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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
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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
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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
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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
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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).
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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.
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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:
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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.
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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
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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.
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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.
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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
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TERRY ALLEN KRAMER
/s/ JUDITH D. MOYERS Director
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JUDITH D. MOYERS
Director
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HOMER A. NEAL
/s/ Stanford S. Penner Director
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STANFORD S. PENNER
/s/ Frederick Seitz Director
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FREDERICK SEITZ
/s/ Robert E. Smith Director
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ROBERT E. SMITH
/s/ Helmut F.o. Volcker Director
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HELMUT F.O. VOLCKER
/s/ Abraham Zaleznik Director
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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.