OGDEN CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED OPERATIONS
The following discussion and analysis should be used in connection with Note
21, "Information Concerning Business Segments."
OPERATIONS: Sales and service revenues for 1993 were $270,500,000 higher
than the comparable period of 1992. Operating Services revenues were
$55,500,000 higher, primarily reflecting increased revenues of $30,400,000 in
Entertainment Services primarily due to new contracts and increased customer
activity principally at sports venues; $17,500,000 in Aviation Services,
chiefly associated with the in-flight catering group and the Mexican and
European ground handling operations, reflecting increased customer activity
by both and the start-up of operations at Schiphol Airport in Holland; and
$7,300,000 in Ogden Environmental and Energy Services Co., Inc. (OEES),
primarily reflecting the acquisition of a Spanish environmental services
company in 1993. Waste-to-Energy Operations revenues increased $215,000,000.
Service revenues increased $60,900,000, primarily due to the operations of
the three waste-to-energy plants acquired from RRS Holdings, Inc. (RRS), the
waste-to-energy subsidiary of Asea Brown Boveri Inc. on January 8, 1993.
Construction revenues increased $154,100,000 due to increased construction
activity at the Lee County, Florida; Detroit, Michigan; and Montgomery
County, Maryland, waste-to-energy facilities.
Income from operations for 1993 was $13,300,000 higher than the
comparable period of 1992. Operating Services income from operations was
$5,400,000 higher, primarily reflecting increased income of $3,900,000 in
Entertainment Services due to new contracts and increased customer activity,
principally at sports venues; $1,900,000 at Universal Ogden reflecting
increased activity in the offshore remote services business; and $800,000 at
OEES, primarily due to the acquisition of a Spanish environmental services
company. These increases were partially offset by a reduction in Aviation
Services reflecting increased operating costs and start-up expenses in the
European operations. Waste-to-Energy income from operations was $7,900,000
higher than the comparable period of 1992. Service income (service revenues
less operating costs and debt service charges) was $8,500,000 higher, chiefly
associated with increased activity at existing facilities and the addition of
three RRS facilities in January 1993. Construction income (construction
revenues less construction costs) of $16,500,000 was $6,300,000 higher than
the comparable period of 1992 due to increased construction activity in 1993.
Construction income for 1992 included a gain of $5,600,000 from the sale of
limited partnership interests and related tax benefits in the Huntington, New
York, waste-to-energy facility. General and administrative expenses for 1993
were $7,500,000 higher due primarily to increased marketing efforts to
develop new business.
In December 1993, the Corporation adopted a plan to discontinue its
fixed-site hazardous waste business. The net charge for all discontinued
operations' activity in 1993, which was not material, has been included in
Other (Income) Deductions-Net. See Note 2 to the Consolidated Financial
Statements for a more detailed discussion of Discontinued Operations.
Net corporate unallocated expenses for 1993 were comparable to 1992.
Net corporate interest expense for 1993 was $700,000 higher than the
comparable period of 1992. Interest expense increased by $1,600,000, from
$22,000,000 in 1992 to $23,600,000 in 1993, primarily due to interest costs
on the 9 1/4% debentures issued in March 1992, partially offset by lower
interest costs on the Corporation's variable rate debt. Interest income
increased by $900,000, from $11,600,000 in 1992 to $12,500,000 in 1993. This
increase was due to increased income arising from the investment of net
proceeds from the debenture offering and the income from an interest rate
swap agreement entered into in March 1992. These increases were offset by
lower interest rates, reduced income due to the collection of a subordinated
note bearing interest above the prime rate, and a reduction in
interest-bearing restricted construction funds.
The effective income tax rate for 1993 was 45.0%, compared with a 40.1%
rate for the comparable period of 1992. This increase of 4.9% is chiefly
associated with the Omnibus Budget Reconciliation Act of 1993, signed in
August 1993, which increased the Federal income tax rate from 34% to 35%
retroactively to January 1, 1993. In addition, deferred income tax balances
were restated to the new tax rate as required by Statement of Financial
Accounting Standards (SFAS) No. 109, which resulted in a one-time charge for
Federal income taxes of $4,100,000 in 1993. Note 7 to the Consolidated
Financial Statements contains a more detailed reconciliation of the variances
from the Federal statutory income tax rate.
Revenues for 1992 were $201,300,000 higher than 1991. Operating
Services revenues were $99,500,000 higher, primarily reflecting increased
revenues of $33,000,000 in Aviation Services due to an upturn in the
commercial aviation market chiefly associated with the in-flight catering
area; $31,500,000 in OEES, primarily due to increased power generation
activities reflecting the acquisition of Catalyst New Martinsville
Hydroelectric, Inc., in August 1991 and increased activity in the consulting
and engineering and remediation areas; and $42,900,000 in Government
Services, primarily reflecting increased activity in the systems and
engineering areas as well as increased customer activity. The Industrial
Services group also had increased revenues due to increased customer activity
and new contracts. These increases were partially offset by a decrease in
the Entertainment Services group, reflecting the sale of certain vending
operations in the second half of 1991 and poor attendance in 1992 at sporting
arenas and other venues.
Waste-to-Energy Operations revenues increased $101,800,000. Service
revenues increased $50,300,000 due primarily to six facilities that were in
operation for only a portion of 1991, generating revenue for the entire year
1992. The Corporation operated 21 facilities during 1992 and 1991.
Construction revenues increased $51,500,000, chiefly associated with
increased construction activity at the Union County, New Jersey,
waste-to-energy facility and the start-up of construction at the Lee County,
Florida, waste-to-energy facility.
Income from operations for 1992 increased $10,000,000 over 1991.
Operating Services income was $9,900,000 higher, primarily reflecting
increased earnings of $9,500,000 in the Aviation Services group chiefly
associated with the upturn in the commercial aviation market and the absence
of any major customer airline bankruptcies, and $5,500,000 in Government
Services, primarily due to increased activity in the systems and engineering
areas as well as increased customer activity. OEES also had increased
income, primarily from increased power generation activities. These
increases were partially offset by lower income in the Entertainment Services
group, reflecting lower attendance at sporting arenas and other venues.
Waste-to-Energy Operations income was $100,000 higher than 1991, reflecting
increased service income of $14,300,000 chiefly associated with six
facilities in operation for the entire year 1992 that were in operation for
only a portion of 1991, partially reduced by increased maintenance costs at
several facilities. Construction income was $11,500,000 lower, principally
due to reduced income from the sale of limited partnership interests and
related tax benefits in the Huntington, New York, waste-to-energy facility.
Net corporate unallocated expenses for 1992 were $600,000 lower than
1991, primarily reflecting reduced corporate overhead expenses.
Net interest expense for 1992 was $2,000,000 higher than 1991. Interest
expense increased by $4,100,000, from $17,900,000 in 1991 to $22,000,000 in
1992, primarily reflecting interest costs on the 9 1/4% $100,000,000
subordinated debentures issued in March 1992, partially offset by lower
interest costs on the Corporation's variable rate debt. Interest income for
1992 increased by $2,100,000, from $9,500,000 in 1991 to $11,600,000 for
1992. This increase was chiefly associated with earnings from increased
investments arising from the investment of the net proceeds of the debenture
offering and net income from an interest rate swap agreement entered into in
March 1992, partially offset by lower interest rates on funds invested,
reduced interest income due to the collection of a subordinated note bearing
interest above the prime rate, and a reduction in interest-bearing restricted
construction funds.
The effective income tax rate for 1992 was 40.1%, compared with 37.3%
for 1991. This increase of 2.8% is chiefly associated with tax benefits of
prior foreign losses and other net adjustments recognized in 1991 that did
not recur in 1992. The Corporation adopted SFAS No. 109, "Accounting for
Income Taxes," as of January 1, 1992, and recorded a charge to income for a
cumulative effect of a change in accounting principle of $5,186,000. Note 7
to the Consolidated Financial Statements contains a more detailed description
of SFAS No. 109 and a reconciliation of the variances from the Federal
statutory income tax rate.
The Corporation adopted SFAS No. 106, "Employers' Accounting for
Postretirement Benefits Other Than Pensions," as of January 1, 1993, and
recorded a charge to income for a cumulative effect of a change in accounting
principle of $5,340,000. Note 15 to the Consolidated Financial Statements
contains a more detailed description of SFAS No. 106.
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," was
issued in November 1992 and is effective for years beginning after December
15, 1993. This Statement establishes accounting standards for employers who
provide benefits to former or inactive employees after employment but before
retirement. These benefits include, but are not limited to, salary
continuation, supplemental unemployment benefits, severance benefits,
disability benefits, job training, health care benefits, and life insurance
coverage. The effect of implementing SFAS No. 112 as of January 1, 1994,
will not have a significant effect on Ogden's financial condition or results
of operations.
CAPITAL INVESTMENTS, COMMITMENTS, AND LIQUIDITY: During 1993, capital
investments amounted to $116,200,000, of which $77,800,000, inclusive of
restricted funds transferred from funds held in trust, was for
Waste-to-Energy Operations and $33,900,000, $4,000,000, and $500,000 were for
normal replacement and growth in Operating Services, Waste-to-Energy
Operations, and for corporate equipment, respectively.
As of December 31, 1993, capital commitments amounted to $46,300,000,
which includes commitments for equity investments (over and above restricted
funds provided by revenue bonds issued by municipalities) of $12,300,000 for
waste-to-energy facilities and $34,000,000 for normal replacement,
modernization, and growth in Operating Services and Waste-to-Energy
Operations. In 1990, the Ogden Corporation Board of Directors authorized a
plan to repurchase up to 2,000,000 shares of Ogden common stock from time to
time in the open market. The Corporation has not purchased any of its shares
under this plan.
Ogden continues as guarantor of surety bonds and letters of credit
totaling approximately $19,200,000 on behalf of International Terminal
Operating Co. Inc. Ogden also continues as guarantor of tax-exempt 8 1/4%
Industrial Revenue Bonds (IRBs), secured by a letter of credit, which expires
June 16, 1994, amounting to approximately $36,000,000 on behalf of Avondale
Industries, Inc. These IRBs are redeemable at the option of the bondholders
or Avondale on June 1, 1994, and annually thereafter through June 1, 2001.
The IRBs are subject to a mandatory call for redemption on June 1, 1994, if
the existing letter of credit is not replaced or the IRBs otherwise
refinanced. If the IRBs are redeemed, Ogden may be required to purchase
Avondale preferred stock. In addition, Ogden may also be required to
purchase Avondale preferred stock in connection with certain litigation and
income tax matters.
With construction of waste-to-energy facilities financed to a large
degree by revenue bonds issued by municipalities, potential repurchase of
Ogden common shares and capital commitments are expected to be satisfied from
cash flow from operations; available funds, including short-term investments;
and the Corporation's unused credit facilities to the extent needed. At
December 31, 1993, the Corporation had $203,300,000 in cash, cash
equivalents, and marketable securities and unused revolving credit lines of
$177,000,000.
Ogden expects to continue its strategy of developing and offering new
operating services to an increasing number of customers and competing for
additional contract awards of waste-to-energy facilities. Acquisitions
similar to the purchase of Blount Energy Resource Corp. in 1991 for a total
of $52,000,000; the United States waste-to-energy business of Asea Brown
Boveri Inc. for approximately $48,000,000 in January 1993; and the
acquisition of several small service companies in 1993 and 1992, as well as
increasing our global capabilities, are expected to be continuing factors in
the future growth of Ogden.
OGDEN CORPORATION AND SUBSIDIARIES
SELECTED FINANCIAL DATA
December 31, 1993 1992 1991 1990 1989
(In thousands of dollars,
except per-share amounts)
Net Sales and Service Revenues $2,039,337 $1,768,815 $1,567,568 $1,556,406 $1,526,775
Segment Income From Operations:
Operating Services 69,582 64,168 54,229 58,798 37,673
Waste-to-Energy Operations 77,778 69,847 69,733 48,319 31,912
Total 147,360 134,015 123,962 107,117 69,585
Income (Loss) From:
Continuing operations 62,130 60,767 57,604 58,072 58,929
Discontinued operations (13,880) (2,160) (626)
Cumulative effect of changes in
accounting principles (5,340) (5,186)
Net income 56,790 55,581 43,724 55,912 58,303
Earnings (Loss) Per Common Share:
Continuing operations 1.43 1.41 1.33 1.36 1.39
Discontinued operations (.32) (.05) (.01)
Cumulative effect of changes in
accounting principles (.12) (.12)
Total 1.31 1.29 1.01 1.31 1.38
Earnings (Loss) Per Common Share-
Assuming Full Dilution:
Continuing operations 1.42 1.40 1.32 1.34 1.37
Discontinued operations (.32) (.05) (.01)
Cumulative effect of changes in
accounting principles (.12) (.12)
Total 1.30 1.28 1.00 1.29 1.36
Consolidated Assets 3,312,510 3,187,826 2,846,254 2,690,448 2,700,109
Long-Term Obligations:
Operations Other Than
Waste to Energy 399,390 416,757 324,611 325,219 338,031
Waste-to-Energy Operations 1,579,789 1,611,236 1,473,103 1,363,205 1,377,730
Shareholders' Equity 486,267 481,084 478,122 484,482 476,639
Shareholders' Equity
Per Common Share 11.15 11.11 11.09 11.26 11.19
Cash Dividends Declared
Per Common Share 1.25 1.25 1.25 1.31 1.25
NOTES:
Net income in 1993 was reduced by $.11 per share ($4.7 million), reflecting the effect of the increased
Federal income tax rate which was enacted in August 1993. The $.11 per-share reduction includes $.08
per share for a net one-time charge due to the adjustment of prior years' deferred income tax balances
and $.03 per share for the 1% increase in the tax rate for the full year 1993.
Cash dividends declared does not include supplemental dividend payable in Ogden Projects, Inc., common
stock on January 9, 1990, to Ogden common shareholders of record on December 14, 1989 (equivalent value
of $.6875 per Ogden common share).
OGDEN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
For the years ended December 31, 1993 1992 1991
Operations Other Than Waste to Energy:
Net sales $ 423,329,000 $ 390,994,000 $ 379,395,000
Service revenues 934,948,000 911,784,000 823,932,000
Total net sales and service revenues 1,358,277,000 1,302,778,000 1,203,327,000
Costs of goods sold 375,391,000 359,736,000 347,971,000
Operating expenses 817,140,000 785,724,000 709,634,000
Selling, administrative,
and general expenses 109,153,000 102,298,000 102,792,000
Total costs and expenses 1,301,684,000 1,247,758,000 1,160,397,000
Operating income 56,593,000 55,020,000 42,930,000
Waste-to-Energy Operations:
Service revenues 432,609,000 371,669,000 321,361,000
Construction revenues 248,451,000 94,368,000 42,880,000
Total revenues 681,060,000 466,037,000 364,241,000
Operating costs 257,542,000 204,059,000 178,870,000
Construction costs 231,956,000 84,212,000 21,232,000
Selling, administrative,
and general expenses 16,066,000 8,574,000 6,813,000
Debt service charges 98,664,000 99,734,000 88,958,000
Other (income) deductions-net (946,000) (389,000) (1,365,000)
Total costs and expenses 603,282,000 396,190,000 294,508,000
Operating income 77,778,000 69,847,000 69,733,000
Consolidated operating income 134,371,000 124,867,000 112,663,000
Interest (expense)-net (11,108,000) (10,362,000) (8,344,000)
Other income (deductions)-net 2,238,000 (1,630,000) (125,000)
Consolidated income from continuing
operations before income taxes
and minority interest 125,501,000 112,875,000 104,194,000
Less: income taxes 56,526,000 45,255,000 38,007,000
minority interest 6,845,000 6,853,000 8,583,000
Income from continuing operations
before cumulative effect of changes
in accounting principles 62,130,000 60,767,000 57,604,000
Loss (net of income tax credits of
$8,702,000 and minority interest of
$3,012,000 for 1991) from
discontinued operations (13,880,000)
Cumulative effect of changes in
accounting principles (net of income
taxes of $3,710,000 for 1993 and
including minority interest of
$6,582,000 for 1992) (5,340,000) (5,186,000)
Net income $ 56,790,000 $ 55,581,000 $ 43,724,000
Earnings (Loss) Per Common Share:
Continuing operations $ 1.43 $ 1.41 $ 1.33
Discontinued operations (.32)
Cumulative effect of changes
in accounting principles (.12) (.12)
Total $ 1.31 $ 1.29 $ 1.01
Earnings (Loss) Per Common Share-
Assuming Full Dilution:
Continuing operations $ 1.42 $ 1.40 $ 1.32
Discontinued operations (.32)
Cumulative effect of changes
in accounting principles (.12) (.12)
Total $ 1.30 $ 1.28 $ 1.00
See Notes to Consolidated Financial Statements
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS December 31, 1993 1992
Operations Other Than Waste to Energy:
Current Assets:
Cash and cash equivalents $ 105,539,000 $ 108,519,000
Marketable securities-at cost,
which approximates market 94,247,000 99,938,000
Receivables (less allowances:
1993, $18,226,000 and
1992, $14,954,000) 375,532,000 352,285,000
Other 29,835,000 26,845,000
Total current assets 605,153,000 587,587,000
Property, plant, and equipment-net 130,439,000 133,638,000
Other assets 281,255,000 244,013,000
Total 1,016,847,000 965,238,000
Waste-to-Energy Operations:
Cash 3,558,000 7,938,000
Receivables (less allowances:
1993, $7,321,000 and 1992, $4,776,000) 224,561,000 174,571,000
Restricted funds held in trust 359,416,000 419,763,000
Property, plant, and equipment-net 1,563,362,000 1,518,218,000
Other assets 144,766,000 102,098,000
Total 2,295,663,000 2,222,588,000
Consolidated Assets $3,312,510,000 $3,187,826,000
LIABILITIES AND SHAREHOLDERS' EQUITY
Operations Other Than Waste to Energy:
Current Liabilities:
Current portion of long-term debt $ 3,070,000 $ 4,813,000
Dividends payable 13,594,000 13,474,000
Accounts payable 60,723,000 58,898,000
Accrued expenses, etc. 105,132,000 99,427,000
Total current liabilities 182,519,000 176,612,000
Long-term debt 247,640,000 265,007,000
Deferred income taxes 43,926,000 52,679,000
Other liabilities 95,963,000 63,968,000
Minority interest in subsidiaries 61,981,000 53,494,000
Convertible subordinated debentures 151,750,000 151,750,000
Total 783,779,000 763,510,000
Waste-to-Energy Operations:
Accounts payable 24,647,000 11,681,000
Accrued expenses, etc. 156,806,000 110,490,000
Project Debt:
Revenue bonds issued by and prime
responsibility of municipalities 1,210,935,000 1,234,910,000
Revenue bonds issued by municipal
agencies with sufficient service
revenues guaranteed by third parties 340,431,000 347,903,000
Other borrowings 28,423,000 28,423,000
Deferred income taxes 155,130,000 102,353,000
Deferred income 52,028,000 52,613,000
Other liabilities 74,064,000 54,859,000
Total 2,042,464,000 1,943,232,000
Consolidated Liabilities 2,826,243,000 2,706,742,000
Shareholders' Equity 486,267,000 481,084,000
Consolidated Liabilities and
Shareholders' Equity $3,312,510,000 $3,187,826,000
See Notes to Consolidated Financial Statements
OGDEN CORPORATION AND SUBSIDIARIES
STATEMENTS OF SHAREHOLDERS' EQUITY
For the years ended December 31, 1993 1992 1991
Serial Cumulative Convertible Preferred Stock,
Par Value $1.00 Per Share;
Authorized, 4,000,000 Shares:
Balance at beginning of year $ 62,000 $ 68,000 $ 73,000
Shares converted into common stock (5,000) (6,000) (5,000)
Balance at end of year (shares outstanding:
57,000 in 1993, 62,000 in 1992,
68,000 in 1991; aggregate involuntary
liquidation value-1993, $1,153,000) 57,000 62,000 68,000
Common Stock, Par Value $.50 Per Share;
Authorized, 80,000,000 Shares:
Balance at beginning of year 21,595,000 21,497,000 21,439,000
Exercise of stock options 95,000 76,000 40,000
Conversion of preferred shares 14,000 18,000 14,000
Conversion of debentures 46,000 4,000 4,000
Balance at end of year (shares outstanding:
43,499,000 in 1993, 43,190,000 in 1992,
42,994,000 in 1991) 21,750,000 21,595,000 21,497,000
Capital Surplus:
Balance at beginning of year 94,659,000 90,551,000 87,600,000
Exercise of stock options 3,640,000 2,623,000 1,269,000
Capital transactions of subsidiary companies-net 696,000 1,379,000 1,584,000
Conversion of preferred shares (10,000) (12,000) (10,000)
Conversion of debentures 1,238,000 118,000 108,000
Balance at end of year 100,223,000 94,659,000 90,551,000
Earned Surplus:
Balance at beginning of year 367,908,000 366,410,000 376,644,000
Net income 56,790,000 55,581,000 43,724,000
Total 424,698,000 421,991,000 420,368,000
Preferred dividends per share
1993 and 1992, $3.35; 1991, $3.44 199,000 213,000 239,000
Common dividends-per share 1993, 1992, and
1991, $1.25 54,268,000 53,870,000 53,719,000
Total dividends 54,467,000 54,083,000 53,958,000
Balance at end of year 370,231,000 367,908,000 366,410,000
Cumulative Translation Adjustment-Net (4,639,000) (2,544,000) 387,000
Pension Liability Adjustment (928,000)
Net Unrealized Loss on Noncurrent Marketable
Equity Securities (427,000) (596,000) (791,000)
Total Shareholders' Equity $486,267,000 $481,084,000 $478,122,000
See Notes to Consolidated Financial Statements
OGDEN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
For the years ended December 31, 1993 1992 1991
Cash Flows From Operating Activities:
Net income $ 56,790,000 $ 55,581,000 $ 43,724,000
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Depreciation and amortization 85,643,000 77,048,000 67,715,000
Deferred income taxes 47,598,000 37,547,000 29,208,000
Cumulative effect of changes in
accounting principles 5,340,000 5,186,000
Loss from disposal of discontinued operations-net 11,991,000
Other 24,653,000 20,322,000 23,544,000
Management of Operating Assets and Liabilities:
Decrease (Increase) in Assets:
Receivables (61,559,000) (72,751,000) (12,832,000)
Other assets (36,450,000) (29,684,000) (30,309,000)
Increase (Decrease) in Liabilities:
Accounts payable 8,087,000 383,000 3,038,000
Accrued expenses 40,310,000 11,420,000 (302,000)
Deferred income (1,152,000) (926,000) 364,000
Other liabilities 22,152,000 (5,784,000) (2,422,000)
Net cash provided by operating activities 191,412,000 98,342,000 133,719,000
Cash Flows From Investing Activities:
Entities purchased, net of cash acquired (54,224,000) (7,940,000) (18,546,000)
Decrease (increase) in marketable securities 5,691,000 (63,024,000) 1,142,000
Proceeds from sale of property, plant,
and equipment 8,185,000 1,234,000 7,767,000
Investments in waste-to-energy facilities (77,777,000) (29,856,000) (68,144,000)
Other capital expenditures (38,423,000) (34,201,000) (34,230,000)
Purchase of minority interest in subsidiaries (2,942,000) (38,761,000)
Proceeds from sale of limited partnership interests 8,238,000 10,521,000
Decrease (increase) in noncurrent receivables (7,920,000) 12,490,000 (8,092,000)
Net investing activities of discontinued operations 827,000
Decrease in other investments 7,111,000 2,362,000 1,128,000
Net cash used in investing activities (157,357,000) (113,639,000) (146,388,000)
Cash Flows From Financing Activities:
Borrowings for waste-to-energy facilities 225,686,000 1,800,000
Decrease in restricted funds 7,277,000 24,813,000
Decrease (increase) in restricted funds held
in trust for waste-to-energy facilities 60,347,000 (139,705,000) 161,271,000
Other new debt 680,000 114,125,000 15,248,000
Proceeds from exercise of stock options 5,366,000 5,000,000 3,558,000
Payment of debt (49,973,000) (116,248,000) (134,138,000)
Dividends paid (54,347,000) (54,054,000) (56,491,000)
Other (3,488,000) (1,932,000) (632,000)
Net cash provided (used) by
financing activities (41,415,000) 40,149,000 15,429,000
Net Increase (Decrease) in Cash and
Cash Equivalents (7,360,000) 24,852,000 2,760,000
Cash and Cash Equivalents at Beginning of Year 116,457,000 91,605,000 88,845,000
Cash and Cash Equivalents at End of Year $109,097,000 $116,457,000 $ 91,605,000
See Notes to Consolidated Financial Statements
OGDEN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION, COMBINATIONS, ETC.: The Consolidated Financial
Statements include the accounts of Ogden Corporation and its subsidiaries
(Ogden). Intercompany transactions and balances have been eliminated,
including $136,664,000 due to Ogden Projects, Inc. (OPI), the Corporation's
84.2%-owned subsidiary at December 31, 1993.
On January 8, 1993, OPI consummated the purchase of all of the
outstanding capital stock of RRS Holdings, Inc. (RRS), the waste-to-energy
subsidiary of Asea Brown Boveri Inc. for a total purchase price of
$47,696,000. The acquisition was accounted for as a purchase. Accordingly,
the assets, primarily long-term contracts to operate three waste-to-energy
facilities, and liabilities of RRS have been recorded at their estimated fair
values at the date of acquisition, and operations from that date are included
in the accompanying financial statements. In addition, during 1993 in
transactions accounted for as purchases, other Ogden subsidiaries acquired a
Spanish environmental services company and two aviation service companies for
a total cost of $6,528,000. If Ogden had acquired these companies at January
1, 1992, consolidated net sales and service revenues would have increased to
$1,868,500,000. Net income and earnings per share would not have changed by
significant amounts.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all cash
balances and highly liquid investments having maturities of three months or
less.
MARKETABLE SECURITIES: Marketable securities are carried at the lower of
cost or market. Net unrealized losses on noncurrent marketable equity
securities have been charged to shareholders' equity.
CONTRACTS AND REVENUE RECOGNITION: Service revenues for Operations Other
Than Waste to Energy primarily include only the fees for cost-plus contracts
and the gross billings for fixed-fee and other types of contracts. Both the
service revenues and operating expenses exclude reimbursed expenditures of
$432,891,000, $405,362,000, and $386,148,000 for the years ended December 31,
1993, 1992, and 1991, respectively. Subsidiaries engaged in governmental
contracting recognize revenues from cost-plus-fixed-fee contracts on the
basis of direct costs incurred plus indirect expenses and the allocable
portion of the fixed fee. Revenues under time and material contracts are
recorded at the contracted rates as the labor hours and other direct costs
are incurred. Revenues under fixed-price contracts are recognized on the
basis of the estimated percentage of completion of services rendered.
Waste-to-energy subsidiaries engaged in long-term construction contracting
record income on the percentage-of-completion method of accounting and
recognize income as the work progresses. Anticipated losses on contracts are
recognized as soon as they become known. In addition, construction revenues
include amounts relating to sales of limited partnership interests and
related tax benefits as well as other activities prior to the commencement of
commercial operations. Waste-to-energy service revenues represent the fees
earned under contracts to operate and maintain the facilities and to service
the facilities' debt, with additional fees earned based on excess tonnage
processed and energy generation. Long-term unbilled service receivables are
discounted in recognizing the present value for services performed currently.
Such unbilled receivables at December 31, 1993, amounted to $108,000,000.
INVENTORIES: Inventories, consisting primarily of finished goods, are
recorded principally at the lower of first-in, first-out cost or market.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment is stated at
cost. For financial reporting purposes, depreciation is provided by the
straight-line method over the estimated useful lives of the assets, which
range generally from five years for machinery and equipment to 50 years for
waste-to-energy facilities. Accelerated depreciation is generally used for
Federal income tax purposes. Leasehold improvements are amortized by the
straight-line method over the terms of the leases or the estimated useful
lives of the improvements as appropriate. Landfills are amortized based on
the quantities deposited into each landfill compared to the total estimated
capacity of such landfill.
RESTRICTED FUNDS: Restricted funds represent proceeds from the financing of
waste-to-energy facilities. Funds are held in trust and released as
expenditures are made or upon satisfaction of conditions provided under the
respective trust agreements.
GOODWILL: Goodwill acquired subsequent to 1970 is being amortized by the
straight-line method over periods ranging from 20 to 40 years. Goodwill
acquired prior to 1970 is not being amortized. Where there has been a loss
of value, goodwill is written off.
RETIREMENT PLANS: Ogden and certain subsidiaries have several retirement
plans covering all salaried and hourly employees. Certain subsidiaries also
contribute to multiemployer plans for unionized hourly employees that cover,
among other benefits, pensions and postemployment health care. During 1992
and 1991, the cost of retiree health care and life insurance benefits for
employees not covered by multiemployer plans was recognized as expense as
claims were paid. For 1992 and 1991, these costs were not significant. Ogden
adopted Statement of Financial Accounting Standards (SFAS) No. 106,
"Employers' Accounting for Postretirement Benefits Other than Pensions," as
of January 1, 1993. The effect of adopting SFAS No. 106 is shown in the
accompanying financial statements as a cumulative effect of a change in
accounting principle and is reflected as a charge to income of $5,340,000
(see Note 15).
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," was
issued in November 1992 and is effective for years beginning after December
15, 1993. This Statement establishes accounting standards for employers who
provide benefits to former or inactive employees after employment but before
retirement and requires the accrual of these benefits during the period
employees render the service necessary to earn the benefits rather than on
the current pay-as-you-go method. These benefits include, but are not
limited to, salary continuation, supplemental unemployment benefits,
severance benefits, disability benefits, job training, health care benefits,
and life insurance coverage. The cumulative effect of implementing SFAS No.
112 as of January 1, 1994, will not have a significant effect on Ogden's
financial condition or results of operations.
INCOME TAXES: Ogden files a consolidated Federal income tax return, which
includes all eligible United States subsidiary companies. Foreign
subsidiaries are taxed according to regulations existing in the countries in
which they do business. Provision has not been made for United States income
taxes on distributions, which may be received from foreign subsidiaries, that
would be substantially offset by foreign tax credits. Investment credits are
accounted for by the "flow-through" method, and provisions for income taxes
have been reduced by the amount of investment credits earned.
Ogden adopted SFAS No. 109, "Accounting for Income Taxes," as of January
1, 1992. The effect of adopting SFAS No. 109 is shown in the accompanying
financial statements as a cumulative effect of a change in accounting
principle and is reflected as a charge to income of $5,186,000 (see Note 7).
GAIN ON ISSUANCE OF STOCK BY SUBSIDIARIES: At the time a subsidiary sells
stock to unrelated parties at prices in excess of its book value, Ogden's
equity in the subsidiary increases, and Ogden records this increase as a gain
with appropriate deferred income taxes.
RECLASSIFICATION: The accompanying financial statements have been
reclassified as to certain amounts to conform with the 1993 presentation.
2. DISCONTINUED OPERATIONS
In December 1993, the Corporation adopted a plan to discontinue its
fixed-site hazardous waste business. As part of the disposal of this
business, the Corporation ceased all development activities and in 1994
intends to dispose of all assets related to this business. Provision has
been made in 1993 for the write-down of assets, primarily development costs,
resulting in a pretax loss of $12,629,000.
In December 1991, the Corporation adopted a plan to discontinue the
on-site remediation business, utilizing mobile technology, of OPI. During
1993, the Corporation recognized a pretax gain of $12,379,000 resulting
primarily from the receipt of amounts previously withheld pending
satisfactory completion of obligations under existing contracts and from
proceeds from the sale of assets in excess of previously estimated net
realizable values.
For the year ended December 31, 1993, the $250,000 net loss from both
discontinued operations is reported as Other (Income) Deductions-Net in the
statements of consolidated income. At December 31, 1993, the remaining net
liabilities of approximately $1,000,000 related to discontinued operations
are included in Other Liabilities in the accompanying consolidated balance
sheets.
The results of operations of the discontinued on-site remediation
business and the estimated loss on disposal, presented as Discontinued
Operations in the accompanying statements of consolidated income (expressed
in thousands of dollars) for the year ended December 31,1991, were as
follows:
Service revenues $ 4,540
Less: costs and expenses 8,014
income tax credits (1,181)
minority interest (404)
Loss from operations 1,889
Net loss on disposition (net of income tax credits and
minority interest of $7,521 and $2,608, respectively) 11,991
Loss from discontinued operations $13,880
3. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment (expressed in thousands of dollars) consisted
of the following:
1993 1992
Operations Other Than Waste to Energy:
Land $ 1,804 $ 1,805
Buildings and improvements 95,019 94,321
Machinery and equipment 262,050 249,877
Total 358,873 346,003
Less accumulated depreciation
and amortization 228,434 212,365
Property, plant, and equipment-net $ 130,439 $ 133,638
Waste-to-Energy Operations:
Land $ 5,049 $ 5,049
Waste-to-energy facilities 1,539,373 1,538,762
Buildings and improvements 48,146 39,498
Machinery and equipment 23,016 19,228
Landfills 8,464 8,306
Construction in progress 95,789 24,993
Total 1,719,837 1,635,836
Less accumulated depreciation and
amortization 156,475 117,618
Property, plant, and equipment-net $1,563,362 $1,518,218
4. OTHER ASSETS
Other assets (expressed in thousands of dollars) consisted of the following:
1993 1992
Operations Other Than Waste to Energy:
Noncurrent marketable securities,
etc. $ 5,434 $ 10,224
Noncurrent receivables 52,177 44,257
Investment and advances in
joint ventures 33,554 30,886
Goodwill and other intangible assets 83,552 79,071
Unamortized contract acquisition costs,
etc. 58,026 35,272
Other 48,512 44,303
Total $281,255 $244,013
Waste-to-Energy Operations:
Unamortized bond issuance costs $ 36,984 $ 39,945
Unamortized contract acquisition costs 55,519 16,201
Deferred charges on projects-net 12,704 16,014
Spare parts 25,825 16,458
Other 13,734 13,480
Total $144,766 $102,098
5. ACCRUED EXPENSES, ETC.
Accrued expenses, etc. (expressed in thousands of dollars), consisted of the
following:
1993 1992
Operations Other Than Waste to Energy:
Insurance $ 18,221 $ 22,385
Payroll 19,314 19,229
Payroll and other taxes 3,542 2,563
Interest 7,015 7,276
Other 57,040 47,974
Total $105,132 $ 99,427
Waste-to-Energy Operations:
Interest $ 36,430 $ 34,252
Construction costs 27,314 11,828
Lease payments 12,234 10,906
Insurance 16,201 8,869
Municipalities' share of service revenues 18,747 12,764
Other 45,880 31,871
Total $156,806 $110,490
6. CREDIT ARRANGEMENTS
At December 31, 1993, Ogden had unused revolving credit lines amounting to
$177,000,000, of which $155,000,000 is available under its principal
revolving credit line at various borrowing rates including prime, the London
interbank offering rate plus 3/8 of 1%, or certificate-of-deposit rates plus
1/2 of 1%. Ogden is not required to maintain compensating balances; however,
Ogden pays a facility fee of 1/4 of 1% on its principal revolving credit line
of $175,000,000, which expires October 29, 1996.
7. INCOME TAXES
Ogden adopted the provisions of SFAS No. 109, "Accounting for Income Taxes,"
as of January 1, 1992. SFAS No. 109 requires recognition of deferred income
tax assets and liabilities for the expected future tax consequences of events
that have been included in the financial statements or income tax returns.
Under this method, deferred income tax liabilities and assets are based on
the difference between the financial statements and the tax bases of assets
and liabilities, using tax rates currently in effect. As of January 1, 1992,
Ogden recorded a deferred income tax charge of $5,186,000 or $.12 per share,
which represented a net increase to the deferred tax liability as of that
date. This amount has been included in the statements of consolidated income
as a cumulative effect of a change in accounting principle.
In August 1993, the Omnibus Budget Reconciliation Act was enacted, which
increased the corporate Federal income tax rate from 34% to 35% retroactive
to January 1, 1993. In addition, deferred Federal income tax balances were
adjusted to this new rate as required by SFAS No. 109, which resulted in a
one-time charge for Federal income taxes of $4,066,000 in 1993.
The components of the provision for income taxes (expressed in thousands
of dollars) were as follows:
1993 1992 1991
Current:
Federal $ 453 $ 183
State 6,999 $ 5,498 5,491
Foreign 1,476 2,210 1,944
Total current 8,928 7,708 7,618
Deferred:
Federal 43,295 32,392 16,864
State 4,303 5,155 4,823
Total deferred 47,598 37,547 21,687
Total $56,526 $45,255 $29,305
Income tax expense (credit) (expressed in thousands of dollars) was included
in the financial statements as follows:
1993 1992 1991
Continuing operations $56,526 $45,255 $38,007
Discontinued operations (8,702)
Total $56,526 $45,255 $29,305
The provision for income taxes (expressed in thousands of dollars) varied from the Federal
statutory income tax rate due to the following:
1993 1992 1991
Percent Percent Percent
of Income of Income of Income
Amount Before Amount Before Amount Before
of Tax Taxes of Tax Taxes of Tax Taxes
Taxes at statutory rate $43,925 35.0% $38,378 34.0% $26,724 34.0%
Adjustment of deferred
income tax balances 4,066 3.2
State income taxes, net
of Federal tax benefit 7,346 5.8 7,030 6.2 6,807 8.7
Investment tax credit, net
of recapture (1,807) (1.4) 1,553 2.0
Tax benefit of prior
foreign losses (2,511) (3.2)
Other-net. 2,996 2.4 (153) ( .1) (3,268) (4.2)
Provision for income taxes $56,526 45.0% $45,255 40.1% $29,305 37.3%
Deferred income tax (credits) charges (expressed in thousands of
dollars), arising from differences between tax and financial reporting,
determined under the provisions of Accounting Principles Board Opinion 11 for
1991, were as follows:
1991
Depreciation $62,675
Net operating loss carryforwards (40,261)
Accrued expenses, etc. (1,436)
Investment and other tax credits, net of recapture 1,553
Disposal of discontinued operations (7,521)
Deferred income 7,770
Interest income (2,801)
Unbilled revenue (767)
Other-net 2,475
Total $21,687
The components of the net deferred income tax liability (expressed in
thousands of dollars) as of December 31, 1993 and 1992, were as follows:
1993 1992
Deferred Tax Assets:
Deferred income $ 18,922 $ 11,712
Accrued expenses 46,465 40,448
Other liabilities 17,758 16,837
Investment tax credits 33,844 31,072
Alternative minimum tax credits 9,246 11,366
Net operating loss carryforwards 185,210 153,566
Total deferred tax assets 311,445 265,001
Deferred Tax Liabilities:
Unbilled accounts receivable 44,784 33,640
Property, plant, and equipment 435,580 352,743
Other 30,137 33,650
Total deferred tax liabilities 510,501 420,033
Net Deferred Tax Liability:
Operations Other Than Waste to Energy 43,926 52,679
Waste-to-Energy Operations 155,130 102,353
Total $199,056 $155,032
At December 31, 1993, for Federal income tax purposes, the Corporation
had investment and energy tax credit carryforwards of approximately
$33,800,000 and net operating loss carryforwards of approximately
$424,800,000, which will expire in 2004 through 2008. Deferred Federal
income taxes have been reduced by the tax effect of these amounts.
8. LONG-TERM DEBT
Long-term debt (expressed in thousands of dollars) consisted of the
following:
1993 1992
Operations Other Than Waste to Energy:
Adjustable rate revenue bonds due
2014 through 2024 $ 124,755 $ 124,755
9.25% debentures due 2022 100,000 100,000
Miscellaneous 22,885 40,252
Total $ 247,640 $ 265,007
Waste-to-Energy Operations:
Project Debt:
Revenue Bonds Issued by and Prime
Responsibility of Municipalities:
3.5-10% serial revenue bonds maturing
1994 through 2005 $ 257,180 $ 269,055
5.4-10% term revenue bonds
due 1995 through 2019 934,685 865,285
Adjustable rate revenue bonds
due 1994 through 2013 19,070 100,570
Total 1,210,935 1,234,910
Revenue Bonds Issued by Municipal
Agencies with Sufficient Service
Revenues Guaranteed by Third Parties:
4.15-8.9% serial revenue bonds maturing
1994 through 2007 91,290 94,280
7.25-7.4% term revenue bonds due 1999
through 2011 105,610 105,610
Adjustable rate revenue bonds due 1994
through 2011 143,531 148,013
Total 340,431 347,903
Total project debt 1,551,366 1,582,813
Other borrowings 28,423 28,423
Total $1,579,789 $1,611,236
The project debt associated with the financing of waste-to-energy
facilities is generally arranged by municipalities through the issuance of
tax-exempt and taxable revenue bonds. The category, "Revenue Bonds Issued by
and Prime Responsibility of Municipalities," includes bonds issued with
respect to which debt service is an explicit component of the client
community's obligation under the related service agreement. In the event
that a municipality is unable to satisfy its payment obligations, the
bondholders' recourse with respect to the Corporation is limited to the
waste-to-energy facilities and restricted funds pledged to secure such
obligations. The category, "Revenue Bonds Issued by Municipal Agencies with
Sufficient Service Revenues Guaranteed by Third Parties," includes bonds
issued to finance three facilities for which contractual obligations of third
parties to deliver waste ensure sufficient revenues to pay debt service,
although such debt service is not an explicit component of a third party's
service fee obligation.
Payment obligations for the project debt, which are nonrecourse to the
Corporation subject to construction and operating performance guarantees and
commitments, are secured by the revenues pledged under various indentures and
are collateralized principally by a mortgage lien and a security interest in
each of the respective waste-to-energy facilities and related assets. At
December 31, 1993, such project debt was collateralized by property, plant,
and equipment with a net carrying value of $1,534,958,000, credit
enhancements of approximately $200,000,000 for which Ogden has certain
reimbursement obligations, and substantially all restricted funds (see Note
9).
As part of the acquisition of Blount Energy Resource Corp. in 1991, OPI
assumed an obligation for approximately $28,400,000, representing the equity
component of a sale and leaseback arrangement relating to the Hennepin
County, Minnesota, waste-to-energy facility. This arrangement is accounted
for as a financing. The obligation has an effective interest rate of 5% and
extends through 2017.
The adjustable rate revenue bonds are adjusted periodically to
re-establish the variable rates at current market rates for similar issues,
generally with an upside cap of 15%. The average rates for Waste-to-Energy
Operations and Operations Other Than Waste to Energy, respectively, were
2.65% and 2.24% in 1993 and 3.40% and 2.74% in 1992. The bonds due 2014
through 2024 were issued under agreements that contain various restrictions,
the most significant being the requirement to maintain Shareholders' Equity
of $400,000,000. At December 31, 1993, Ogden had $86,267,000 in excess of
the required amount. The maturities on long-term debt (expressed in
thousands of dollars) at December 31, 1993, were as follows:
Operations
Other Than Waste-to-
Waste to Energy
Energy Operations
1994 $ 3,070 $ 32,632
1995 2,131 37,867
1996 20,680 48,597
1997 52,617
1998 58,132
Later years 224,829 1,349,944
Total $250,710 $1,579,789
At December 31, 1993, Ogden had entered into four interest rate swap
agreements. Under two of these agreements covering notional amounts of
$100,000,000 each, expiring March 23, 1994, and December 16, 1998,
respectively, Ogden receives a fixed rate of 6.56% and 5.52%, respectively,
per annum paid on a semi-annual basis and pays a floating rate of three
months LIBOR set in arrears on a quarterly basis. At December 31, 1993, the
LIBOR rate was 3.38%. The two other interest rate swap agreements have
notional amounts at December 31, 1993, of $91,070,000 and $48,305,000,
respectively, which are reduced periodically and expire in May 1999. Under
the former swap agreement, OPI pays a fixed rate of 3.95% per annum on a
semi-annual basis and receives a floating rate based on an index of
tax-exempt variable rate obligations. Under the latter swap agreement, OPI
pays a fixed rate of 5.25% per annum on a semi-annual basis and receives a
floating rate based on defined commercial paper rate. At December 31, 1993,
the floating rates on the two swaps were 2.34% and 3.36%, respectively. The
counterparties to these interest swaps are major financial institutions.
Management believes the credit risk associated with nonperformance is not
significant.
9. RESTRICTED FUNDS HELD IN TRUST
Funds held by trustees from proceeds received from the financing of
waste-to-energy facilities are segregated principally for the construction of
the facilities, debt service reserves for payment of principal and interest
on revenue bonds, and capitalized interest for payment of interest generally
during the construction period. Such funds are invested principally in
United States Treasury bills and notes and United States government agencies
securities.
Fund balances (expressed in thousands of dollars) were as follows:
1993 1992
Construction funds $ 71,725 $129,913
Debt service funds 197,649 195,841
Capitalized interest funds 19,289 28,788
Other funds 70,753 65,221
Total $359,416 $419,763
Based on anticipated construction schedules, the remaining construction
funds at December 31, 1993, are expected to be disbursed during 1994 and
1995.
10. CONVERTIBLE SUBORDINATED DEBENTURES
Convertible subordinated debentures (expressed in thousands of dollars)
consisted of the following:
1993 1992
6% debentures due June 1, 2002 $ 85,000 $ 85,000
5 3/4% debentures due October 20, 2002 66,750 66,750
Total $151,750 $151,750
The 6% convertible subordinated debentures are convertible into Ogden
common stock at the rate of one share for each $39.077 principal amount of
debentures. The debentures are redeemable at Ogden's option at 103.6% of
principal amount during the year commencing June 1, 1993, and at decreasing
prices thereafter.
The 5 3/4% convertible subordinated debentures are convertible into
Ogden common stock at the rate of one share for each $41.772 principal amount
of debentures. The debentures are redeemable at Ogden's option at 100% of
face value. During 1992, the Corporation purchased $1,250,000 face value of
these debentures at prevailing market rates. The net gain on the acquisition
of these securities amounted to $259,000 and is included in other income.
The 5% convertible subordinated debentures became due on June 1, 1993,
and were converted into Ogden common stock at the rate of one share for each
$14.01 principal amount of debentures.
During 1993, 1992, and 1991, $1,287,000, $122,000, and $112,000 face
value of the 5% debentures were converted into 91,762, 8,694, and 7,982
shares of common stock, respectively.
11. PREFERRED STOCK
The outstanding Series A $1.875 Cumulative Convertible Preferred Stock is
convertible at any time at the rate of 5.97626 common shares for each
preferred share. Ogden may redeem the outstanding shares of preferred stock
at $50 per share, plus all accrued dividends. These preferred shares are
entitled to receive cumulative annual dividends at the rate of $1.875 per
share, plus an amount equal to 150% of the amount, if any, by which the
dividend paid or any cash distribution made on the common stock in the
preceding calendar quarter exceeded $.667 per share. During 1993, 1992, and
1991, 4,697, 6,013, and 4,901 preferred shares were converted into 28,046,
35,908, and 29,265 shares of common stock, respectively.
12. COMMON STOCK AND STOCK OPTIONS
In 1986, Ogden adopted a nonqualified stock option plan (the "1986 Plan").
Under the 1986 Plan, options and/or stock appreciation rights may be granted
to key management employees to purchase Ogden common stock at prices not less
than the fair market value at the time of grant, which become exercisable
during a five-year period from the date of grant, except for the grant to the
Chairman of the Board, which vested in its entirety six months after the date
of the grant. As adopted, and as adjusted for stock splits, the 1986 Plan
calls for up to an aggregate of 2,700,000 shares of Ogden common stock to be
available for issuance upon the exercise of options and stock appreciation
rights, which may be granted over a ten-year period ending March 10, 1996;
115,500 shares were available for grant at December 31, 1993.
In October 1990, Ogden adopted the Ogden 1990 Stock Option Plan (the
"1990 Plan"). Under the 1990 Plan, nonqualified options, incentive stock
options, and/or stock appreciation rights and stock bonuses may be granted to
key management employees and outside directors to purchase Ogden common stock
at an exercise price to be determined by the Ogden Compensation Committee.
Pursuant to the 1990 Plan, an aggregate of 3,000,000 shares of Ogden common
stock is available for issuance upon the exercise of such options, rights,
and bonuses, which may be granted over a ten-year period ending October 11,
2000; 237,000 shares were available for grant at December 31, 1993.
Under the foregoing plans, Ogden issued 3,190,000 limited stock
appreciation rights in conjunction with the stock options granted. These
limited rights are exercisable only during the period commencing on the first
day following the occurrence of any of the following events and terminate 90
days after such date: the acquisition by any person of 20% or more of the
voting power of Ogden's outstanding securities; the approval by Ogden
shareholders of an agreement to merge or to sell substantially all of its
assets; or the occurrence of certain changes in the membership of the Ogden
Board of Directors. The exercise of these limited rights entitles
participants to receive an amount in cash with respect to each share subject
thereto, equal to the excess of the market value of a share of Ogden common
stock on the exercise date or the date these limited rights become
exercisable, over the related option price.
In connection with the acquisition of ERC International, Inc. (ERCI),
Ogden assumed pre-existing ERCI stock option plans and converted all options
then outstanding into options to acquire shares of Ogden common stock. No
further options will be granted under the ERCI plans. These options expired
in 1993.
Information regarding the Corporation's stock option plans is summarized as
follows:
Option Available
Price for
Per Share Outstanding Exercisable Grant
1986 Plan:
December 31, 1990, balance $14.98-28.54 1,305,500 589,500 105,500
Became exercisable 154,000
Exercised 14.98 (79,100) (79,100)
December 31, 1991, balance 14.98-28.54 1,226,400 664,400 105,500
Became exercisable 150,000
Exercised 14.98 (136,400) (136,400)
Cancelled 28.54 (10,000) (10,000) 10,000
December 31, 1992, balance 14.98-28.54 1,080,000 668,000 115,500
Became exercisable 144,000
Exercised 14.98 (49,313) (49,313)
December 31, 1993, balance 14.98-28.54 1,030,687 762,687 115,500
1990 Plan:
December 31, 1990, balance 18.31 2,520,000 480,000
Granted 20.31 211,000 (211,000)
Became exercisable 498,000
Cancelled 18.31-20.31 (50,000) 50,000
December 31, 1991, balance 18.31-20.31 2,681,000 498,000 319,000
Granted 21.19 40,000 (40,000)
Became exercisable 539,400
Cancelled 18.31-21.19 (66,000) 66,000
December 31, 1992, balance 18.31-21.19 2,655,000 1,037,400 345,000
Granted 23.56 158,000 (158,000)
Became exercisable 522,900
Exercised 18.31-20.31 (123,000) (123,000)
Cancelled 18.31-20.31 (50,000) (4,000) 50,000
December 31, 1993, balance 18.31-23.56 2,640,000 1,433,300 237,000
Conversion of ERCI Plan:
December 31, 1990, balance 19.98-35.55 143,115 96,281
Became exercisable 30,591
Exercised 19.98 (407) (407)
Cancelled 19.98-34.03 (4,750) (4,750)
December 31, 1991, balance 21.05-35.55 137,958 121,715
Became exercisable 16,243
Exercised 21.05 (15,890) (15,890)
Cancelled 21.05-35.55 (51,951) (51,951)
December 31, 1992, balance 21.05-24.74 70,117 70,117
Exercised 21.05 (23,102) (23,102)
Cancelled 21.05-24.74 (47,015) (47,015)
December 31, 1993, balance - - -
Total, December 31, 1993 $14.98-28.54 3,670,687 2,195,987 352,500
At December 31, 1993, there were 8,138,164 shares of common stock reserved
for the exercise of stock options and the conversion of preferred shares and
debentures.
13. PREFERRED STOCK PURCHASE RIGHTS
On September 20, 1990, The Board of Directors declared a dividend of one
preferred stock purchase right (Right) on each outstanding share of common
stock. Among other provisions, each Right may be exercised to purchase a one
one-hundredth share of a new series of cumulative participating preferred stock
at an exercise price of $80, subject to adjustment. The Rights may only be
exercised after a party has acquired 15% or more of the Corporation's common
stock or commenced a tender offer to acquire 15% or more of the Corporation's
common stock. The Rights do not have voting rights, expire October 2, 2000, and
may be redeemed by the Corporation at a price of $.01 per Right at any time
prior to the acquisition of 15% of the Corporation's common stock.
In the event a party acquires 15% or more of the Corporation's outstanding
common stock in accordance with certain defined terms, each Right will then
entitle its holder (other than such party) to purchase, at the Right's
then-current exercise price, a number of the Corporation's common shares having
a market value of twice the Right's exercise price. At December 31, 1993,
43,499,122 preferred stock purchase rights were outstanding.
14. RETIREMENT PLANS
Ogden has retirement plans that cover substantially all of its employees. A
substantial portion of hourly employees of Ogden Services Corporation
participates in defined contribution plans. Other employees participate in
defined benefit or defined contribution plans.
The defined benefit plans provide benefits based on years of service and
either employee compensation or a flat benefit amount. Ogden's funding policy
for those plans is to contribute annually an amount no less than the minimum
funding required by ERISA. Contributions are intended to provide not only
benefits attributed to service to date but also for those expected to be earned
in the future.
The following table sets forth the defined benefit plans' funded status and
related amounts recognized in Ogden's consolidated balance sheets (expressed in
thousands of dollars):
1993 1992
Assets Accumulated Assets
Exceed Benefits Exceed
Accumulated Exceed Accumulated
Benefits Assets Benefits
Accumulated Benefit Obligation:
Vested $ 5,356 $ 8,888 $11,100
Nonvested 879 1,511 1,404
Total $ 6,235 $10,399 $12,504
Projected benefit obligation
for services rendered to date $ 8,723 $12,889 $16,537
Plan assets at fair value 7,903 7,880 15,268
Underfunded projected benefits $ 820 $ 5,009 $ 1,269
Source of Underfunded Status:
Unrecognized net gain (loss) from
past experience different from
that assumed and effects of changes
in assumptions $(1,356) $(1,415) $ 23
Unrecognized net transition asset
(obligation) at January 1, 1986,
being recognized over 13 years 728 (300) 602
(Pension liability) prepaid pension
costs (192) 228 1,598
Unrecognized prior service costs (3,522) (3,492)
Underfunded projected benefits $ 820 $ 5,009 $ 1,269
At December 31, 1993, the accumulated benefit obligation of certain pension
plans exceeded plan assets. As required by SFAS No. 87, the Corporation
recorded a liability for such excess of $2,765,000 offset by an intangible asset
and a reduction, net of income taxes, of $928,000 in Shareholders' Equity.
Pension costs for Ogden's defined plans included the following components
(expressed in thousands of dollars):
1993 1992 1991
Service cost on benefits earned
during the period $1,610 $1,592 $1,415
Interest cost on projected benefit
obligation 1,457 1,301 1,077
Net amortization and deferral 40 161 189
Actual return on plan assets (979) (1,227) (867)
Net periodic pension cost $2,128 $1,827 $1,814
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligations were 7 1/2% and 4 1/2% for 1993 and 8 1/2% and 5%
for the years 1992 and 1991, respectively. The expected long-term rate of
return on plan assets was 8% for each year.
Contributions and costs for defined contribution plans are determined by
benefit formulas based on percentage of compensation as well as discretionary
contributions and totaled $13,061,000, $11,397,000, and $9,637,000 in 1993,
1992, and 1991, respectively. Plan assets at December 31, 1993, 1992, and 1991,
primarily consisted of common stocks, United States government securities, and
guaranteed insurance contracts.
With respect to union employees, the Corporation is required under
contracts with various unions to pay, generally based on hours worked,
retirement, health, and welfare benefits. These multiemployer defined benefit
and defined contribution plans are not controlled or administered by the
Corporation. The amounts charged to expense for such plans during 1993, 1992,
and 1991 were $32,000,000, $32,000,000, and $31,200,000, respectively.
15. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE BENEFITS
In 1992, the Corporation discontinued its policy of providing postretirement
health care and life insurance benefits for all salaried employees, except those
employees who were retired or eligible for retirement at December 31, 1992, or
who were covered under certain company-sponsored union plans. The Corporation
adopted SFAS No. 106, "Employers' Accounting for Postretirement Benefits Other
Than Pensions," as of January 1, 1993. SFAS No. 106 requires the accrual method
of accounting for postretirement health care and life insurance benefits, based
on actuarial determined costs to be recognized over the period from the date of
hire to the full eligibility date of employees who are expected to qualify for
such benefits.
As of January 1, 1993, the Corporation recognized the full amount of its
estimated accumulated postretirement benefit obligation, representing the
present value of the estimated future benefits payable to current retirees, and
a pro rata portion of estimated benefits payable to eligible active employees
after retirement. The effect of recognizing SFAS No. 106 at January 1, 1993,
is shown in the accompanying financial statements as a cumulative effect of a
change in accounting principle and is reflected as a charge to income of
$5,340,000 (net of income taxes of $3,710,000) or $.12 per share.
For the year ended December 31, 1993, the components of the periodic
expense for these benefits were as follows:
Recognition of Components of Net Periodic Postretirement Benefit Costs for the
Year Ended December 31, 1993:
Service costs $140,157
Interest 747,665
Total $887,822
As of December 31, 1993, the actuarial recorded liabilities for these
postretirement benefits, none of which has been funded, were as follows:
Accumulated Postretirement Benefit Obligation:
Retirees $ 3,948,954
Eligible active participants 4,957,341
Other active 1,654,000
Total accumulated postretirement obligation 10,560,295
Unrecognized net loss 1,135,080
Accrued postretirement benefit liability $ 9,425,215
The accumulated postretirement benefit obligation was determined using a
discount rate of 7.5%, an estimated increase in compensation levels of 4.5%, and
a health care cost rate of approximately 14.5%, decreasing in subsequent years
until it reaches 6% in the year 2008 and thereafter. The effect of a one
percentage point increase in the assumed health care cost trend rates for each
future year on the aggregate of the service and interest cost components of net
periodic postretirement health care benefit cost and the accumulated
postretirement benefit obligation for health care benefits would be $83,000 and
$723,000, respectively.
16. INTEREST AND DEBT SERVICE CHARGES
Ogden charges to the cost of capital assets interest incurred during the period
of construction. For the years ended December 31, 1993, 1992, and 1991,
$5,538,000, $753,000, and $9,166,000, respectively, of interest costs were
charged to assets during construction.
Interest expense for Operations Other Than Waste to Energy, net of amounts
capitalized, was $23,641,000, $21,980,000, and $17,903,000 for 1993, 1992, and
1991, respectively. Debt service charges for Waste-to-Energy Operations
(expressed in thousands of dollars) consisted of the following:
1993 1992 1991
Interest incurred on taxable
and tax-exempt borrowings $107,846 $99,828 $101,906
Interest earned on temporary investment
of borrowings during construction, etc. 9,985 6,095 8,919
Net interest incurred 97,861 93,733 92,987
Interest capitalized during construction
in property, plant, and equipment 5,538 753 9,166
Interest expense-net 92,323 92,980 83,821
Amortization of bond issuance costs 6,341 6,754 5,137
Debt service charges $ 98,664 $99,734 $ 88,958
17. INVESTMENTS IN NONCURRENT MARKETABLE EQUITY SECURITIES
The aggregate cost, market value, and components of unrealized loss of
noncurrent marketable equity securities (expressed in thousands of dollars) at
December 31, 1993 and 1992, were as follows:
1993 1992
Cost $5,549 $5,549
Market value 4,846 4,611
Gross unrealized loss 703 938
Deferred income taxes 276 342
Valuation allowance charged to
shareholders' equity $ 427 $ 596
18. FOREIGN EXCHANGE TRANSLATION
Foreign exchange translation adjustments for 1993, 1992, and 1991, amounting to
$(2,095,000), $(2,931,000), and $310,000, respectively, have been (charged)
credited directly to shareholders' equity.
19. EARNINGS PER SHARE
Earnings per common share were computed by dividing net income, reduced by
preferred stock dividend requirements, by the weighted average of the number of
shares of common stock and common stock equivalents, where dilutive, outstanding
during each year.
Earnings per common share, assuming full dilution, were computed on the
assumption that all convertible debentures, convertible preferred stock, and
stock options converted or exercised during each year, or outstanding at the end
of each year, were converted at the beginning of each year or at the date of
issuance or grant, if dilutive. This computation provided for the elimination
of related convertible debenture interest and preferred dividends.
The weighted-average number of shares used in computing earnings per common
share was as follows:
1993 1992 1991
Primary 43,378,000 43,086,000 42,969,000
Assuming full dilution 43,776,000 43,583,000 43,512,000
20. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Expressed in thousands of dollars) 1993 1992 1991
Cash Paid for Interest and Income Taxes:
Interest (net of amounts capitalized) $117,733 $115,316 $100,582
Income taxes 3,197 6,328 6,069
Noncash Investing and Financing Activities:
Conversion of preferred shares for
common shares 5 6 5
Conversion of debentures for common shares 1,287 122 112
Adjustments to property, plant, and
equipment resulting from purchase price
and contract cost adjustments 8,300
Adjustment to property, plant, and
equipment and deferred income taxes in
connection with adoption of SFAS No. 109 38,051
Contract acquisition costs, etc. 22,539
Future contract obligations (22,539)
Acquisition of net assets in connection
with merger 4,375
Detail of Entities Acquired:
Fair value of assets acquired 76,875 9,420 278,302
Liabilities assumed (22,651) (1,480) (259,756)
Net cash paid for acquisitions 54,224 7,940 18,546
21. INFORMATION CONCERNING BUSINESS SEGMENTS
Ogden's two activity areas are Operating Services and Waste-to-Energy
Operations. Operating Services includes professional and technical services to
environmental and energy markets; worldwide aviation ground services and
fueling; food and beverage services to airlines as well as sports and recreation
centers; a wide range of technical services to space and defense contractors;
security services; facility management services, including promotion of sporting
and entertainment events; building and plant housekeeping and mechanical
maintenance; and the operation of one racetrack. Waste-to-Energy Operations
designs, builds, and operates, in conjunction with Operating Services, solid
waste-to-energy plants principally utilizing mass-burn technology and offers a
broad range of integrated services to recycle, manage, and market solid waste
materials.
Revenues and income from continuing operations (expressed in thousands of
dollars) for the years ended December 31, 1993, 1992, and 1991, were as follows:
1993 1992 1991
Revenues:
Operating Services $1,358,277 $1,302,778 $1,203,327
Waste-to-Energy Operations 681,060 466,037 364,241
Total revenues $2,039,337 $1,768,815 $1,567,568
Income From Operations:
Operating Services $ 69,582 $ 64,168 $ 54,229
Waste-to-Energy Operations 77,778 69,847 69,733
Total income from operations 147,360 134,015 123,962
Corporate unallocated income
and expenses-net (10,751) (10,778) (11,424)
Corporate interest-net (11,108) (10,362) (8,344)
Consolidated Income From
Continuing Operations Before
Income Taxes and Minority
Interest $ 125,501 $ 112,875 $ 104,194
Operating Services revenues include $245,100,000, $251,300,000, and
$206,300,000 from United States government contracts for the years ended
December 31, 1993, 1992, and 1991, respectively.
Total revenues by segment reflect sales to unaffiliated customers. In
computing income from operations, none of the following have been added or
deducted: unallocated corporate expenses, nonoperating interest expenses,
interest income, and income taxes.
A summary (expressed in thousands of dollars) of identifiable assets,
depreciation and amortization, and capital additions of continuing operations
for the years ended December 31, 1993, 1992, and 1991, is as follows:
Identifiable Depreciation and Capital
Assets Amortization Additions
1993
Operations Other Than
Waste to Energy:
Operating Services $ 762,016 $35,991 $ 33,917
Corporate 254,831 2,484 471
Total 1,016,847 38,475 34,388
Waste-to-Energy Operations 2,295,663 47,168 81,812
Consolidated $3,312,510 $85,643 $116,200
1992
Operations Other Than
Waste to Energy:
Operating Services $ 689,206 $32,282 $ 30,743
Corporate 276,032 2,610 25
Total 965,238 34,892 30,768
Waste-to-Energy Operations 2,222,588 42,156 33,289
Consolidated $3,187,826 $77,048 $ 64,057
1991
Operations Other Than
Waste to Energy:
Operating Services $ 669,663 $31,197 $ 30,135
Corporate 195,014 2,487 26
Total 864,677 33,684 30,161
Waste-to-Energy Operations 1,981,577 34,031 72,213
Consolidated $2,846,254 $67,715 $102,374
22. LEASES
Total rental expense amounted to $73,138,000, $65,822,000, and $55,559,000 (net
of sublease income of $2,606,000, $3,633,000, and $2,520,000) for 1993, 1992,
and 1991, respectively. Included in rental expense for Operations Other Than
Waste to Energy are amounts based on contingent factors (principally sales) in
excess of minimum rentals, amounting to $19,836,000, $14,332,000, and
$13,420,000 for 1993, 1992, and 1991, respectively. Principal leases are for
leaseholds, sale and leaseback arrangements on waste-to-energy facilities,
trucks and automobiles, airplane, and machinery and equipment. Some of these
operating leases have renewal options.
The following is a schedule (expressed in thousands of dollars), by year,
of future minimum rental payments, net of income from related subleases, in the
average amount of $1,273,000 yearly through 1998, required under operating
leases that have initial or remaining noncancelable lease terms in excess of one
year as of December 31, 1993:
Operations
Other Than Waste-to-
Waste to Energy
Energy Operations
1994 $ 39,903 $ 12,845
1995 37,955 12,447
1996 27,858 14,561
1997 24,091 13,915
1998 17,755 13,748
Later years 130,558 181,667
Total $278,120 $249,183
Waste-to-Energy Operations includes $144,916,000 of future nonrecourse
rental payments that are supported by third-party commitments to provide
sufficient service revenues to meet such obligations. Operations Other Than
Waste to Energy includes future nonrecourse rental payments of $107,244,000
relating to a hydroelectric power generating facility operated by a
special-purpose subsidiary acquired in 1991. These rent payment obligations are
supported by contractual power purchase obligations of a third party, which are
expected to provide sufficient revenues to make the rent payments.
23. COMMITMENTS AND CONTINGENT LIABILITIES
Ogden and certain of its subsidiaries are contingently liable as a result of
transactions arising in the ordinary course of business and are involved in
legal proceedings in which damages and other remedies are sought. In the
opinion of management, after review with counsel, the eventual disposition of
these matters will not have a material adverse effect on Ogden's Consolidated
Financial Statements.
Ogden continues as guarantor of surety bonds and letters of credit totaling
approximately $19,200,000 on behalf of International Terminal Operating Co. Inc.
(ITO). Ogden also continues as guarantor of tax-exempt 8 1/4% Industrial
Revenue Bonds (IRBs) secured by a letter of credit, which expires June 16, 1994,
amounting to approximately $36,000,000 on behalf of Avondale Industries, Inc.
These IRBs are redeemable at the option of the bondholders or Avondale on June
1, 1994, and annually thereafter through June 1, 2001. The IRBs are subject to
a mandatory call for redemption on June 1, 1994, if the existing letter of
credit is not replaced or the IRBs otherwise refinanced. If the IRBs are
redeemed, Ogden may be required to purchase Avondale preferred stock. In
addition, Ogden may also be required to purchase Avondale preferred stock in
connection with certain litigation and income tax matters.
As of December 31, 1993, capital commitments amounted to $46,300,000, which
includes commitments for equity investments (over and above restricted funds
provided by revenue bonds issued by municipalities) of $12,300,000 for
waste-to-energy facilities and $34,000,000 for normal replacement,
modernization, and growth in Operating Services and Waste-to-Energy Operations.
24. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments
is made in accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments." The estimated fair-value amounts have
been determined using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts that
Ogden could realize in a current market exchange.
The estimated fair value (expressed in thousands of dollars) of financial
instruments at December 31, 1993 and 1992, is summarized as follows:
1993 1992
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Assets:
Operations Other Than
Waste to Energy:
Cash and cash equivalents $ 105,539 $ 105,539 $ 108,519 $ 108,519
Marketable securities 94,247 94,086 99,938 100,123
Other Assets:
Noncurrent marketable securities 4,706 4,706 4,582 4,582
Noncurrent receivables 52,177 48,633 44,257 42,099
Other 29,808 28,709 27,092 26,068
Waste-to-Energy Operations:
Cash 3,558 3,558 7,938 7,938
Receivables 224,561 233,841 174,571 180,790
Restricted funds 359,416 366,006 419,763 424,940
Liabilities:
Operations Other Than
Waste to Energy:
Current portion of long-term debt 3,070 3,070 4,813 4,813
Accrued expenses 84,798 84,798 74,147 74,147
Long-term debt 247,640 251,587 265,007 265,007
Convertible subordinated
debentures 151,750 142,919 151,750 129,838
Other liabilities 22,539 22,539
Waste-to-Energy Operations:
Project debt 1,551,366 1,691,939 1,582,813 1,668,372
Other borrowings 28,423 19,810 28,423 14,835
Other liabilities 8,300 7,175 8,300 6,395
Off Balance Sheet Financial
Instruments:
Unrealized Gains (Losses) on
Interest Rate Swap Agreements-
Net:
Operations Other Than
Waste to Energy (402) 2,226
Waste-to-Energy Operations (430)
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to estimate
that value:
For cash and cash equivalents and accrued expenses, etc., the carrying
value of these amounts is a reasonable estimate of their fair value. The fair
value of long-term unbilled receivables is estimated by using a discount rate
that approximates the current rate for comparable notes. Marketable securities'
fair values are based on quoted market prices or dealer quotes. The fair value
of restricted funds held in trust is based on quoted market prices of the
investments held by the trustee. The fair value of noncurrent receivables is
estimated by discounting the future cash flows using the current rates at which
similar loans would be made to such borrowers based on the remaining maturities,
consideration of credit risks, and other business issues pertaining to such
receivables. Other assets, consisting primarily of insurance and escrow
deposits and other miscellaneous financial instruments used in the ordinary
course of business, are valued based on quoted market prices or other
appropriate valuation techniques.
Fair values for short-term debt and long-term debt are determined based on
interest rates that are currently available to the Corporation for issuance of
debt with similar terms and remaining maturities for debt issues that are not
traded or quoted on an exchange. With respect to convertible subordinated
debentures, fair values are based on quoted market prices. The fair value of
project debt is estimated based on quoted market prices for the same or similar
issues. Other borrowings and liabilities are valued by discounting the future
stream of payments using the incremental borrowing rate of the Corporation. The
fair value of the Corporation's interest rate swap agreements is the estimated
amount that the Corporation would receive or pay to terminate the swap
agreements at the reporting date. The fair value of Ogden financial guarantees
provided on behalf of ITO and Avondale Industries, Inc., (see Note 23) would be
zero because Ogden receives no fees associated with such commitments.
The fair-value estimates presented herein are based on pertinent
information available to management as of December 31, 1993 and 1992. Although
management is not aware of any factors that would significantly affect the
estimated fair-value amounts, such amounts have not been comprehensively
revalued for purposes of these financial statements since that date, and current
estimates of fair value may differ significantly from the amounts presented
herein.
25. SALE OF LIMITED PARTNERSHIP INTERESTS
In 1992, construction revenues for Waste-to-Energy Operations included
$7,700,000 from the sale of the remaining limited partnership interests and
related tax benefits in the Huntington, New York, waste-to-energy facility. In
1991, construction revenues for Waste-to-Energy Operations included $17,800,000
from the sale of limited partnership interests and related tax benefits, which
was offset by the recapture of investment tax credits and minority interest and
a provision of $6,500,000 for potential write-offs of deferred proposal costs
on facilities for which construction has not commenced.
INDEPENDENT AUDITORS' REPORT
Deloitte & Touche 1633 Broadway
New York, NY 10019
The Board of Directors and Shareholders of Ogden Corporation:
We have audited the accompanying consolidated balance sheets of Ogden
Corporation and subsidiaries as of December 31, 1993 and 1992 and the related
statements of shareholders' equity, consolidated income and cash flows for each
of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Corporation's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the companies at December 31, 1993 and 1992
and the results of their operations and cash flows for each of the three years
in the period ended December 31, 1993 in conformity with generally accepted
accounting principles.
As discussed in Note 1 to the financial statements, in 1993 the Corporation
changed its method of accounting for postretirement benefits other than pensions
to conform with Statement of Financial Accounting Standards No. 106 and in 1992
changed its method of accounting for income taxes to conform with Statement of
Financial Accounting Standards No. 109.
/s/Deloitte & Touche
February 2, 1994
OGDEN CORPORATION AND SUBSIDIARIES
REPORT OF MANAGEMENT
Ogden's management is responsible for the information and representations
contained in this annual report. Management believes that the financial
statements have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances to reflect in all material respects
the substance of events and transactions that should be included and that the
other information in the annual report is consistent with those statements. In
preparing the financial statements, management makes informed judgments and
estimates of the expected effects of events and transactions currently being
accounted for.
In meeting its responsibility for the reliability of the financial
statements, management depends on the Corporation's internal control structure.
This structure is designed to provide reasonable assurance that assets are
safeguarded and transactions are executed in accordance with management's
authorization and recorded properly to permit the preparation of financial
statements in accordance with generally accepted accounting principles. In
designing control procedures, management recognizes that errors or
irregularities may nevertheless occur. Also, estimates and judgments are
required to assess and balance the relative cost and expected benefits of such
controls. Management believes that the Corporation's internal control structure
provides reasonable assurance that errors or irregularities that could be
material to the financial statements are prevented and would be detected within
a timely period by employees in the normal course of performing their assigned
functions.
The Board of Directors pursues its oversight role for these financial
statements through the Audit Committee, which is composed solely of
nonaffiliated directors. The Audit Committee, in this oversight role, meets
periodically with management to monitor their responsibilities. The Audit
Committee also meets periodically with the independent auditors and the internal
auditors, both of whom have free access to the Audit Committee without
management present.
The independent auditors elected by the shareholders express an opinion on
our financial statements. Their opinion is based on procedures they consider
to be sufficient to enable them to reach a conclusion as to the fairness of the
presentation of the financial statements.
/s/R. Richard Ablon /s/Philip G. Husby
R. Richard Ablon Philip G. Husby
President and Senior Vice President and
Chief Executive Officer Chief Financial Officer
OGDEN CORPORATION AND SUBSIDIARIES
QUARTERLY RESULTS OF OPERATIONS
1993 QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31
(In thousands of dollars,
except per-share amounts)
Net sales and service revenues $458,491 $516,157 $540,856 $523,833
Gross profit $ 81,911 $ 86,494 $ 94,347 $ 94,556
Income before cumulative effect of
change in accounting principle $ 13,822 $ 16,092 $ 14,723 $ 17,493
Cumulative effect of change in
accounting principle (5,340)
Net income $ 8,482 $ 16,092 $ 14,723 $ 17,493
Earnings Per Common Share:
Income before cumulative effect of
change in accounting principle $ .32 $ 0.37 $ 0.34 $ 0.40
Cumulative effect of change in
accounting principle (0.12)
Total $ 0.20 $ 0.37 $ 0.34 $ 0.40
Earnings Per Common Share-Assuming
Full Dilution:
Income before cumulative effect of
change in accounting principle $ 0.31 $ 0.37 $ 0.34 $ 0.40
Cumulative effect of change in
accounting principle (0.12)
Total $ 0.19 $ 0.37 $ 0.34 $ 0.40
1992 QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31
(In thousands of dollars,
except per-share amounts)
Net sales and service revenues $414,179 $430,378 $458,591 $465,667
Gross profit $ 83,395 $ 83,665 $ 86,510 $ 81,514
Income before cumulative effect of
change in accounting principle $ 13,875 $ 14,486 $ 17,152 $ 15,254
Cumulative effect of change in
accounting principle (5,186)
Net income, as restated $ 8,689 $ 14,486 $ 17,152 $ 15,254
Earnings Per Common Share:
Income before cumulative effect of
change in accounting principle $ 0.32 $ 0.34 $ 0.40 $ 0.35
Cumulative effect of change in
accounting principle (0.12)
Total $ 0.20 $ 0.34 $ 0.40 $ 0.35
Earnings Per Common Share-Assuming
Full Dilution:
Income before cumulative effect of
change in accounting principle $ 0.32 $ 0.33 $ 0.40 $ 0.35
Cumulative effect of change in
accounting principle (0.12)
Total $ 0.20 $ 0.33 $ 0.40 $ 0.35
Notes: Net income was reduced by $.10 per share ($4.3 million) for the September 30, 1993, quarter,
reflecting the retroactive effect of the increased Federal income tax rate. The $.10 per-share reduction
includes $.08 per share for a net one-time charge due to the adjustment of prior years' deferred income
tax balances and $.02 per share for the 1% increase in tax rate for the first nine months of 1993.
The cumulative effect of changes in accounting principles reflects the adoption of SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," effective January 1, 1993, and
SFAS No. 109, "Accounting for Income Taxes," effective January 1, 1992.
OGDEN CORPORATION AND SUBSIDIARIES
PRICE RANGE OF STOCK AND DIVIDEND DATA
1 9 9 3 1 9 9 2
High Low High Low
Common:
First Quarter 24 5/8 21 1/2 24 3/8 19 1/2
Second Quarter 26 1/2 22 1/8 22 1/2 17 7/8
Third Quarter 27 21 5/8 21 3/4 18 1/2
Fourth Quarter 26 22 22 7/8 17 1/8
$1.875 Preferred:
First Quarter Not Traded 120 120
Second Quarter 146 146 129 129
Third Quarter 145 131 1/2 115 115
Fourth Quarter Not Traded 122 122
Quarterly common stock dividends of $.3125 per share were paid to shareholders
of record for the four quarters of 1993 and 1992, the dividends for the last
quarters of 1993 and 1992 being paid in January of the subsequent years.
Quarterly dividends of $.8376 were paid for the four quarters of 1993 and 1992
on the $1.875 preferred stock.
Ogden common and $1.875 preferred stocks are listed on the New York Stock
Exchange.