000 197,921,000 -------------- ------------ ------------ Earned Surplus: Balance at beginning of year........................ 330,302,000 328,047,000 381,864,000 Net income.................... 75,673,000 64,534,000 7,444,000 -------------- ------------ ------------ Total......................... 405,975,000 392,581,000 389,308,000 -------------- ------------ ------------ Preferred dividends-per share 1997, 1996, and 1995, $3.35....................... 152,000 161,000 171,000 Common dividends-per share 1997, 1996, and 1995, $1.25....................... 62,586,000 62,118,000 61,090,000 -------------- ------------ ------------ Total dividends............... 62,738,000 62,279,000 61,261,000 -------------- ------------ ------------ Balance at end of year........ 343,237,000 330,302,000 328,047,000 -------------- ------------ ------------ Cumulative Translation Adjustment-Net.............. (13,862,000) (5,768,000) (2,657,000) -------------- ------------ ------------ Pension Liability Adjustment.................. (324,000) (565,000) (760,000) -------------- ------------ ------------ Net Unrealized Loss on Securities Available For Sale........................ (535,000) (126,000) (357,000) -------------- ------------ ------------ Total Shareholders' Equity.... $ 566,091,000 $550,925,000 $546,978,000 -------------- ------------ ------------ -------------- ------------ ------------
See Notes to Consolidated Financial Statements X-8 OGDEN CORPORATION AND SUBSIDIARIES STATEMENTS OF CONSOLIDATED CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, ---------------------------------------- 1997 1996 1995 ------------ ------------ ------------ Cash Flows From Operating Activities: Net income........................................................................... $ 75,673,000 $ 64,534,000 $ 7,444,000 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and amortization........................................................ 104,377,000 115,263,000 109,604,000 Deferred income taxes................................................................ 24,975,000 20,027,000 18,153,000 Long-lived asset write-downs......................................................... 45,260,000 Other................................................................................ (26,015,000) (20,663,000) 11,986,000 Management of Operating Assets and Liabilities: Decrease (Increase) in Assets: Accounts receivable.................................................................. 111,326,000 54,633,000 (43,852,000) Inventories.......................................................................... 18,916,000 (27,392,000) (11,825,000) Other assets......................................................................... (5,313,000) (25,231,000) (56,410,000) Increase (Decrease) in Liabilities: Accounts payable..................................................................... 7,892,000 (1,608,000) 8,472,000 Accrued expenses..................................................................... (46,582,000) (1,689,000) 1,920,000 Deferred income...................................................................... (3,393,000) 10,233,000 3,861,000 Other liabilities.................................................................... (19,306,000) (11,927,000) (22,369,000) ------------ ------------ ------------ Net cash provided by operating activities............................................ 242,550,000 176,180,000 72,244,000 ------------ ------------ ------------ Cash Flows From Investing Activities: Entities purchased, net of cash acquired............................................. (63,212,000) (16,968,000) (15,474,000) Proceeds from sale of marketable securities available for sale....................... 13,970,000 13,158,000 71,364,000 Proceeds from sale of businesses..................................................... 61,164,000 90,946,000 18,000,000 Proceeds from sale of property, plant, and equipment................................. 4,865,000 6,803,000 5,402,000 Investments in Energy facilities..................................................... (28,459,000) (14,303,000) (26,827,000) Other capital expenditures........................................................... (87,742,000) (49,888,000) (65,999,000) Decrease (increase) in other receivables............................................. 51,046,000 10,553,000 (2,809,000) Investments in marketable securities available for sale.............................. (13,970,000) Distributions from investees and joint ventures...................................... 49,605,000 Increases in investments in and advances to investees and joint ventures............. (68,748,000) (19,985,000) (27,983,000) ------------ ------------ ------------ Net cash provided by (used in) investing activities.................................. (81,481,000) (20,316,000) (44,326,000) ------------ ------------ ------------ Cash Flows From Financing Activities: Borrowings for Energy facilities..................................................... 57,358,000 124,272,000 96,822,000 Other new debt....................................................................... 102,266,000 6,552,000 40,948,000 Payment of debt...................................................................... (217,970,000) (229,206,000) (139,205,000) Dividends paid....................................................................... (62,564,000) (62,026,000) (59,604,000) Decrease in funds held in trust...................................................... 928,000 3,903,000 9,514,000 Proceeds from exercise of stock options.............................................. 10,493,000 4,377,000 2,691,000 Other................................................................................ (5,447,000) (289,000) 630,000 ------------ ------------ ------------ Net cash used in financing activities................................................ (114,936,000) (152,417,000) (48,204,000) ------------ ------------ ------------ Effect of foreign currency exchange rate changes on cash and cash equivalents........ (1,286,000) (37,000) (291,000) ------------ ------------ ------------ Net Increase (Decrease) in Cash and Cash Equivalents................................. 44,847,000 44,042,000 (20,577,000) Cash and Cash Equivalents at Beginning of Year....................................... 140,824,000 96,782,000 117,359,000 ------------ ------------ ------------ Cash and Cash Equivalents at End of Year............................................. $185,671,000 $140,824,000 $ 96,782,000 ------------ ------------ ------------ ------------ ------------ ------------
See Notes to Consolidated Financial Statements X-9 OGDEN CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation, Combinations, etc.: The Consolidated Financial Statements include the accounts of Ogden Corporation and its subsidiaries (Ogden). Companies in which Ogden has equity investments of 50% or less are accounted for using the "Equity Method," if appropriate. All intercompany transactions and balances have been eliminated. In 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, 1995, consolidated revenues, net income, and diluted earnings per share would have been $2,033,000,000, $60,565,000, and $1.20 for 1996 and $2,210,000,000, $2,687,000, and $.05 for 1995. In December 1995, Ogden issued 526,869 shares of common stock in exchange for all of the outstanding shares of Firehole Entertainment Corp. (Firehole). This transaction was accounted for as a pooling of interests. The accompanying financial statements for 1995 have not been restated to include the accounts of Firehole, since the amounts did not have a significant effect on prior period reported results or balances. In addition, in other transactions accounted for as purchases in 1995, Ogden acquired the shares of Applied Data Technology, Inc., an air range and pilot training systems company, and four airline catering kitchens in the Canary and Balearic Islands for a total cost of $15,474,000. The operations of these companies have been included in the accompanying financial statements from dates of acquisition. If Ogden had acquired these companies at January 1, 1995, total revenues, net income, and diluted earnings per share would have been $2,185,000,000, $7,346,000, and $.14 for 1995. Ogden also acquired a 50% interest in Metropolitan Entertainment Company, Inc.; a 50% interest in IFC, an Australian entertainment company; as well as a 50% interest in SFTA, a Turkish airport handling company. In connection with Ogden's restructuring plan, the Facility Services group's operations in New York City were sold in July 1997; the Charlotte, North Carolina, operations of Atlantic Design, a contract manufacturing company, were sold in September 1997; and the Binghamton, New York, and Cork, Ireland, operations of Atlantic Design were sold in January 1998. 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 and 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 Shareholders' Equity (see Note 2). Contracts and Revenue Recognition: Service revenues primarily include only the fees for cost-plus contracts and other types of contracts. Both the service revenues and operating expenses exclude reimbursed expenditures of $283,900,000, $357,698,000, and $450,696,000 for the years ended December 31, 1997, 1996, and 1995, 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 $130,388,000 and $123,420,000 at December 31, 1997 and 1996, respectively. Subsidiaries engaged in long-term construction contracting record income on the percentage-of-completion method of accounting and recognize income as the work progresses. Anticipated losses on contracts are recognized as soon as they become known. Inventories: Inventories, consisting primarily of raw materials and finished goods, are recorded principally at the lower of first-in, first-out cost or market. Property, Plant, and Equipment: Property, plant, and equipment is stated at cost. For financial reporting purposes, depreciation is provided by the straight-line method over the estimated useful lives of the assets, which range generally from 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. X-10 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. Deferred Charges on Projects: Costs incurred in connection with certain project development efforts are deferred until the award of the related project is determined. Costs on awarded projects are deferred until the commencement of construction, at which time they are either capitalized in property, plant, and equipment for privately owned facilities or charged to construction costs for municipally owned facilities. Costs associated with projects that are no longer under consideration are charged to operating costs. Restricted Funds: Restricted funds represent proceeds from the financing of waste-to-energy facilities and the operations of a waste-to-energy facility and a power plant. Funds are held in trust and released as expenditures are made or upon satisfaction of conditions provided under the respective trust agreements. Interest Rate Swap Agreements: Amounts received or paid relating to swap agreements during the year are credited or charged to interest expense or debt service charges, as appropriate. Goodwill: Goodwill acquired subsequent to 1970 is being amortized by the straight-line method over periods ranging from 15 to 40 years. Goodwill acquired prior to 1970 is not being amortized. Retirement Plans: The Corporation and certain subsidiaries have several retirement plans covering substantially all of their employees. Certain subsidiaries also contribute to multiemployer plans for unionized hourly employees that cover, among other benefits, pensions and postemployment health care. Income Taxes: Ogden files a consolidated Federal income tax return, which includes all eligible United States subsidiary companies. Foreign subsidiaries are taxed according to regulations existing in the countries in which they do business. Provision has not been made for United States income taxes on distributions, which may be received from foreign subsidiaries, which are considered to be permanently invested overseas. Investment credits are accounted for by the "flow-through" method, and provisions for income taxes have been reduced by the amount of investment credits earned. Long-Lived Assets: Ogden adopted Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of," in the fourth quarter of 1995. The effect of adopting SFAS No. 121 resulted in an after-tax charge of $34,700,000 in 1995 (see Note 20). When indications of impairment are present, Ogden evaluates the carrying value of its long-lived assets in relation to the operating performance and future undiscounted cash flows of the underlying businesses. Long-lived assets to be disposed of, if any, are evaluated in relation to the net realizable value. Earnings per Share: Ogden adopted SFAS No. 128, "Earnings per Share," in the fourth quarter of 1997. The Statement establishes standards for computing basic earnings per share, which 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 24). Earnings per share amounts for prior years have been restated to reflect this revised standard. Reclassification: The accompanying financial statements have been reclassified to conform with the 1997 presentation. 2. INVESTMENTS IN MARKETABLE SECURITIES AVAILABLE FOR SALE At December 31, 1997 and 1996, marketable equity and debt securities held for noncurrent uses, such as nonqualified pension liabilities and a deferred compensation plan, are classified as long-term assets (see Note 6). Net unrealized losses on marketable equity and debt securities held for noncurrent uses are charged to Shareholders' Equity. Marketable securities at December 31, 1997 and 1996 (expressed in thousands of dollars), include the following:
1997 1996 -------------------- -------------------- MARKET MARKET VALUE COST VALUE COST --------- --------- --------- --------- Classified as Noncurrent Assets: Mutual and bond funds.................................................................. $ 25,543 $ 26,495 $ 21,159 $ 21,410 --------- --------- --------- --------- Total.................................................................................. $ 25,543 $ 26,495 $ 21,159 $ 21,410 --------- --------- --------- --------- --------- --------- --------- ---------
Unrealized holding losses at December 31, 1997 and 1996, amounted to $952,000 and $251,000, respectively. Deferred tax benefits on these losses amounted to $417,000 and $125,000, respectively, resulting in net charges of $535,000 and $126,000, respectively, to Shareholders' Equity. Proceeds and realized gains and losses from the sales of securities classified as available for sale for the years ended December 31, 1997, 1996, and 1995, were $13,970,000, $3,444,000, and zero; $13,158,000, $1,455,000, and $304,000; and $71,364,000, $235,000, and $1,749,000, respectively. For the purpose of determining realized gains and losses, the cost of securities sold was based on specific identification. X-11 3. UNBILLED SERVICE AND OTHER RECEIVABLES Unbilled service and other receivables (expressed in thousands of dollars) consisted of the following:
1997 1996 --------- --------- Unbilled service receivables............................................................................... $ 130,388 $ 123,420 Notes receivable........................................................................................... 44,574 95,002 --------- --------- Total...................................................................................................... $ 174,962 $ 218,422 --------- --------- --------- ---------
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 $41,357,000 and $35,747,000 at December 31, 1997 and 1996, 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:
1997 1996 ---------------------- ---------------------- CURRENT NONCURRENT CURRENT NONCURRENT --------- ----------- --------- ----------- Construction funds.............................................................. $ 3,201 $ 2,888 Debt service funds.............................................................. 43,423 $ 139,961 53,960 $ 142,149 Revenue funds................................................................... 8,811 13,289 Lease reserve funds............................................................. 9,629 5,050 19,556 Other funds..................................................................... 38,818 61,002 31,189 47,780 --------- ----------- --------- ----------- Total........................................................................... $ 103,882 $ 206,013 $ 101,326 $ 209,485 --------- ----------- --------- ----------- --------- ----------- --------- -----------
5. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment (expressed in thousands of dollars) consisted of the following:
1997 1996 ------------- ------------- Land.............................................................................................. $ 7,068 $ 6,654 Waste-to-energy facilities........................................................................ 1,720,990 1,721,670 Power plants...................................................................................... 224,120 105,738 Buildings and improvements........................................................................ 242,345 192,566 Machinery and equipment........................................................................... 312,525 305,723 Landfills......................................................................................... 17,618 14,508 Construction in progress.......................................................................... 32,523 47,329 ------------- ------------- Total............................................................................................. 2,557,189 2,394,188 Less accumulated depreciation and amortization.................................................... 609,642 542,884 ------------- ------------- Property, plant, and equipment-net................................................................ $ 1,947,547 $ 1,851,304 ------------- ------------- ------------- -------------
X-12 6. OTHER ASSETS Other assets (expressed in thousands of dollars) consisted of the following:
1997 1996 --------- --------- Investment in and advances to investees and joint ventures................................................. $ 151,435 $ 91,980 Unamortized bond issuance costs............................................................................ 31,604 35,517 Spare parts................................................................................................ 9,779 17,045 Noncurrent securities available for sale................................................................... 25,543 21,159 Deferred charges on projects............................................................................... 3,178 3,819 Insurance deposits......................................................................................... 5,388 5,388 Other...................................................................................................... 35,424 36,909 --------- --------- Total...................................................................................................... $ 262,351 $ 211,817 --------- --------- --------- ---------
7. ACCRUED EXPENSES, ETC. Accrued expenses, etc. (expressed in thousands of dollars), consisted of the following:
1997 1996 --------- --------- Debt service charges and interest.......................................................................... $ 31,416 $ 32,755 Payroll.................................................................................................... 21,834 23,196 Insurance.................................................................................................. 34,655 45,415 Operating expenses......................................................................................... 43,075 49,445 Municipalities' share of energy revenues................................................................... 28,145 25,162 Lease payments............................................................................................. 15,243 16,747 Payroll and other taxes.................................................................................... 19,794 16,983 Pension and profit sharing................................................................................. 7,383 7,727 Commissions................................................................................................ 7,972 7,983 Other...................................................................................................... 58,357 77,184 --------- --------- Total...................................................................................................... $ 267,874 $ 302,597 --------- --------- --------- ---------
8. DEFERRED INCOME Deferred income (expressed in thousands of dollars) consisted of the following:
1997 1996 ---------------------- ---------------------- CURRENT NONCURRENT CURRENT NONCURRENT --------- ----------- --------- ----------- Sale and leaseback arrangements................................................... $ 1,523 $ 20,313 $ 1,523 $ 21,963 Advance billings to municipalities................................................ 14,662 16,505 Other............................................................................. 26,777 28,200 --------- ----------- --------- ----------- Total............................................................................. $ 42,962 $ 20,313 $ 46,228 $ 21,963 --------- ----------- --------- ----------- --------- ----------- --------- -----------
The gain from sale and leaseback transactions consummated in 1986 and 1987 was deferred and is being amortized as a reduction of rental expense. Advance billings to various customers are billed one or two months prior to performance of service and are recognized as income in the period the service is provided. Noncurrent deferred income is included in Other Liabilities. 9. LONG-TERM DEBT Long-term debt (expressed in thousands of dollars) consisted of the following:
1997 1996 ----------- ----------- 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............................................................................. 36,186 Other long-term debt.................................................................................. 93,091 84,622 ----------- ----------- Total................................................................................................. $ 354,032 $ 309,377 ----------- ----------- ----------- -----------
The adjustable-rate revenue bonds are adjusted periodically to reflect current market rates for similar issues, generally with an upside cap of 15%. The average rate for this debt was 3.44% and 3.49% in 1997 and 1996, 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, 1997, Ogden was in compliance with all requirements and had $126,091,000 in excess of the required amount of Shareholders' Equity. X-13 At December 31, 1997, Ogden had two long-term interest rate swap agreements covering notional amounts of $100,000,000 and $4,700,000, respectively, which expire December 16, 1998, and November 30, 2000, respectively. These swaps were entered into to convert Ogden's fixed-rate $100,000,000, 9.25% debentures due in 2022 to variable-rate debt and Ogden's $4,700,000 variable-rate debt to a fixed rate. On the $100,000,000 swap, Ogden receives a fixed rate of 5.52% per annum paid on a semi-annual basis and pays a floating rate of three months LIBOR set in arrears on a quarterly basis. On the $4,700,000 swap, Ogden pays a fixed rate of 5.83% paid on a quarterly basis and receives a floating rate of three months LIBOR on a quarterly basis. At December 31, 1997, the three-month LIBOR rate was 5.81%. The counterparties to these interest rate swaps are major financial institutions. Management believes its credit risk associated with nonperformance by the counterparties is not significant. Amounts paid on swap agreements amounted to $400,000, $200,000, and $600,000 for 1997, 1996, and 1995, respectively, and were charged to interest expense. The effect on Ogden's weighted-average borrowing rate for 1997, 1996, and 1995 was an increase of .09%, .04%, and .14%, respectively. Other long-term debt includes an obligation for approximately $28,400,000, representing the equity component of a sale and leaseback arrangement relating to a waste-to-energy facility. This arrangement is accounted for as a financing, has an effective interest rate of 5%, and extends through 2017. Additionally, other long-term debt includes $22,450,000 resulting from the sale of limited partnership interests in and related tax benefits of the Onondaga County, New York, waste-to-energy facility, which has been accounted for as a financing for accounting purposes. This obligation has an effective interest rate of 10% and extends through 2015. Long-term debt also includes $24,645,000 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% (8.5% at December 31, 1997) and matures in 2001. The remaining other debt of $17,596,000 consists primarily of debt associated with entertainment facilities in the United Kingdom and Argentina and debt acquired in the Firehole acquisition. These loans bear various interest rates and maturity dates. The maturities on long-term debt (expressed in thousands of dollars) at December 31, 1997, were as follows: 1998.............................................................................. $ 19,696 1999.............................................................................. 25,483 2000.............................................................................. 19,007 2001.............................................................................. 24,971 2002.............................................................................. 226 Later years....................................................................... 284,345 --------- Total............................................................................. 373,728 Less current portion.............................................................. 19,696 --------- Total long-term debt.............................................................. $ 354,032 --------- ---------
10. PROJECT DEBT Project debt (expressed in thousands of dollars) consisted of the following:
1997 1996 ------------- ------------- Revenue Bonds Issued by and Prime Responsibility of Municipalities: 4.25-7.6% serial revenue bonds due through 2008................................................... $ 212,368 $ 238,908 5.4-7.75% term revenue bonds due through 2015..................................................... 745,350 764,876 Adjustable-rate revenue bonds due through 2013.................................................... 86,185 86,590 ------------- ------------- Total............................................................................................. 1,043,903 1,090,374 ------------- ------------- Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties: 4.95-8.9% serial revenue bonds due through 2007................................................... 53,938 62,886 7.25-7.4% term revenue bonds due 1999 through 2011................................................ 105,871 105,859 Adjustable-rate revenue bonds due through 2011.................................................... 115,428 121,723 ------------- ------------- Total............................................................................................. 275,237 290,468 ------------- ------------- Other project debt................................................................................ 105,508 119,848 ------------- ------------- Total long-term project debt...................................................................... $ 1,424,648 $ 1,500,690 ------------- ------------- ------------- -------------
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 three facilities for which contractual obligations of third parties to deliver waste ensure sufficient revenues to pay debt service, although such debt service is not an explicit component of the third parties' service fee obligations. X-14 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, 1997, such revenue bonds were collateralized by property, plant, and equipment with a net carrying value of $1,479,743,000, credit enhancements of approximately $161,000,000 for which Ogden has certain reimbursement obligations, and substantially all restricted funds (see Note 4). The interest rates on adjustable-rate revenue bonds are adjusted periodically to reflect current market rates for similar issues, generally with an upside cap of 15%. The average rate for such revenue bonds was 4.35% and 4.6% in 1997 and 1996, 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 $77,502,000 at December 31, 1997, has an effective interest rate of 5.3% and extends through 2008 with options to renew for additional periods and has a fair market value purchase option at the conclusion of the initial term. Payment obligations under this lease arrangement are limited to assets of the limited partnership and revenues derived from a power purchase agreement with a third party, which are expected to provide sufficient revenues to make rental payments. Such payment obligations are secured by all the assets, revenues, and other benefits derived from the geothermal power plant, which had a net carrying value of approximately $93,556,000 at December 31, 1997. Other project debt also includes $17,206,000 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 $10,800,000, which is due to financial institutions and bears interest at an adjustable rate equal to the three-month LIBOR rate plus 3.5% (9.5% at December 31, 1997). 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 $47,140,000 at December 31, 1997. At December 31, 1997, Ogden had three interest rate swap agreements as hedges against interest rate exposure on certain adjustable-rate revenue bonds. The first two interest rate swap agreements expire in May 1999 and the third swap expires in 2019 and had notional amounts at December 31, 1997, of $91,070,000, $27,685,000, and $80,220,000, respectively, which are reduced in accordance with the scheduled repayments of the revenue bonds. Under the first swap agreement, Ogden pays a fixed rate of 3.95% per annum on a semi-annual basis and receives a floating rate based on an index of tax-exempt, variable-rate obligations. Under the second swap agreement, Ogden pays a fixed rate of 5.25% per annum on a semi-annual basis and receives a floating rate based on a defined commercial paper rate. Under the third swap agreement, Ogden pays a fixed rate of 6.07% per annum on a semi-annual basis through 1998 and thereafter a fixed rate of 5.18% per annum and receives a floating rate based on a defined LIBOR-based rate. At December 31, 1997, the floating rates on the three swaps were 3.72%, 5.65%, and 6.23%, respectively. These swap agreements were entered into to convert from floating rates to fixed interest rates $91,070,000 of tax-exempt, adjustable-rate revenue bonds and $107,905,000 of taxable, adjustable-rate revenue bonds. The counterparties to these interest rate swaps are major financial institutions. Management believes the credit risk associated with nonperformance by the counterparties is not significant. Amounts (received) or paid on these swap agreements amounted to $300,000, $700,000, and $(230,000) for 1997, 1996, and 1995, respectively, and were charged or (credited) to debt service charges. The effect on Ogden's weighted-average borrowing rate was an increase (decrease) of .02%, .04%, and (.01)% for 1997, 1996, and 1995, respectively. The maturities on long-term project debt (expressed in thousands of dollars) at December 31, 1997, were as follows: 1998.................................................................. $ 68,052 1999.................................................................. 80,407 2000.................................................................. 80,736 2001.................................................................. 89,832 2002.................................................................. 116,555 Later years........................................................... 1,057,118 ------------ Total................................................................. 1,492,700 Less current portion.................................................. 68,052 ------------ Total long-term project debt.......................................... $ 1,424,648 ------------ ------------
X-15 11. CREDIT ARRANGEMENTS At December 31, 1997, Ogden had unused revolving credit lines amounting to $217,000,000, of which $200,000,000 is available under its principal revolving credit line at various borrowing rates including prime, the Eurodollar rate plus .225%, or 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 of $200,000,000, which expires July 1, 2002. 12. CONVERTIBLE SUBORDINATED DEBENTURES Convertible subordinated debentures (expressed in thousands of dollars) consisted of the following:
1997 1996 --------- --------- 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 101.2% of principal amount during the year commencing June 1, 1997, 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, 1997, all of the authorized shares of this plan had been granted. In October 1990, Ogden adopted a nonqualified stock option plan (the "1990 Plan"). Under this plan, nonqualified options, incentive stock options, and/or stock appreciation rights and stock bonuses may be granted to key management employees and outside directors to purchase Ogden common stock at an exercise price to be determined by the Ogden Compensation Committee, which become exercisable during the five-year period from the date of grant. These options are exercisable for a period of ten years after the date of grant. Pursuant to the 1990 Plan, which was amended in 1994 to increase the number of shares available by 3,200,000 shares, an aggregate of 6,200,000 shares of Ogden common stock became available for issuance upon the exercise of such options, rights, and bonuses, which may be granted over a ten-year period ending October 11, 2000; 1,555,000 shares were available for grant at December 31, 1997. Under the foregoing plans, Ogden issued 4,549,500 limited stock appreciation rights in conjunction with the stock options granted. These limited rights are exercisable only during the period commencing on the first day following the occurrence of any of the following events and terminate 90 days after such date: the acquisition by any person of 20% or more of the voting power of Ogden's outstanding securities; the approval by Ogden shareholders of an agreement to merge or to sell substantially all of its assets; or the occurrence of certain changes in the membership of the Ogden Board of Directors. The exercise of these limited rights entitles participants to receive an amount in cash with respect to each share subject thereto, equal to the excess of the market value of a share of Ogden common stock on the exercise date or the date these limited rights became exercisable, over the related option price. In connection with the acquisition of the minority interest of 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. X-16 14. COMMON STOCK AND STOCK OPTIONS (CONTINUED) 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 1997, 1996, and 1995 under these plans been determined consistent with the provisions of SFAS No. 123, using the binomial option-pricing model with the following assumptions--dividend yield of 6.2%, 5.7% and 6.2%; volatility of 25.84%, 22.74%, and 24.77%; risk-free interest rate of 6.43%, 5.42%, and 7.72%; and an expected life of 7.5 years--the effect on net income and diluted earnings per share would have been $334,000 and $.01 for 1997; $214,000 and zero for 1996; and zero and zero for 1995. The weighted-average fair value of options granted during 1997, 1996, and 1995 was $2.56, $2.38, and $2.62, 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, 1994, Balance..................... $14.98-$28.54 1,127,543 878,043 $ 18.84 Became Exercisable............................. $18.31-$28.54 157,100 Exercised...................................... $14.98 (16,618) (16,618) $ 14.98 ------------ ----------- ----------- ----------- 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 ------------ ----------- ----------- ----------- 1990 Plan: December 31, 1994, Balance..................... $18.31-$23.56 3,585,500 1,799,800 $ 19.99 Granted........................................ $20.06-$22.69 409,000 $ 20.26 Became Exercisable............................. $18.31-$23.56 699,900 Exercised...................................... $18.31-$21.31 (129,000) (129,000) $ 18.56 Cancelled...................................... $18.31-$23.56 (184,700) (34,000) $ 20.31 ------------ ----------- ----------- ----------- December 31, 1995, Balance..................... $18.31-$23.56 3,680,800 2,336,700 $ 20.06 Granted........................................ $21.00-$21.94 252,500 $ 21.83 Became Exercisable............................. $18.31-$23.56 346,800 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-$23.56 3,657,000 2,470,200 $ 20.21 Granted........................................ $20.19 570,000 $ 20.19 Became Exercisable............................. $18.31-$23.56 385,400 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-$23.56 3,684,000 2,373,600 $ 20.39 ------------ ----------- ----------- ----------- Conversion of OEGI Plan: December 29, 1994, Balance..................... $14.17-$29.46 266,561 266,561 $ 14.60 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 ------------ ----------- ----------- ----------- Total December 31, 1997........................ $14.17-$28.54 4,724,921 3,368,321 $ 20.05 ------------ ----------- ----------- ----------- ------------ ----------- ----------- -----------
X-17 The following table summarizes information about stock options outstanding at December 31, 1997:
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-$18.31 2,223,921 2.74 years $ 17.99 2,223,921 $ 17.99 $20.06-$28.54 2,501,000 6.72 years $ 21.89 1,144,400 $ 22.61 - ------------ ----------- ---------------- ------ ----------- ------ $14.17-$28.54 4,724,921 4.84 years $ 20.05 3,368,321 $ 19.56 - ------------ ----------- ---------------- ------ ----------- ------ - ------------ ----------- ---------------- ------ ----------- ------
The weighted-average exercise price for all exercisable options at December 31, 1997, 1996, and 1995, was $19.56, $19.10, and $18.49, respectively. At December 31, 1997, there were 10,243,886 shares of common stock reserved for the exercise of stock options and the conversion of preferred shares and debentures. In January 1998, Ogden's Board of Directors authorized the purchase of shares of the Corporation's common stock in an amount up to $100,000,000. Fifty thousand (50,000) shares of common stock were purchased in February 1998 for $1,372,000. 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 only be exercised after a party has acquired 15% or more of the Corporation's common stock or commenced a tender offer to acquire 15% or more of the Corporation's common stock. The Rights do not have voting rights, expire October 2, 2000, and may be redeemed by the Corporation at a price of $.01 per Right at any time prior to the acquisition of 15% of the Corporation's common stock. In the event a party acquires 15% or more of the Corporation's outstanding common stock in accordance with certain defined terms, each Right will then entitle its holders (other than such party) to purchase, at the Right's then-current exercise price, a number of the Corporation's common shares having a market value of twice the Right's exercise price. At December 31, 1997, 50,295,123 Rights were outstanding. 16. FOREIGN EXCHANGE Foreign exchange translation adjustments for 1997, 1996, and 1995, amounting to $(8,094,000), $(3,111,000), and $(1,258,000), respectively, have been credited (charged) directly to Shareholders' Equity. Foreign exchange transaction adjustments, amounting to $(683,000), $(215,000), and $1,590,000, have been credited (charged) directly to income for 1997, 1996, and 1995, respectively. 17. DEBT SERVICE CHARGES Debt service charges for Ogden's project debt (expressed in thousands of dollars) consisted of the following:
1997 1996 1995 --------- --------- --------- Interest incurred on taxable and tax-exempt borrowings............................................ $ 104,890 $ 107,595 $ 112,029 Interest earned on temporary investment of borrowings during construction, etc.................... 3,992 4,256 4,908 --------- --------- --------- Net interest incurred............................................................................. 100,898 103,339 107,121 Interest capitalized during construction in property, plant, and equipment........................ 631 485 1,512 --------- --------- --------- Interest expense-net.............................................................................. 100,267 102,854 105,609 Amortization of bond issuance costs............................................................... 6,997 7,201 6,241 --------- --------- --------- Debt service charges.............................................................................. $ 107,264 $ 110,055 $ 111,850 --------- --------- --------- --------- --------- ---------
18. RETIREMENT PLANS Ogden has retirement plans that cover substantially all of its employees. A substantial portion of hourly employees of Ogden Services Corporation participates in defined contribution plans. Other employees participate in defined benefit or defined contribution plans. The defined benefit plans provide benefits based on years of service and either employee compensation or a flat benefit amount. Ogden's funding policy for those plans is to contribute annually an amount no less than the minimum funding required by ERISA. Contributions are intended to provide not only benefits attributed to service to date but also for those expected to be earned in the future. X-18 The following table sets forth the defined benefit plans' funded status and related amounts recognized in Ogden's Consolidated Balance Sheets (expressed in thousands of dollars):
1997 1996 ---------------------------- ---------------------------- ASSETS ACCUMULATED ASSETS ACCUMULATED EXCEED BENEFITS EXCEED BENEFITS ACCUMULATED EXCEED ACCUMULATED EXCEED BENEFITS ASSETS BENEFITS ASSETS ------------- ------------- ------------- ------------- Accumulated Benefit Obligation: Vested.................................................................. $ 10,887 $ 10,008 $ 8,820 $ 10,480 Nonvested............................................................... 397 497 314 442 ------------- ------------- ------------- ------------- Total................................................................... $ 11,284 $ 10,505 $ 9,134 $ 10,922 ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Projected benefit obligation for services rendered to date.............. $ 15,795 $ 14,976 $ 12,715 $ 15,355 Plan assets at fair value............................................... 16,914 5,386 13,495 5,764 ------------- ------------- ------------- ------------- Over (underfunded) projected benefits................................... $ 1,119 $ (9,590) $ 780 $ (9,591) ------------- ------------- ------------- ------------- ------------- ------------- ------------- ------------- Source of Underfunded Status: Unrecognized net gain (loss) from past experience different from that assumed and effects of changes in assumptions......................... $ 1,501 $ 67 $ 588 $ (1,037) Unrecognized net transition asset (obligation) at January 1, 1986, being recognized over 15 years.............................................. 335 (240) 417 (320) Pension liability costs................................................. (1,145) (7,659) (688) (5,916) Unrecognized prior service costs........................................ 428 (1,758) 463 (2,318) ------------- ------------- ------------- ------------- Over (underfunded) projected benefits................................... $ 1,119 $ (9,590) $ 780 $ (9,591) ------------- ------------- ------------- ------------- ------------- ------------- ------------- -------------
At December 31, 1997 and 1996, the accumulated benefit obligation of certain pension plans exceeded plan assets. The Corporation's minimum liability for those plans amounted to $911,000 and $1,463,000 at December 31, 1997 and 1996, respectively. Such amounts were offset by intangible assets and reductions in Shareholders' Equity, net of income taxes of $324,000 and $565,000 at December 31, 1997 and 1996, respectively. At December 31, 1997 and 1996, the Corporation has designated $13,970,000 of its marketable securities (Note 2) as pertaining to a nonqualified pension plan that is underfunded by $7,050,000, which underfunding is reflected above under plans in which accumulated benefits exceeded assets. Pension costs for Ogden's defined benefit plans included the following components (expressed in thousands of dollars):
1997 1996 1995 ------ ------- ------- Service cost on benefits earned during the period...... $2,193 $ 2,139 $ 2,078 Interest cost on projected benefit obligation.......... 1,929 1,900 1,716 Net amortization and deferral.......................... 3,623 2,268 2,584 Actual return on plan assets........................... (4,501) (2,746) (3,260) ------ ------- ------- Net periodic pension cost.............................. $3,244 $ 3,561 $ 3,118 ------ ------- ------- ------ ------- -------
The weighted-average discount rate and rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit obligations were 7% and 4 1/2% for 1997 and 7 1/2% and 4 1/2% for 1996 and 1995. The expected long-term rate of return on plan assets was 8% for each year. Contributions and costs for defined contribution plans are determined by benefit formulas based on percentage of compensation as well as discretionary contributions and totaled $8,652,000, $7,954,000, and $10,358,000 in 1997, 1996, and 1995, respectively. Plan assets at December 31, 1997, 1996, and 1995, 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 1997, 1996, and 1995 was $16,700,000, $26,600,000, and $27,900,000, respectively. 19. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS In 1992, the Corporation discontinued its policy of providing postretirement health care and life insurance benefits for all salaried employees, except those employees who were retired or eligible for retirement at December 31, 1992, or who were covered under certain company-sponsored union plans. X-19 For the years ended December 31, 1997, 1996, and 1995, the components of the periodic expense for these benefits were as follows: Recognition of Components of Net Periodic Postretirement Benefit Costs for the Years Ended December 31:
1997 1996 1995 ---------- ---------- ---------- Service costs................................................................ $ 101,204 $ 126,879 $ 131,966 Interest..................................................................... 828,446 806,016 755,944 Amortization of unrecognized net (gain) loss................................. (27,193) 18,481 (22,113) ---------- ---------- ---------- Total........................................................................ $ 902,457 $ 951,376 $ 865,797 ---------- ---------- ---------- ---------- ---------- ----------
As of December 31, 1997 and 1996, the actuarial recorded liabilities for these postretirement benefits, none of which have been funded, were as follows: Accumulated Postretirement Benefit Obligation:
Retirees........................................................... $ 7,087,053 $5,618,399 Eligible active participants....................................... 4,246,196 4,616,340 Other active....................................................... 1,130,645 959,853 ----------- ---------- Total accumulated postretirement obligation........................ 12,463,894 11,194,592 Unrecognized net loss.............................................. 1,386,694 603,201 ----------- ---------- Accrued postretirement benefit liability........................... $11,077,200 $10,591,391 ----------- ---------- ----------- ----------
The accumulated postretirement benefit obligation was determined using discount rates of 7% and 7 1/2% for 1997 and 1996, respectively; an estimated increase in compensation levels of 4 1/2%; and a health care cost rate of approximately 14 1/2%, decreasing in subsequent years until it reaches 6% in the year 2008 and thereafter. The effect of a one percentage point increase in the assumed health care cost trend rates for each future year on the aggregate of the service and interest cost components of net periodic postretirement health care benefit cost and the accumulated postretirement benefit obligation for health care benefits would be $75,391 and $817,580, respectively. 20. IMPAIRMENT OF LONG-LIVED ASSETS Ogden adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of," in the fourth quarter of 1995. SFAS No. 121 requires that long-lived assets and certain identifiable intangibles held and used by an entity, including any goodwill related to these assets, be reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of such assets may not be recoverable. In performing this review for recoverability, the Corporation estimated future cash flows expected from the use of such assets and their eventual disposition. If the sum of expected cash flows (undiscounted) was less than the carrying value of the assets, an impairment loss was recognized. The Statement also requires that long-lived assets and certain identifiable intangibles to be disposed of be reported at the lower of carrying value or fair value less the costs to sell. The effect of recognizing SFAS No. 121 resulted in a pretax charge of $45,300,000 and an after-tax charge of $34,700,000, or $.69 per share, diluted. This charge included estimated losses on the disposal of noncore businesses, as announced in the fourth quarter of 1995, of $32,800,000 and the write-down of other long-lived assets of $12,500,000. The loss of $32,800,000 on the assets to be disposed of was based on the Corporation's estimate of realizable or liquidation values of the operations and bids received from prospective purchasers. The impairment loss of $12,500,000 on other long-lived assets represents the difference between the carrying amount of the assets and their estimated fair values, which was determined based on operating projections and future discounted cash flows. The remaining carrying value of these assets is not significant. These amounts were charged to cost of goods sold ($4,500,000) and operating expenses ($40,800,000) in the accompanying 1995 financial statements. 21. OTHER CHARGES-1995 During 1995, the Corporation recognized unusual charges of $37,500,000, which were reduced by a $13,500,000 gain on the sale of a noncore business in the fourth quarter for a net pretax charge of $24,000,000 and an after-tax charge of $14,200,000, or $.29 per share, diluted. The charge of $37,500,000 included, in the second quarter, $17,100,000 at Ogden Communications, Inc. (OCI), for the write-off of receivables of $10,300,000 and related costs recorded in connection with a telecommunications project at OCI, as well as a loss on the disposal of inventory of $3,900,000 and costs related to the curtailment of operations of $2,900,000; and in the fourth quarter, $8,200,000 for costs, principally severance pay relating to restructuring activities, and $12,200,000 representing the write-down of deferred charges relating to a previously awarded waste-to-energy project that is not expected to be completed; unusual waste-to-energy repair costs; and an adjustment of inventory balances resulting from a physical inventory. The $17,100,000 charge at OCI resulted from a review of the activities of this unit, during which the Corporation concluded that contracts and other documentation did not provide a basis for recovering any of the accounts receivable related to the telecommunications project and that the sale of inventory would not recover its full carrying value. In addition, the Corporation decided to discontinue the business of OCI and estimated the costs relating thereto. X-20 These amounts were charged to sales allowances ($10,300,000); operating costs ($3,800,000); cost of goods sold ($6,000,000); and selling, administrative, and general expenses ($3,900,000) in the accompanying 1995 financial statements. The gain on the sale of the noncore business of $13,500,000 was included as a reduction of operating expenses. In addition, 1995 operating expenses include $3,500,000 for the settlement of litigation relating to the discontinuance of the fixed-site hazardous waste business. 22. INCOME TAXES The components of the provision for income taxes (expressed in thousands of dollars) were as follows:
1997 1996 1995 --------- --------- --------- Current: Federal.......................................................................... $ 9,806 $ 14,661 $ 6,444 State............................................................................ 12,195 9,048 5,038 Foreign.......................................................................... 6,124 2,425 4,602 --------- --------- --------- Total current.................................................................... 28,125 26,134 16,084 --------- --------- --------- Deferred: Federal.......................................................................... 25,288 18,984 17,120 State............................................................................ (2,577) 1,043 1,033 Foreign.......................................................................... 2,264 --------- --------- --------- Total deferred................................................................... 24,975 20,027 18,153 --------- --------- --------- Total provision for income taxes................................................. $ 53,100 $ 46,161 $ 34,237 --------- --------- --------- --------- --------- ---------
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:
1997 1996 ------------- ------------- PERCENT PERCENT OF INCOME OF INCOME AMOUNT BEFORE AMOUNT BEFORE AMOUNT OF TAX TAXES OF TAX TAXES OF TAX --------- ------------- --------- ------------- --------- Taxes at statutory rate................................ $ 45,772 35.0% $ 38,374 35.0% $ 14,184 State income taxes, net of Federal tax benefit.................................... 6,252 4.8 6,559 5.9 3,946 Settlement of tax liability with former subsidiary..... (2,638) (2.4) Taxes on foreign earnings.............................. 1,135 .9 738 .7 6,694 Amortization of goodwill............................... 866 .6 1,070 1.0 1,206 Write-down of goodwill................................. 1,750 1.3 648 .6 5,263 Pooling-related taxes and costs........................ 1,807 Benefit relating to sale of stock of former subsidiary........................................... (3,581) (2.7) Other-net.............................................. 906 .7 1,410 1.3 1,137 --------- --- --------- --- --------- Provision for income taxes............................. $ 53,100 40.6% $ 46,161 42.1% $ 34,237 --------- --- --------- --- --------- --------- --- --------- --- --------- 1995 ------------- PERCENT OF INCOME BEFORE TAXES ------------- Taxes at statutory rate................................ 35.0% State income taxes, net of Federal tax benefit.................................... 9.7 Settlement of tax liability with former subsidiary..... Taxes on foreign earnings.............................. 16.5 Amortization of goodwill............................... 3.0 Write-down of goodwill................................. 13.0 Pooling-related taxes and costs........................ 4.5 Benefit relating to sale of stock of former subsidiary........................................... Other-net.............................................. 2.8 --- Provision for income taxes............................. 84.5% --- ---
The components of the net deferred income tax liability (expressed in thousands of dollars) as of December 31, 1997 and 1996, were as follows:
1997 1996 ---------- ---------- Deferred Tax Assets: Deferred income....................................................... $ 4,029 $ 8,200 Accrued expenses...................................................... 79,093 62,904 Other liabilities..................................................... 28,325 24,936 Investment tax credits................................................ 20,813 24,081 Alternative minimum tax credits....................................... 47,704 46,917 Net operating loss carryforwards...................................... 58,066 ---------- ---------- Total deferred tax assets............................................. 179,964 225,104 ---------- ---------- Deferred Tax Liabilities: Unbilled accounts receivable.......................................... 45,384 46,270 Property, plant, and equipment........................................ 428,185 440,293 Other................................................................. 33,046 33,032 ---------- ---------- Total deferred tax liabilities........................................ 506,615 519,595 ---------- ---------- Net deferred tax liability............................................ $ 326,651 $ 294,491 ---------- ---------- ---------- ----------
X-21 Deferred tax assets and liabilities (expressed in thousands of dollars) are presented as follows in the accompanying balance sheets:
1997 1996 ---------- ---------- Net deferred tax liability-noncurrent................................. $ 383,341 $ 325,925 Less net deferred tax asset-current................................... 56,690 31,434 ---------- ---------- Net deferred tax liability............................................ $ 326,651 $ 294,491 ---------- ---------- ---------- ----------
At December 31, 1997, for Federal income tax purposes, the Corporation had investment and energy tax credit carryforwards of approximately $20,813,000, which will expire in 2004 through 2008, and alternative minimum tax credit carryforwards of approximately $47,704,000 that have no expiration date. Deferred Federal income taxes have been reduced by these amounts. 23. LEASES Total rental expense amounted to $100,449,000, $91,351,000, and $93,396,000 (net of sublease income of $2,113,000, $1,427,000, and $193,000) for 1997, 1996, and 1995, respectively. Included in rental expense are amounts based on contingent factors (principally sales) in excess of minimum rentals amounting to $23,365,000, $20,970,000, and $21,676,000, for 1997, 1996, and 1995, respectively. Principal leases are for leaseholds, sale and leaseback arrangements on waste-to-energy facilities, trucks and automobiles, airplane, and machinery and equipment. Some of these operating leases have renewal options. The following is a schedule (expressed in thousands of dollars), by year, of future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year as of December 31, 1997:
1998............................................................. $ 82,482 1999............................................................. 77,522 2000............................................................. 65,502 2001............................................................. 59,049 2002............................................................. 54,437 Later years...................................................... 303,385 --------- Total.......................................................... $ 642,377 --------- ---------
These future minimum rental payment obligations include $91,736,000 of future nonrecourse rental payments that relate to a waste-to-energy facility, which are supported by third-party commitments to provide sufficient service revenues to meet such obligations. Also included are $64,344,000 of nonrecourse rental payments relating to a hydroelectric power generating facility operated by a special-purpose subsidiary, which are supported by contractual power purchase obligations of a third party and which are expected to provide sufficient revenues to make the rent payments. These nonrecourse rental payments (in thousands of dollars) are due as follows:
1998............................................................. $ 19,492 1999............................................................. 20,797 2000............................................................. 21,402 2001............................................................. 21,402 2002............................................................. 21,411 Later years...................................................... 51,576 --------- Total............................................................ $ 156,080 --------- ---------
24. 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, 1997, 1996, and 1995, is as follows: X-22
1997 1996 ------------- ------------- INCOME SHARES PER-SHARE INCOME SHARES PER-SHARE INCOME (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) (DENOMINATOR) AMOUNT (NUMERATOR) ------------ ------------- ------------- ------------ ------------- ------------- ------------ Net income........... $75,673,000 $64,534,000 $7,444,000 Less: preferred stock dividend........... 152,000 161,000 171,000 ------------ ------------ ------------ Basic Earnings Per Share............ 75,521,000 50,030,000 $ 1.51 64,373,000 49,663,000 $ 1.30 7,273,000 ----- ----- ----- ----- Effect of Dilutive Securities: Stock options........ 538,000 501,000 Convertible preferred stock.............. 152,000 275,000 161,000 289,000 6% convertible debentures......... 2,353,000 1,631,000 (A) 5 3/4% convertible debentures......... 1,693,000 1,143,000 (A) ------------ ------------- ------------ ------------- ------------ Diluted Earnings Per Share............ $79,719,000 53,617,000 $ 1.49 $64,534,000 50,453,000 $ 1.28 $7,273,000 ------------ ------------- ----- ------------ ------------- ----- ------------ ------------ ------------- ----- ------------ ------------- ----- ------------ 1995 ------------- SHARES PER-SHARE (DENOMINATOR) AMOUNT ------------- ------------- Net income........... Less: preferred stock dividend........... Basic Earnings Per Share............ 49,385,000 $ 0.15 ----- ----- Effect of Dilutive Securities: Stock options........ 605,000 Convertible preferred stock.............. (A) 6% convertible debentures......... (A) 5 3/4% convertible debentures......... (A) ------------- ------------- Diluted Earnings Per Share............ 49,990,000 $ 0.15 ------------- ----- ------------- -----
- ------------------------ (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 80,000 in 1997, 2,100,400 in 1996, and 1,443,200 in 1995. 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 306,000 in 1995 for convertible preferred shares; 544,000 in 1997 and 2,175,000 in 1996 and 1995 for the 6% convertible debentures; and 381,000 in 1997 and 1,524,000 in 1996 and 1995 for the 5 3/4% convertible debentures. 25. Commitments and Contingent Liabilities Ogden and certain of its subsidiaries have issued or are party to performance bonds and guarantees and related contractual obligations undertaken mainly pursuant to agreements to construct and operate certain waste-to-energy, entertainment, and other facilities. In the normal course of business, they are involved in legal proceedings in which damages and other remedies are sought. In connection with certain contractual arrangements, Ogden has agreed to provide two vendors with specified amounts of business over a three-and-a-half-year period. If these amounts are not provided, the Corporation may be liable for prorated damages of approximately $5,700,000. 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 $97,679,000 on December 30, 2002, if such debt is not refinanced prior to that time. Ogden's repurchase obligation is collateralized by bank letters of credit. 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, 1997, was $46,562,000. In February 1998, this amount was increased to $51,624,000. During 1997, this customer purchased certain subordinated secured debt and repaid other amounts owed to Ogden in an aggregate amount of $38,900,000. In February 1998, this customer repaid an additional $7,343,000 owed to Ogden. In addition, at December 31, 1997, the Corporation had guaranteed indebtedness of $20,683,000 of an affiliate and principal tenant of this customer, which indebtedness is due in September 1998. Ogden has also guaranteed borrowings of another customer amounting to approximately $14,400,000 as well as $15,500,000 of borrowings of joint ventures in which Ogden has an equity interest. Management does not expect that these arrangements will have a material adverse effect on Ogden's Consolidated Financial Statements. In January 1998, a joint venture in which the Corporation has a 28% interest was awarded a 30-year concession contract to develop, improve, and operate 33 airports in Argentina. Ogden has a commitment of $28,000,000 for its equity contribution to this joint venture. At December 31, 1997, capital commitments amounted to $158,700,000, which included $86,100,000 for normal replacement, modernization, and growth in Entertainment ($45,200,000); Aviation ($23,200,000); Energy ($16,800,000); and Corporate and Other ($900,000) operations. Also included was $61,200,000 for Energy's coal-fired power project in the Philippines reflecting $41,800,000 for the remaining mandatory equity contributions, $5,700,000 for contingent equity contributions, and $13,700,000 for a standby letter of credit in support of debt service reserve requirements. Funding for the remaining mandatory equity contribution is being provided through a bank credit facility, which must be repaid in December 2001. The Corporation also has a $11,400,000 contingent equity contribution in an entertainment venture. In addition, compliance with standards and guidelines under the Clean Air Act Amendments of 1990 will require further Energy capital expenditures currently estimated at $40,000,000 by December 2000, subject to final time schedules determined by the individual states in which the Corporation's waste-to-energy facilities are located. X-23 26. INFORMATION CONCERNING BUSINESS SEGMENTS Ogden elected to change the reporting of its business segments as of January 1, 1997, and restated its prior years' presentation to conform to this revised segment reporting. Two of Ogden's core businesses formerly reported as part of the Services segment-Entertainment and Aviation-have been designated as separate business segments. All other operations formerly in the Services segment, mainly the Facility Management and Technology groups, were transferred to the Other segment except the Facility Management operations at Ogden's waste-to-energy plants and its environmental business, which have been transferred to the Energy segment. Noncore businesses scheduled for disposition are included in the Other segment. In connection with Ogden's restructuring plan, in 1997 Facility Services' New York City operations and the Charlotte, North Carolina, operations of Atlantic Design were sold. In 1996, the environmental laboratory business of Energy was sold, and in addition, the Other segment sold the operations of W.J. Schafer Associates, Ogden Professional Services, and the Facility Services group's operations outside of New York City and discontinued its asbestos abatement operations. The Entertainment segment consists principally of interests in themed attractions; live theater; concerts; gaming; large-format theaters and films; performing artist management; recorded music and video development; food, beverage, and novelty concession operations; and facility management at arenas, stadiums, amphitheaters, 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, amphitheaters, 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, aviation fueling, and in-flight catering 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"). Revenues and income from continuing operations (expressed in thousands of dollars) for the years ended December 31, 1997, 1996, and 1995, were as follows:
1997 1996 1995 ------------ ------------ ------------ REVENUES: Entertainment........................................................... $ 425,922 $ 391,933 $ 301,315 Aviation................................................................ 363,264 426,746 450,046 Energy.................................................................. 712,272 724,281 769,754 Other................................................................... 248,267 488,121 663,878 ------------ ------------ ------------ Total revenues.......................................................... $ 1,749,725 $ 2,031,081 $ 2,184,993 ------------ ------------ ------------ ------------ ------------ ------------ INCOME (LOSS) FROM OPERATIONS: Entertainment........................................................... $ 30,545 $ 20,259 $ (9,458) Aviation................................................................ 34,015 14,940 1,381 Energy.................................................................. 94,433 90,464 64,716 Other................................................................... 528 16,745 22,518 ------------ ------------ ------------ Total income from operations............................................ 159,521 142,408 79,157 EQUITY IN NET INCOME (LOSS) OF INVESTEES AND JOINT VENTURES: Entertainment........................................................... (3,091) (1,196) (392) Aviation................................................................ 3,343 1,231 368 Energy.................................................................. 1,605 325 4,423 Other................................................................... 179 3,244 2,467 ------------ ------------ ------------ Total................................................................... 161,557 146,012 86,023 Corporate unallocated income and expenses-net........................... (22,178) (22,941) (30,132) Corporate interest-net.................................................. (8,601) (13,430) (15,365) ------------ ------------ ------------ CONSOLIDATED INCOME BEFORE INCOME TAXES AND MINORITY INTEREST............................................. $ 130,778 $ 109,641 $ 40,526 ------------ ------------ ------------ ------------ ------------ ------------
In 1995, income from operations of Entertainment, Aviation, Energy, and Other reflects pretax charges of $6,500,000, $10,800,000, $32,400,000, and $19,600,000, respectively, reflecting the adoption of SFAS No. 121 and other unusual charges (see Notes 20 and 21). Ogden's revenues include $53,600,000, $137,600,000, and $280,846,000 from the United States government contracts for the years ended December 31, 1997, 1996, and 1995, respectively. Total revenues by segment reflect sales to unaffiliated customers. In computing income from operations, none of the following have been added or deducted: unallocated corporate expenses, nonoperating interest expense, interest income, and income taxes. X-24 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, 1997, 1996, and 1995, is as follows (reportable amounts for 1995 are shown as originally reported since the Corporation cannot practically restate these amounts):
IDENTIFIABLE DEPRECIATION AND CAPITAL ASSETS AMORTIZATION ADDITIONS ------------ ---------------- ---------- 1997 Entertainment......................................................... $ 317,313 $ 14,731 $ 52,523 Aviation.............................................................. 250,474 13,129 19,008 Energy................................................................ 2,808,571 72,835 39,967 Other................................................................. 81,512 2,423 2,131 Corporate............................................................. 181,425 1,259 2,572 ------------ -------- ---------- Consolidated.......................................................... $ 3,639,295 $ 104,377 $ 116,201 ------------ -------- ---------- ------------ -------- ---------- 1996 Entertainment......................................................... $ 294,653 $ 13,980 $ 17,618 Aviation.............................................................. 219,510 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 ------------ -------- ---------- ------------ -------- ---------- 1995 Services.............................................................. $ 813,591 $ 37,936 $ 49,940 Energy................................................................ 2,646,979 70,805 42,875 Corporate............................................................. 192,101 863 11 ------------ -------- ---------- Consolidated.......................................................... $ 3,652,671 $ 109,604 $ 92,826 ------------ -------- ---------- ------------ -------- ----------
Ogden's areas of operations are principally in the United States. Operations outside of the United States are worldwide but primarily in Europe, South America, and Asia. No single foreign country or geographic area is significant to the consolidated operations. Foreign operations' revenues, income from operations, and identifiable assets were $248,970,000, $22,513,000, and $387,294,000, respectively, for 1997 and $238,500,000, $10,900,000, and $275,100,000, respectively, for 1996. 27. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(EXPRESSED IN THOUSANDS OF DOLLARS) 1997 1996 1995 - ----------------------------------------------------------------------------- ---------- ---------- ---------- CASH PAID FOR INTEREST AND INCOME TAXES: Interest (net of amounts capitalized)........................................ $ 145,270 $ 134,560 $ 140,878 Income taxes................................................................. 24,187 20,552 9,885 NONCASH INVESTING AND FINANCING ACTIVITIES: Conversion of preferred shares for common shares............................. 3 2 4 Detail of Entities Acquired: Fair value of assets acquired................................................ 152,836 38,019 32,293 Liabilities assumed.......................................................... (89,624) (21,051) (16,819) Net cash paid for acquisitions............................................... 63,212 16,968 15,474
X-25 28. 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, 1997 and 1996, is summarized as follows:
1997 1996 ---------------------- ---------------------- CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE ---------- ---------- ---------- ---------- ASSETS: Cash and cash equivalents..................................... $ 185,671 $ 185,671 $ 140,824 $ 140,824 Receivables................................................... 568,147 571,159 721,846 725,075 Restricted funds.............................................. 309,895 309,711 310,811 310,716 Other assets.................................................. 26,659 26,659 23,799 23,799 LIABILITIES: Debt.......................................................... 373,728 413,453 312,937 335,819 Convertible subordinated debentures........................... 148,650 143,342 148,650 142,546 Project debt.................................................. 1,492,700 1,563,877 1,561,656 1,617,690 Other liabilities............................................. 21,175 18,729 21,245 18,330 OFF BALANCE-SHEET FINANCIAL INSTRUMENTS: Unrealized losses on interest rate swap agreements............ 3,529 1,413 Unrealized gains on interest rate swap agreements............. 201 670
The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value: For cash and cash equivalents, the carrying value of these amounts is a reasonable estimate of their fair value. The fair value of long-term unbilled receivables is estimated by using a discount rate that approximates the current rate for comparable notes. The fair value of restricted funds held in trust is based on quoted market prices of the investments held by the trustee. The fair value of noncurrent receivables is estimated by discounting the future cash flows using the current rates at which similar loans would be made to such borrowers based on the remaining maturities, consideration of credit risks, and other business issues pertaining to such receivables. Other assets, consisting primarily of marketable securities, insurance and escrow deposits, and other miscellaneous financial instruments used in the ordinary course of business, are valued based on quoted market prices or other appropriate valuation techniques. Fair values for short-term debt and long-term debt were determined based on interest rates that are currently available to the Corporation for issuance of debt with similar terms and remaining maturities for debt issues that are not traded 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. The fair value of Ogden financial guarantees provided on behalf of customers (see Note 25) would be zero because Ogden receives no fees associated with such commitments. The fair-value estimates presented herein are based on pertinent information available to management as of December 31, 1997 and 1996. 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. X-26 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, 1997 and 1996, and the related statements of shareholders' equity, consolidated income and cash flows for each of the three years in the period ended December 31, 1997. 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, 1997 and 1996, and the results of their operations and cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. As discussed in Note 1 to the financial statements, in 1995 the Corporation adopted Statement of Financial Accounting Standards No. 121, relating to long-lived assets and long-lived assets to be disposed of. /s/ Deloitte & Touche LLP February 27, 1998 X-27 OGDEN CORPORATION AND SUBSIDIARIES REPORT OF MANAGEMENT Ogden's management is responsible for the information and representations contained in this annual report. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances to reflect in all material respects the substance of events and transactions that should be included and that the other information in the annual report is consistent with those statements. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions currently being accounted for. In meeting its responsibility for the reliability of the financial statements, management depends on the Corporation's internal control structure. This structure is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. In designing control procedures, management recognizes that errors or irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of such controls. Management believes that the Corporation's internal control structure provides reasonable assurance that errors or irregularities that could be material to the financial statements are prevented and would be detected within a timely period by employees in the normal course of performing their assigned functions. The Board of Directors pursues its oversight role for these financial statements through the Audit Committee, which is composed solely of nonaffiliated directors. The Audit Committee, in this oversight role, meets periodically with management to monitor their responsibilities. The Audit Committee also meets periodically with the independent auditors and the internal auditors, both of whom have free access to the Audit Committee without management present. The independent auditors elected by the shareholders express an opinion on our financial statements. Their opinion is based on procedures they consider to be sufficient to enable them to reach a conclusion as to the fairness of the presentation of the financial statements. /s/ R. Richard Ablon /s/ Philip G. Husby - ------------------------------- ------------------------------- R. Richard Ablon Philip G. Husby Chairman of the Board, Senior Vice President and President, and Chief Financial Officer Chief Executive Officer
X-28 OGDEN CORPORATION AND SUBSIDIARIES QUARTERLY RESULTS OF OPERATIONS
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 $ 91,554 $ 95,128 $ 89,044 ---------- ---------- ---------- ---------- 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 ---------- ---------- ---------- ----------
1996 QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31 - ----------------------------------------------------------------- ---------- ---------- ---------- ---------- (In thousands of dollars, except per-share amounts) Total revenues................................................... $ 520,672 $ 546,099 $ 500,641 $ 463,669 ---------- ---------- ---------- ---------- Gross profit..................................................... $ 82,057 $ 89,216 $ 91,111 $ 85,013 ---------- ---------- ---------- ---------- Net income....................................................... $ 9,288 $ 16,888 $ 20,388 $ 17,970 ---------- ---------- ---------- ---------- Basic earnings per common share.................................. $ 0.19 $ 0.34 $ 0.41 $ 0.36 ---------- ---------- ---------- ---------- Diluted earnings per common share................................ $ 0.18 $ 0.34 $ 0.40 $ 0.35 ---------- ---------- ---------- ----------
OGDEN CORPORATION AND SUBSIDIARIES PRICE RANGE OF STOCK AND DIVIDEND DATA
1997 1996 -------------------- -------------------- HIGH LOW HIGH LOW --------- --------- --------- --------- Common: First Quarter............................ 22 5/8 18 3/8 23 7/8 19 3/8 Second Quarter........................... 22 19 20 7/8 17 7/8 Third Quarter............................ 24 5/8 20 3/8 21 5/8 18 Fourth Quarter........................... 28 7/16 23 5/8 20 5/8 17 5/8 --------- --------- --------- --------- Preferred: First Quarter............................ 118 118 128 128 Second Quarter........................... 114 1/2 114 1/2 121 117 1/4 Third Quarter............................ 121 121 125 1/2 125 1/2 Fourth Quarter........................... 153 153 Not Traded --------- --------- --------- ---------
Quarterly common stock dividends of $.3125 per share were paid to shareholders of record for the four quarters of 1997 and 1996, the dividends for the last quarters of 1997 and 1996 being paid in January of the subsequent years. Quarterly dividends of $.8376 were paid for the four quarters of 1997 and 1996 on the $1.875 preferred stock. X-29 EX-21 7 SUBSIDIARIES OF OGDEN
EXHIBIT 21 OGDEN CORPORATION - U.S. SUBSIDIARIES LIST (See Attachment A for foreign subsidiaries list) PPERCENT DOMESTIC COMPANY OWNERSHIP STATE CO. ODE/E.I.N. - ------- --------- ----- -------------- Ogden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE. . . . 13-5549268 Ogden Management Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-2918484 OFS Equity of Babylon, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 13-3543094 OFS Equity of Huntington, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 13-3543092 Ogden Services Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 141*/13-3058273 Ogden Firehole Entertainment Corp.. . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3516164 Ogden Asia Pacific Services, Inc. (See Attachment A for subsidiaries) . . . 100. . . .DE. . . . 134/13-3793247 Ogden Central and South America, Inc. (See Attachment A for subsidiaries). 100. . . .DE. . . . 135/13-3793248 Ogden International Europe Inc. (See Attachment A for subsidiaries). . . . 100. . . .DE. . . . 164/13-3688536 Ogden Entertainment, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 001/11-2145117 Doggie Diner, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 003/92-1228666 I & S Consultants, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .IL. . . . /36-3241812 The Metropolitan Entertainment Co., Inc.. . . . . . . . . . . . . . . . . 50 . . . .NJ. . . . 22-1968974 Offshore Food Service, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .LA. . . . 027/72-0535141 Gulf Coast Catering Company, Inc. . . . . . . . . . . . . . . . . . . . 100. . . .LA. . . . 028/13-3537164 Ogden American Food Services, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . .OH. . . . 008/34-4197320 Ogden Attractions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3934857 Ogden Aviation Food Services, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 080/11-2161743 Ogden Aviation Food Services (ALC), Inc . . . . . . . . . . . . . . . . 100. . . .NY. . . . 085/11-1619941 Ogden-Burtco Services, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .WA. . . . 042/92-0022939 Alpine Food Products, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .WA. . . . 041/91-0760148 Ogden Facility Management of Alaska, Inc. . . . . . . . . . . . . . . . 100. . . .AK. . . . 058/92-0097503 Ogden Entertainment of Florida, Inc.. . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3877904 Ogden Entertainment of New York, Inc. . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 011/13-3428320 Ogden Facility Management Corporation . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 098/13-3282969 Ogden Facility Management Corporation of Anaheim. . . . . . . . . . . . . 100. . . .CA. . . . 060/13-3526194 Ogden Facility Management Corporation of Huntington . . . . . . . . . . . 100. . . .WV. . . . 13-3852104 Ogden Facility Management Corporation of Iowa . . . . . . . . . . . . . . 100. . . .IA. . . . 007/13-3444248 Ogden Facility Management Corporation of Pensacola. . . . . . . . . . . . 100. . . .FL. . . . 006/13-3245048 Ogden Facility Management Corporation of West Virginia. . . . . . . . . . 100. . . .WV. . . . 55-0459949 Ogden Film and Theatre, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . /13-3934858 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 Ogden Food Service Corporation of Kansas. . . . . . . . . . . . . . . . . 100. . . .KS. . . . 0032/13-3703705 Ogden Food Service Corporation of Milwaukee . . . . . . . . . . . . . . . 100. . . .WI. . . . 063/13-2783130 Ogden Food Service Corporation of Texas . . . . . . . . . . . . . . . . . 100. . . .TX. . . . 092/74-1310443 Ogden Food Service Corporation of Wisconsin . . . . . . . . . . . . . . . 100. . . .WI. . . . 056/39-0912345 Ogden Leisure, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 54-0848368 Ogden Fairmount, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 021/37-0912053 Ogden Technology Services Corporation . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 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 Allied Maintenance Corporation. . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 010*/13-65939 Alantic Design Company, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 086*/13-2629642 Lenzar Electro-Optics, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 175/59-3063752 Ogden Allied Payroll Services, Inc. . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 063*/13-6160158 Ogden Cisco, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 157*/13-3670141 Ogden Communications, Inc.. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 130/13-3793364
PPERCENT DOMESTIC COMPANY OWNERSHIP STATE CO. ODE/E.I.N. - ------- --------- ----- -------------- Ogden Corporation Ogden Services Corporation DE 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 Ogden New York Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .NY. . . . 020/13-5623889 Ogden Pipeline Services Corporation . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 125*/13-2949046 Ogden Facility Holdings, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3852102 Ogden Facility Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE. . . . 13-3773192 Ogden Allied Building & Airport Services Inc. . . . . . . . . . . . . 100. . . .DE. . . . 017*/13-5618372 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 Resource Recovery Support Services, Inc.. . . . . . . . . . . . . . . . 100. . . .DE. . . . 149*/13-3560729 Ogden Plant Services of New Jersey, Inc.. . . . . . . . . . . . . . . . . . 100. . . .NJ. . . . 176/13-3597547 Ogden Water Treatment Support Services, Inc.. . . . . . . . . . . . . . . . . 100. . . .DE. . . . 199*/13-3807441 Ogden Allied Abatement & Decontamination Service, Inc.. . . . . . . . . . . . 100. . . .NY. . . . 144*/13-3429112 Ogden Energy Group, Inc. (formerly known as Ogden Projects, Inc.) . . . . . . . 100. . . .DE. . . . 13-3213657 (SEE ATTACHMENT B FOR OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST) 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
PPERCENT DOMESTIC COMPANY OWNERSHIP STATE CO. ODE/E.I.N. - ------- --------- ----- -------------- Ogden Corporation Ogden Services Corporation DE 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
* For payroll/personnel, add 200 to codes of Maintenance companies ONLY.
ATTACHMENT A OGDEN CORPORATION - FOREIGN SUBSIDIARIES LIST --------------------------------------------- PERCENT DOMESTIC CO. COMPANY OWNERSHIP COUNTRY CODE - ------- --------- ------- ---- Ogden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE/U.S.A. Ogden Services Corporation. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. . . . . . .141 Ogden Aviation Services Limited . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K.186/2176414259610 Ogden Aviation Engineering Limited. . . . . . . . . . . . . . . . . . . . 100. . . .U.K.. . . . . . . . .188 Ogden Entertainment Services (UK) Ltd.. . . . . . . . . . . . . . . . . . 100. . . .U.K.. . . . . . . . .015 Ogden Ice Hockey Limited. . . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K. Ogden Cargo Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K. SkyCare Limited . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .U.K. Air Cargo Enterprises Limited . . . . . . . . . . . . . . . . . . . . . 50 . . . .U.K. Ogden Asia Pacific Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. IEA of Japan Company Ltd. . . . . . . . . . . . . . . . . . . . . . . . . 50 . . . .Japan HO/Ogden Investimentos e Transportes, Limitada. . . . . . . . . . . . . . 51 . . . .Macau MASC/Ogden Aviation Services (Macau) Limited. . . . . . . . . . . . . . . 29 . . . .Macau Ogden Asia Pacific Holding Limited. . . . . . . . . . . . . . . . . . . . 100. . . .British Virgin Islands. Ogden Aviation (Asia Pacific) Limited . . . . . . . . . . . . . . . . . 80.1 . . .British Virgin Islands Ogden Aviation (Hong Kong) Limited. . . . . . . . . . . . . . . . . . 100. . . .Hong Kong Ogden Aviation Services (NZ) Limited. . . . . . . . . . . . . . . . . . . 100. . . .New Zealand156 Ogden International Facilities Corporation (Asia Pacific) Pty Ltd.. . . . 100. . . .Australia . . . . . .172 Ogden International Facilities Corporation (Australia) Pty Ltd. . . . . 50 . . . .Australia International Facilities Corporation (Cairns) Pty Ltd.. . . . . . . . . 100. . . .Australia International Facilities Corporation (NZ) Pty Ltd.. . . . . . . . . . . 100. . . .New Zealand . . . . .156 International Facility Corporation (Newcastle) Ltd. . . . . . . . . . . 100 International Facility Corporation (Hong Kong) Pty Ltd. . . . . . . . . * . . . .Hong Kong * Boscastle Ltd and Coverack Ltd are shareholders due to residency requirements. Ogden Central and South America, Inc. . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. Americana Entertainment N.V.. . . . . . . . . . . . . . . . . . . . . . . 80 . . . .Aruba Ogden Argentina, S.A. . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Argentina Ogden Aviation Services (Chile) Ltda. . . . . . . . . . . . . . . . . . . 99 . . . .Chile . . . . . . . .158 (1% held by Ogden Asia Pacific Services Inc.) Aviation Services Leader S.A. . . . . . . . . . . . . . . . . . . . . . 80 . . . .Chile . . . . . . . .185 Ogden Aviation Services Dominicana, S.A.. . . . . . . . . . . . . . . . . 99 . . . .Dominican Rep. Ogden Aviation Services (Panama) Corp.. . . . . . . . . . . . . . . . . . 85 . . . .Panama. . . . . . . .171 Ogden 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, S. de R.L. de C.V. . . . . . . . . . . . . . . . . . . . . . . . . 66.67. . .Mexico Ogden Servair Servicios Aeroportuarios, S.A.. . . . . . . . . . . . . . . 50 . . . .Mexico. . . . . . . .184 Ogden SEITSA Leasing, S.A. de C.V.. . . . . . . . . . . . . . . . . . . . 94.9 . . .Mexico. . . . . . . .183 Ogden Saint Maarten Ground Services N.V.. . . . . . . . . . . . . . . . . 100. . . .Netherlands Antilles Ogden & Talma Aviation Services of Peru S.A.. . . . . . . . . . . . . . . 54 . . . .Peru. . . . . . . . .178
PERCENT DOMESTIC CO. COMPANY OWNERSHIP COUNTRY CODE - ------- --------- ------- ---- Ogden Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .DE/U.S.A. Ogden Services Corporation (cont'd) . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. . . . . . .141 Ogden International Europe Inc. . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. . . . . . .164 Ogden Atlantic Design (Europe) Limited. . . . . . . . . . . . . . . . . . 100. . . .Ireland Ogden Holdings B.V. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Netherlands . . . . .166 Compania General de Sondeos CGS, S.A. . . . . . . . . . . . . . . . . . 100. . . .Spain . . . . . . . .191 Czech-Ogden Airhandling s.r.o.. . . . . . . . . . . . . . . . . . . . . 50 . . . .Czech. . . . . . . .162 Ogden Aviation (Schiphol) B.V.. . . . . . . . . . . . . . . . . . . . . 100. . . .Netherlands . . . . .161 Ogden Cargo B.V.. . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .Netherlands Ogden Aviation 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 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 Ogden Holdings (Deutschland) GmbH . . . . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .192 Ogden Allied Services GmbH. . . . . . . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .138 Ogden Aviation Services GmbH & Co. KG . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .193 Ogden Entertainment (Oberhausen) GmbH . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .194 Ogden Tegel Verwaltungs GmbH (formerly DAN AIR Services GmbH) . . . . 100. . . .Germany . . . . . . .195 Tegel Aircraft Handling GmbH. . . . . . . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .196 Verwaltung Ogden Aviation Services GmbH . . . . . . . . . . . . . . 100. . . .Germany . . . . . . .197 Ogden Entertainment, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . .DE/U.S.A. Ogden Entertainment of Cape Town (Proprietary) Limited. . . . . . . . . . 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 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
ATTACHMENT B OGDEN ENERGY GROUP, INC. - U.S. AND FOREIGN SUBSIDIARIES LIST ------------------------------------------------------------- PPERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3939460 Ogden Projects, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3213657 Ogden Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 22-3405522 OGDEN PHILIPPINES OPERATING, INC. . . . . . . . . . . . . . . . . . . . . 100. . . . . CAYMAN ISLANDS NA Ogden Power Corporation . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1732981 Geothermal, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Virginia . . . . 54-1504703 Imperial Power Services, Inc. . . . . . . . . . . . . . . . . . . . . . 100. . . . . California . . . 95-3677245 New Martinsville Hydro-Operations Corporation . . . . . . . . . . . . . 100. . . . . West Virginia. . 31-1275468 Ogden Brandywine Operations, Inc. . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1740297 Ogden Geothermal Operations, Inc. . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1607228 Ogden Hydro Operations, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . . . Tennessee. . . . 52-1661862 Ogden Oil & Gas, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1734589 Ogden Power Equity Corporation. . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1504746 Catalyst New Martinsville Hydroelectric Corporation . . . . . . . . 100. . . . . Delaware . . . . 13-3372123 ERC Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1523295 Ogden Heber Field Energy, Inc.. . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1611569 Ogden Hydro Energy, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1606911 Ogden Power International Holdings, Inc.. . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 54-1742808 EDISON BATAAN COGENERATION CORPORATION. . . . . . . . . . . . . . . 100. . . . . PHILIPPINE NA HIDRO OPERACIONES DON PEDRO S.A.. . . . . . . . . . . . . . . . . . 100. . . . . COSTA RICA NA ISLAND POWER CORPORATION. . . . . . . . . . . . . . . . . . . . . . 40**** . . . PHILIPPINE NA LINASA COGENERACION Y ASOCIADOS, S.L. . . . . . . . . . . . . . . . 50*****. . . SPAIN. . . . . . B30556484 OGDEN ENERGY INDIA INVESTMENTS LTD.. . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA OGDEN CHINESE INVESTMENTS LTD. . . . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA OGDEN ENERGY CHINA (Alpha) LTD.. . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA OGDEN ENERGY CHINA (Beta) LTD. . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA OGDEN ENERGY CHINA (Delta) LTD . . . . . . . . . . . . . . . .100 . . . . .MAURITIUS NA OGDEN ENERGY CHINA (Gamma) LTD . . . . . . . . . . . . . . . .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 (F/K/A OGDEN QUEZON POWER, INC.- OLD DVLPMNT. CO.) QUEZON POWER, INC. (NEW DVLPMNT CO.) . . . . . . . . . . . . .39.01** . . .CAYMAN ISLANDS NA Ogden Power Development, Inc.. . . . . . . . . . . . . . . . . . . .100 . . . . .Delaware. . . . .13-3662254 Ogden Power Development of Bolivia, Inc. . . . . . . . . . . . . .100 . . . . .Delaware. . . . .13-3852464 OPDB, LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . .100 . . . . .CAYMAN ISLANDS NA Ogden Power 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 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
PPERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) Ogden Energy Resource Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 63-0837475 Ogden Environmental and Energy Services Co., Inc. . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 52-1594168 Analytical Technologies, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 95-3705905 G A Technical Services, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . . . 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 Remediation Services Co., Inc.. . . . . . . . . . . . . . . . . . . . 100. . . . . Florida. . . . . 59-2661991 OGDEN UMWELT UND ENERGIE SYSTEME GMBH . . . . . . . . . . . . . . . . . . . 100. . . . . GERMANY NA IEAL ENERGIE & UMWELT CONSULT, GMBH . . . . . . . . . . . . . . . . . . . 100. . . . . GERMANY NA OLMEC INSURANCE, LTD. . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . BERMUDA NA Ogden Waste to Energy, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3871973 Ogden Martin Systems, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3162629 Ogden Engineering Services, Inc.. . . . . . . . . . . . . . . . . . . . . 100. . . . . New Jersey . . . 13-3284896 Ogden Marion Land Corp. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Oregon . . . . . 13-3369730 OGDEN WASTE TO ENERGY, LTD. (FORMERLY OGDEN MARTIN SYSTEMS, LTD). . . . . 100. . . . . ONTARIO NA OGDEN MARTIN SYSTEMS OF NOVA SCOTIA, LTD. . . . . . . . . . . . . . . 100. . . . . NOVA SCOTIA NA Ogden Martin Systems of Alexandria/Arlington, Inc.. . . . . . . . . . . . 100. . . . . Virginia . . . . 58-1594213 OMS Equity of Alexandria/Arlington, Inc.. . . . . . . . . . . . . . . . . 100. . . . . Virginia . . . . 13-3389573 Ogden Martin Systems of Babylon, Inc. . . . . . . . . . . . . . . . . . . 100. . . . . New York . . . . 13-3246689 Ogden Martin Systems of Bristol, Inc. . . . . . . . . . . . . . . . . . . 100. . . . . Connecticut. . . 13-3246723 Ogden Martin Systems of Clark, Inc. . . . . . . . . . . . . . . . . . . . 100. . . . . Ohio . . . . . . 11-3140377 OMSC One, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690804 OMSC Two, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690801 OMSC Three, Inc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690806 OMSC Four, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3690807 Ogden Martin Systems of Fairfax, Inc. . . . . . . . . . . . . . . . . . . 100. . . . . Virginia . . . . 13-3410434 Ogden Martin Systems of Haverhill, Inc. . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 13-3375647 Haverhill Power, Inc. . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 04-2908628 LMI, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 04-2943947 Ogden Omega Lease, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3028120 Ogden Haverhill Properties, Inc.. . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 13-3382130 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 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
PPERCENT COMPANY OWNERSHIP INCORP. E.I.N. - ------- --------- ------- ------ Ogden Energy Group, Inc. (cont.) Ogden Projects, Inc. (cont.) 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 Tulsa, Inc. . . . . . . . . . . . . . . . . . . . . 100. . . . . Oklahoma . . . . 13-3203172 Ogden Martin Systems of Union, Inc. . . . . . . . . . . . . . . . . . . . . 100. . . . . New Jersey . . . 13-3323867 OPI CARMONA LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . CAYMAN ISLANDS NA OPI CARMONA ONE LIMITED . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . CAYMAN ISLANDS NA OGDEN ENERGY ASIA PACIFIC LIMITED (F/K/A OGDEN PROJECTS ASIA PACIFIC LIMITED) . 100* . . . . HONG KONG 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 Projects of Haverhill, Inc. . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Massachusetts. . 13-3522006 Ogden Wallingford Associates, Inc.. . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Connecticut. . . 13-3494166 Ogden Waste Treatment Services, Inc.. . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3362679 Ogden Environmental Services of Houston, Inc. . . . . . . . . . . . . . . . . 100. . . . . Texas. . . . . . 13-3586015 Ogden Waste Solutions, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 22-3557169 Stockton Soil Treatment Facility, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . . . California . . . 13-3610053 Ogden Waste Treatment Services USA, Inc.. . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 13-3940678 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 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 Yorkshire USA, Inc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100. . . . . Delaware . . . . 51-0354748
* Ogden Energy Asia Pacific Limited's stock is owned 50% by Ogden Projects, Inc. and 50% by Ogden Power Development, Inc. ** Quezon Power, Inc (new development company) is owned 39.01% by Ogden Power Development - Cayman, Inc., 1.30% by PMR Power, Inc. and 59.69% by Quezon Generating Company, Ltd. *** Yorkshire USA, Inc. was acquired by Ogden Projects, Inc. when Yorkshire Water terminated its involvement as a direct participant in the Venture. **** 40% of the stock of Island Power Corporation is owned by Ogden Power International Holdings, Inc. and 60% is owned by various stockholders. *****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. EX-23 8 CONSENT OF DELOITTE & TOUCHE 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 on Forms S-8 of Ogden Corporation of our reports dated February 27, 1998 (which express an unqualified opinion and include an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 121), appearing or incorporated by reference in this Annual Report on Form 10-K of Ogden Corporation for the year ended December 31, 1997. Deloitte & Touche LLP New York, New York March 25, 1998 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1997 JAN-01-1997 DEC-31-1997 185,671 0 413,392 20,207 34,235 832,071 2,557,189 609,642 3,639,295 525,937 1,927,330 0 45 25,147 540,899 3,639,295 582,134 1,749,725 539,640 959,738 0 3,485 32,077 130,778 53,100 75,673 0 0 0 75,673 1.51 1.49
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