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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, 1998
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ____________________ to____________________
Commission File Number 1-3122
OGDEN CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-5549268
(State or Other Jurisdiction of (I.R.S. Employee Identification No.)
Incorporation or Organization)
Two Pennsylvania Plaza, New York, N.Y. 10121
- -------------------------------------- -----------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code - (212) 868-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
- ------------------- ----------------
Common Stock, par value New York Stock Exchange
$.50 per share
$1.875 Cumulative Convertible New York Stock Exchange
Preferred Stock (Series A)
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. |_|
The aggregate market value of registrant's voting stock, held by non-affiliates
based on the New York Stock Exchange closing price as reported in the
consolidated transaction reporting system as of the close of business on March
1, 1999 was as follows:
Common Stock, par value $.50 per share $1,204,689,605
$1.875 Cumulative Convertible
Preferred Stock (Series A) $6,279,900
The number of shares of the registrant's Common Stock outstanding as of March 1,
1999 was 49,048,469 shares.
The following documents are hereby incorporated by reference into this Form
10-K:
(1) Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1998 (Parts II and IV).
(2) Portions of the Registrant's 1999 Proxy Statement to be filed with the
Securities and Exchange Commission (Part III).
INDEX
PART I PAGE
- ------ ----
Item 1. Business
Entertainment 1-8
Aviation 8-11
Energy 12-29
Other 29
Recent Developments 11
Other Information 30-37
Markets, Competition and General Business Conditions 30-31
Equal Employment Opportunity 31
Year 2000 Issues 31
Employee and Labor Relations 32
Environmental Regulatory Laws 32-34
Energy and Water Regulation 35-37
Item 2. Properties 38-42
Item 3. Legal Proceeding 43-44
Item 4. Submission of Matters to a Vote of Security Holders
44
Executive Officers of Ogden 44-48
PART II
Item 5. Market For Ogden's Common Equity and Related Stockholder Matters 48
Item 6. Selected Financial Data 48
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations 48
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 48
Item 8. Financial Statements and Supplementary Data 49
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 49
PART III
Item 10. Directors and Executive Officers of Ogden 49
Item 11. Executive Compensation 49
Item 12. Security Ownership of Certain Beneficial Owners and Management 49
Item 13. Certain Relationships and Related Transactions 49
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 50-55
PART I
Item 1. BUSINESS
Ogden Corporation, a Delaware corporation (hereinafter together with
its consolidated subsidiaries referred to as "Ogden" or the "Company"), is a
global company engaged in providing a wide range of operations and services
through its operating groups within each of its four business segments,
Entertainment, Aviation, Energy and Other. The amounts of revenue, operating
profit or loss and identifiable assets attributable to each of Ogden's four
business segments for each of the last three fiscal years is set forth in
footnote 23. INFORMATION CONCERNING BUSINESS SEGMENTS of Ogden's 1998 Annual
Report to Shareholders, certain specified portions of which are incorporated
herein by reference.
ENTERTAINMENT
Ogden Entertainment, Inc. ("Entertainment"), directly and through joint
ventures, is engaged in business activities related to the ownership and
providing of, services to, entertainment attractions and leisure and gaming
venues in the United States, Canada, Europe, South America and Australia.
Entertainment's business operations are divided into four categories: Themed
Attractions; Food and Beverage Concessions; Venue Management; and Specialty
Casinos. In addition, Entertainment owns a 50% interest in the Metropolitan
Entertainment Group, which is engaged in a number of activities related to the
development and exhibition of entertainment products.
Where services are performed on a cost-plus basis, the customer reimburses
Entertainment for all acceptable reimbursable expenditures made in connection
with the job and also pays a management fee, which may be a percentage of the
reimbursable expenditures, a specific dollar amount, or a combination of the
two.
Themed Attractions
Entertainment, directly and through joint ventures, operates a variety of
themed entertainment attractions in the United States, Europe and South America.
Entertainment's themed attractions are situated on land either owned or leased
by Entertainment and are generally operated by Entertainment as principal and
not as a service provider. As owner of the entertainment "product" at such
locations, Entertainment is responsible for all aspects of the business,
including marketing and ticket sales, day-to-day operation of the attraction and
any food service or merchandising operations on the premises.
Entertainment's principal operations in the themed attraction area include:
Tinseltown(TM) Studios - Developed, owned and operated by Entertainment,
Tinseltown(TM) is an innovative, audience-participation dinner attraction
situated on a 1.25 acre parcel of land owned by Entertainment and located in
Anaheim, California. As part of the operation, Entertainment also leases from
the City of Anaheim adjacent land to accommodate 550 parking
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spaces. Tinseltown(TM) commenced operation in November, 1998 and is a specially
designed and constructed facility, which includes a 700-seat theatre, full
service kitchen and a gift shop. Tinseltown(TM) re-creates for guests the
experience of being a star, producer or other Hollywood notable attending a
major televised awards show, and arriving guests walk the "red carpet" as they
are greeted by paparazzi, autograph hounds and television interviewers. The
two-hour experience (which includes service of a three-course dinner) features a
live musical stage production. At each performance, a number of guests appear on
the theatre's two 9' x 12' video screens as part of the "televised" Tinseltown
Awards Show, and some are inserted into clips from motion pictures (such as
"Jurassic Park", "Field of Dreams", "Jaws" and "The Blues Brothers") as they
compete for Tinseltown's(TM) "Oggie", the statuette awarded for best actor and
best actress performances.
Top of the World - Entertainment operates the "Top of the World" visitor
attraction on the 107th Floor Observation Deck at the World Trade Center in New
York City. Pursuant to an eleven and one-half year lease from the Port Authority
of New York and New Jersey, Entertainment commenced these operations in 1995. In
the Fall of 1996, Entertainment undertook extensive renovations to the
attraction, including the installation of three motion simulation theatres that
take visitors on a simulated aerial sightseeing tour of New York City. The
attraction, which reopened in April, 1997, attracts over 1.8 million visitors
per year. Entertainment's lease with the Port Authority provides for the payment
of base rent plus percentage rent on revenues in excess of certain specified
levels.
Silver Springs and Wild Waters - Pursuant to a long-term lease from the
State of Florida, Entertainment operates Silver Springs, a nature-based
attraction, and Wild Waters, an adjacent water park, located in Ocala, Florida.
Silver Springs is a unique 250-acre nature preserve, which features exotic
wildlife, jungle cruise glass-bottom boat rides, jeep safari rides, animal shows
and exhibits, gift shops and eateries. Wild Waters, a six-acre water park
adjacent to Silver Springs, features water slides, wave pools, miniature golf,
and food and beverage concession areas. Silver Springs operates year-round,
while Wild Waters operates from March through Labor Day weekend.
Enchanted Castle - Owned and operated by Entertainment in a leased
facility located in Lombard, Illinois. Enchanted Castle is an indoor family
entertainment center that features a variety of mechanical and video games,
miniature golf, laser tag, motion simulators and similar attractions. Enchanted
Castle also features a full service casual restaurant and concession area, and a
large party room area for servicing corporate groups and private parties.
Enchanted Castle is operated year-round.
La Rural de Palermo - La Rural is a 28-acre fairground and exhibition
center located in Buenos Aires, Argentina. This facility is operated pursuant to
a long-term lease by a joint venture for which Entertainment serves as managing
partner and in which Entertainment owns a 50% interest. In addition to operating
the fair and exhibition business on the property, the joint venture is
developing a master plan for renovation of the fair ground and exhibition
facilities and
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development of an entertainment and retail complex on the site, including a
multi-screen theatre. Initial construction on the renovation project began in
early 1998.
Jazzland - During 1998, Entertainment commenced construction on this
100-plus acre theme and ride park located in New Orleans, Louisiana.
Entertainment holds a long-term lease on the Jazzland site that can be converted
into fee ownership at nominal cost to Entertainment. Jazzland will consist of a
number of separate areas themed around the history and cultures of New Orleans
and will feature a roller coaster and a variety of other rides and attractions,
restaurants and concession areas, and retail merchandise stores. Adjacent to
Jazzland will be an outdoor concert facility capable of hosting concerts and
other musical presentations. Jazzland is scheduled to open in the spring of
2000.
Grizzly Park - Owned and operated by Entertainment and located in Montana
at the main entrance to Yellowstone National Park. Grizzly Park is a
nature-based attraction featuring the Grizzly Discovery Center, an indoor
exhibit that showcases items of interest relating to Yellowstone and its
wildlife, outdoor natural habitats containing live grizzly bears and gray
wolves, and a variety of shops and restaurants.
Isla Magica - Entertainment owns a 28% equity interest in Parques
Tecnicultores, S.A. ("Partecsa"), which operates the Isla Magica theme park,
located on a 200-acre parcel in Seville, Spain. Originally the site of the
Seville Expo world's fair, Isla Magica was converted by Partecsa into a themed
ride park pursuant to a 30-year lease, and reopened to the public in the spring
of 1997. Isla Magica contains a number of areas themed around the history and
culture of Spain, including rides, restaurants and concession areas, and retail
merchandise stores.
Large Format Film - Entertainment is also engaged in the production and
distribution of large-format films, as well as the management and operation of
theatres exhibiting such films. In 1997, Entertainment completed production on
its first large-format IMAX(R) feature film, AMAZON. This film, which is owned
by Entertainment, has been contracted by over 45 theatres both domestically and
internationally and was nominated for an Academy Award(R) in 1998 in the
category of "Best Documentary (Short Subject)". In 1998, Entertainment
co-produced, with Sony Corporation of America, its second large-format film
(produced in both 2D and 3D versions), MARK TWAIN'S AMERICA. Entertainment owns
a 50% interest in this film, which is distributed by Sony under the terms of the
co-production agreement between Sony and Entertainment.
Food and Beverage Concessions - Entertainment's food and beverage operations
consist of Concessions and Restaurants.
Concessions - Entertainment is a leading provider of food and beverage
concession services at a wide variety of public assembly facilities, including
arenas, stadiums, amphitheaters, convention and exhibition centers, parks,
fairgrounds and zoos. At some client locations, Entertainment also operates
concessions for the sale of souvenir merchandise. The contractual arrangements
governing these operations are individually negotiated, and vary widely as to
terms and duration. These arrangements often require Entertainment to make an
initial investment in
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food service equipment and leasehold improvements, a cash payment to the client
facility or both. In most cases, the contracts provide for a payment by
Entertainment of ongoing commissions or rentals based on a percentage of gross
sales or net profits, sometimes with a minimum rental or payment. Where minimum
payments are required the contracts generally protect Entertainment against
"force majeure" events over which Entertainment has no control, such as player
strikes or lockouts, and weather or natural disaster-related disruptions in
operations.
Entertainment's concession service locations at client facilities
currently number approximately 125, including those listed in the following
table:
Name Location
- ---- --------
Edison International Field Anaheim, California
Wrigley Field Chicago, Illinois
Los Angeles Convention Center Los Angeles, California
The Kingdome Seattle, Washington
Veterans Stadium Philadelphia, Pennsylvania
Market Square Arena Indianapolis, Indiana
McNichols Arena Denver, Colorado
Cobo Hall Detroit, Michigan
Tempe Diablo Stadium Tempe, Arizona
University of Oklahoma Stadium Norman, Oklahoma
The MGM Grand Gardens Arena Las Vegas, Nevada
General Motors Place Vancouver, British Columbia, Canada
Mile High Stadium Denver, Colorado
Victory Field Indianapolis, Indiana
MCI Center Washington, D. C.
Alameda County Coliseum Complex Oakland, California
In addition, Entertainment has been awarded concession contracts at three
new facilities scheduled to open in 2000: (i) the 20,000-seat Staples Center in
California, the new home of the National Hockey League ("NHL") Los Angeles Kings
and the National Basketball Association ("NBA") Los Angeles Lakers and Los
Angeles Clippers; (ii) the 66,000-seat Paul Brown Stadium (football) in
Cincinnati, Ohio; and the 20,000 seat Pepsi Center Arena in Denver, Colorado,
the new home of the NBA's Denver Nuggets and the NHL's Colorado Avalanche.
During 1998 Entertainment sold their food and beverage concession
agreements at several amphitheaters to SFX Entertainment, Inc. ("SFX"). In
December 1998 Entertainment and SFX entered into a new master food and beverage
concessions agreement at the amphitheaters controlled by SFX whereby
Entertainment was granted the right to operate the food and beverage
concessions, for a ten-year term, at the Blockbuster Amphitheater in Charlotte,
North Carolina; Starwood Amphitheater in Nashville, Tennessee; Desert Sky
Amphitheater in Phoenix, Arizona; and Coral Sky Amphitheater in West Palm Beach,
Florida. In addition, SFX granted to Entertainment the exclusive right to sell
food and beverages at any 10,000-seat (or larger) amphitheater that SFX acquires
within the next ten years.
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Entertainment provides food and beverage concession services at
amphitheaters throughout the United States, including those listed in the
following table:
Name Location
- ---- --------
PNC Bank Arts Center Holmdel, New Jersey
Starlake Amphitheatre Pittsburgh, Pennsylvania
Fiddlers Green Amphitheatre Englewood, Colorado
Sandstone Amphitheatre Kansas City, Missouri
Cynthia Woods Mitchell Pavilion Woodlands, Texas
Meadows Music Theatre Hartford, Connecticut
Camden Amphitheatre Camden, New Jersey
Polaris Amphitheatre Columbus, Ohio
Nissan Amphitheatre Manassas, Virginia
Molson Amphitheatre Toronto, Canada
Virginia Beach Amphitheatre Virginia Beach, Virginia
Entertainment also develops and operates food courts in shopping malls.
Under a typical arrangement, Entertainment and the mall owner will enter into a
long-term master lease giving Entertainment exclusive use of the food court
area. Entertainment then enters into franchise agreements covering the
individual locations within the food court with national and regional food
concept owners (Burger King, Sbarro's, Nathan's, etc.). While Entertainment
generally seeks to act as franchisee of such concepts, in some cases
Entertainment will sublease individual locations in the food court to a third
party or will itself operate such locations as one or more of Entertainment's
own, in-house "branded" concepts. Entertainment currently master leases food
courts at the Arizona Mills mega mall in Tempe, Arizona and the Wonderland Mall
in Livonia, Michigan.
Restaurants - Entertainment developed and operates two new free-standing
restaurant concepts: "The Wilderness Grill" at the Ontario Mills mega mall in
Ontario, California and "The Wilderness Grill - Paradise Down Under" at the
Sunset Place Mall in Miami, Florida. In addition, at The Block at Orange,
located in Orange, California, Entertainment recently opened its first "Ron
Jon's Surf Grill" restaurant, developed by Entertainment under a license
agreement with Ron Jon's Surf Shop. Under the terms of such license agreement,
Entertainment has the exclusive right to develop additional Ron Jon Surf Grill
units in the United States during the term of the agreement.
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Venue Management
Entertainment is a leading provider of full facility management services
at arenas and other sports and Entertainment facilities in the United States,
Canada, Europe and Australia. Such services generally cover all aspects of the
operation, including events booking, food and beverage concessions, crowd
control, parking, set-up and tear-down for events, facility maintenance and
repairs, etc. Entertainment's facility management venues currently include the
following:
Name Location
- ---- --------
Arrowhead Pond of Anaheim Anaheim, California
Corel Centre Ottawa, Canada
Pensacola Civic Center Pensacola, Florida
Sullivan Arena Anchorage, Alaska
Egan Convention Center Anchorage, Alaska
Target Center Minneapolis, Minnesota
The Great Western Forum Los Angeles, California
Newcastle Arena Newcastle, England
Manchester Evening News Arena Manchester, England
Bridgewater Hall Manchester, England
Stadium Australia Sydney, Australia
Arena Oberhausen Oberhausen, Germany
Providence Civic Center Providence, Rhode Island
Bakersfield Arena Bakersfield, California
Blue Cross Arena Rochester, New York
Temple University Arena Philadelphia, Pennsylvania
In addition, Entertainment has been awarded venue management contracts at
the 100,000 square foot Charleston Area Convention and Performing Arts Center in
South Carolina scheduled to open in the spring of 1999 and the Northeast
Pennsylvania Arena scheduled to open in November 1999.
The Corel Center, a 19,000-seat multi-purpose indoor arena in Ottawa,
Canada, opened in January of 1996. Pursuant to a 30-year agreement entered into
in January 1996 between Entertainment and the arena's owner (the "Owner")
Entertainment provides complete facility management and concession services at
this arena, which is the home of the Ottawa Senators of the National Hockey
League. Under the terms of the agreement, Entertainment has agreed that the
Corel Centre, under Entertainment's management, will generate a minimum amount
of revenues and has agreed to advance funds, if necessary, to cover cash
shortfalls. The Owner is a party to a 30-year license agreement with the owner
of the Ottawa Senators, pursuant to which the Ottawa Senators play their home
games at the arena.
Pursuant to a 30-year management agreement entered into in June 1993
between the City of Anaheim, California and a wholly-owned subsidiary of
Entertainment, Entertainment manages
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and operates the Arrowhead Pond, a facility owned by and located within the City
of Anaheim. Entertainment has agreed that the Arrowhead Pond, under
Entertainment's management, will generate a minimum amount of revenues computed
in accordance with the terms of the management agreement. The Arrowhead Pond is
a multi-purpose facility capable of accommodating professional basketball and
hockey, concerts and other attractions, and has a maximum seating capacity of
approximately 19,400. Entertainment also has a 30-year lease agreement entered
into in June 1993 with The Walt Disney Company (which own the NHL Anaheim Mighty
Ducks) pursuant to which the team plays its home games at the arena.
Entertainment owns a 50% interest in the Australian and New Zealand
business of the International Facility Corporation Pty. Ltd. ("IFC"), a private
facility management firm based in Brisbane, Australia. IFC is the managing
general partner for all of the Entertainment/IFC joint venture accounts in
Australia and New Zealand. These accounts include the Brisbane Entertainment
Centre, the Newcastle Entertainment Centre, the Cairns Convention Centre, and a
significant interest in Convex, operator of the Brisbane Convention and
Exposition Centre. IFC is also acting as a consultant for the design and
construction, and will be providing ongoing management, of Stadium Australia in
Sydney, Australia.
Entertainment also manages and operates movie theatres. In 1997,
Entertainment entered into a 15-year agreement with the County of San
Bernardino, California to manage and operate the Ultra Screen(R) theatre owned
by the County and located at the Ontario Mills mega mall in Ontario, California.
In 1998, Entertainment entered into a 10-year agreement with the British Film
Institute to manage and operate the BFI London IMAX(R) Cinema in London,
England. Also, during 1998 Entertainment and Imax Corporation opened a jointly
owned IMAX(R) theater at the Arizona Mills Mall in Tempe, Arizona. Entertainment
is currently pursuing additional opportunities in this area.
Specialty Casinos
In 1998, Entertainment purchased Iguazu Grand Hotel Resort & Casino, which
is located in Argentina at the intersection of the borders of Brazil and
Paraguay. Situated on 14.8 acres, this resort property features a five-star,
60-room hotel, conference center, business center, premier restaurant and
casino. The casino enjoys an exclusive gaming license in the Province of
Misiones in Argentina.
Entertainment is currently exploring additional activities in the casino
and leisure area, with an emphasis on special situations which, in management's
view, represent unusual opportunities not being pursued by the major gaming
companies. Of special interest are opportunities to develop or acquire casino
operations that enjoy an exclusive license to operate in their geographic area,
or which otherwise operate in areas of limited competition.
In a related area, Entertainment also leases and operates the Fairmount
Park thoroughbred and harness racetrack in Collinsville, Illinois and four
off-track betting parlors in Illinois that receive telecast races from Fairmount
Park, and other racing facilities. Entertainment also operates restaurants and
other food and beverage services at the racetrack and the off-track parlor
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locations. A large portion of Fairmount Park's revenue is derived from its share
of the pari-mutuel pool, which can be adjusted by state legislation. Other
revenue is derived from admission charges, parking, program sales and
concessions.
Metropolitan Entertainment Group
The Metropolitan Entertainment Group, in which Entertainment owns a 50%
interest, is a leading concert promoter in New York, New Jersey, Connecticut,
and part of Massachusetts. Metropolitan conducts concert promotion activities,
operates amphitheaters in the eastern United States, and concentrates on
national and global music tours, artist management, Broadway and television
productions, recording, and music publishing. Through a long-term lease,
Metropolitan operates the 20,000, capacity Darien Lake Performing Arts Center
located in Darien Lake, New York. Metropolitan has also established its own
record label, Hybrid Recordings.
AVIATION
Aviation provides specialized support services to airlines and designs,
finances, builds and operates major airport facilities and other aviation
infrastructure projects throughout the world. Specialized support services
include airport development and management; ground handling and passenger
services; cargo facility development and operations; and fueling and fuel
facility management. These diversified services are performed through joint
ventures, consortiums, contracts with individual airlines, consolidated
agreements with several airlines, and contracts with various airport
authorities. As of February 1999, Aviation was present at 116 airports in 24
countries and serves more than 350 airlines.
Some customers of Aviation are billed on a cost-plus or fixed-price basis.
Where services are performed on a cost-plus basis, the customer reimburses
Aviation for all acceptable reimbursable expenditures made in connection with
the job. Many Aviation contracts may be written on a month-to-month basis or
provide for a longer or indefinite term but are terminable by either party on
notice varying from 30 to 180 days.
During January 1998, Aeropuertos Argentina 2000, a consortium among
Aviation, which has a 20% interest, and its Italian and Argentine partners, was
awarded an exclusive 30-year license by the Government of Argentina to provide
management services, improvements, and operations at 33 airports in Argentina.
The consortium will finance and implement capital improvements and manage,
operate, and commercially develop these airports. Consortium revenues will be
earned from aircraft landing fees, ground handling, cargo operations, parking,
advertising, terminal retail sales, and passenger departure fees.
The consortium will commit $100 million in equity to the project and
provide the Government of Argentina with fixed concession payments of at least
$171 million per year. An 18-month phase-in schedule commenced the end of May
1998 with the takeover of the international and domestic airports in Buenos
Aires - Ezeiza International Airport and Aeroparque Jorge Newbery. Substantial
improvements are planned and groundbreaking for essential infrastructure
development projects are anticipated to commence by May 1999.
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During 1998, a consortium in which Aviation has a 19.9% interest, opened a
second runway at the Eldorado International Airport in Bogata, Colombia. The
consortium maintains both runways at Eldorado and retains all landing fees until
the year 2015. During 1998, an Aviation-led consortia submitted proposals and
prequalification documents necessary to participate in airport privatizations in
Central America, South America and the West Indies.
Aviation's ground handling services include diversified ramp operations
such as aircraft loading and unloading, aircraft cleaning, aircraft maintenance,
flight planning, de-icing, interline baggage transfer, push-back and towing, and
passenger-related services such as terminal check-in and ticketing, VIP
passenger handling, the operation of passenger lounges, and other miscellaneous
services. While these services are principally conducted in the United States,
global expansion by the Aviation group has resulted in providing comprehensive
ground handling and passenger services at many international gateways throughout
Europe, South America, the Caribbean, and Asia-Pacific. Major foreign airports
where Aviation currently conducts both ground handling and passenger services
include:
Airport Location
- ------- --------
Reina Beatrix International Airport Aruba, Netherlands Antilles
Galaeo International Airport Rio de Janeiro, Brazil
Arturo Marino Benitez Airport Santiago, Chile
Praha Ruzyne Airport Prague, Czech Republic
Hong Kong International Airport Lantau, Hong Kong
Macau International Airport Taipa, Macau
Mexico City International Airport Mexico City, Mexico
Amsterdam Airport Schiphol Amsterdam, Netherlands
Auckland International Airport Auckland, New Zealand
Jorge Chavez International Airport Lima, Peru
Bucharest-Otopeni Airport Bucharest, Romania
Princess Juliana International Airport St. Maarten, Netherlands Antilles
Simon Bolivar Airport Caracas, Venezuela
During 1998, Aviation continued the expansion of its operations into
several new markets throughout Asia, Europe, and South America. On July 6, 1998,
Aviation began performing ground handling and passenger services at the new Hong
Kong International Airport. Aviation's Hong Kong operation is part of a joint
venture agreement between Aviation and Dresdner Kleinwort Benson ("DKB"), which
owns a 20% interest in the joint venture. Aviation retains a majority interest
and operating control of the joint venture whose operations geographically
extends from India into mid-Asia and the Pacific Rim, excluding Aviation's Macau
operations. Aviation is one of three license holders at the new airport for
aircraft ramp services and provides ground handling, passenger services, cargo
handling, loading and unloading of mail and baggage, and other related services.
This operation positions Aviation for targeted growth not only in China but
throughout Asia-Pacific as well.
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Aviation increased its presence in Eastern Europe with the commencement of
ground handling operations at Bucharest-Otopeni Airport in Romania. Present at
this airport since late 1997, Aviation began full ground handling operations
with the scheduled opening of the new terminal in July 1998. In 1998, three
airports in Mexico - Puebla, Tampico, and Veracruz - were added to the group's
ground handling client base. Aviation also performs passenger handling and/or
other related aviation services at 15 airports throughout Mexico, 11 airports
across the United States, seven airports in Germany, and four in Canada.
Aviation continues to perform services at St. Maarten's Princess Juliana
International Airport where its license has been extended through 2008. In
Aruba, through a corporation jointly owned by Aviation and Air Aruba, Aviation
provides ramp and passenger services at Reina Beatrix International Airport.
Other ground handling operations are provided at the Guarulhos International
Airport in Sao Paulo, Brazil; Pearson International Airport in Toronto, Canada;
and Gregorio Luperon International Airport in Puerto Plata, Dominican Republic.
In 1995, a consortium comprised of Aviation, Macau Aviation Services
Corporation, EVA Airways, Air Macau, and several local companies and prominent
businessmen, entered into a 19-year agreement, with 16 years of exclusive
control, to provide ramp and cargo handling, passenger services, and aircraft
line maintenance at the Macau International Airport. The consortium, of which
Aviation is the managing partner with a 29% participation, provides all
necessary passenger and ramp equipment and constructed a cargo warehouse and
engineering facilities, an aircraft hangar, and state-of-the-art training center
at the airport. The consortium's investment in infrastructure developments and
ancillary equipment at Macau International Airport is approximately $40 million.
Through a 75% interest in a Prague-based airport handling company,
Aviation opened a new $20 million, 10,000-square meter cargo terminal in
September 1998 at Praha Ruzyne Airport in Prague, Czech Republic. The Prague
cargo facility is expected to position the airport as a major cargo hub within
Europe. In March 1998, Aviation acquired a 50% interest in the Talma cargo
operations at the Jorge Chavez International Airport and at C.F. Secada Airport,
located in Lima and Iquitos, Peru, respectively. Talma is Peru's leading
provider of airport handling and services for international and domestic air
freight. This acquisition expands Aviation's existing operation at Jorge Chavez
International to include import and export, cargo handling, and warehousing
through facilities totaling 33,000 square meters. Through a joint venture with
Aldeasa S.A. of Spain, Aviation provides cargo handling and warehousing services
in Spain at airports located in Barcelona and Madrid.
Aviation provides into-plane fueling at twenty-six (26) installations and
operates fueling facilities, including storage and hydrant fueling systems for
the fueling of aircraft. This operation assists airlines and airports in
designing, arranging financing, and installing underground and above-ground
fueling systems. Fueling operations are performed primarily in North America,
including the maintenance and operation of a new fuel farm located at San Diego
International Airport. Aviation provides into-plane fueling at major airports in
Canada (Montreal and Toronto), the United States (Dallas/Fort Worth; Houston;
Kansas City; New York's John F. Kennedy International and LaGuardia Airport;
Newark; Philadelphia; and Ronald Reagan
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Washington National Airport in Washington, D.C.), as well as Panama (Panama
City) and in Puerto Rico (San Juan).
Consistent with Aviation's long-term objectives, Aviation finalized the
sale of its in-flight catering business in July 1998. The sale of the in-flight
catering business was based on management's decision that its projected
long-term growth would not provide the required levels of return.
ENTERTAINMENT AND AVIATION
Recent Developments
During March 1999 Entertainment entered into definitive agreements to
acquire the following water parks:
(i) Wet 'N Wild(R), Inc. a leading water amusement park company with
operations in the United States and Latin America. International
franchise agreements also exist for several locations in Mexico and
Brazil.
(ii) Emerald Point Water Park located in Greensboro, North Carolina.
Emerald Point is situated on approximately 35 acres and offers 34
rides and attractions including a large wave pool, a Skycoaster(R)
ride and an artificial outdoor climbing wall.
(iii) San Jose Raging Waters park, a 24-acre water park located in San
Dimas, California.
During the first quarter of 1999, Aviation acquired 100% of the operations
of Flight Services Group, Inc. ("FSG"), a Connecticut - based company that
provides corporate aircraft maintenance and management, aircraft charter,
aircraft fueling, and aircraft sales brokerage services. FSG has on-site
locations at Teterboro, New Jersey; Stratford, Connecticut; Norwich, New York;
and West Palm Beach, Florida.
During the first quarter of 1999 a consortium, of which Aviation owns a
32% interest, was awarded a 20-year concession to design, finance, and construct
capital improvements at four major international airports in the Dominican
Republic; Las Americas (serving the capital city of Santo Domingo); Gregorio
Luperon (Puerto Plata); Arroyo Barril (Samana); and Maria Montez (Barahona). The
consortium will establish a local operating company that will collect and retain
airport revenues from aircraft landing and parking fees; "port" fees from
service providers (ground handling, cargo operations, in-flight catering, and
fueling); passenger facility charges; and all commercial revenues, rents and
utility fees.
11
ENERGY
Ogden's Energy segment seeks to develop, own or operate energy
generating facilities in the United States and abroad that utilize a variety of
fuels, as well as water and wastewater facilities that will similarly serve
communities on a long-term basis. The operations of Ogden's Energy segment are
conducted by Ogden Energy Group, Inc. and subsidiaries through four principal
business areas: independent power; waste-to-energy; water and wastewater; and
environmental consulting, engineering and construction (collectively, together
with its subsidiaries, the "Energy Group"). Since the early 1980's, the Energy
Group has been engaged in developing and in some cases owning energy-generating
projects fueled by municipal solid waste, and providing long-term services from
these projects to communities. The Energy Group is now the largest full service
vendor (i.e., builder/operator) in the world for large-scale waste-to-energy
projects. In addition, since 1989, the Energy Group has been engaged in
developing, owning and/or operating independent power production projects. The
Energy Group's involvement in the operation of water and wastewater facilities
began in 1994.
The Energy Group generally seeks to participate in projects in which
it can make an equity investment and become the operator; its returns will be
derived from equity distributions and/or operating fees. It also seeks to have a
role in the development of the projects. The types of projects in which the
Energy Group seeks to participate sell the electrical power services they
generate, or the waste or water-related services they provide, under long-term
contracts or market concessions to utilities, government agencies providing
power distribution, creditworthy industrial users, or local government units.
For power projects utilizing a combustible fuel or geothermal sources, the
Energy Group typically seeks projects which have a secure supply of fuel or
geothermal brine through long-term supply arrangements or by obtaining control
of the fuel source. Similarly, for water and wastewater-related services, the
Energy Group seeks to operate under long-term contracts with governmental units
or market concessions.
The Energy Group generally looks to finance its projects using
equity or capital commitments provided by it or other investors, combined with
non-recourse debt for which the lender's source of payment is project revenues
and assets. Consequently, the ability of the Energy Group to declare and pay
cash dividends to the Company is subject to certain limitations in the project
loan and other documents entered into by such project subsidiaries. In some
project situations, limited support by the Energy Group or Ogden has been
provided and in the future may be considered, such as operating guarantees,
financial guarantees of bridge loans or other interim debt arrangements.
The number of projects being pursued at any given time by the Energy
Group will fluctuate. The complexities and uniqueness of international project
development in particular requires that the Energy Group continually assess the
likelihood of successful project financing throughout the development stage and
weigh that against the expected benefits. In addition, the Energy Group may,
depending upon circumstances and at the appropriate time, elect to dispose of a
portion of an equity interest it may have in a project after financing.
12
The Energy Group presently has interests in projects with an
aggregate generating capacity in excess of 2700 MW (gross) either operating or
under construction in the United States, Central and South America, and Asia. It
continues to seek to expand its ownership and operation of projects in these and
other regions. The Energy Group's business is facilitated through field offices
in Hong Kong; Manila, the Philippines; Taipei, Taiwan; Sao Paulo, Brazil; and
Calcutta, India.
Independent Power
The Energy Group's independent power business is conducted by its
wholly-owned subsidiary, Ogden Energy, Inc. ("OEI"). OEI develops, operates
and/or invests in independent (i.e., non-utility) energy generation
("Independent Power Production" or "IPP") projects which sell their output to
utilities, electricity distribution companies or industrial consumers in the
United States and abroad. The activities of this group do not include the
development of generating facilities fueled by municipal solid waste, which are
conducted by the waste-to-energy group, discussed below.
Where possible, the Energy Group attempts to sell electricity under
long-term power sales contracts. The Energy Group attempts to structure the
revenue provisions of such power sales contracts such that the revenue
components of such contracts correspond, as effectively as possible, to the
projects' cost structure (including changes therein due to inflation and
currency fluctuations) of building, financing, operating and maintaining the
projects.
On many of its projects, the Energy Group performs operation and
maintenance services on behalf of the project owner. While all operation and
maintenance contracts are different, the Energy Group typically seeks to perform
these services on a cost-plus-fixed-fee basis, with a bonus and limited penalty
payment mechanism related to specified benchmarks of plant performance.
(a) Facilities Under Construction.
o Quezon, the Philippines.
A consortium, of which the Energy Group is a 26% member, has a 500 MW (gross)
coal-fired electric generating facility in the Republic of the Philippines (the
"Quezon Project"). Construction is expected to be completed during the third
quarter, 1999. The other members of the consortium are affiliates of
International Generating Company, an affiliate of Bechtel Enterprises, Inc., an
affiliate of General Electric Capital Corporation, and PMR Limited Co., a
Philippines partnership. The consortium entered into a power purchase agreement
with Manila Electric Company ("Meralco"), the largest electric distribution
company in the Philippines, which serves the area surrounding and including
metropolitan Manila. Under a long-term agreement, Meralco is obligated to take
or pay for stated minimum annual quantities of electricity produced by the
facility on terms and at prices set forth in the agreement. The consortium has
entered into contracts for the supply of coal at stated prices for a portion of
the term of the power purchase agreement.
13
The turnkey contractors are affiliates of Bechtel Enterprises,
Inc. The Energy Group will operate the Quezon Project on behalf of the
consortium under a long-term contract. The Energy Group will receive certain
limited amounts of revenue from the Quezon Project during construction.
Operating revenue is expected to commence upon commercial operation, projected
for the fourth quarter of 1999.
o Haripur, Bangladesh.
In 1998, the Energy Group 982122879acquired an equity interest
in a barge-mounted 122 MW diesel/natural gas fired facility located near
Haripur, Republic of Bangladesh. This project is under construction, and
commercial operation is expected in June, 1999. The project will be operated by
the Energy Group. The Energy Group will own approximately 45% of the project
company equity if it exercises its options to acquire the project company's
982123084stock. An affiliate of El Paso Energy Corporation will own 50% of such
equity, and the remaining interests will be held by Wartsila NSD North America,
Inc. and/or the local developer. The electrical output of the project will be
sold to the Bangladesh Power Development Board (the BPDB) pursuant to a
long-term agreement. That agreement also obligates the BPDB to supply all of the
natural gas requirements of the project. The BPDB's obligations under agreement
are guaranteed by the Government of Bangladesh.
(b) Operating Facilities. The Energy Group's operating IPP projects utilize a
variety of energy sources: water (hydroelectric), natural gas, coal, geothermal
energy, wood waste, landfill gas, and diesel fuel.
o Domestic Projects
o Geothermal Energy.
The Energy Group has interests in two geothermal facilities in
Southern California, the Heber and SIGC facilities, with a combined gross
generating capacity of 100 MW. These facilities are both leaseholds, with the
Energy Group as the sole lessee of the SIGC project and holding a 50%
partnership interest in the Heber project lessee. The Energy Group operates
these facilities. The Energy Group also owns a 50% partnership interest in a
geothermal resource, which is adjacent to and supplies fluid to both geothermal
facilities. The electricity from both projects is sold under long-term contracts
with Southern California Edison.
The Energy Group also owns a 50% partnership interest in
Mammoth-Pacific, L.P., which owns three geothermal power plants with a gross
capacity of 40 MW, located on the eastern slopes of the Sierra Nevada Mountains
at Casa Diablo Hot Springs, California. The projects have contractual rights to
the geothermal brine resource for a term not less than the term of the power
contracts. All three projects sell electricity to Southern California Edison
under long-term contracts.
14
o Hydroelectric.
The Energy Group owns 50% equity interests in three run-of-river
hydroelectric projects which generate a total of 30 MW: Bangor Pacific
Hydroelectric Project ("Bangor"), Koma Kulshan Hydroelectric Project ("Koma
Kulshan") and Weeks Falls Hydroelectric Project ("Weeks Falls"). The Bangor
facility is in Maine; the other two, in Washington State. Bangor sells its
electricity to Bangor-Hydro Electric Company under a long-term contract, while
Koma Kulshan and Weeks Falls each sell electricity to Puget Sound Power & Light
Company under long-term contracts. The Energy Group is seeking a buyer for the
Bangor project; any such sale is not expected to be material to the Energy
Group's business.
The Catalyst New Martinsville, West Virginia project, is a 40 MW
run-of-river project which is operated through a subsidiary. The Energy Group is
the lessee. The output is sold under a long-term contract with Monongahela Power
Company.
o Waste Wood.
The Energy Group owns 100% interests in three waste wood fired
electric power plants in California: Burney Mountain Power Station, Mount Lassen
Power Station and Pacific Oroville Power Station. A fourth, Pacific Ultrapower
Chinese Station Power Station, is owned by a partnership in which the Energy
Group holds a 50% interest. Generally, fuel supply is procured from local
sources through a variety of short-term waste wood supply agreements. The four
projects have a gross capacity of 67 MW. All four projects sell electricity to
Pacific Gas & Electric Company under long-term contracts.
o Landfill Gas.
The Energy Group owns and operates eight landfill gas projects which
produce electricity by burning methane gas produced by the anaerobic digestion
of the solid waste contained in sanitary landfills. Seven of the projects are
located in California, and one is located in Maryland. The eight projects have a
gross capacity of 43 MW. All sell electricity generated to local utilities,
under contracts having varying lengths, the longest expiring in 2011.
o Natural Gas.
The Energy Group's domestic natural gas project is the operation by
the Energy Group of the Brandywine, Maryland facility, a 240 MW facility whose
output is sold to Potomac Electric Power Company. This project is owned by an
affiliate of Panda Energy, and the Energy Group's contract for operations will
expire in the fourth quarter of 1999, unless renewed by Panda Energy at that
time.
15
o International Projects
o Hydroelectric.
The Energy Group has ownership interests in the Don Pedro project
and the Rio Volcan project in Costa Rica through an equity investment in Energia
Global, Inc. ("EGI"). Don Pedro and Rio Volcan are leased by EGI and operated by
the Energy Group under long-term contracts. The electric output from both of
these facilities is sold to Instituto Costarricense de Electricidad, a local
utility.
o Coal.
The Energy Group has majority equity interests in four coal-fired
cogeneration facilities in three different provinces in the Peoples Republic of
China. These projects are operated, in each case, by an affiliate of the
minority equity stakeholder in the projects. Parties holding minority positions
in the projects include a private company, a local government enterprise and in
the remaining two cases, affiliates of the local municipal government. A
majority of the electrical output of the projects is sold to the relevant local
Municipal Power Bureau and steam is sold to various host industrial facilities,
both pursuant to long-term power and steam sales agreements.
o Natural Gas.
The Energy Group owns an interest in Empresa Valle Hermoso ("EVH")
which was formed by the Bolivian government as part of the capitalization of the
government-owned utility ENDE. EVH owns and operates 215 MW of gas-fired
generating capacity. The Energy Group also participates in a joint venture that
supplies EVH with management services support.
The Energy Group executed definitive agreements to acquire ownership
interests in two 122 MW gas-fired combined cycle facilities in Thailand: the
Sahacogen facility and the Rojana Power facility. Both facilities, which are
expected to commence operations in the second quarter of 1999, will sell power
under long-term contracts to adjacent industrial parks, and the excess will be
sold into the national power grid. The Energy Group will acquire a 74% ownership
interest in the Sahacogen facility, and a 25% ownership interest the Rojana
Power facility. Both facilities will be operated under the supervision of the
Energy Group. As part of these agreements, the Energy Group also will acquire an
operating company which currently operates a third gas-fired facility in
Thailand, the Gulf Co-Generation facility. This facility has a gross capacity of
110 MW, and sells its output to an adjacent industrial park and into the
national power grid.
o Diesel.
The Energy Group has ownership interests in three diesel fuel
facilities in the Philippines. The Bataan Cogeneration project is a 65 MW
facility that has a long-term contract to sell its electrical output to the
National Power Corporation (with which it also has entered into a
16
fuel management agreement for fuel supply) and the Bataan Export Processing Zone
Authority. The Island Power project is a 7 MW facility that has a long-term
power contract with the Occidental Mindoro Electric Cooperative. Both projects
are operated by the Energy Group.
In 1998, the Energy Group executed definitive agreements for the
acquisition of 100% of the stock of a Philippine company that owns and operates
a 65 MW diesel fired electric generating facility located in the province of
Cavite, the Philippines. This project sells a portion of its energy and capacity
to the National Power Corporation and a portion to the Cavite Export Processing
Zone Authority pursuant to long-term power purchase agreements. This acquisition
was completed in February, 1999.
c) Project Summaries. Certain information with respect to the Energy Group's IPP
projects as of March 1, 1999 is summarized in the following table:
IPP PROJECTS
Date of
Acquisition/
Commencement
In Operation Location Size Nature of Interest of Operations
- ------------ -------- ---- ------------------ -------------
A. Hydroelectric
1. New Martinsville West Virginia 40MW Lessee/Operator 1991
2. Rio Volcan Costa Rica 16MW Part Owner/Operator 1997
3. Don Pedro Costa Rica 16MW Part Owner/Operator 1996
4. Bangor(1) Maine 13MW Part Owner/Operator 1997
5. Koma Kulshan(1) Washington 12MW Part Owner 1997
6. Weeks Falls(1) Washington 5MW Part Owner 1997
B. Geothermal
1. Heber (2)(3) California 52MW Lessee/Operator 1989
2. SIGC (3) California 48MW Lessee/Operator 1994
3. Mammoth G1(1) California 10MW Part Owner/Operator 1997
4. Mammoth G2(1) California 15MW Part Owner/Operator 1997
5. Mammoth G3(1) California 15MW Part Owner/Operator 1997
17
C. Natural Gas
1. Empresa Valle Bolivia 215MW Part Owner/ 1995
Hermoso (4) Operations Mgmt.
2. Brandywine Maryland 240MW Operator 1996
3. Sahacogen Thailand 122MW Owner 1999
4. Rojana Thailand 122MW Owner 1999
5. Gulf Co. Generation Thailand 110MW Operator 1999
D. Coal
1. Lin'an(5) China 24MW Part Owner 1997
2. Huantai(5) China 24MW Part Owner 1997
3. Taixing(5) China 24MW Part Owner 1997
4. Yanjiang(5) China 24MW Part Owner 1997
E. Diesel
1. Island Power Philippines 7MW Part Owner/ 1996
Corporation(6) Operator
2. Bataan Philippines 65MW Owner/Operator 1996
Cogeneration
3. Magellan Philippines 65MW Owner/Operator 1998
F. Waste Wood
1. Burney California 11.4MW Owner/Operator 1997
2. Chinese(1) California 25.6MW Part Owner 1997
3. Mount Lassen California 11.4MW Owner/Operator 1997
4. Oroville California 18.7MW Owner/Operator 1997
G. Landfill Gas
1. Gude Maryland 3MW Owner/Operator 1997
2. Otay California 3.7MW Owner/Operator 1997
18
3. Oxnard California 5.6MW Owner/Operator 1997
4. Penrose California 10MW Owner/Operator 1997
5. Salinas California 1.5MW Owner/Operator 1997
6. Santa Clara California 1.5MW Owner/Operator 1997
7. Stockton California 0.8MW Owner/Operator 1997
8. Toyon California 10MW Owner/Operator 1997
Under Construction:
1. Quezon (7) Philippines 500MW Part Owner/Operator 1999(est.)
2. Haripur (8) Bangladesh 122MW Part Owner/Operator 1999(est.)
--------
Total 2015.4MW
========
Notes
(1) The Energy Group has a 50% ownership interest in the project.
(2) The Energy Group is a 50% partner in the project entity which leases the
facility from a third-party lessor. The lease expires in 2000 and is
subject to a 15-year renewal at the option of the Energy Group and its
joint venture partner.
(3) The Energy Group is a 50% partner of the lessee of the resource supplying
fluid to the project, and the lessor is the same third-party that leases
the Heber project to that project entity.
(4) The Energy Group owns an approximate 24% interest in a consortium that
purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by
Bolivian pension funds.
(5) The Energy Group has a 60% ownership interest in this project.
(6) The Energy Group has an approximately 40% ownership interest in this
project.
(7) The Energy Group has an approximately 26% ownership interest in the
project.
(8) The Energy Group has a 23% ownership interest in this project, which may
increase to an approximately 45% interest, depending upon the exercise of
certain options by the Energy Group and other project owners. In addition,
this project is capable of operating through combustion of diesel oil in
addition to natural gas.
19
(d) Other Development Efforts. The Energy Group is actively pursuing a number of
projects, some of which have achieved significant development milestones such as
executed power purchase agreements, or receipt of key governmental approvals.
Included in this category is the development of a 500 MW gas combined cycle
merchant plant to be located at the same site as the Energy Group's existing
Burney facility in Shasta County, California. As with all development efforts,
however, there are in each case numerous conditions to be satisfied prior to
financing, some of which are not within the Energy Group's control. As such, no
assurance can be given that these projects will ultimately be developed
successfully.
Waste-To-Energy
The Energy Group's waste-to-energy operations are managed through a
wholly-owned subsidiary, Ogden Waste to Energy, Inc. ("OWTE"). Waste-to-energy
facilities combust municipal solid waste to make saleable energy in the form of
electricity or steam. This group completed construction of its first
waste-to-energy project in 1986. It currently operates 27 waste-to-energy
projects at 26 locations. OWTE's subsidiaries are the owners or lessees of 17 of
its waste-to-energy projects. The Energy Group has the exclusive right to market
in the United States the proprietary, mass-burn technology of Martin GmbH fur
Umwelt und Energietechnik ("Martin"). All of the waste-to-energy facilities the
Energy Group has constructed use this Martin technology. In addition, the Energy
Group operates waste-to-energy facilities using other technologies.
Generally, the Energy Group provides waste-to-energy services
pursuant to long-term service contracts ("Service Agreements") with local
governmental units sponsoring the waste-to-energy project ("Client
Communities"). Certain of its waste-to-energy facilities do not have sponsoring
Client Communities.
(a) Terms and Conditions of Service Agreements. Each Service Agreement is
different in order to reflect the specific needs and concerns of the Client
Community, applicable regulatory requirements, and other factors. The following
description sets forth terms that are generally common to these agreements:
o The Energy Group designs the facility, helps to arrange for
financing, and then constructs and equips the facility on a
fixed price and schedule basis.
o The Energy Group operates the facility and generally
guarantees it will meet minimum processing capacity and
efficiency standards, energy production levels, and
environmental standards. The Energy Group's failure to meet
these guarantees or to otherwise observe the material terms of
the Service Agreement (unless caused by the Client Community
or by events beyond its control ("Unforeseen Circumstances"))
may result in liquidated damages being charged to the Energy
Group or, if the breach is substantial, continuing and
unremedied, the termination of the Service Agreement. In the
case of such Service Agreement termination,
20
the Energy Group may be obligated to discharge project
indebtedness.
o The Client Community is generally required to deliver minimum
quantities of municipal solid waste ("MSW") to the facility
and is obligated to pay a service fee for its disposal,
regardless of whether that quantity of waste is delivered to
the facility. The service fee escalates to reflect indices of
inflation. In many cases the Client Community must also pay
for other costs, such as insurance, taxes, and transportation
of the residue to the disposal site. If the facility is owned
by the Energy Group, the Client Community also pays as part of
the Service Fee an amount equal to the debt service due to be
paid on the bonds issued to finance the facility. Generally,
expenses resulting from the delivery of unacceptable and
hazardous waste on the site are also borne by the Client
Community. In addition, the contracts generally require that
the Client Community pay increased expenses and capital costs
resulting from Unforeseen Circumstances, subject to limits
which may be specified in the Service Agreement.
o The Client Community usually retains a portion of the energy
revenues (generally 90%) generated by the facility, with the
balance paid to the Energy Group.
(b) Other Arrangements for Providing Waste-to-Energy Services. The Energy Group
owns one facility that is not operated pursuant to a Service Agreement with a
Client Community. The Energy Group may undertake additional such projects in the
future. In such projects, the Energy Group generally assumes the project debt
and risks relating to waste availability and pricing, risks relating to the
continued performance of the electricity purchaser, as well as risks associated
with Unforeseen Circumstances. In these projects, the Energy Group generally
retains all of the energy revenues from sales of power to utilities or
industrial power users and disposal fees for waste accepted at these facilities.
Accordingly, the Energy Group believes that such projects carry both greater
risks and greater potential rewards than projects in which there is a Client
Community.
In addition, the Energy Group has recently undertaken, together with
two Client Communities, restructuring of its waste-to-energy projects in
response to the demise of certain local laws permitting municipalities to
require delivery of waste to specific facilities. One of these restructurings,
in Union County, New Jersey, is final. The other, in Warren County, New Jersey,
is in progress. In Union County, the facility has been leased to the Energy
Group, and the Client Community has agreed to deliver approximately 50% of the
facility's capacity on a put-or-pay basis. The balance of facility capacity will
be marketed by the Energy Group, at its risk. The Company provided limited
credit support in the form of an operating performance guaranty, as well as a
rent guaranty supporting one series of subordinated bonds.
In Warren County, the Energy Group has agreed to market the
facility's capacity, at its risk, in a restructuring plan that includes State
assistance with debt retirement. The Warren
21
County restructuring is subject to several conditions precedent, some of which
are beyond the control of the Energy Group, notably the securing of State funds.
While some funds are currently available to the State that could be used in
connection with the Warren restructuring, state legislation has been introduced
that would create a source of additional funding for payment of project debt.
There can be no assurance, however, that an acceptable contractual and
legislative resolution will be achieved. If such a resolution cannot be
achieved, the Warren County Client Community may be forced to default on its
obligations, including obligations to bondholders, in which case a restructuring
would need to be addressed between the Energy Group and the project's lenders
and credit enhancement providers. The State of New Jersey continues to publicly
state that it will not allow a bond default to occur. The Energy Group may
consider additional such restructuring in the future.
(c) Project Financing. Financing for the Energy Group's domestic projects is
generally accomplished through the issuance of tax-exempt and taxable revenue
bonds issued by or on behalf of the Client Community. If the facility is owned
by the Energy Group subsidiary the Client Community loans the bond proceeds to
the subsidiary to pay for facility construction, and pays to the subsidiary
amounts necessary to pay debt service. For such facilities, project-related debt
is included as a liability in Ogden's consolidated financial statements.
Generally, such debt is secured by the revenues pledged under the respective
indenture and is collateralized by the assets of the Energy Group subsidiary and
otherwise provides no recourse to Ogden, subject to construction and operating
performance guarantees and commitments.
(d) OWTE Projects. Certain information with respect to projects as of March 1,
1999 is summarized in the following table:
22
WASTE-TO-ENERGY PROJECTS
Boiler Commencement
Units Tons per Day Units of Operations
- ----- ------------ ----- -------------
Tulsa, OK (I) (1) 750 2 1986
Marion County, OR 550 2(2) 1987
Hillsborough County, FL (3) 1,200 3(2) 1987
Tulsa, OK (II) (1)(4) 375 1 1987
Bristol, CT 650 2(2) 1988
Alexandria/Arlington, VA 975 3 1988
Indianapolis, IN 2,362 3(2) 1988
Hennepin County, MN (1)(5) 1,000 2 1989
Stanislaus County, CA 800 2 1989
Babylon, NY 750 2(2) 1989
Haverhill, MA 1,650 2 1989
Warren County, NJ (5) 400 2 1988
Kent County, MI (3) 625 2(2) 1990
Wallingford, CT (5) 420 3(2) 1989
Fairfax County, VA 3,000 4(2) 1990
Huntsville, AL (3) 690 2(2) 1990
Lake County, FL 520 2(2) 1991
Lancaster County, PA (3) 1,200 3(2) 1991
Pasco County, FL (3) 1,050 3(2) 1991
Huntington, NY (6) 750 3(2) 1991
Hartford, CT (3)(7)(8) 2,000 3 1987
Detroit, MI (1)(8) 3,300 3 1991
Honolulu, HI (1)(8) 2,160 2 1990
Union County, NJ (3) 1,440 3 1994
Lee County, FL (3) 1,200 2(2) 1994
Onondaga County NY (6) 990 3 1995
Montgomery County, MD (3) 1,800 3(2) 1995
------
Total 32,607
======
- ----------
(1) Facility is owned by an owner/trustee pursuant to a sale/leaseback
arrangement.
(2) Facility has been designed to allow for the addition of another unit.
(3) Facility is owned by the Client Community.
(4) Phase II of the Tulsa facility, which was financed as a separate project,
expanded the capacity of the facility from two to three units.
(5) Energy Group subsidiaries were purchased after completion, and use a
mass-burn technology that is not the Martin Technology.
(6) Owned by a limited partnership in which the limited partners are not
affiliated with Ogden.
(7) Under contracts with the Connecticut Resource Recovery Authority and
Northeast Utilities, the Energy Group operates only the boiler and turbine
for this facility.
23
(8) Operating contracts where acquired after completion. Facility uses a
refuse-derived fuel technology and does not employ the Martin Technology.
In addition, during 1998 the Energy Group closed down one non-Martin
waste-to-energy facility. This facility was not material to the Energy Group's
business.
(e) Technology. The principal feature of the Martin Technology is the
reverse-reciprocating stoker grate upon which the waste is burned. The patent
for the basic stoker grate technology used in the Martin Technology expired in
1989. The Energy Group believes that unexpired patents on other portions of the
Martin Technology and other proprietary know-how would limit the ability of
other companies to effectively use the basic stoker grate technology in
competition with the Energy Group. There are several unexpired patents related
to the Martin Technology including: (i) Grate Bar for Grate Linings, especially
in Incinerators - expires, 1999; (ii) Method and Arrangement for Reducing NOx
Emissions from Furnaces - expires 2000; (iii) Method and Apparatus for
Regulating the Furnace Output of Incineration Plants - expires 2007; (iv) Method
for Regulating the Furnace Output in Incineration Plants - expires 2008; and (v)
Feed Device with Filling Hopper and Adjoining Feed Chute for Feeding Waste to
Incineration Plants - expires 2008. More importantly, the Energy Group believes
that it is Martin's know-how and worldwide reputation in the waste-to-energy
field, and the Energy Group's know-how in designing, constructing and operating
waste-to-energy facilities, rather than the use of patented technology, that is
important to the Energy Group's competitive position in the waste-to-energy
industry in the United States. Ogden does not believe that the expiration of the
patent covering the basic stoker grate technology or patents on other portions
of the Martin Technology will have a material adverse effect on Ogden's
financial condition or competitive position.
The Energy Group believes that mass burn technology is now the
predominant technology used for the combustion of solid waste. Overall, there
are several other mass-burn technologies available in the market including those
of Von Roll, W+E, Takuma, Volund, Steinmueller, Deutsche Babcock, Lurgi, and
Detroit Stoker. Martin and other vendors seek to implement improvements and
modifications to its technology in order to maintain their competitive position
with non-mass burn technologies. The Energy Group believes that the Martin
technology is a proven and reliable mass burn technology, and that its
association with Martin has created significant name recognition and value for
the Energy Group's domestic waste-to-energy business. The Energy Group's efforts
internationally have not been technology-specific.
(f) The Cooperation Agreement. Under an agreement between Martin and an Ogden
affiliate (the "Cooperation Agreement"), the Energy Group has the exclusive
rights to market the proprietary technology (the "Martin Technology") of Martin
in the United States, Canada, Mexico, Bermuda, certain Caribbean countries, most
of Central and South America, and Israel. Martin is obligated to assist the
Energy Group in installing, operating, and maintaining facilities incorporating
the Martin Technology. The 15 year term of the Cooperation Agreement renews
automatically each year unless notice of termination is given, in which case the
Cooperation Agreement would terminate 15 years after such notice. Additionally,
the Cooperation Agreement may be terminated by either party if the other fails
to remedy its material default within 90 days of notice. The
24
Cooperation Agreement is also terminable by Martin if there is a change of
control (as defined in the Cooperation Agreement) of Ogden Martin Systems, Inc.
Termination would not affect the rights of the Energy Group to design,
construct, operate, maintain, or repair waste-to-energy facilities for which
contracts have been entered into or proposals made prior to the date of
termination.
(g) Other Development Efforts. The Energy Group has no commitments in its
waste-to-energy backlog as of December 31, 1998.
Water And Wastewater
The Energy Group's water and wastewater business is conducted
through Ogden Water Systems, Inc. ("OWS"). OWS's mission is to develop, design,
construct, maintain, operate and, in some cases, own, water and wastewater
treatment facilities and distribution and collection networks in the United
States, the Middle East, Latin America and elsewhere. OWS is an outgrowth of
Ogden Yorkshire Water Company ("OYWC"), which was a joint venture between the
Energy Group and a British water utility, Yorkshire Water PLC. In 1996 Yorkshire
Water PLC determined that it needed to refocus its efforts on its core business
in the United Kingdom, and terminated its ownership interest in OYWC and its
projects.
In the United States, the Energy Group seeks to participate in water
projects in which, under contracts with municipalities, it privatizes water
and/or wastewater facilities, agrees to build new or substantially augment
existing facilities and agrees to operate and maintain the facilities under
long-term contracts. In addition, Energy Group currently has contracts with four
communities in New York State for the operation of facilities in which it has no
ownership or long-term leasehold interest.
In countries other than the United States, the Energy Group is
seeking water and wastewater opportunities in which it will provide services to
municipalities in which it can own an equity interest in facilities under a
concession that grants it the right to provide service to, and collect revenues
from, consumers. The Energy Group believes that the lack of creditworthiness of
some non-U.S. municipalities, which may result from their limited ability to
raise revenues or from other causes, makes the collection of tariffs from the
consumer a more secure source of revenue. In circumstances where the
creditworthiness of a sponsoring municipality is adequate to support a limited
recourse financing, the Energy Group may provide services to and collect fees
from municipal entities or other governmental agencies.
Under contractual arrangements, the Energy Group may be required to
warrant certain levels of performance and may be subject to financial penalties
or termination if it fails to meet these warranties. The Energy Group may be
required to guarantee the performance of OWS. OWS seeks not to take
responsibility for conditions that are beyond its control.
(a) Water and Wastewater Projects. The Energy Group operates and
maintains wastewater treatment facilities for four small municipalities in New
York State. Such facilities together process approximately 12.8 million gallons
per day ("mgd").
25
(b) Projects Under Construction. The Energy Group entered into a
Water Facilities Services Agreement with The Governmental Utility Services
Corporation (the "GUSC") of the City of Bessemer, Alabama in 1997. The Agreement
provides that the Energy Group will design, construct, operate and maintain a 25
mgd potable water treatment facility and associated transmission and pumping
equipment, which will supply water to residents and businesses in Bessemer,
Alabama, a suburb of Birmingham. The Energy Group will be compensated on a fixed
price basis for design and construction of the facility, and will be paid a
fixed fee plus passthrough costs for delivering processed water to the City's
water distribution system. GUSC closed on its financing in 1998, and the Energy
Group commenced design and construction shortly thereafter. Construction
completion is expected during the second quarter of 2000.
(c) Other Development Efforts. The Energy Group currently has no
other commitments in its water and wastewater backlog. A consortium of which it
is a member has, however, received a project award with respect to a 32 year
concession serving a population in excess of 700,000 in the City of Muscat, the
capital of the Sultanate of Oman. The project encompasses taking over the
existing wastewater treatment and collection facilities in Muscat, as well as
the construction and operation of new wastewater infrastructure. The
infrastructure capital program would be phased in over several years, with the
first phase projected to require approximately $250 million in new construction.
The Energy Group's role would be as operator on behalf of a joint venture to be
formed. The joint venture's arrangement with the government would be on a
Build/Own/Operate/Transfer basis, and some equity capital, expected to be
approximately $15 million, would be required of the Energy Group. The
implementation of the Muscat project remains subject to several conditions
precedent, many of which are beyond the control of the Energy Group. The Energy
Group is targeting other similar projects internationally, all of which are in
preliminary stages of negotiation or competitive procurement.
Environmental Consulting And Engineering
The Energy Group's environmental consulting services are provided
through Ogden Environmental and Energy Services Co., Inc. ("OEES") which
provides a comprehensive range of environmental, infrastructure and energy
consulting, engineering and design services to industrial and commercial
companies, electric utilities and governmental agencies. These services include
analysis and characterization, remedial investigations, engineering and design,
data management, project management, regulatory assistance and remedial
construction as well as concrete and civil construction projects which are
provided to a variety of clients in the public and private sectors in the United
States and abroad. Principal clients include major Federal agencies,
particularly the Department of Defense, as well as major corporations in the
chemical, petroleum, transportation, public utility and health care industries
and Federal and state regulatory authorities. United States Government contracts
may be terminated, in whole or in part, at the convenience of the government or
for cause. In the event of a convenience termination, the government is
obligated to pay the costs incurred under the contract plus a fee based upon
work completed.
26
Professional environmental engineering services, including program
management, environmental analysis, and restoration continues to be provided by
OEES to the United States Navy CLEAN Program (Comprehensive Long Term
Environmental Action Navy) pursuant to a 10-year contract awarded during 1991.
Thus far OEES has provided these services at Navy bases in Hawaii, Guam, Japan,
Hong Kong, the Philippines, Australia and Korea.
OEES also continues to provide consulting and design services
nationally to the U.S. Navy, Air Force, National Guard Bureau and U.S. Army
Corps of Engineers on a wide variety of projects.
International Business Development
The Energy Group develops projects in many countries, and in doing
so seeks to implement its strategy for the development of its business in
selected international markets where private development is encouraged. It seeks
to do so by focusing on a limited number of opportunities which can be developed
in conjunction with local and international partners. Offices have been
established in Hong Kong, Manila, Sao Paulo, Calcutta and Taipei in order to
service foreign projects. Opportunities in foreign countries for the services
provided by the Energy Group are highly dependent upon the elimination of
historic legal and political barriers to the participation of foreign capital
and foreign companies in the financing, construction, ownership and operation of
infrastructure facilities.
The development, construction, ownership and operation of facilities
in foreign countries entails significant political and financial uncertainties
and other structuring issues that typically are not involved in such activities
in the United States. These risks include unexpected changes in electricity
tariffs, conditions in financial markets, currency exchange rate fluctuations,
currency repatriation restrictions, currency inconvertibility, unexpected
changes in laws and regulations, political, economic or military instability,
civil unrest and expropriation. Such risks have the potential to cause
substantial delays or material impairment to the value of the project being
developed or business being operated.
Many of the countries in which the Energy Group is or intends to be
active are lesser developed countries or developing countries. The financial
condition and creditworthiness of the potential purchasers of power and services
provided by the Energy Group (which may be a governmental or private utility or
industrial consumer) or of the suppliers of fuel for projects in these countries
may not be as strong as those of similar entities in developed countries. The
obligations of the purchaser under the power purchase agreement, the service
recipient under the related service agreement and the supplier under the fuel
supply agreement generally are not guaranteed by any host country or other
creditworthy governmental agency. Whenever such governmental guarantees are not
available, the Energy Group undertakes a credit analysis of the proposed power
purchaser or fuel supplier. It also seeks, to the extent practicable, to cause
such parties to adequately secure the performance of their obligations through
contractual commitments and, where necessary, through the provision by such
entities of financial instruments such as letters of credit or arrangements
regarding the escrowing of the receivables of such parties in the case of power
purchasers.
27
The Energy Group's IPP and waste-to-energy projects in particular
are dependent on the reliable and predictable delivery of fuel meeting the
quantity and quality requirements of the project facilities. The Energy Group
will typically seek to negotiate long-term contracts for the supply of fuel with
creditworthy and reliable suppliers. However, the reliability of fuel deliveries
may be compromised by one or more of several factors that may be more acute or
may occur more frequently in developing countries than in developed countries,
including a lack of sufficient infrastructure to support deliveries under all
circumstances, bureaucratic delays in the import, transportation and storage of
fuel in the host country, customs and tariff disputes and local or regional
unrest or political instability. In most of the projects in which the Energy
Group participates internationally, it seeks, to the extent practicable, to
shift the consequences of interruptions in the delivery of fuel, whether due to
the fault of the fuel supplier or due to reasons beyond the fuel supplier's
control, to the electricity purchaser or service recipient by securing a
suspension of its operating responsibilities under the applicable agreements and
an extension of its operating concession under such agreements and/or, in some
instances, by requiring the energy purchaser or service recipient to continue to
make payments in respect of fixed costs. In order to mitigate the effect of
short-term interruptions in the supply of fuel, the Energy Group endeavors to
provide on-site storage of fuel in sufficient quantities to address such
interruptions.
Payment for services that the Energy Group provides will often be
made in whole or part in the domestic currencies of the host countries.
Conversion of such currencies into U.S. dollars generally is not assured by a
governmental or other creditworthy country agency, and may be subject to
limitations in the currency markets, as well as restrictions of the host
country. In addition, fluctuations in value of such currencies against the value
of the U.S. dollar may cause the Energy Group's participation in such projects
to yield less return than expected. Transfer of earnings and profits in any form
beyond the borders of the host country may be subject to special taxes or
limitations imposed by host country laws. The Energy Group seeks to participate
in projects in jurisdictions where limitations on the convertibility and
expatriation of currency have been lifted by the host country and where such
local currency is freely exchangeable on the international markets. In most
cases, components of project costs incurred or funded in the currency of the
United States are recovered without risk of currency fluctuation through
negotiated contractual adjustments to the price charged for electricity or
service provided. This contractual structure may cause the cost in local
currency to the project's power purchaser or service recipient to rise from time
to time in excess of local inflation, and consequently there is risk in such
situations that such power purchaser or service recipient will, at least in the
near term, be less able or willing to pay for the project's power or service.
Due to the fact that many of the countries in which the Energy Group
is or intends to be active are lesser developed countries or developing
countries, the successful development of a project or projects may be adversely
impacted by economic changes in such countries or by changes in government
support for such projects. Adverse economic changes may, and have, resulted in
initiatives (by local governments alone or at the request of world financial
institutions) to reduce local commitments to pay long-term obligations in US
dollars or US dollar equivalents. There is therefore risk that the Energy
Group's development efforts in such countries may from time to time be adversely
affected by such changes on a temporary or long-term basis.
28
In addition, the Energy Group will generally participate in projects
which provide services that are treated as a matter of national or key economic
importance by the laws and politics of many host countries. There is therefore
risk that the assets constituting the facilities of these projects could be
temporarily or permanently expropriated or nationalized by a host country, or
made subject to local or national control.
The Energy Group will seek to manage and mitigate these risks
through all available means that it deems appropriate. They will include:
political and financial analysis of the host countries and the key participants
in each project; guarantees of relevant agreements with creditworthy entities;
political risk and other forms of insurance; participation by international
finance institutions, such as affiliates of the World Bank, in financing of
projects in which it participates; and joint ventures with other companies to
pursue the development, financing and construction of these projects.
OTHER
During 1997 and early 1998 Ogden substantially completed the
disposition of its non-core businesses, principally through the sale of the
remaining Facility Services operations (New York Region) which provided facility
management, maintenance, janitorial and manufacturing support services and the
sale of the Charlotte, North Carolina, Binghamton, New York and Cork, Ireland
operations of Atlantic Design Company, Inc. Atlantic Design continues to provide
contract manufacturing at its remaining facility located in Reynosa, Mexico near
the boarder with McAllen, Texas.
Applied Data Technology, Inc. ("ADTI"), located in San Diego,
California, is a leading supplier of air combat maneuvering instrumentation
systems and after-action reporting and display systems. ADTI's range systems are
installed at Navy and Air Force aircraft training ranges to facilitate
air-to-air combat exercises and monitor, record and graphically display the
exact maneuvers of the aircraft on the ranges and simulate the various weapons
systems aboard the aircraft. These range automated systems are used by the U.S.
Navy and Air Force to train pilots for combat conditions and by the Department
of Defense in training pilots to avoid "friendly fire" incidents.
29
OTHER INFORMATION
MARKETS, COMPETITION AND GENERAL BUSINESS CONDITIONS
Ogden's Entertainment, Aviation and Energy segments businesses can
be adversely affected by general economic conditions, war, inflation, adverse
competitive conditions, governmental restrictions and controls, natural
disasters, energy shortages, weather, the adverse financial condition of
customers and suppliers, various technological changes and other factors over
which Ogden has no control.
The Energy Group's independent power business faces a domestic
market that is expected to change substantially in the years ahead from a
mature, highly regulated and uncompetitive market for energy services to a less
regulated and more competitive market as utilities restructure for deregulation
and termination of their traditional monopolies. The international market for
energy services is characterized by a large demand and much competition for
projects within a relatively immature market framework.
The domestic market for the Energy Group's waste-to-energy services
has largely matured and is now heavily regulated. New opportunities for domestic
projects are expected to be scarce for the foreseeable future. This reflects a
number of factors that adversely affected communities' willingness to make
long-term capital commitments to waste disposal projects, including: declining
prices at which energy can be sold, and low alternative disposal costs. Another
factor adversely affecting the demand for new waste-to-energy projects, as well
as having an impact on existing projects, was a 1994 United States Supreme Court
decision invalidating state and local laws and regulations mandating that waste
generated within a given jurisdiction be taken to a designated facility. The
invalidation of such laws has created pressure on Client Communities as well as
the Energy Group to lower costs or restructure contractual arrangements in order
to continue to attract waste supplies and ensure that revenues are sufficient to
pay for all project costs. See Waste to Energy, "Other Arrangements for
Providing Waste-to-Energy Services".
Foreign demand for waste to energy projects is expected to exist
only in unique circumstances where other disposal options are unavailable or
unusually costly.
The Energy Group's water and wastewater business faces an immature
but developing domestic market for private water and wastewater services, and,
like energy, a large foreign demand within an immature marketplace.
Competition for business is intense in all the domestic and foreign
markets in which Ogden conducts or intends to conduct its businesses and its
businesses are subject to a variety of competitiveness and market influences,
which are different for each of its three principal businesses. The economic
climate can adversely affect several of Ogden's operations, including,
30
but not limited to, domestic and foreign government regulations, fewer airline
flights and flight cancellations in the Aviation group and reduced event
attendance in its Entertainment group. In addition, disputes between owners of
professional sports organizations and the professional players of such
organizations have affected and may continue to affect the operations of the
Entertainment group. Ogden's Entertainment, Aviation and Energy groups expend
substantial amounts for the development of new businesses, some of which
expenditures are capitalized. The financial support required to undertake some
of these activities comes from Ogden. Beyond staffing costs, expenditures can
include the costs of contract and site acquisition, feasibility and
environmental studies, technical and financial analysis, and in some cases the
preparation of extensive proposals in response to public or private requests for
proposals. Development of some projects by the Entertainment, Aviation and
Energy groups involves substantial risks which are not within their control.
Success of a project may depend upon obtaining in a timely manner acceptable
contractual arrangements and financing, appropriate sites, acceptable licenses,
environmental permits and governmental approvals. Even after the required
contractual arrangements are achieved, implementation of the project often is
subject to substantial conditions that may be outside the control of the group.
If development opportunities in which Ogden's businesses are involved are no
longer viewed as viable, any capitalized costs are written off as an expense. In
some, but not all, circumstances, the applicable Entertainment, Aviation or
Energy group will make contractual arrangements for the partial recovery of
development costs if the project fails to be implemented for reasons beyond its
control.
EQUAL EMPLOYMENT OPPORTUNITY
In recent years, governmental agencies (including the Equal Employment
Opportunity Commission) and representatives of minority groups and women have
asserted claims against many companies, including some Ogden subsidiaries,
alleging that certain persons have been discriminated against in employment,
promotions, training, or other matters. Frequently, private actions are brought
as class actions, thereby increasing the practical exposure. In some instances,
these actions are brought by many plaintiffs against groups of defendants in the
same industry, thereby increasing the risk that any defendant may incur
liability as a result of activities which are the primary responsibility of
other defendants. Although Ogden and its subsidiaries have attempted to provide
equal opportunity for all of its employees, the combination of the foregoing
factors and others increases the risk of financial exposure.
YEAR 2000 ISSUES
See discussion on Ogden's Year 2000 issues set forth on page 23 of
Management's Discussion and Analysis of Consolidated Operations of Ogden's 1998
Annual Report to Shareholders, certain specified portions of which are
incorporated herein by reference.
31
EMPLOYEE AND LABOR RELATIONS
As of March 1, 1999, Ogden and its subsidiaries had approximately 21,970
U.S. and foreign employees.
Certain employees of Ogden are employed pursuant to collective bargaining
agreements with various unions. During 1998 Ogden successfully renegotiated
collective bargaining agreements in certain of its business sectors with no
strike-related loss of service. Ogden considers relations with its employees to
be good and does not anticipate any significant labor disputes in 1999.
ENVIRONMENTAL REGULATORY LAWS
(a) Domestic. Ogden's business activities in the United States are
pervasively regulated pursuant to Federal, state and local environmental laws.
Federal laws, such as the Clean Air Act and Clean Water Act, and their state
counterparts, govern discharges of pollutants to air and water. Other federal,
state, and local laws, comprehensively govern the generation, transportation,
storage, treatment, and disposal of solid waste, and also regulate the storage
and handling of petroleum products, including hazardous waste (such laws and the
regulations thereunder, "Environmental Regulatory Laws").
The Environmental Regulatory Laws and other federal, state, and
local laws, such as the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") (collectively, "Environmental Remediation Laws"), make
Ogden potentially liable on a joint and several basis for any environmental
contamination which may be associated with the Aviation group's activities
(including fueling) and the activities at sites, including landfills, which the
Energy Group's subsidiaries have owned, operated, or leased or at which there
has been disposal of residue or other waste handled or processed by such
subsidiaries or at which there has been disposal of waste generated by the
Aviation groups activities. Through its subsidiaries, the Energy Group leases
and operates a landfill in Haverhill, Massachusetts, and leases a landfill in
Bristol, Connecticut, in connection with its projects at those locations. Some
state and local laws also impose liabilities for injury to persons or property
caused by site contamination. Some Service Agreements provide for
indemnification of the operating subsidiaries from some such liabilities.
The Environmental Regulatory Laws require that many permits be
obtained before the commencement of construction and operation of
waste-to-energy, independent power and water and wastewater projects. There can
be no assurance that all required permits will be issued, and the process of
obtaining such permits can often cause lengthy delays, including delays caused
by third-party appeals challenging permit issuance. Failure to meet conditions
of these permits or of the Environmental Regulatory Laws and the corresponding
regulations can subject an Operating Subsidiary to regulatory enforcement
actions by the appropriate governmental unit, which could include monetary
penalties, and orders requiring certain remedial actions or limiting
32
or prohibiting operation. Ogden's Aviation fueling activities also must comply
with various regulatory and permitting requirements and can be subject to
regulatory enforcement actions. To date, Ogden has not incurred material
penalties, been required to incur material capital costs or additional expenses,
nor been subjected to material restrictions on its operations as a result of
violations of environmental laws, regulations, or permits.
The Environmental Regulatory Laws and Federal and state governmental
regulations and policies governing their enforcement are subject to revision.
New technology may be required or stricter standards may be established for the
control of discharges of air or water pollutants for storage and handling of
petroleum products or for solid or hazardous waste or ash handling and disposal.
Thus, as new technology is developed and proven, it may be required to be
incorporated into new facilities or major modifications to existing facilities.
This new technology may often be more expensive than that used previously.
The Clean Air Act Amendments of 1990 required EPA to promulgate New
Source Performance Standards ("NSPS") and Emission Guidelines ("EG") applicable
to new and existing municipal waste combustion units for particulate matter
(total and fine), opacity, sulfur dioxide, hydrogen chloride, oxides of
nitrogen, carbon monoxide, dioxins and dibenzofurans.
The NSPS and EG, which were issued in final form in 1995, will
require capital improvements or operating changes to most of the waste-to-energy
facilities operated by OWTE to control emissions of nitrogen oxides, organics,
mercury and acid gases. The timing and cost of the modifications required at
OWTE facilities will depend on the provisions of implementing regulations that
states must adopt and EPA approve. The deadline for states to submit their
implementing regulations originally was December 19, 1996. However, the
requirement that all states submit implementing regulations became the subject
of protracted litigation and appeals, and most states suspended preparation of
their implementation plans as a result. Following rulings by the courts, EPA
issued a final rule which slightly revised the emission limits for NOX, CO, SO2,
HCl, dioxin, cadmium, and lead, tightening all but the NOX limit. While the
compliance deadline for the 1995 NSPS and EG remains December 19, 2000, the
deadline for these seven revised limits is August 26, 2002. As a practical
matter the capital and operating changes necessary to meet them is very nearly
identical to that needed to achieve the prior NSPS and EG limits. OWTE
anticipates that projects to install all new equipment needed to achieve the
applicable new limits under the NSPS and EG will be undertaken in a single
effort, to be completed by December 19, 2000.
The costs to meet new rules for existing facilities owned by Client
Communities generally will be borne by the Client Communities. For projects
owned or leased by Ogden and operated under a Service Agreement, the Client
Community has the obligation to fund such capital improvements, to which Ogden
may be required to make an equity contribution. In certain cases, Ogden is
required to fund the full cost of these capital improvements at those facilities
that are either not operated pursuant to a Service Agreement or whose Service
Agreement does not require the costs to be borne by the Client Community. The
Company estimates that its commitments for these capital improvements will total
approximately $54 million during 1999 and 2000 (including amounts which would be
required if certain Service Agreement amendments are
33
finalized). Only moderate additional costs are likely to be incurred during 2001
and 2002. OWTE believes that most costs incurred to meet EG and operating permit
requirements at facilities it operates may be recovered from Client Communities
and other users of its facilities through increased service fees permitted under
applicable contracts. Such increased service fees will be paid for either out of
their general revenues or by increasing fees charged to facility users by the
Client Community. Because of the reluctance or inability of some municipalities
to increase taxes, or tipping fees if the market may not bear the increase
without some loss of waste deliveries, Client Communities may seek to have OWTE
subsidize the cost, or modify its contractual relationship.
Domestic drinking water facilities developed in the future by OWS
will be subject to regulation of water quality by the EPA under the Federal Safe
Drinking Water Act and by similar state laws. Domestic wastewater facilities are
subject to regulation under the Federal Clean Water Act and by similar state
laws. These laws provide for the establishment of uniform minimum national water
quality standards, as well as governmental authority to specify the type of
treatment processes to be used for public drinking water. Under the Federal
Clean Water Act, OWS may be required to obtain and comply with National
Pollutant Discharge Elimination System permits for discharges from its treatment
stations. Generally, under its current contracts, the client community is
responsible for fines and penalties resulting from the delivery to OWS's
treatment facilities of water not meeting standards set forth in those
contracts.
The Environmental Remediation Laws prohibit disposal of hazardous
waste other than in small, household-generated quantities at OWTE's municipal
solid waste facilities. The Service Agreements recognize the potential for
improper deliveries of hazardous wastes and specify procedures for dealing with
hazardous waste that is delivered to a facility. Although certain Service
Agreements require the Operating Subsidiary to be responsible for some costs
related to hazardous waste deliveries, to date, no Operating Subsidiary has
incurred material hazardous waste disposal costs.
(b) International. Among the Energy Group's objectives is providing
energy generating and other infrastructure through environmentally protective
project designs, regardless of the location of a particular project. This
approach is consistent with the increasingly stringent environmental
requirements of multilateral financing institutions, such as the World Bank, and
also with the Energy Group's experience in domestic waste-to-energy projects,
where environmentally protective facility design and performance has been
required. The laws of other countries also may require regulation of emissions
into the environment, and provide governmental entities with the authority to
impose sanctions for violations, although these requirements are generally not
as rigorous as those applicable in the United States. Compliance with
environmental standards comparable to those of the United States may be
conditions to the provision of credit by multilateral banking agencies as well
as other lenders or credit providers. As with domestic project development,
there can be no assurance that all required permits will be issued, and the
process can often cause lengthy delays.
34
ENERGY AND WATER REGULATIONS
The Energy Group's domestic businesses are subject to the provisions
of federal, state and local energy laws applicable to their development,
ownership and operation of their domestic facilities, and to similar laws
applicable to their foreign operations. Federal laws and regulations govern
transactions with utilities, the types of fuel used and the power plant
ownership. State regulatory regimes govern rate approval and other terms under
which utilities purchase electricity from independent power producers, except to
the extent such regulation is pre-empted by federal law.
Pursuant to Federal Public Utility Regulatory Policies Act
("PURPA"), the Federal Energy Regulatory Commission ("FERC") has promulgated
regulations that exempt qualifying facilities (facilities meeting certain size,
fuel and ownership requirements, or "QFs") from compliance with certain
provisions of the Federal Power Act ("FPA"), the Public Utility Holding Company
Act of 1935 ("PUHCA"), and certain state laws regulating the rates charged by,
or the financial and organizational activities of, electric utilities. PURPA was
enacted in 1978 to encourage the development of cogeneration facilities and
other facilities making use of non-fossil fuel power sources, including
waste-to-energy facilities. The exemptions afforded by PURPA to qualifying
facilities from regulation under the FPA and PUHCA and most aspects of state
electric utility regulation are of great importance to the Energy Group and its
competitors in the waste-to-energy and independent power industries.
Except with respect to waste to energy facilities with a net power
production capacity in excess of thirty megawatts (where rates are set by FERC),
state public utility commissions must approve the rates, and in some instances
other contract terms, by which public utilities purchase electric power from
QFs. PURPA requires that electric utilities purchase electric energy produced by
QFs' at negotiated rates or at a price equal to the incremental or "avoided"
cost that would have been incurred by the utility if it were to generate the
power itself or purchase it from another source. PURPA does not expressly
require public utilities to enter into long-term contracts.
Under PUHCA, any entity owning or controlling ten percent or more of
the voting securities of a "public utility company" or company which is a
"holding company" of a public utility company is subject to registration with
the Securities and Exchange Commission (the "SEC") and regulation by the SEC
unless exempt from registration. Under PURPA, most projects that satisfy the
definition of a "qualifying facility" are exempt from regulation under PUHCA.
Under the Energy Policy Act of 1992, projects that are not QFs under PURPA but
satisfy the definition of an "exempt wholesale generator" ("EWG") are not deemed
to be public utility companies under PUHCA. Finally, projects that satisfy the
definition of "foreign utility companies" are exempt from regulation under
PUHCA. The Energy Group believes that all of its projects involved in the
generation, transmission and/or distribution of electricity, both domestically
and internationally, will qualify for an exemption from PUHCA and that it is not
and will not be required to register with the SEC.
35
In the past there has been consideration in the U.S. Congress of
legislation to repeal PURPA entirely, or at least to repeal the obligation of
utilities to purchase power from QFs. It is likely that similar legislation will
be introduced in the current Congress. There is strong support for
grandfathering existing QF contracts if such legislation is passed. Various
bills have also proposed repeal of PUHCA. Repeal of PUHCA would allow both
independents and vertically integrated utilities to acquire electric assets
throughout the United States that are geographically widespread, eliminating the
current requirement that the utility's electric assets be capable of physical
integration. Also, registered holding companies would be free to acquire
non-utility businesses, which they may not do now, with certain limited
exceptions. With the repeal of PURPA or PUHCA, competition for independent power
generators from vertically integrated utilities would likely increase.
In addition, the FERC, many state public utility commissions and
Congress have implemented or are considering a series of proposals to
restructure the electric utility industry in the United States to permit utility
customers to choose their utility supplier in a competitive electric energy
market. The FERC has issued a series of orders requiring utilities to offer
wholesale customers and suppliers open access on their transmission lines on a
comparable basis to the utilities' own use of the line. All public utilities
have already filed "open access" tariffs to implement this requirement. As the
trend toward increased competition continues, the utilities contend that they
are entitled to recover from departing customers their fixed costs that will be
"stranded" by the ability of their wholesale customers (and perhaps eventually,
their retail customers) to choose new electric power suppliers. These include
the costs utilities are required to pay under many QF contracts which the
utilities view as excessive when compared with current market prices. Many
utilities are therefore seeking ways to lower these contract prices, or rescind
or buy out these contracts altogether, out of concern that their shareholders
will be required to bear all or part of such "stranded" costs. Regulatory
agencies to date have recognized the continuing validity of approved power
purchase agreements, and have rejected attempts by some utilities to abrogate
these contracts. At the same time, regulatory agencies have encouraged
renegotiations of power contracts where rate payer savings can be achieved as a
result. The Energy Group anticipates that the regulatory impetus to restructure
"above market" power purchase agreements will continue in many of the
jurisdictions where it owns or operates generating facilities. Future U.S.
electric rates may be deregulated in a restructured U.S. electric utility
industry and increased competition may result in lower rates and less profit for
U.S. electricity sellers developing new projects. Falling electricity prices and
uncertainty as to the future structure of the industry can be expected to
inhibit United States utilities from entering into long-term power purchase
contracts. On the other hand, deregulation could open up markets for the sale of
electricity previously available only to regulated utilities.
The Energy Group presently has, and intends to continue to acquire,
ownership and operating interests in projects outside the United States. Most
countries have expansive systems for the regulation of the power business. These
generally include provisions relating to ownership, licensing, rate setting and
financing of generating and transmission facilities.
OWS's business may be subject to the provisions of state, local and,
in the case of foreign operations, national utility laws applicable to the
development, ownership and operation
36
of water supply and wastewater facilities. Whether such laws apply depends upon
the local regulatory scheme as well as the manner in which OWS provides its
services. Where such regulations apply, they may relate to rates charged,
services provided, accounting procedures, acquisitions and other matters. In the
United States, rate regulations have typically been structured to provide a
predetermined return on the regulated entities investments. In other
jurisdictions, the trend is towards periodic price reviews comparing rates to
anticipated capital and operating revenues. The regulated entity benefits from
efficiencies achieved during the period for which the rate is set.
37
Item 2. PROPERTIES
Ogden's executive offices are located at Two Pennsylvania Plaza, New
York, New York 10121, pursuant to a lease that expires on April 30, 2008,
subject to an option by Ogden to renew the lease for an additional five years.
Ogden Services Corporation also owns a 12,000 square-foot warehouse and office
facility located in Long Island City, New York.
(a) Entertainment
The executive offices for the Entertainment group are located at Two
Pennsylvania Plaza, New York, New York. The Entertainment group owns and leases
buildings in various areas in the United States and several foreign countries,
that house office and warehousing operations. The leases range from a
month-to-month term to as long as five years.
Entertainment also leases or owns the following facilities:
Nature of
Location Site Use Size Interest
- -------- -------- ---- --------
Collinsville, IL Fairmount Race Track 150 - acres Lease (1)
East St. Louis, IL Fairmount 148 - acres Owns
West Yellowstone, Montana Grizzly Park 25 - acres Owns
Ocala, Florida Silver Springs 256 - acres Lease (2)
Lombard, IL Enchanted Castle 42,500 sq. ft. Lease (3)
Anaheim, CA Tinseltown(TM) Studios 1.25 - acres Owns
New York, NY Observation Deck, 107th Floor Lease (4)
World Trade Center
New Orleans, LA Jazzland 160 - acres Lease (5)
Buenos Aires, Argentina La Rural 28 - acres Lease (6)
Province of Missions, Iguazu Grand Hotel
Argentina Resort & Casino 15 - acres Owns
(1) Expires in 2017.
(2) Expires in 2008.
(3) Expires in 2006.
(4) Expires in 2009.
(5) A 99 year lease convertible into fee ownership at Entertainment's option.
(6) Expires 2026.
(b) Aviation
The executive offices for the Aviation group are located at Two
Pennsylvania Plaza, New York, New York. Aviation manages its global ground
handling business from leased space at
38
four regional offices: Hong Kong (Asia-Pacific); Miami, Florida (Central & South
America/Mexico/Caribbean); Amsterdam/Schiphol, Netherlands (Europe); and Irving,
Texas (United States & Canada).
To conduct its ground handling, passenger services, and cargo operations,
Aviation leases office, terminal, and ramp space at the many airports around the
globe where Aviation provides these services, and owns several minor storage and
maintenance facilities located in Santiago, Chile; Auckland, New Zealand; and at
St. Maarten in the Netherlands Antilles. Aviation's fueling business leases
fueling installations located at various airports in the United States and
Canada.
Through a joint venture company, Aviation owns a newly constructed,
state-of-the-art air cargo terminal at Praha Ruzyne Airport in Prague, Czech
Republic. With a design capacity to handle 100,000 metric tons of air cargo per
year, the warehouse encompasses 10,000 square meters of operational and storage
space. At Newark Airport in New Jersey, Aviation owns a building and land that
was previously used in support of its in-flight catering food service operation.
Aviation's recently acquired Flight Services Group, Inc. leases corporate
office space in Stratford, CT. This operations also leases office and hangar
space at the Palm Beach International Airport, West Palm Beach, FL, Lt. Warren
E. Eaton Airport, Norwich, NY and the Teterboro Airport in Teterboro, NJ, and
owns an 11,000 square foot hangar at the Sikorsky Memorial Airport in Stratford,
CT.
(c) Energy
The principal executive offices of Ogden Energy Group, Inc. are
located in Fairfield, New Jersey, in an office building located on a 5.4 acre
site owned by Ogden Projects, Inc. It also leases approximately 47,000 square
feet of office space in Fairfax, Virginia.
The following table summarizes certain information relating to the
locations of the properties owned or leased by Ogden Energy Group, Inc. or its
subsidiaries as of March 1, 1999.
Approximate
Site Size
Location in Acres Site Use Nature of Interest(1)
- -------- -------- -------- ---------------------
1. Fairfield, New Jersey 5.4 Office space Own
2. Marion County, Oregon 15.2 Waste-to-energy facility Own
3. Alexandria/Arlington,
Virginia 3.3 Waste-to-energy facility Lease
4. Bristol, Connecticut 18.2 Waste-to-energy facility Own
5. Bristol, Connecticut 35.0 Landfill Lease
6. Indianapolis, Indiana 23.5 Waste-to-energy facility Lease
39
Approximate
Site Size
Location in Acres Site Use Nature of Interest(1)
- -------- -------- -------- ---------------------
7. Stanislaus County, California 16.5 Waste-to-energy facility Lease
8, Babylon, New York 9.5 Waste-to-energy facility Lease
9. Haverhill, Massachusetts 12.7 Waste-to-energy facility Lease
10. Haverhill, Massachusetts 16.8 RDF processing facility Lease
11. Haverhill, Massachusetts 20.2 Landfill Lease
12. Lawrence, Massachusetts 11.8 RDF power plant (closed) Own
13. Lake County, Florida 15.0 Waste-to-energy facility Own
14. Wallingford, Connecticut 10.3 Waste-to-energy facility Lease
15. Fairfax County, Virginia 22.9 Waste-to-energy facility Lease
16. Montgomery County, 35.0 Waste-to-energy facility Lease
Maryland
17. Huntington, New York 13.0 Waste-to-energy facility Lease
18. Warren County, New Jersey 19.8 Waste-to-energy facility Lease
19. Hennepin County, Minnesota 14.6 Waste-to-energy facility Lease
20. Tulsa, Oklahoma 22.0 Waste-to-energy facility Lease
21. Onondaga County, New York 12.0 Waste-to-energy facility Lease
22. New Martinsville, W. VA N/A Hydroelectric Power Generating Lease
23. Heber, California N/A Geothermal Power Plant Lease
24. Heber, California N/A Geothermal Power Plant Lease
25. Bataan, Philippines 3,049 sq. meters Diesel Power Plant Lease
26. Zhejiang Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China
China Joint Venture Partner
Upon termination of
Joint Venture
Agreement.
40
Approximate
Site Size
Location in Acres Site Use Nature of Interest(1)
- -------- -------- -------- ---------------------
27. Shandong Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China Joint
China Venture Partner upon
termination of Joint
Venture Agreement.
28. Jiangsu Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China Joint
China Venture Partner upon
termination of Joint
Venture Agreement
29. Jiangsu Province, N/A Coal-fired Land Use Right
Peoples Republic of Cogeneration Facility reverts to China Joint
China Venture Partner upon
termination of Joint Venture Agreement
30. Casa Diablo Hot Springs, 1,510 Geothermal Projects Land Use Rights from
California Geothermal Resource
Lease
31. Rockville, Maryland N/A Landfill Gas Project Lease
32. San Diego, California N/A Landfill Gas Project Lease
33. Oxnard, California N/A Landfill Gas Project Lease
34. Sun Valley, California N/A Landfill Gas Project Lease
35. Salinas, California N/A Landfill Gas Project Lease
36. Santa Clara, California N/A Landfill Gas Project Lease
37. Stockton, California N/A Landfill Gas Project Lease
38. Los Angeles, California N/A Landfill Gas Project Lease
39. Burney, California 40 Wood Waste Project Lease
40. Jamestown, California 26 Wood Waste Project Own (50%)
41. Westwood, California 60 Wood Waste Project Own
42. Oroville, California 43 Wood Waste Project Lease
43. Penobscot County, Maine N/A Hydroelectric Project Own (50%)
44. Whatcom County, Washington N/A Hydroelectric Project Own (50%)
41
Approximate
Site Size
Location in Acres Site Use Nature of Interest(1)
- -------- -------- -------- ---------------------
45. Weeks Falls, Washington N/A Hydroelectric Project Lease
46. Haripur, Bangladesh 4.6 Gas/Diesel Project Lease
47. Cavite, Philippines 13,122 Diesel Lease
sq. meters
48. Chonburi, Thailand 5.92 Gas Project Own
49. Ayutthya, Thailand 6.95 Gas Project Own
- ----------
(1) All ownership or leasehold interests are subject to material liens in
connection with the financing of the related project, except those listed
above under items 1, 12, 26-29, and 31-42. In addition, all leasehold
interests extend at least as long as the term of applicable project
contracts, and several of the leasehold interests are subject to renewal
and/or purchase options.
42
Item 3. LEGAL PROCEEDINGS
The Company has various legal proceedings involving matters arising
in the ordinary course of business. The Company does not believe that there are
any pending legal proceedings other than ordinary routine litigation incidental
to its business to which the Company or any of its subsidiaries is a party or to
which any of their property is subject, the outcome of which would have a
material adverse effect on the Company's consolidated financial statements.
The Company conducts regular inquiries of its subsidiaries regarding
litigation and environmental violations which include determining the nature,
amount and likelihood of liability for any such claims, potential claims or
threatened litigation.
In the ordinary course of its business, the Company may become
involved in Federal, state, and local proceedings relating to the laws
regulating the discharge of materials into the environment and the protection of
the environment. These include proceedings for the issuance, amendment, or
renewal of the licenses and permits pursuant to which a Company subsidiary
operates. Such proceedings also include actions brought by individuals or local
governmental authorities seeking to overrule governmental decisions on matters
relating to the subsidiaries' operations in which the subsidiary may be, but is
not necessarily, a party. Most proceedings brought against the Company by
governmental authorities or private parties under these laws relate to alleged
technical violations of regulations, licenses, or permits pursuant to which a
subsidiary operates. The Company believes that such proceedings will not have a
material adverse effect on the Company's consolidated financial position or
results of operations.
The Company's operations are subject to various Federal, state and
local environmental laws and regulations, including the Clean Air Act, the Clean
Water Act, the Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) and Resource Conservation and Recovery Act (RCRA). Although the
Company operations are occasionally subject to proceedings and orders pertaining
to emissions into the environment and other environmental violations, the
Company believes that it is in substantial compliance with existing
environmental laws and regulations.
In connection with certain previously divested operations, the
Company may be identified, along with other entities, as being among potentially
responsible parties responsible for contribution for costs associated with the
correction and remediation of environmental conditions at various hazardous
waste disposal sites subject to CERCLA. In certain instances the Company may be
exposed to joint and several liability for remedial action or damages. The
Company's ultimate liability in connection with such environmental claims will
depend on many factors, including its volumetric share of waste, the total cost
of remediation, the financial viability of other companies that also sent waste
to a given site and its contractual arrangement with the purchaser of such
operations.
The potential costs related to all of the foregoing matters and the
possible impact on future operations are uncertain due in part to the complexity
of government laws and regulations and their interpretations, the varying costs
and effectiveness of cleanup technologies,
43
the uncertain level of insurance or other types of recovery, and the
questionable level of the Company's responsibility. Although the ultimate
outcome and expense of environmental remediation is uncertain, the Company
believes that currently required remediation and continuing compliance with
environmental laws will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of Ogden
during the fourth quarter of 1998.
EXECUTIVE OFFICERS OF OGDEN
Set forth below are the names, ages, positions and offices held and
years appointed, of all "executive officers" (as defined by Rule 3b-7 of the
Securities Exchange Act of 1934) of Ogden as of March 1, 1999:
CONTINUALLY AN OGDEN
POSITION AND OFFICE EXECUTIVE OFFICER
NAME HELD AGE AS OF 3/1/99 SINCE
---- ---- ---------------- -----
R. Richard Ablon Chairman of the 49 1987
Board, President &
Chief Executive
Officer
Scott G. Mackin Executive Vice 42 1992
President
Jesus Sainz Executive Vice 55 1998
President
Raymond E. Senior Vice 44 1998
Dombrowski, Jr. President and Chief
Financial Officer
Lynde H. Coit Senior Vice 44 1991
President and
General Counsel
44
CONTINUALLY AN OGDEN
POSITION AND OFFICE EXECUTIVE OFFICER
NAME HELD AGE AS OF 3/1/99 SINCE
---- ---- ---------------- -----
Rodrigo Arboleda Senior Vice 58 1995
President, Business
Development, Latin
America
David L. Hahn Senior Vice 47 1995
President, Aviation
Quintin G. Marshall Senior Vice 37 1995
President, Corporate
Development
Gary D. Perusse Senior Vice 50 1996
President, Risk
Management
Peter Allen Senior Vice President 62 1998
Bruce W. Stone Executive Vice 51 1997
President for
Waste-to-Energy
Operations and
Managing
Director-Ogden
Energy Group, Inc.
B. Kent Burton Vice President, 47 1997
Policy and
Communications
Alane G. Baranello Vice President, 39 1998
Human Resources
45
CONTINUALLY AN OGDEN
POSITION AND OFFICE EXECUTIVE OFFICER
NAME HELD AGE AS OF 3/1/99 SINCE
---- ---- ---------------- -----
Peter Cain Vice President, 41 1997
Finance and Treasurer
Robert M. DiGia Vice President, 74 1965
Controller and Chief
Accounting Officer
Kathleen Ritch Vice President and 56 1981
Secretary
There is no family relationship by blood, marriage or adoption (not more
remote than first cousins) between any of the above individuals and any
Ogden director.
The term of office of all officers shall be until the next election of
directors and until their respective successors are chosen and qualified.
There are no arrangements or understandings between any of the above
officers and any other person pursuant to which any of the above was
selected as an officer.
The following briefly describes the business experience, the principal
occupation and employment of the foregoing Executive Officers during the
past five years:
R. Richard Ablon has been President and Chief Executive Officer of Ogden
for more than the last five years and Chairman of the Board since May,
1996.
Scott G. Mackin, has served as Executive Vice President of Ogden since
1997 and for more than the last five years has served as President and
Chief Operating Officer of Ogden Energy Group, Inc.
Jesus Sainz served as an Ogden director from 1994 until January 1, 1998.
On January 15, 1998 he was appointed Executive Vice President of Ogden.
For more than five years prior to 1997, Mr. Sainz served as Executive Vice
Chairman of a private Spanish company which he created in 1984 which holds
interests in companies operating in such fields as foreign trade, fast
food and real estate.
46
Raymond E. Dombrowski, Jr. was appointed Senior Vice President and Chief
Financial Officer of Ogden on September 17, 1998. From 1997 until he
joined Ogden he served as General Attorney, Finance, Bell Atlantic
Headquarters, responsible for all domestic and international finance
transactions. Between 1994 and 1997 Mr. Dombrowski served as Counsel,
Treasury and Finance, Bell Atlantic Headquarters, with responsibilities in
the area of structuring, negotiating and documenting sensitive financing
structures.
Lynde H. Coit has been a Senior Vice President and General Counsel of
Ogden for more than the last five years.
Rodrigo Arboleda was appointed Senior Vice President of Ogden in January
1995. For more than the last five years he served as Ogden's Senior Vice
President-Business Development-Latin America operations.
David L. Hahn was appointed Senior Vice President, Business Development,
Asia in January 1995 and since 1997 he has served as Ogden's Senior Vice
President, Aviation and Chief Operating Officer of Ogden's Aviation
segment. Prior to 1995 he served as Vice President-Marketing of Ogden
Services Corporation.
Quintin G. Marshall was appointed Senior Vice President - Corporate
Development of Ogden on January 16, 1997. From October 1995 to January
1997 he served as Ogden's Vice President - Investor Relations. From May
1993 to October 1995 he served as Managing Director of CDA Investment
Technologies, a division of Thomson Financial.
Gary D. Perusse was appointed Senior Vice President - Risk Management in
September, 1996. Prior thereto he had served as Director - Risk Management
of Ogden for more than five years.
Peter Allen has served as a Senior Vice President of Ogden since January
1998 and as Senior Vice President and General Counsel of Ogden Services
segment for more than the last five years.
Bruce W. Stone was designated an Executive Officer of Ogden in 1997.
Mr. Stone served as Co-President and Chief Operating Officer of Ogden
Projects, Inc. and the Energy Group between October 5, 1990 and January
29, 1991. He currently serves as Executive Vice President and Managing
Director of Ogden Energy Group, Inc., a position he has held since
January 29, 1991.
B. Kent Burton has served as Vice President - Policy and Communications of
Ogden since May 1997 and for more than the last five years as Senior Vice
President of the Ogden Energy Group, Inc. in political affairs and
lobbying activities.
47
Alane G. Baranello was appointed Vice President, Human Resources of Ogden
on May 20, 1998. Between 1993 and May 1998 she served as Ogden's Director,
Human Resources.
Peter Cain has served in various financial capacities as a senior officer
of many of Ogden's major subsidiaries for more than the last five years.
He served as Ogden's Vice President of Finance since 1997 and was
appointed Ogden's Treasurer in 1998.
Robert M. DiGia has been Vice President, Controller and Chief Accounting
Officer of Ogden for more than the past five years.
Kathleen Ritch has been Vice President and Secretary of Ogden for more
than the past five years.
PART II
Item 5. MARKET FOR OGDEN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The principal U.S. market for Ogden's common stock and $1.875
cumulative convertible preferred stock is the New York Stock Exchange, Inc. (the
"NYSE"). As of March 1, 1999, the approximate number of record holders of Ogden
common stock was 6,614. Pursuant to General Instruction G (2), the information
called for by this item is hereby incorporated by reference from Page 48 of
Ogden's 1998 Annual Report to Shareholders. The prices set forth therein are as
reported on the consolidated transaction reporting system of the NYSE.
Item 6. SELECTED FINANCIAL DATA
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Page 25 of Ogden's 1998
Annual Report to Shareholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Pages 20 through 24 of
Ogden's 1998 Annual Report to Shareholders.
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Pursuant to General Instruction (G)2, the information called for
by this item is hereby incorporated by reference from page 23 of Ogden's 1998
Annual Report to Shareholders.
48
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Pages 26 through 45 and Page
48 of Ogden's 1998 Annual Report to Shareholders.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF OGDEN
Pursuant to General Instruction G (3), the information regarding
directors called for by this item is hereby incorporated by reference from
Ogden's 1999 Proxy Statement to be filed with the Securities and Exchange
Commission. The information regarding officers called for by this item is
included at the end of Part I of this document under the heading "Executive
Officers of Ogden."
Item 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1999 Proxy Statement
to be filed with the Securities and Exchange Commission.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1999 Proxy Statement
to be filed with the Securities and Exchange Commission.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1999 Proxy statement
to be filed with the Securities and Exchange Commission.
49
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Listed below are the documents filed as a part of this report:
1). All financial statements contained on pages 26 through 45 and the
Independent Auditors' Report on page 46 of Ogden's 1998 Annual
Report to Shareholders are incorporated herein by reference.
2). Financial statement schedules as follows:
(i) Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1998, 1997 and 1996.
3). Those exhibits required to be filed by Item 601 of Regulation S-K:
EXHIBITS
2.0 Plans of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1 Agreement and Plan of Merger, dated as of October 31, 1989,
among Ogden, ERCI Acquisition Corporation and ERC
International, Inc.*
2.2 Agreement and Plan of Merger among Ogden Corporation, ERC
International, Inc., ERC Acquisition Corporation and ERC
Environmental and Energy Services Co., Inc., dated as of
January 17, 1991.*
2.3 Amended and Restated Agreement and Plan of Merger among Ogden
Corporation, OPI Acquisition Corp. and Ogden Projects, Inc.,
dated as of September 27, 1994.*
3.0 Articles of Incorporation and By-laws.
3.1 Ogden's Restated Certificate of Incorporation as amended.*
3.2 Ogden's By-Laws, as amended through April 8, 1998.*
4.0 Instruments Defining Rights of Security Holders.
4.1 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of June 1, 1987, and Offering Memorandum
dated June 12, 1987, relating to U.S. $85 million Ogden 6%
Convertible Subordinated
50
Debentures, Due 2002.*
4.2 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of October 15, 1987, and Offering
Memorandum, dated October 15, 1987, relating to U.S. $75
million Ogden 5-3/4% Convertible Subordinated Debentures, Due
2002.*
4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to
The Bank of New York, Trustee, relating to Ogden's $100
million debt offering.*
10.0 Material Contracts
10.1(a) U.S. $95 million Term Loan and Letter of Credit and Reimbursement
Agreement among Ogden, the Deutsche Bank AG, New York Branch and
the signatory Banks thereto, dated March 26, 1997.*
10.1(b) $200 million Credit Agreement among Ogden, The Bank of New York as
Agent and the signatory Lenders thereto, dated as of June 30,
1997.*
10.2 Rights Agreement between Ogden Corporation and Manufacturers Hanover
Trust Company, dated as of September 20, 1990 and amended August 15,
1995 to provide The Bank of New York as successor agent.*
10.3 Executive Compensation Plans and Agreements.
(a) Ogden Corporation 1990 Stock Option Plan.*
(i) Ogden Corporation 1990 Stock Option Plan as Amended and
Restated as of January 19, 1994.*
(ii) Amendment adopted and effective as of September 18,
1997.*
(b) Ogden Services Corporation Executive Pension Plan.*
(c) Ogden Services Corporation Select Savings Plan.*
(i) Ogden Services Corporation Select Savings Plan Amendment
and Restatement as of January 1, 1995.*
(ii) Amendment Number One to the Ogden Services Corporation
Select Savings Plan as amended and Restated January 1,
1995, effective January 1, 1998.*
51
(d) Ogden Services Corporation Select Savings Plan Trust.*
(i) Ogden Services Corporation Select Savings Plan Trust
Amendment and Restatement dated as of January 1, 1995.*
(e) Ogden Services Corporation Executive Pension Plan Trust.*
(f) Changes effected to the Ogden Profit Sharing Plan effective
January 1, 1990.*
(g) Ogden Corporation Profit Sharing Plan.*
(i) Ogden Profit Sharing Plan as amended and restated
January 1, 1991 and as in effect through January 1,
1993.*
(ii) Ogden Profit Sharing Plan as amended and restated
effective as of January 1, 1995.*
(h) Ogden Corporation Core Executive Benefit Program.*
(i) Ogden Projects Pension Plan.*
(j) Ogden Projects Profit Sharing Plan.*
(k) Ogden Projects Supplemental Pension and Profit Sharing Plans.*
(l) Ogden Projects Core Executive Benefit Program.*
(m) Form of amendments to the Ogden Projects, Inc. Pension Plan
and Profit Sharing Plans effective as of January 1, 1994.*
(i) Form of Amended Ogden Projects, Inc. Profit Sharing
Plan, effective as of January 1, 1994.*
(ii) Form of Amended Ogden Projects, Inc. Pension Plan,
effective as of January 1, 1994.*
(n) Ogden Corporation Amended and Restated CEO Formula Bonus Plan.
Transmitted herewith as Exhibit 10.3(n).
52
(o) Ogden Key Management Incentive Plan.*
10.4 Employment Agreements
(a) Employment Agreement between Ogden and Lynde H. Coit dated
March 1, 1999. Transmitted herewith as Exhibit 10.4(a).
(b) Employment Agreement between Ogden and R.Richard Ablon dated
as of January 1, 1998.*
(c) Termination Agreement between Ogden and Philip G. Husby,
Senior Vice President and CFO, dated as of September 17,
1998.*
(d) Employment Agreement between Ogden and Ogden's Chief
Accounting Officer dated as of December 18, 1991.*
(e) Employment Agreement between Scott G. Mackin, Executive Vice
President and Ogden Corporation dated as of October 1, 1998.*
(f) Employment Agreement between David L. Hahn and Ogden
Corporation, dated December 1, 1995.*
i. Letter Amendment to Employment Agreement between Ogden
Corporation and David L. Hahn, Senior Vice President,
Aviation, effective as of October 1, 1998.*
(g) Employment Agreement between Ogden Services Corporation and
Rodrigo Arboleda dated January 1, 1997.*
i. Letter Amendment to Employment Agreement between Ogden
and Rodrigo Arboleda, Senior Vice President, effective
as of October 1, 1998.*
(h) Employment Agreement between Ogden Projects, Inc. and Bruce W.
Stone dated June 1, 1990.*
(i) Employment Agreement between Ogden Corporation and Quintin G.
Marshall, dated October 30, 1996.*
i. Letter Amendment to Employment Agreement between Ogden
and Quintin G. Marshall, Senior Vice President-Corporate
Development, effective as of October 1, 1998.*
53
(j) Employment Agreement between Ogden Corporation and Jesus
Sainz, effective as of January 1, 1998.*
i. Letter Amendment to Employment Agreement between Ogden
and Jesus Sainz, Executive Vice President, effective
October 1, 1998.*
(k) Employment Agreement between Alane Baranello, Vice
President-Human Resources and Ogden dated October 28, 1996.*
i. Letter Amendment to Employment Agreement between Ogden
and Alane Baranello, Vice President-Human Resources
dated October 13, 1998.*
(l) Employment Agreement between Peter Allen, Senior Vice
President and Ogden, dated July 1, 1998.*
(m) Employment Agreement between Ogden and Raymond E. Dombrowski,
Jr., Senior Vice President and Chief Financial Officer, dated
as of September 21, 1998. Transmitted herewith as Exhibit
10.4(m).
10.5 First Amended and Restated Ogden Corporation Guaranty
Agreement made as of January 30, 1992 by Ogden Corporation for
the benefit of Mission Funding Zeta and Pitney Bowes Credit
Corporation.*
10.6 Ogden Corporation Guaranty Agreement as of January 30, 1992 by
Ogden Corporation for the benefit of Allstate Insurance
Company and Ogden Martin Systems of Huntington Resource
Recovery Nine Corporation.*
11 Ogden Corporation and Subsidiaries Detail of Computation of
Earnings Applicable to Common Stock for the years ended
December 31, 1998, 1997 and 1996.*
13 Those portions of the Annual Report to Stockholders for the
year ended December 31, 1998, which are incorporated herein by
reference. Transmitted herewith as Exhibit 13.
21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21.
23 Consent of Deloitte & Touche LLP. Transmitted herewith as
Exhibit 23.
27 Financial Data Schedule (EDGAR Filing Only).
54
* Incorporated by reference as set forth in the Exhibit Index of this
Annual Report on Form 10-K.
(b) No Reports on Form 8-K were filed by Ogden during the fourth
quarter of 1998. A Form 8-K Report was filed on March 12, 1999
and is incorporated herein by reference.
55
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
OGDEN CORPORATION
Date: March 11, 1999
By /s/ R. Richard Ablon
-------------------------
R. Richard Ablon Chairman
of the Board, President
and Chief Executive
Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.
SIGNATURE TITLE
/s/ R. Richard Ablon President, Chief Executive Officer,
- ------------------------------------ Chairman of the Board and Director
R. RICHARD ABLON
/s/ Raymond E. Dombrowski, Jr. Senior Vice President and Chief
- ------------------------------------ Financial Officer
RAYMOND E. DOMBROWSKI, JR.
/s/ Robert M. DiGia Vice President, Controller and Chief
- ------------------------------------ Accounting Officer
ROBERT M. DIGIA
Director
- ------------------------------------
DAVID M. ABSHIRE
/s/ Anthony J. Bolland Director
- ------------------------------------
ANTHONY J. BOLLAND
/s/ George L. Farr Director
- ------------------------------------
GEORGE L. FARR
/s/ Norman G. Einspruch Director
- ------------------------------------
NORMAN G. EINSPRUCH
/s/ Jeffrey F. Friedman Director
- ------------------------------------
JEFFREY F. FRIEDMAN
/s/ Attallah Kappas Director
- ------------------------------------
ATTALLAH KAPPAS
Director
- ------------------------------------
TERRY ALLEN KRAMER
/s/ Judith D. Moyers Director
- ------------------------------------
JUDITH D. MOYERS
Director
- ------------------------------------
HOMER A. NEAL
/s/ Robert E. Smith Director
- ------------------------------------
ROBERT E. SMITH
/s/ Helmut F.O. Volcker Director
- ------------------------------------
HELMUT F.O. VOLCKER
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Ogden Corporation:
We have audited the consolidated financial statements of Ogden Corporation
and subsidiaries as of December 31, 1998 and 1997, and for each of the three
years in the period ended December 31, 1998, and have issued our report
thereon dated February 9, 1999; such consolidated financial statements and
report are included in your 1998 Annual Report to Shareholders and are
incorporated herein by reference. Our audits also included the financial
statement schedule of Ogden Corporation and subsidiaries, listed in Item 14.
This financial statement schedule is the responsibility of the Corporation's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all materials respects the information set forth therein.
/s/ Deloitte & Touche LLP
New York, New York
February 9, 1999
SCHEDULE II
OGDEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1998
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
---------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
Allowances deducted in the balance sheet from the
assets to which they apply:
Doubtful receivables -- current $20,207,000 $ 9,490,000 $6,786,000 (E) $ 3,688,000 (A) $30,595,000
2,200,000 (C)
Doubtful receivables -- noncurrent 3,000,000 3,000,000 (A) 0
Deferred charges on projects 10,741,000 2,609,000 280,000 (D) 13,070,000
------------------------------------------------------------------------------
TOTAL $33,948,000 $ 12,099,000 $6,786,000 $ 9,168,000 $43,665,000
==============================================================================
Allowances not deducted:
Estimated cost of disposal of assets $ 296,000 $ 296,000 (B) $ --
Provision for restructuring 1,141,000 867,000 (B) 274,000
Reserves relating to tax indemnification and other
contingencies in connection with the sale of limited
partnership interests in and related tax benefits of
a waste-to-energy facility 3,000,000 2,700,000 (C) 300,000
Other 5,052,000 $ 100,000 1,864,000 (B) 2,282,000
1,006,000 (C)
------------------------------------------------------------------------------
TOTAL $ 9,489,000 $ 100,000 $ 6,733,000 $ 2,856,000
==============================================================================
NOTES:
(A) Write-offs of receivables considered uncollectible.
(B) Payments charged to allowances.
(C) Reversal of provisions no longer required.
(D) Write off of deferred charges.
(E) Provision of Company purchased during 1998.
SCHEDULE II
OGDEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
---------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
Allowances deducted in the balance sheet from the
assets to which they apply:
Doubtful receivables -- current $38,275,000 $ 3,485,000 $14,009,000 (A) $20,207,000
1,544,000 (D)
6,000,000 (C)
Doubtful receivables -- noncurrent 6,000,000 3,000,000 (C) 3,000,000
Deferred charges on projects 8,638,000 6,707,000 4,604,000 (E) 10,741,000
------------------------------------------------------------------------------
TOTAL $52,913,000 $ 10,192,000 $29,157,000 $33,948,000
==============================================================================
Allowances not deducted:
Estimated cost of disposal of assets $ 863,000 $ 567,000 (B) $ 296,000
Provision for restructuring 2,507,000 1,213,000 (B) 1,141,000
153,000 (C)
Reserves relating to tax indemnification and other
contingencies in connection with the sale of limited
partnership interests in and related tax benef its of
a waste-to-energy facility 3,000,000 3,000,000
Other 6,893,000 $ 2,832,000 2,273,000 (B) 5,052,000
1,900,000 (C)
500,000 (F)
------------------------------------------------------------------------------
TOTAL $13,263,000 $ 2,832,000 $ 6,606,000 $ 9,489,000
==============================================================================
Notes:
(A) Write-offs of receivables considered uncollectible.
(B) Payments charged to allowances.
(C) Reversal of provisions no longer required.
(D) Allowance of company sold during 1997.
(E) Write-off of deferred charges.
(F) Write-off to other accounts.
SCHEDULE II
OGDEN CORPORATION AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1996
- ------------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
---------------------------
BALANCE AT CHARGED TO BALANCE AT
BEGINNING COSTS AND CHARGED TO END OF
DESCRIPTION OF PERIOD EXPENSES OTHER ACCOUNTS DEDUCTIONS PERIOD
- ------------------------------------------------------------------------------------------------------------------------------------
Allowances deducted in the balance sheet from the
assets to which they apply:
Doubtful receivables -- current $37,039,000 $ 10,442,000 $ 370,000 (A) $ 9,576,000 (B) $38,275,000
Doubtful receivables -- noncurrent 6,000,000 6,000,000
Deferred charges on projects 3,670,000 4,968,000 8,638,000
------------------------------------------------------------------------------
TOTAL $40,709,000 $ 21,410,000 $ 370,000 $ 9,576,000 $52,913,000
==============================================================================
Allowances not deducted:
Estimated cost of disposal of discontinued
operations $ 186,000 $ 186,000 (C)
Estimated cost of disposal of assets 14,993,000 14,130,000 (C) $ 863,000
Provision for restructuring 6,110,000 $ 682,000 4,285,000 (C) 2,507,000
Reserves relating to tax indemnification and other
contingencies in connection with the sale of limited
partnership interests in and related tax benef its of
a waste-to-energy facility 3,000,000 3,000,000
Other 9,371,000 3,743,000 6,221,000 (D) 6,893,000
------------------------------------------------------------------------------
TOTAL $33,660,000 $ 4,425,000 $24,822,000 $13,263,000
==============================================================================
Notes:
(A) Recoveries of amounts previously written ofL
(B) Write-offs of receivables considered uncollectible.
(C) Payments charged to allowances.
(D) Reversal to operating costs of provisions no longer required.
EXHIBIT INDEX
Exhibit No. Description of Document Filing Information
- ----------- ----------------------- ------------------
2 Plans of Acquisition, Reorganization
Arrangement, Liquidation or Succession.
2.1 Agreement and Plan of Merger, dated as Filed as Exhibit 2 to Ogde's Form
of October 31, 1989, among Ogden, ERCI S-4 Registration Statement File No.
Acquisition Corporation and ERC 33-32155, and incorporated herein
International Inc. by reference.
2.2 Agreement and Plan of Merger among Filed as Exhibit (10)(x) to Ogden's
Ogden Corporation, ERC International Form 10-K for the fiscal year ended
Inc., ERC Acquisition Corporation and December 31, 1990 and incorporated
ERC Environmental and Energy Services herein by reference.
Co., Inc. dated as of January 17, 1991.
2.3 Amended and Restated Agreement and Filed as Exhibit 2 to Ogden's Form
Plan of Merger among Ogden S-4 Registration Statement File No.
Corporation, OPI Acquisition 33-56181 and incorporated herein by
Corporation sub. and Ogden Projects, reference.
Inc. dated as of September 27, 1994.
3 Articles of Incorporation and By-Laws.
3.1 Ogden Restated Certificate of Filed as Exhibit (3)(a) to Ogden's
Incorporation as amended. Form 10-K for the fiscal year ended
December 31, 1988 and incorporated
herein by reference.
3.2 Ogden By-Laws, as amended. Filed as Exhibit 3.2 to Ogden's
Form 10-Q for the quarterly period
ended March 31, 1998 and
incorporated herein by reference.
4 Instruments Defining Rights of
Security Holders.
4.1 Fiscal Agency Agreement between Ogden Filed as Exhibits (C)(3) and (C)(4)
and Bankers Trust Company, dated as of to Ogden's Form 8-K filed with the
June 1, 1987 and Offering Memorandum Securities and Exchange Commission
dated June 12, 1987, relating to U.S. on July 7, 1987 and incorporated
$85 million Ogden 6% Convertible herein by reference.
Subordinated Debentures, Due 2002.
4.2 Fiscal Agency Agreement between Ogden Filed as Exhibit (4) to Ogden's
and Bankers Trust Company, dated as of Form S-3 Registration Statement
October 15, 1987, and Offering filed with the Securities and
Memorandum, dated October 15, 1987, Exchange Commission on December 4,
relating to U.S.$75 million Ogden 5 3/4% 1987, Registration No. 33-18875,
Convertible Subordinated Debentures, and incorporated herein by
Due 2002. reference.
4.3 Indenture dated as of March 1, 1992 Filed as Exhibit (4)(C) to Ogden's
from Ogden Corporation to The Bank of Form 10-K for fiscal year ended
New York, Trustee, relating to Ogden's December 31, 1991, and incorporated
$100 million debt offering. herein by reference.
10 Material Contracts
10.1(a) U.S. $95 million Term Loan and Letter Filed as Exhibit 10.6 to Ogden's
of Credit and Reimbursement Agreement Form 10-Q for the quarterly period
among Ogden, the Deutsche Bank AG, New ended March 31, 1997 and
York Branch and the signatory Banks incorporated herein by reference.
thereto, dated March 26, 1997.
10.1(b) $200 million Credit Agreement among Filed as Exhibit 10.1(i) to Ogden's
Ogden, The Bank of New York as Agent Form 10-Q for the quarterly period
and the signatory Lenders thereto, ended June 30, 1997 and
dated as of June 30, 1997. incorporated herein by reference.
10.2 Rights Agreement between Ogden Filed as Exhibit (10)(h) to Ogden's
Corporation and Manufacturers Hanover Form 10-K for the fiscal year ended
Trust Company, dated as of September December 31, 1990 and incorporated
20, 1990 and amended August 15, 1995 herein by reference.
to provide The Bank of New York as
successor agent.
10.3 Executive Compensation Plans.
(a) Ogden Corporation 1990 Stock Filed as Exhibit (10)(j) to Ogden
Option Plan. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(i) Ogden Corporation 1990 Filed as Exhibit 10.6(b)(i) to
Stock Option Plan as Ogden's Form 10-Q for the quarterly
Amended and Restated as period ended September 30, 1994 and
of January 19, 1994. incorporated herein by reference.
(ii) Amendment adopted and Filed as Exhibit 10.7(a)(ii) to
effective as of Ogden's Form 10-K for the fiscal
September 18, 1997. year ended December 31, 1997 and
incorporated herein by reference.
(b) Ogden Services Corporation Filed as Exhibit (10)(k) to Ogden's
Executive Pension Plan. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(c) Ogden Services Corporation Filed as Exhibit (10)(l) to Ogden
Select Savings Plan. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(i) Ogden Services Filed as Exhibit 10.7(d)(I) to
Corporation Select Ogden's Form 10-K for the fiscal
Savings Plan Amendment year ended December 31, 1994 and
and Restatement as of incorporated herein by reference.
January 1, 1995.
(ii) Amendment Number One Filed as Exhibit 10.7(c)(ii) to
to the Ogden Services Ogden's Form 10-K for the fiscal
Corporation Select year ended December 31, 1997 and
Savings Plan as Amended incorporated herein by reference.
and Restated January 1,
1995, effective January
1, 1998.
(d) Ogden Services Corporation Filed as Exhibit (10)(m) to Ogden's
Select Savings Plan Trust. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(i) Ogden Services Filed as Exhibit 10.7(e)(i) to
Corporation Select Ogden's Form 10-K for the fiscal
Savings Plan Trust year ended December 31, 1994 and
Amendment and incorporated herein by reference.
Restatement as of
January 1, 1995.
(e) Ogden Services Corporation Filed as Exhibit (10)(n) to Ogden's
Executive Pension Plan Trust. Form 10-K for the fiscal year ended
December 31, 1990 and incorporated
herein by reference.
(f) Changes effected to the Ogden Filed as Exhibit (10)(o) to Ogden's
Profit Sharing Plan effective Form 10-K for the fiscal year ended
January 1, 1990. December 31, 1990 and incorporated
herein by reference.
(g) Ogden Corporation Profit Filed as Exhibit 10.8(p) to Ogden's
Sharing Plan. Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(i) Ogden Profit Sharing Filed as Exhibit 10.8(p)(i) to
Plan as amended and Ogden's Form 10-K for fiscal year
restated January 1, ended December 31, 1993 and incorporated
1991
and as in effect herein by reference.
through January 1, 1993.
(ii) Ogden Profit Sharing Filed as Exhibit 10.7(p)(ii) to
Plan as amended and Ogden's Form 10-K for fiscal year
restated effective as ended December 31, 1994 and
of January 1, 1995. incorporated herein by reference.
(h) Ogden Corporation Core Filed as Exhibit 10.8(q) to Ogden's
Executive Benefit Program. Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(i) Ogden Projects Pension Plan. Filed as Exhibit 10.8(r) to Ogden's
Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(j) Ogden Projects Profit Sharing Filed as Exhibit 10.8(s) to Ogden's
Plan. Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(k) Ogden Projects Supplemental Filed as Exhibit 10.8(t) to Ogden's
Pension and Profit Sharing Form 10-K for fiscal year ended
Plans. December 31, 1992 and incorporated
herein by reference.
(l) Ogden Projects Core Executive Filed as Exhibit 10.8(v) to Ogden's
Benefit Program. Form 10-K for fiscal year ended
December 31, 1992 and incorporated
herein by reference.
(m) Form of amendments to the Filed as Exhibit 10.8(w) to Ogden's
Ogden Projects, Inc. Pension Form 10-K for fiscal year ended
Plan and Profit Sharing Plans December 31, 1993 and incorporated
effective as of January 1, herein by reference.
1994.
(i) Form of amended Ogden Filed as Exhibit 10.7(w)(i) to
Projects Profit Sharing Ogden's Form 10-K for fiscal year
Plan effective as of ended December 31, 1994 and
January 1, 1994. incorporated herein by reference.
(ii) Form of amended Ogden Filed as Exhibit 10.7(w)(ii) to
Projects Pension Plan, Ogden's Form 10-K for fiscal year
effective as of January ended December 31, 1994 and
1, 1994. incorporated herein by reference.
(n) Ogden Corporation Amended and Transmitted herewith as Exhibit
Restated CEO Formula Bonus Plan. 10.3(n).
(o) Ogden Key Management
Incentive Plan. Filed as Exhibit 10.7(p) to Ogden's
Form 10-K for fiscal year ended
December 31, 1997 and incorporated
herein by reference.
10.4 Employment Agreements
(a) Employment Agreement between Transmitted herewith as Exhibit
Ogden and Lynde H. Coit dated 10.4(a).
March 1, 1999.
(b) Employment Agreement between Filed as Exhibit 10.3(h) to Ogden's
R. Richard Ablon and Ogden Form 10-Q for the quarterly period
dated as of January 1, 1998. ended June 30, 1998 and
incorporated herein by reference.
(c) Termination Agreement between Filed as Exhibit 10.8(c) to Ogden's
Ogden and Philip G. Husby, Form 10-Q for the quarterly period
Senior Vice President and CFO ended September 30, 1998 and
dated as of September 17, 1998. incorporated herein by reference.
(d) Employment Agreement between Filed as Exhibit 10.2(q) to Ogden's
Ogden Corporation and Ogden's Form 10-K for fiscal year ended
Chief Accounting Officer dated December 31, 1991 and incorporated
as of December 18, 1991. herein by reference.
(e) Employment Agreement between Filed as Exhibit 10.8(e) to Ogden's
Scott G. Mackin, Executive Form 10-Q for quarterly period
Vice President and Ogden ended September 30, 1998 and
Corporation, dated as of incorporated herein by reference.
October 1, 1998.
(f) Employment Agreement between Filed as Exhibit 10.8(i) to Ogden's
Ogden Corporation and David L. Form 10-K for fiscal year ended
Hahn, dated December 1, 1995. December 31, 1995 and incorporated
herein by reference.
i Letter Amendment to Filed as Exhibit 10.8(f)i. to
Employment Agreement Ogden's Form 10-Q for quarterly
between Ogden period ended September 30, 1998 and
Corporation and David incorporated herein by reference.
L. Hahn, Senior Vice
President, dated as of
October 1, 1998.
(g) Employment Agreement between Filed as Exhibit 10.8(j) to Ogden's
Ogden Corporation and Rodrigo Form 10-K for fiscal year ended
Arboleda, dated January 1, December 31, 1996 and incorporated
1997. herein by reference.
i. Letter Amendment Filed as Exhibit 10.8(g)(i) to
to Employment Agreement Ogden's Form 10-Q for quarterly
between Ogden period ended September 30, 1998 and
and Rodrigo Arboleda, incorporated herein by reference.
Senior Vice President,
effective as of October
1, 1998.
(h) Employment Agreement Filed as Exhibit 10.8(k) to Ogden's
between Ogden Projects, Inc. Form 10-K for fiscal year ended
and Bruce W. Stone, dated June December 31, 1996 and incorporated
1, 1990. herein by reference.
(i) Employment Agreement Filed as Exhibit 10.8(l) to Ogden's
between Ogden Corporation and Form 10-K for fiscal year ended
Quintin G. Marshall, dated December 31, 1996 and incorporated
October 30, 1996. herein by reference.
i. Letter Amendment to Filed as Exhibit 10.8(i)i. to
Employment Agreement Ogden's Form 10-Q for the quarter
between Ogden ended September 30, 1998 and
and Quintin G. incorporated herein by reference.
Marshall, Senior Vice
President, Corporate
Development, effective
as of October 1, 1998.
(j) Employment Agreements between Filed as Exhibit 10.8(m) to Ogden's
Ogden and Jesus Sainz, Form 10-K for the fiscal year ended
effective as of January 1, 1998. December 31, 1997 and incorporated
herein by reference.
i. Letter Amendment to Filed as Exhibit 10.8(j)i. to
Employment Agreement Ogden's Form 10-Q for the quarter
between Ogden and Jesus ended September 30, 1998 and
Sainz, Executive Vice incorporated herein by reference.
President, effective as
of October 1, 1998.
(k) Employment Agreement between Filed as Exhibit 10.3(m) to Ogden's
Alane Baranello, Vice President Form 10-Q for the quarterly period
- Human Resources and Ogden ended June 30, 1998 and
dated October 28, 1996. incorporated herein by reference.
i. Letter Amendment to Filed as Exhibit 10.8(k)i. to
Employment Agreement Ogden's Form 10-Q for the quarterly
between Ogden period ended September 30, 1998.
and Alane Baranello,
Vice President-Human
Resources, dated
October 13, 1998.
(l) Employment Agreement Filed as Exhibit 10.3(l) to Ogden's
between Ogden and Peter Allen, Form 10-Q for the quarterly period
Senior Vice President, dated ended June 30, 1998.
July 1, 1998.
(m) Employment Agreement between Transmitted herewith as Exhibit
Ogden and Raymond E. 10.4(m).
Dombrowski, Jr., Senior Vice
President and CFO, dated as of
September 21, 1998.
10.5 First Amended and Restated Ogden Filed as Exhibit 10.3(b)(i) to
Corporation Guaranty Agreement Ogden's Form 10-K for fiscal
made as of January 30, 1992 by year ended December 31, 1991
Ogden Corporation for the benefit and incorporated herein by
of Mission Funding Zeta and reference.
Pitney Bowes Credit.
10.6 Ogden Corporation Guaranty Filed as Exhibit 10.3(b)(iii)
Agreement made as of January to Ogden's Form 10-K for
30,1992 by Ogden Corporation for fiscal year ended December 31,
the benefit of Allstate Insurance 1991 and incorporated herein
Company and Ogden Martin Systems by reference.
of Huntington Resource Recovery
Nine Corp.
11 Ogden Corporation and Filed as part of Ogden's
Subsidiaries Detail of Annual Report to Shareholders
Computation of Earnings on page 42 thereof which is
Applicable to Common Stock for filed as Exhibit 13 to Ogden's
the years ended December 31, Form 10-K for fiscal year
1998, 1997 and 1996. ended December 31, 1998 and
incorporated herein by
reference.
13 Those portions of the Annual Transmitted herewith as
Report to Stockholders for the Exhibit 13.
year ended December 31, 1998,
which are incorporated herein by
reference.
21 Subsidiaries of Ogden. Transmitted herewith as
Exhibit 21.
23 Consent of Deloitte & Touche LLP. Transmitted herewith as
Exhibit 23.
27 Financial Data Schedule. Transmitted herewith as
Exhibit 27.