FINANCIAL HIGHLIGHTS
Ogden Corporation and Subsidiaries
December 31, 1995 1994 1993 1992 1991
(In thousands of dollars, except per-share amounts)
Total Revenues $2,184,993 $2,104,547 $2,035,860 $1,766,443 $1,566,579
Income (Loss) From:
Continuing operations 7,444 67,826 62,130 60,767 57,604
Discontinued operations (13,880)
Cumulative effect of
changes in accounting
principles (1,520) (5,340) (5,186)
Net income 7,444 66,306 56,790 55,581 43,724
Earnings (Loss) Per
Common Share:
Continuing operations 0.15 1.55 1.43 1.41 1.33
Discontinued operations (0.32)
Cumulative effect of
changes in
accounting principles (0.03) (0.12) (0.12)
Total 0.15 1.52 1.31 1.29 1.01
Total Assets 3,652,671 3,644,886 3,340,729 3,187,826 2,846,254
Shareholders' Equity 546,978 596,818 486,267 481,084 478,122
Shareholders' Equity
Per Common Share 11.04 12.21 11.15 11.11 11.09
Net income in 1995 reflects a net after-tax charge of $48.9 million, or $.99
per share. (See Notes 21 and 22 to the Consolidated Financial Statements.)
Net income in 1993 was reduced by $.08 per share, reflecting the retroactive
effect of the increased Federal income tax rate that was enacted in August
1993 on the prior years' deferred income tax balances.
Total Revenues (expressed in millions of dollars)
Year - Revenues
1991 - 1,567
1992 - 1,766
1993 - 2,036
1994 - 2,105
1995 - 2,185
[presented as a bar chart]
Income from Continuing Operations Before Income Taxes and Minority Interest
(expressed in millions of dollars)
Year - income as described above
1991 - 104
1992 - 113
1993 - 126
1994 - 139
1995 - 41<F1>
[presented as bar chart]
Total Assets (expressed in millions of dollars)
Year - Assets
1991 - 2,846
1992 - 3,188
1993 - 3,341
1994 - 3,645
1995 - 3,653
[presented as bar chart]
<F1>
Reflects an unusual net pretax charge of $69.3 million. (See Notes 21 and
22 to the Consolidated Financial Statements.)
Ogden Corporation and Subsidiaries
Management's Discussion and Analysis of Consolidated Operations
The following discussion and analysis should be read in conjunction
with the Corporation's Financial Statements and notes thereto.
Operations: Revenues for 1995 were $80,400,000 higher than the
comparable period of 1994, primarily due to increased revenues of
$67,300,000 in Aviation Services reflecting the acquisition in 1995 of an
air range and pilot training systems company, four airline catering kitchens
in the Canary and Balearic islands, and in late 1994, an airline cargo
operation at Heathrow Airport in the United Kingdom; $56,100,000 in
Entertainment Services, chiefly associated with new contracts at Wrigley
Field, the Target Center, General Motors Place, amphitheaters, as well as
the start-up of operations in the United Kingdom; $39,100,000 in Technology
Services due to increased customer activity and new contracts in the
Atlantic Design operations, as well as the start-up of operations in Ireland;
$35,400,000 in waste-to-energy services, primarily due to revenues generated
at the Lee County (Florida), Onondaga County (New York), and Montgomery
County (Maryland) facilities, which commenced commercial operations in
December 1994 and March and August 1995, respectively; $31,100,000 in
Independent Power Services income, primarily reflecting the acquisition
of the SIGC facility in December 1994; and $17,500,000 in Facility Services,
reflecting several new contracts and increased customer activity. These
increases were partially offset by a decrease of $143,200,000 in
construction revenues due primarily to the completion of the Union County
(New Jersey) and Lee County facilities in May and December 1994,
respectively; from reduced construction activity at the Montgomery County
facility; and from a reduction of $26,100,000 in revenues from the gain
on the sale of limited partnership interests and related tax benefits in
1994, which did not recur in 1995.
Consolidated operating income for 1995 was $92,400,000 lower than
1994, primarily reflecting the effects of the early adoption of Statement
of Financial Accounting Standards (SFAS) No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of"; restructuring initiatives; and other unusual losses and costs
totaling $82,800,000, which were reduced by a gain of $13,500,000 from
the sale of a noncore business, for a net charge of $69,300,000. The
charges principally related to the early adoption of SFAS No. 121,
amounting to $45,300,000, included anticipated losses on the sale of
noncore businesses of $32,800,000; costs of restructuring initiatives of
$8,200,000; and an impairment loss of $12,200,000 for the write-down of
certain deferred charges relating to a previously awarded contract not
expected to be completed, unusual waste-to-energy repair costs, and an
adjustment of inventory balances resulting from a physical inventory.
Also included in the second quarter of 1995 was a charge of $17,100,000
relating to the write-off of accounts receivable of $10,300,000, disposal
of inventory of $3,900,000, and $2,900,000 of costs related to
curtailment of operations all at Ogden Communications, Inc. Of the net
charge of $69,300,000, $56,900,000 was applicable to the Services segment
and $12,400,000 pertained to Projects. (Also see Notes 21 and 22 to the
Consolidated Financial Statements for further information.)
Before the charges discussed above, consolidated operating income
for 1995 would have been $23,100,000 lower than 1994, primarily
reflecting lower income of $26,100,000 due to the gain on the sale of
limited partnership interests in and related tax benefits of the Onondaga
County facility in 1994, which did not recur in 1995; $10,500,000 in
Entertainment Services, primarily reflecting development costs in Europe,
lower income from the Ottawa Palladium, and costs associated with the
acquisition of Firehole Entertainment Corp.; $6,800,000 at Ogden
Environmental, primarily due to reduced activity in the environmental
laboratory area; and $3,200,000 in Water/Wastewater Treatment Services,
its first year of operations, primarily reflecting continuing development
costs. These decreases were partially offset by increased income of
$9,000,000 in construction activities, primarily reflecting increased
activity on the Detroit (Michigan) facility and an early completion bonus
on the Montgomery County facility; $5,600,000 in Independent Power,
primarily due to the acquisition of SIGC in 1994; and $2,600,000 in
waste-to-energy service income (service revenues less operating costs and
debt service charges), primarily reflecting increased income from the
full commercial operations of the Lee County, Onondaga County, and
Montgomery County facilities, as well as enhanced performance at the
Honolulu (Hawaii) facility, offset in part by lower income at the Union
County and Hartford (Connecticut) facilities resulting from lower margins
in 1995 than 1994 due to a contract renegotiation.
Debt service charges for 1995 increased $11,500,000 over 1994 and
included $7,000,000 in waste-to-energy services, chiefly associated with
the Onondaga County facility being in full commercial operation during
1995, and $4,500,000 for project debt assumed as part of the SIGC
acquisition. Three interest rate swap agreements entered into as hedges
against interest rate exposure on three series of adjustable-rate project
debt resulted in lower debt service of $230,000 in 1995 and additional
debt service of $1,400,000 in 1994. The effect of these swap agreements
on the weighted-average interest rate was not significant. Selling,
administrative, and general expenses increased $4,800,000, primarily
reflecting increased marketing and development expenses.
The effective income tax rate for 1995 was 84.5%, compared with
44.4% for 1994. This increase of 40.1% was primarily due to the effect
of adopting SFAS No. 121, which included the write-down of goodwill for
which the Corporation will not receive tax benefits, as well as higher
foreign tax rates and certain nondeductible foreign losses. Note 23 to
the Consolidated Financial Statements contains a more detailed
reconciliation of the variances from the Federal statutory income tax
rate.
Interest income for 1995 was $2,400,000 higher than 1994,
primarily reflecting interest earned on loans made in the second half of
1994. Interest expense was $6,800,000 higher, chiefly associated with
higher interest rates on variable-rate debt, higher borrowings, and a net
increase of $1,412,000 in interest costs on two interest rate swap
agreements covering notional amounts of $100,000,000 each. One swap
agreement expired in March 1994. The other swap agreement expires on
December 16, 1998. These swap agreements were entered into in order to
convert Ogden's fixed-rate $100,000,000, 9.25% debentures into
variable-rate debt. During 1995, Ogden paid $603,000 on the remaining
swap, while in 1994, Ogden received $809,000 on the two swaps. The effect of
these swap agreements on the weighted-average interest rate was not
significant.
Revenues for 1994 were $68,700,000 higher than the comparable
period of 1993, primarily due to increased revenues of $26,100,000,
reflecting the sale of limited partnership interests in and related tax
benefits of the Onondaga County facility in 1994; $26,900,000 in
waste-to-energy service revenues due primarily to increased revenues at
the Detroit, Hartford, and Honolulu facilities acquired in January 1993,
revenues from the start-up and full operation of the Union County
facility, and the operation of the transfer station at Montgomery
County; $24,100,000 in Aviation Services, reflecting the start-up of
operations in Brazil and increased activity in Venezuela, Chile, and
European operations; $30,200,000 in Technology Services, primarily in
the Atlantic Design operations and the Systems Engineering group,
reflecting several new contracts and increased customer activity;
$18,500,000 in Environmental Services due primarily to increased activity in
the consulting group (these increases were partially offset by lower revenues
of $35,300,000 in construction revenues, primarily due to reduced
construction activity at the Union County facility completed in May 1994
and the Lee County facility completed in December 1994, which reductions
were partially offset by increased activity at the Montgomery County
facility); and $24,800,000 in the Facility Management Services group due
primarily to the loss of several building cleaning contracts and certain
utility maintenance contracts as well as reduced customer activity.
Consolidated operating income for 1994 was $15,400,000 higher
than 1993, primarily due to increased income of $26,100,000, reflecting
the gain on the sale of limited partnership interests in and related tax
benefits of the Onondaga County facility in 1994; $3,500,000 in
Technology Services, primarily due to several new contracts and increased
customer activity in the Atlantic Design operations; $2,600,000 in
construction income (construction revenues less construction costs),
primarily due to increased activity at the Montgomery County facility;
$1,600,000 in waste-to-energy service income (service revenues less
operating costs and debt service charges), primarily associated with the
start-up and full commercial operations of the Union County facility,
partially offset by additional maintenance work at the Detroit facility;
and a provision of $8,000,000 for the potential write-offs of deferred
proposal costs on property for which construction had not commenced and
for litigation and contractor settlements. These increases were
partially offset by lower income of $5,000,000 in Facility Management
Services, reflecting the loss of several building cleaning and utility
maintenance contracts; $2,500,000 in Aviation Services, primarily
reflecting lower margins in the in-flight catering area and a loss on the
devaluation of the Mexican peso, partially offset by increased earnings in
overseas ground services operations; and $800,000 in Entertainment
Services, primarily reflecting the effect of the baseball strike and hockey
lockout and start-up costs of overseas operations, partially offset by the
opening of Arrowhead Pond of Anaheim and several new customer contracts.
Debt service charges increased $1,700,000. This increase was due to higher
interest rates resulting from the conversion of one series of
adjustable-rate project debt to fixed rates in 1993 and higher interest
rates resulting from two fixed interest rate swap agreements entered into
as hedges against two series of adjustable-rate project debt. The swap
agreements resulted in additional interest expense of $1,400,000 and
$1,500,000 in 1994 and 1993, respectively. The effect of these swap
agreements on the weighted-average interest rate was not significant.
Interest income for 1994 was $3,500,000 higher than in 1993,
primarily reflecting interest earned on loans made in the third quarter
of 1994 and higher interest rates on earnings from investments. Interest
expense for 1994 was $3,400,000 higher than in 1993, primarily reflecting
higher borrowings and a reduction of $2,600,000 in income received on two
variable-rate interest rate swap agreements covering notional amounts of
$100,000,000 each. One swap agreement expired in March 1994. The other
swap agreement expires on December 16, 1998. These swap agreements were
entered into as a hedge against Ogden's $100,000,000, 9.25% debentures.
Income received on these swap agreements reduced interest expense by
$800,000 and $3,400,000 in 1994 and 1993, respectively. The effect of
these swap agreements on the weighted-average interest rate was not
significant.
The effective income tax rate for 1994 was 44.4%, compared with
45.0% for 1993. This decrease was primarily due to a charge of
$4,100,000 in 1993, reflecting the adjustment of prior years' deferred
income tax balances to the new 35% rate enacted in 1994 in accordance
with SFAS No. 109, offset by investment tax credits of $3,600,000 in 1994
due to the recapture of investment tax credits relating to the sale of
limited partnership interests in and related tax benefits of the Onondaga
County facility. Note 23 to the Consolidated Financial Statements
contains a more detailed reconciliation of the variances from the Federal
statutory income tax rate.
Capital Investments and Commitments: During 1995, capital
investments amounted to $92,800,000, of which $26,800,000, inclusive of
restricted funds transferred from funds held in trust, was for Projects'
waste-to-energy operations and $66,000,000 was for normal replacement and
growth in Services' and Projects' operations.
At December 31, 1995, capital commitments amounted to $53,400,000
for normal replacement, modernization, and growth in Services'
($42,100,000) and Projects' ($11,300,000) operations. In addition,
compliance with recently promulgated standards and guidelines under the
Clean Air Act Amendments of 1990 may require additional capital
expenditures of $30,000,000 during the next four years.
Ogden and certain of its subsidiaries have issued or are party to
performance bonds and guarantees and related contractual obligations
undertaken mainly pursuant to agreements to construct and operate certain
waste-to-energy, entertainment, and other facilities. In the normal
course of business, they are involved in legal proceedings in which
damages and other remedies are sought. Management does not expect that
these contractual obligations, legal proceedings, or any other contingent
obligations incurred in the normal course of business will have a
material adverse effect on Ogden's Consolidated Financial Statements.
During 1994, a subsidiary of the Corporation entered into a
30-year facility management contract pursuant to which it agreed to
advance funds to a customer, if necessary, to assist refinancing senior
secured debt incurred in connection with construction of the facility. Such
refinancing requirements are not expected to exceed $75,000,000 at
maturity of the senior secured debt, which is expected to be on or about
March 1, 2001. In addition, at December 31, 1995, the Corporation has
guaranteed indebtedness of $6,200,000 of an affiliate and principal
tenant of this customer. The Corporation expects this guaranty will
increase to approximately $16,100,000 in 1996. Ogden continues as
guarantor of surety bonds and letters of credit totaling approximately
$19,200,000 on behalf of International Terminal Operating Co. Inc. and has
guaranteed borrowings of certain customers amounting to approximately
$29,200,000. Management does not expect that these arrangements will have a
material adverse effect on Ogden's Consolidated Financial Statements.
Liquidity/Cash Flow: Net cash provided from operating activities
was $94,300,000 lower, primarily reflecting lower net income of
$58,900,000; reductions of $20,400,000 in billings in excess of costs and
estimated profit on uncompleted contracts resulting from the timing of
billings and construction activity on the Montgomery County facility; a
decrease of $17,300,000 from the timing of retention payments relating to
the construction on the waste-to-energy facilities; payment in 1995 of
$8,300,000 relating to a construction contract adjustment on the Babylon
(New York) facility; and decreases of $13,200,000 in Federal and State
taxes payable, offset, in part, by increases in the effect of noncash
operating expenses.
Net cash used in investing activities was $106,100,000 lower than
1994, primarily reflecting lower investments in waste-to-energy
facilities of $49,900,000 due to the completion of construction of the
Onondaga County facility in early 1995; a reduction of $56,400,000 in the
repurchase of marketable securities held for sale; lower costs of
acquisitions of $16,900,000; and a decrease of $18,300,000 in other
receivables reflecting lower noncurrent loans made to customers. These
decreases were partially offset by increases of $23,000,000 in other capital
expenditures, principally in the Entertainment Services business, reflecting
increased activity, and $28,300,000 in other investments, reflecting increased
equity investments in Argentina and other investee affiliates.
Net cash used in financing activities increased $40,500,000,
primarily reflecting a decrease of $42,800,000 in amounts of restricted
funds utilized due to the completion of the Onondaga County facility;
increased dividends of $5,000,000 related to shares issued in connection
with the acquisition of the minority interest in Ogden Projects, Inc., in
late 1994; and increases of $8,300,000 in payments of other debt. These
increases in cash used in financing activities were partially offset by
increases of $9,400,000 in other borrowings. Increased borrowings for
waste-to-energy facilities of $96,800,000 represent amounts borrowed, net
of issuance and related costs, in connection with the refinancing of
approximately $92,500,000 of project debt, which is reflected under the
heading "Payment of Debt."
Exclusive of changes in waste-to-energy facility construction
activities, the Corporation's various types of contracts are not expected
to have a material effect on liquidity. Debt service associated with
project debt, which is an explicit component of a client community's
obligation under its service agreement, is paid as it is billed and
collected. Cash required for investing and financing activities is
expected to be satisfied from operating activities; available funds, including
short-term investments; proceeds from the sale of noncore businesses; and
the Corporation's unused credit facilities to the extent needed. At
December 31, 1995, the Corporation had $96,800,000 in cash, cash
equivalents, and marketable securities and unused revolving credit lines
of $167,600,000.
Ogden Corporation and Subsidiaries
Selected Financial Data
December 31, 1995 1994 1993 1992 1991
(In thousands of dollars, except per-share amounts)
Total Revenues $2,184,993 $2,104,547 $2,035,860 $1,766,443 $1,566,579
Income (Loss) From:
Continuing operations 7,444 67,826 62,130 60,767 57,604
Discontinued operations (13,880)
Cumulative effect of
changes in
accounting principles (1,520) (5,340) (5,186)
Net income 7,444 66,306 56,790 55,581 43,724
Earnings (Loss) Per
Common Share:
Continuing operations 0.15 1.55 1.43 1.41 1.33
Discontinued operations (0.32)
Cumulative effect of
changes in
accounting principles (0.03) (0.12) (0.12)
Total 0.15 1.52 1.31 1.29 1.01
Earnings (Loss) Per
Common Share
Assuming Full Dilution:
Continuing operations 0.15 1.54 1.42 1.40 1.32
Discontinued operations (0.32)
Cumulative effect of
changes in
accounting principles (0.03) (0.12) (0.12)
Total 0.15 1.51 1.30 1.28 1.00
Total Assets 3,652,671 3,644,886 3,340,729 3,187,826 2,846,254
Long-Term Obligations 2,044,186 2,047,031 1,946,547 2,003,091 1,781,576
Shareholders' Equity 546,978 596,818 486,267 481,084 478,122
Shareholders' Equity
Per Common Share 11.04 12.21 11.15 11.11 11.09
Cash Dividends Declared
Per Common Share 1.25 1.25 1.25 1.25 1.25
Net income in 1995 reflects a net after-tax charge of $48.9 million, or $.99
per share. (See Notes 21 and 22 to the Consolidated Financial Statements.)
Net income in 1993 was reduced by $.08 per share, reflecting the retroactive
effect of the increased Federal income tax rate that was enacted in August
1993 on the prior years' deferred income tax balances.
Ogden Corporation and Subsidiaries
Statements of Consolidated Income
For the years ended December 31, 1995 1994 1993
Service revenues $1,563,748,000 $1,408,710,000 $1,364,080,000
Net sales 551,345,000 456,586,000 423,329,000
Construction revenues 69,900,000 213,125,000 248,451,000
Gain on sale of limited
partnership interests 26,126,000
Total revenues 2,184,993,000 2,104,547,000 2,035,860,000
Operating costs and expenses 1,318,847,000 1,127,348,000 1,077,102,000
Costs of goods sold 518,457,000 405,190,000 376,553,000
Construction costs 41,756,000 194,022,000 231,956,000
Selling, administrative, and
general expenses 144,714,000 135,852,000 125,219,000
Debt service charges 111,850,000 100,358,000 98,664,000
Total costs and expenses 2,135,624,000 1,962,770,000 1,909,494,000
Consolidated operating income 49,369,000 141,777,000 126,366,000
Equity in net income of
investees and joint ventures 6,866,000 7,683,000 6,895,000
Interest income 15,126,000 12,709,000 9,181,000
Interest expense (30,491,000) (23,655,000) (20,289,000)
Other income (deductions) net (344,000) 850,000 3,348,000
Income before income taxes
and minority interests 40,526,000 139,364,000 125,501,000
Less: income taxes 34,237,000 61,883,000 56,526,000
minority interests (1,155,000) 9,655,000 6,845,000
Income before cumulative effect
of changes in
accounting principles 7,444,000 67,826,000 62,130,000
Cumulative effect of changes in
accounting principles
(net of income taxes of
$1,100,000 and $3,710,000
for 1994 and 1993, respectively) (1,520,000) (5,340,000)
Net income $7,444,000 $66,306,000 $56,790,000
Earnings (Loss) Per Common Share:
Income before cumulative effect
of changes in
accounting principles $0.15 1.55 $1.43
Cumulative effect of changes in
accounting principles (0.03) (0.12)
Total $0.15 $1.52 $1.31
Earnings (Loss) Per Common Share
Assuming Full Dilution:
Income before cumulative effect
of changes in
accounting principles $0.15 $1.54 $1.42
Cumulative effect of changes in
accounting principles (0.03) (0.12)
Total $0.15 $1.51 $1.30
See Notes to Consolidated Financial Statements
Ogden Corporation and Subsidiaries
Consolidated Balance Sheets
December 31, 1995 1994
ASSETS
Current Assets:
Cash and cash equivalents $96,782,000 $117,359,000
Marketable securities available for sale 13,939,000 86,676,000
Restricted funds held in trust 95,238,000 110,295,000
Receivables (less allowances:
1995, $37,039,000 and 1994, $32,783,000) 597,644,000 574,184,000
Deferred income taxes 31,979,000 26,451,000
Other 90,784,000 80,932,000
Total current assets 926,366,000 995,897,000
Property, plant, and equipment net 1,879,179,000 1,884,774,000
Restricted funds held in trust 218,551,000 213,999,000
Unbilled service and other receivables 191,753,000 171,441,000
Unamortized contract acquisition costs 148,342,000 133,172,000
Goodwill and other intangible assets 87,596,000 100,416,000
Other assets 200,884,000 145,187,000
Total Assets $3,652,671,000 $3,644,886,000
Liabilities and Shareholders' Equity
Liabilities:
Current Liabilities:
Current portion of long-term debt $4,680,000 $3,483,000
Current portion of project debt 55,774,000 45,279,000
Dividends payable 15,294,000 13,637,000
Accounts payable 114,648,000 93,362,000
Federal and foreign income taxes payable 10,141,000
Accrued expenses, etc. 291,421,000 320,154,000
Deferred income 28,702,000 26,843,000
Total current liabilities 510,519,000 512,899,000
Long-term debt 344,333,000 304,393,000
Project debt 1,551,203,000 1,593,988,000
Deferred income taxes 310,400,000 281,065,000
Other liabilities 230,558,000 196,305,000
Minority interests 10,030,000 10,768,000
Convertible subordinated debentures 148,650,000 148,650,000
Total Liabilities 3,105,693,000 3,048,068,000
Shareholders' Equity:
Serial cumulative convertible preferred
stock, par value $1.00 per share;
authorized, 4,000,000 shares; shares
outstanding: 49,469 in 1995 and 53,503
in 1994, net of treasury shares of
29,820 in 1995 and 1994, respectively 50,000 54,000
Common stock, par value $.50 per share;
authorized, 80,000,000 shares;
shares outstanding: 49,467,781 in 1995
and 48,777,092 in 1994, net of treasury
shares of 3,735,123 and 3,864,123 in
1995 and 1994, respectively 24,734,000 24,388,000
Capital surplus 197,921,000 194,496,000
Earned surplus 328,047,000 381,864,000
Cumulative translation adjustment net (2,657,000) (1,399,000)
Pension liability adjustment (760,000) (441,000)
Net unrealized loss on securities
available for sale (357,000) (2,144,000)
Total Shareholders' Equity 546,978,000 596,818,000
Total Liabilities and Shareholders' Equity 3,652,671,000 $3,644,886,000
See Notes to Consolidated Financial Statements
Ogden Corporation and Subsidiaries
Statements of Shareholders' Equity
For the years ended December 31,.
1995 1994 1993
Shares Amounts Shares Amounts Shares Amounts
Serial Cumulative Convertible
Preferred Stock, Par Value
$1.00 Per Share;
Authorized, 4,000,000 Shares:
Balance at beginning of year 83,323 $ 84,000 87,017 $ 87,000 91,714 $ 92,000
Shares converted into common stock (4,034) (4,000) (3,694) (3,000) (4,697) (5,000)
Total 79,289 80,000 83,323 84,000 87,017 87,000
Treasury shares (29,820) (30,000) (29,820) (30,000) (29,820) (30,000)
Balance at end of year (aggregate
involuntary liquidation vlaue
1995, $996,800) 49,469 50,000 53,503 54,000 57,197 57,000
Common Stock, Par Value $.50 Per
Share; Authorized, 80,000,000
Shares:
Balance at beginning of year 52,641,215 26,320,000 47,472,245 23,736,000 47,287,048 23,643,000
Acquisition of Ogden Projects,
Inc., minority interests 5,139,939 2,570,000
Exercise of stock options,
less common stock utilized 10,735 6,000 6,977 3,000 65,389 33,000
Shares used for pooling of
interests 526,869 264,000
Conversion of preferred shares 24,085 12,000 22,054 11,000 28,046 14,000
Conversion of debentures 91,762 46,000
Total 53,202,904 26,602,000 52,641,215 26,320,000 47,472,245 23,736,000
Treasury shares at beginning
of year 3,864,123 1,932,000 3,973,123 1,986,000 4,096,123 2,048,000
Exercise of stock options (129,000) (64,000) (109,000) (54,000) (123,000) (62,000)
Treasury shares at end of year 3,735,123 1,868,000 3,864,123 1,932,000 3,973,123 1,986,000
Balance at end of year 49,467,781 24,734,000 48,777,092 24,388,000 43,499,122 21,750,000
Capital Surplus:
Balance at beginning of year 194,496,000 100,223,000 94,659,000
Acquisition of Ogden Projects,
Inc., minority interests 91,876,000
Exercise of stock options,
less common stock utilized 2,620,000 2,164,000 3,640,000
Arising from pooling of
interests 813,000
Capital transactions of
subsidiary companies net 241,000 696,000
Conversion of preferred shares (8,000) (8,000) (10,000)
Conversion of debentures 1,238,000
Balance at end of year 197,921,000 194,496,000 100,223,000
Earned Surplus:
Balance at beginning of year 381,864,000 370,231,000 367,908,000
Net income 7,444,000 66,306,000 56,790,000
Total 389,308,000 436,537,000 424,698,000
Preferred dividends per share
1995, 1994, and 1993, $3.35 171,000 184,000 199,000
Common dividends per share
1995, 1994, and 1993, $1.25 61,090,000 54,489,000 54,268,000
Total dividends 61,261,000 54,673,000 54,467,000
Balance at end of year 328,047,000 381,864,000 370,231,000
Cumulative Translation
Adjustment Net (2,657,000) (1,399,000) (4,639,000)
Pension Liability Adjustment (760,000) (441,000) (928,000)
Net Unrealized Loss on Securities
Available For Sale (357,000) (2,144,000)
Net Unrealized Loss on Noncurrent
Marketable Equity Securities (427,000)
Total Shareholders' Equity $546,978,000 $596,818,000 $486,267,000
See Notes to Consolidated Financial Statements
Ogden Corporation and Subsidiaries
Statements of Consolidated Cash Flows
For the years ended December 31, 1995 1994 1993
Cash Flows From Operating
Activities:
Net income $ 7,444,000 $ 66,306,000 $ 56,790,000
Adjustments to Reconcile Net
Income to Net Cash Provided
by Operating Activities:
Depreciation and amortization 109,604,000 90,545,000 85,643,000
Deferred income taxes 18,153,000 37,704,000 47,598,000
Cumulative effect of changes
in accounting principles 1,520,000 5,340,000
Long-lived asset write-downs 45,260,000
Other 11,986,000 38,390,000 19,596,000
Management of Operating
Assets and Liabilities:
Decrease (Increase) in Assets:
Accounts receivable (43,852,000) (63,527,000) (56,180,000)
Other assets (68,235,000) (61,595,000) (36,772,000)
Increase (Decrease) in
Liabilities:
Accounts payable 8,472,000 3,153,000 8,087,000
Accrued expenses 1,920,000 17,629,000 38,481,000
Deferred income 3,861,000 1,222,000 (1,152,000)
Other liabilities (22,369,000) 35,218,000 24,315,000
Net cash provided by
operating activities 72,244,000 166,565,000 191,746,000
Cash Flows From Investing
Activities:
Entities purchased,
net of cash acquired (15,474,000) (32,404,000) (54,224,000)
Proceeds from sale of
marketable securities
available for sale 71,364,000 63,545,000 88,775,000
Purchase of marketable
securities available for sale (56,418,000) (83,084,000)
Proceeds from sale of business 18,000,000 12,516,000
Proceeds from sale of property,
plant, and equipment 5,402,000 2,824,000 8,185,000
Investments in waste-to-energy
facilities (26,827,000) (76,686,000) (77,777,000)
Other capital expenditures (65,999,000) (42,961,000) (38,423,000)
Decrease (increase) in other
receivables (2,809,000) (21,127,000) (7,920,000)
Other (27,983,000) 268,000 7,111,000
Net cash used in investing
activities (44,326,000) (150,443,000) (157,357,000)
Cash Flows From Financing
Activities:
Borrowings for waste-to-energy
facilities 96,822,000
Decrease (increase) in funds
held in trust 9,514,000 52,337,000 60,347,000
Other new debt 40,948,000 31,589,000 680,000
Payment of debt (139,205,000) (38,455,000) (49,973,000)
Dividends paid (59,604,000) (54,630,000) (54,347,000)
Proceeds from exercise of
stock options 2,691,000 3,524,000 5,366,000
Other 630,000 (2,043,000) (3,488,000)
Net cash used by financing
activities (48,204,000) (7,678,000) (41,415,000)
Effect of foreign currency
exchange rate changes on cash
and cash equivalents (291,000) (182,000) (334,000)
Net Increase (Decrease) in
Cash and Cash Equivalents (20,577,000) 8,262,000 (7,360,000)
Cash and Cash Equivalents
at Beginning of Year 117,359,000 109,097,000 116,457,000
Cash and Cash Equivalents
at End of Year $ 96,782,000 $117,359,000 $109,097,000
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). Companies in which Ogden has
equity investments of 50% or less are accounted for using the "Equity
Method," if appropriate. All intercompany transactions and balances
have been eliminated.
In December 1995, Ogden issued 526,869 shares of common
stock in exchange for all of the outstanding shares of Firehole
Entertainment Corp. (Firehole). This transaction was accounted for as
a pooling of interests. The accompanying financial statements for
prior periods have not been restated to include the accounts of
Firehole, since the amounts did not have a significant effect on
prior period reported results or balances.
In addition, in other transactions accounted for as
purchases in 1995, Ogden acquired the shares of Applied Data
Technology, Inc., an air range and pilot training systems company, and
four airline catering kitchens in the Canary and Balearic islands for
a total cost of $15,474,000. The operations of these companies have
been included in the accompanying financial statements from dates of
acquisition. If Ogden had acquired these companies at January 1,
1994, total revenues, net income, and earnings per share would have
been $2,185,000,000, $7,346,000, and $.15 for 1995 and $2,157,000,000,
$65,255,000, and $1.49 for 1994. Ogden also acquired a 50% interest
in Metropolitan Entertainment, Inc.; a 50% interest in IFC, an
Australian entertainment company; as well as a 50% interest in SFTA, a
Turkish airport handling company.
On December 29, 1994, in a transaction accounted for as a
purchase, Ogden acquired the minority interest in Ogden Projects, Inc.
(OPI), for .84 of an Ogden common share for each OPI share. Ogden
issued 5,139,939 shares of common stock valued at $18.375 per share
for a total purchase price of $94,446,000. The cost of other 1994
acquisitions was $32,404,000.
Use of Estimates: The preparation of consolidated financial
statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents: Cash and cash equivalents include
all cash balances and highly liquid investments having original
maturities of three months or less.
Marketable Securities: Ogden adopted Statement of Financial
Accounting Standards (SFAS) No. 115, "Accounting for Certain
Investments in Debt and Equity Securities," at January 1, 1994. In
accordance with SFAS No. 115, prior years' financial statements have
not been restated to reflect the change in accounting method. Under
this Statement, the Corporation's marketable securities have been
classified as available for sale and are recorded at current market
value with an offsetting adjustment to Shareholders' Equity. The
adoption of this Statement did not have a significant effect on the
Corporation's consolidated financial position. At December 31, 1993,
marketable securities were carried at the lower of cost or market.
Net unrealized losses on noncurrent marketable equity securities were
charged to Shareholders' Equity (see Note 2).
Contracts and Revenue Recognition: Service revenues 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
$450,696,000, $439,195,000, and $432,891,000 for the years ended
December 31, 1995, 1994, and 1993, respectively. Subsidiaries engaged
in governmental contracting recognize revenues from
cost-plus-fixed-fee contracts on the basis of direct costs incurred
plus indirect expenses and the allocable portion of the fixed fee.
Revenues under time and material contracts are recorded at the
contracted rates as the labor hours and other direct costs are
incurred. Revenues under fixed-price contracts are recognized on
the basis of the estimated percentage of completion of services
rendered. Service revenues also include the fees earned under
contracts to operate and maintain the waste-to-energy facilities and
to service the facilities' debt, with additional fees earned based
on excess tonnage processed and energy generation. Long-term
unbilled service receivables related to waste-to-energy operations
are discounted in recognizing the present value for services
performed currently. Such unbilled receivables amounted to
$108,953,000 and $92,522,000 at December 31, 1995 and 1994,
respectively. Subsidiaries engaged in long-term construction
contracting record income on the percentage-of-completion method of
accounting and recognize income as the work progresses. Anticipated
losses on contracts are recognized as soon as they become known.
Revenues include the gain on sales of limited partnership interests in
and related tax benefits of waste-to-energy facilities.
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. Property, plant, and equipment
is periodically reviewed to determine recoverability by comparing the
carrying value to expected future cash flows.
Contract Acquisition Costs: Costs associated with the
acquisition of specific contracts are amortized over their respective
terms.
Bond Issuance Costs: Costs incurred in connection with the
issuance of revenue bonds are amortized over the terms of the
respective debt issues.
Deferred Charges on Projects: Costs incurred in connection
with certain project development efforts are deferred until the award
of the related project is determined. Costs on awarded projects are
deferred until the commencement of construction, at which time they
are either capitalized in property, plant, and equipment for privately
owned facilities or charged to construction costs for municipally
owned facilities. Costs associated with projects that are no longer
under consideration are charged to operating costs.
Restricted Funds: Restricted funds represent proceeds from the
financing of waste-to-energy facilities and the operations of a
waste-to-energy facility and a power plant. Funds are held in trust
and released as expenditures are made or upon satisfaction of
conditions provided under the respective trust agreements.
Interest Rate Swap Agreements: Amounts received or paid
relating to swap agreements during the year are credited or charged to
interest expense.
Goodwill: Goodwill acquired subsequent to 1970 is being
amortized by the straight-line method over periods ranging from 15 to
40 years. Goodwill acquired prior to 1970 is not being amortized.
Goodwill is periodically reviewed to determine recoverability by
comparing its carrying value to expected future cash flows of the
businesses to which it relates.
Retirement Plans: The Corporation 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. Ogden adopted 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 for 1993 as a
cumulative effect of a change in accounting principle and is reflected
as a charge to income of $5,340,000 (see Note 19).
Ogden adopted SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," as of January 1, 1994. The effect of
adopting SFAS No. 112 is shown as a cumulative effect of a change in
accounting principle and is reflected as a charge to income of
$1,520,000 in 1994.
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.
Long-Lived Assets: Ogden adopted SFAS No. 121, "Accounting for
the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of," in the fourth quarter of 1995. The effect of adopting
SFAS No. 121 resulted in an after-tax charge of $34,700,000 in 1995
(see Note 21).
Reclassification: The accompanying financial statements have
been reclassified to conform with the 1995 presentation.
2. Investments in Marketable Securities Available for Sale
Ogden adopted SFAS No. 115, "Accounting for Certain Investments
in Debt and Equity Securities," at January 1, 1994, and has classified
its marketable securities as available for sale and recorded them at
current market value with an offsetting adjustment to Shareholders'
Equity. In accordance with SFAS No. 115, prior years' financial
statements have not been restated to reflect this change in
accounting. At December 31, 1993, marketable securities were carried
at the lower of cost or market. Net unrealized losses on noncurrent
marketable equity securities were charged to Shareholders' Equity. At
December 31, 1993, noncurrent marketable securities having a cost of
$5,549,000 and a market value of $4,846,000 resulted in an unrealized
loss of $703,000, which was offset by deferred income taxes of
$276,000. The net valuation allowance of $427,000 was charged to
Shareholders' Equity.
At December 31, 1995 and 1994, marketable equity and debt
securities available for current operations are classified in the
balance sheet as current assets while securities held for noncurrent
uses, such as nonqualified pension liabilities and a deferred
compensation plan, are classified as long-term assets.
Marketable securities at December 31, 1995 and 1994
(expressed in thousands of dollars), include the following:
1995 1994
Market Market
Value Cost Value Cost
Classified as Current Assets:
United States government securities $ 1,652 $ 1,736 $ 1,567 $ 1,736
Tax-exempt municipal bonds 6,214 6,374 52,158 53,295
Mortgage-backed securities 5,560 5,727 31,146 31,669
Other securities 513 360 1,805 1,954
Total current 13,939 14,197 86,676 88,654
Classified as Noncurrent Assets:
United States government securities 236 236
Mutual and bond funds 16,538 17,037 12,174 14,122
Total noncurrent 16,538 17,037 12,410 14,358
Total $30,477 $31,234 $99,086 $103,012
The United States government securities mature April 15,
1998; $3,000,000, $2,200,000, and $1,000,000 of the tax-exempt
municipal bonds mature on July 1, 1998, January 1, 2006, and October
1, 2013, respectively; $400,000, $2,300,000, $1,500,000, and $900,000
of the mortgage-backed securities mature July 1, 2019, June 25, 2020,
August 25, 2021, and March 29, 2030, respectively.
Unrealized holding losses at December 31, 1995 and 1994,
amounted to $757,000 and $3,926,000, respectively. Deferred tax
benefits on these losses amounted to $400,000 and $1,782,000,
respectively, resulting in net charges of $357,000 and $2,144,000,
respectively, to Shareholders' Equity.
Proceeds and realized gains and losses from the sales of
securities classified as available for sale for the years ended
December 31, 1995 and 1994, were $71,364,000, $235,000, and $1,749,000
and $63,545,000, $256,700, and $476,700, respectively. For the
purpose of determining realized gains and losses, the cost of
securities sold is based on specific identification.
3. Unbilled Service and Other Receivables
Unbilled service and other receivables (expressed in thousands
of dollars) consisted of the following:
1995 1994
Unbilled service receivables $108,953 $92,522
Notes receivable 82,800 78,919
Total $191,753 $171,441
Unbilled service receivables are for services performed
currently for municipalities that are due by contract at a later
date and are discounted in recognizing the present value of such
services. Long-term notes receivable primarily represent loans
made to the owners of entertainment and sports facilities. Current
unbilled service receivables amounted to $34,482,000 and $32,240,000
at December 31, 1995 and 1994, respectively.
4. Restricted Funds Held in Trust
Funds held by trustees from proceeds received from the
financing of waste-to-energy facilities and the operations of a
waste-to-energy facility and a power plant are segregated principally
for the construction of the facilities; debt service reserves for
payment of principal and interest on project debt; lease reserves for
lease payments under operating leases; capitalized interest for
payment of interest during the construction period; and deposits of
revenues received. Such funds are invested principally in United
States Treasury bills and notes and United States government agencies
securities.
Fund balances (expressed in thousands of dollars) were as follows:
1995 1994
Current Noncurrent Current Noncurrent
Construction funds $ 2,931 $20,734
Debt service funds 64,706 $144,915 36,803 $158,746
Revenue funds 12,173 21,013
Lease reserve funds 14,190 15,260
Capitalized interest funds 8,847
Other funds 15,428 59,446 22,898 39,993
Total $95,238 $218,551 $110,295 $213,999
5. Property, Plant, and Equipment
Property, plant, and equipment (expressed in thousands of dollars)
consisted of the following:
1995 1994
Land $ 6,667 $ 6,698
Waste-to-energy facilities 1,722,375 1,577,147
Geothermal power plant 105,738 105,738
Buildings and improvements 175,214 155,904
Machinery and equipment 352,238 313,404
Landfills 10,927 9,841
Construction in progress 26,864 161,303
Total 2,400,023 2,330,035
Less accumulated depreciation and amortization 520,844 445,261
Property, plant, and equipment net $1,879,179 $1,884,774
6. Other Assets
Other assets (expressed in thousands of dollars) consisted of
the following:
1995 1994
Investment in and advances to
investees and joint ventures $ 67,095 $ 40,040
Unamortized bond issuance costs 38,473 29,290
Spare parts 19,544 13,915
Noncurrent securities available for sale 16,538 12,410
Deferred charges on projects 10,975 5,708
Insurance deposits 5,388 5,388
Other 42,871 38,436
Total $200,884 $145,187
7. Accrued Expenses, etc.
Accrued expenses, etc. (expressed in thousands of dollars),
consisted of the following:
1995 1994
Debt service charges and interest $ 33,886 $ 38,278
Payroll 25,743 31,493
Insurance 37,278 25,782
Construction costs 12,740 25,442
Operating expenses 37,847 21,802
Billings in excess of costs 19,167
Municipalities' share of energy revenues 18,154 17,756
Retainage payable 6,641 17,550
Lease payments 12,538 16,193
Payroll and other taxes 16,171 10,533
Pension and profit sharing 9,050 6,499
Commissions 8,477 7,226
Other 72,896 82,433
Total $291,421 $320,154
8. Deferred Income
Deferred income (expressed in thousands of dollars) was
comprised of the following:
1995 1994
Current Noncurrent Current Noncurrent
Sale and leaseback arrangements $ 1,523 $23,360 $ 1,523 $24,883
Advance billings to municipalities 11,644 13,028
Other 15,535 12,292
Total $28,702 $23,360 $26,843 $24,883
Deferred income arose primarily from the gain from sale and
leaseback transactions consummated in 1986 and 1987. Such gain
was deferred and is being amortized as a reduction of rental
expense. Advance billings to various customers prior to performance
of service are billed one or two months in advance and are
recognized as income in the period the service is provided. Other
includes interest earnings on restricted funds, which accrue to the
benefit of municipalities. Such amounts are deferred and recognized
as income in the period in which the municipality receives a credit
against service fees for such interest.
9. Long-Term Debt
Long-term debt (expressed in thousands of dollars) consisted of
the following:
1995 1994
Adjustable-rate revenue bonds due 2014 2024 $124,755 $124,755
9.25% debentures due 2022 100,000 100,000
Variable-rate revolving credit lines due 1998 48,000 26,820
Other long-term debt 71,578 52,818
Total $344,333 $304,393
The adjustable-rate revenue bonds are adjusted
periodically to reflect current market rates for similar issues,
generally with an upside cap of 15%. The average rate for this debt
was 3.90% and 2.79% in 1995 and 1994, respectively. These bonds
were issued under agreements that contain various restrictions, the
most significant being the requirements to comply with certain
financial ratios and to maintain Shareholders' Equity of
$400,000,000. At December 31, 1995, Ogden was in compliance with
all requirements and had $146,978,000 in excess of the required
amount of Shareholders' Equity.
At December 31, 1995, Ogden had two long-term interest
rate swap agreements covering notional amounts of $100,000,000 and
$7,500,000, respectively, which expire December 16, 1998, and
November 30, 2000, respectively. These swaps were entered into to
convert Ogden's fixed-rate $100,000,000, 9.25% debentures due in
2022 to variable-rate debt and Ogden's $7,500,000 variable-rate debt
to a fixed rate. On the $100,000,000 swap, Ogden receives a fixed
rate of 5.52% per annum paid on a semi-annual basis and pays a
floating rate of three months LIBOR set in arrears on a quarterly
basis. On the $7,500,000 swap, Ogden pays a fixed rate of 5.83%
paid on a quarterly basis and receives a floating rate of three
months LIBOR on a quarterly basis. At December 31, 1995, the
three-month LIBOR rate was 5.63%. The counterparties to these
interest rate swaps are major financial institutions. Management
believes its credit risk associated with nonperformance by the
counterparties is not significant. Amounts (received) or paid on
the swap agreements amounted to $603,000, $(809,000), and
$(3,352,000) for 1995, 1994, and 1993, respectively, and were
(credited) or charged to interest expense. The effect on Ogden's
weighted-average borrowing rate for 1995, 1994, and 1993, was an
increase (decrease) of .14%, (.20)%, and (.82)%, respectively.
Other long-term debt includes an obligation for
approximately $28,400,000, representing the equity component of a
sale and leaseback arrangement relating to a waste-to-energy
facility. This arrangement is accounted for as a financing, has an
effective interest rate of 5%, and extends through 2017.
Additionally, other long-term debt includes $22,450,000 resulting
from the sale of limited partnership interests in and related tax
benefits of the Onondaga County, New York, waste-to-energy facility,
which has been accounted for as a financing for accounting purposes.
This obligation has an effective interest rate of 10% and extends
through 2015. The remaining other debt of $20,728,000 consists
primarily of debt associated with entertainment facilities in the
United Kingdom and Argentina as well as debt acquired in the
Firehole acquisition. These loans bear various interest rates and
maturity dates.
The maturities on long-term debt (expressed in thousands of
dollars) at December 31, 1995, were as follows:
1996.................................. $4,680
1997.................................. 10,967
1998.................................. 43,189
1999.................................. 5,292
2000.................................. 2,031
Later years........................... 282,854
Total................................. 349,013
Less current portion.................. 4,680
Total long-term debt.................. $344,333
10. Project Debt
Project debt (expressed in thousands of dollars) consisted
of the following:
1995 1994
Revenue Bonds Issued by and
Prime Responsibility of Municipalities:
4.25 8.1% serial revenue bonds due through 2005 $ 198,933 $ 222,036
5.4 8.5% term revenue bonds due through 2019 845,476 939,740
Adjustable-rate revenue bonds due through 2013 86,965 10,875
Total 1,131,374 1,172,651
Revenue Bonds Issued by Municipal Agencies
with Sufficient Service Revenues Guaranteed
by Third Parties:
4.95 8.9% serial revenue bonds due through 2007 71,006 78,591
7.25 7.4% term revenue bonds due 1999 through 2011 105,901 106,109
Adjustable-rate revenue bonds due through 2011 127,820 133,467
Total 304,727 318,167
Other project debt 115,102 103,170
Total long-term project debt $1,551,203 $1,593,988
Project debt associated with the financing of waste-to-energy
facilities is generally arranged by municipalities through the
issuance of tax-exempt and taxable revenue bonds. The category,
"Revenue Bonds Issued by and Prime Responsibility of Municipalities,"
includes bonds issued with respect to which debt service is an
explicit component of the client community's obligation under the
related service agreement. In the event that a municipality is
unable to satisfy its payment obligations, the bondholders' recourse
with respect to the Corporation is limited to the waste-to-energy
facilities and restricted funds pledged to secure such obligations.
The category, "Revenue Bonds Issued by Municipal Agencies with
Sufficient Service Revenues Guaranteed by Third Parties," includes
bonds issued to finance three facilities for which contractual
obligations of third parties to deliver waste ensure sufficient
revenues to pay debt service, although such debt service is not an
explicit component of the third parties' service fee obligations.
Payment obligations for the project debt associated
with waste-to-energy facilities are nonrecourse to the Corporation
subject to construction and operating performance guarantees and
commitments. These obligations are secured by the revenues pledged
under various indentures and are collateralized principally by a
mortgage lien and a security interest in each of the respective
waste-to-energy facilities and related assets. At December 31,
1995, such revenue bonds were collateralized by property, plant, and
equipment with a net carrying value of $1,546,392,000, credit
enhancements of approximately $180,000,000 for which Ogden has
certain reimbursement obligations, and substantially all restricted
funds (see Note 4).
The interest rates on adjustable-rate revenue bonds are
adjusted periodically to reflect current market rates for similar
issues, generally with an upside cap of 15%. The average rate for
such revenue bonds was 5.28% and 3.33% in 1995 and 1994, respectively.
Other project debt includes an obligation of a
special-purpose limited partnership acquired by two special-purpose
subsidiaries of Ogden in December 1994 and represents the lease of a
geothermal power plant, which has been accounted for as a financing.
This obligation, which amounted to $95,156,000 at December 31,
1995, has an effective interest rate of 5.3% and extends through
2008 with options to renew for additional periods and has a fair
market value purchase option at the conclusion of the initial term.
Payment obligations under this lease arrangement are limited to
assets of the limited partnership and revenues derived from a power
purchase agreement with a third party, which are expected to provide
sufficient revenues to make rental payments. Such payment
obligations are secured by all the assets, revenues, and other
benefits derived from the geothermal power plant, which had a net
carrying value of approximately $111,389,000 at December 31, 1995.
In September 1995, the Corporation borrowed $20,984,000 from a
financial institution as part of the refinancing of project debt in
the category "Revenue Bonds Issued by and Prime Responsibility of
Municipalities." The debt service associated with this loan is
included as an explicit component of the client community's
obligation under the related service agreement. A portion of the
funds was retained in the Corporation's restricted funds and is
loaned to the community each month to cover the community's monthly
service fees. The Corporation's repayment for the other part of
the loan is limited to the extent repayment is received from the
client community. This overall obligation totaled $19,946,000 at
December 31, 1995, has an effective interest rate of 7.05%, and
extends through 2005.
At December 31, 1995, Ogden had three interest rate
swap agreements as hedges against interest rate exposure on certain
adjustable-rate revenue bonds. The first two interest rate swap
agreements expire in May 1999 and the third swap expires in 2019
and had notional amounts at December 31, 1995, of $91,070,000,
$38,835,000, and $80,220,000, respectively, which are reduced in
accordance with the scheduled repayments of the revenue bonds.
Under the first swap agreement, Ogden pays a fixed rate of 3.95%
per annum on a semi-annual basis and receives a floating rate based
on an index of tax-exempt, variable-rate obligations. Under the
second swap agreement, Ogden pays a fixed rate of 5.25% per annum
on a semi-annual basis and receives a floating rate based on a defined
commercial paper rate. Under the third swap agreement, Ogden pays a
fixed rate of 6.07% per annum on a semi-annual basis through 1998
and thereafter a fixed rate of 5.18% and receives a floating rate
based on a defined LIBOR-based rate. At December 31, 1995, the
floating rates on the three swaps were 4.22%, 5.87%, and 5.99%,
respectively. These swap agreements were entered into to convert
from floating rates to fixed interest rates $91,070,000 of
tax-exempt, adjustable-rate revenue bonds and $119,055,000 of
taxable, adjustable-rate revenue bonds. The counterparties to these
interest rate swaps are major financial institutions. Management
believes the credit risk associated with nonperformance by the
counterparties is not significant.
Amounts (received) or paid on these swap agreements
amounted to $(230,000), $1,400,000, and $1,500,000 for 1995, 1994,
and 1993, respectively, and were charged or (credited) to debt
service charges. The effect on Ogden's weighted-average borrowing
rate was an increase (decrease) of (.01)%, .09%, and .10% for 1995,
1994, and 1993, respectively.
The maturities on long-term project debt (expressed in
thousands of dollars) at December 31, 1995, were as follows:
1996............................... $ 55,774
1997............................... 61,873
1998............................... 68,672
1999............................... 76,092
2000............................... 77,003
Later years........................ 1,267,563
Total.............................. 1,606,977
Less current portion............... 55,774
Total long-term project debt....... $1,551,203
11. Credit Arrangements
At December 31, 1995, Ogden had unused revolving credit
lines amounting to $167,557,000, of which $160,000,000
is available under its principal revolving credit line at various
borrowing rates including prime, the Eurodollar rate plus .30%, or
certificate-of-deposit rates plus .425%. Ogden is not required to
maintain compensating balances; however, Ogden pays a facility fee
of 3/16 of 1% on its principal revolving credit line of
$200,000,000, which expires October 29, 1998.
12. Convertible Subordinated Debentures
Convertible subordinated debentures (expressed in thousands
of dollars) consisted of the following:
1995 1994
6% debentures due June 1, 2002............. $ 85,000 $ 85,000
53/4% debentures due October 20, 2002...... 63,650 63,650
Total...................................... $148,650 $148,650
The 6% convertible subordinated debentures are convertible
into Ogden common stock at the rate of one share for each $39.077
principal amount of debentures. The debentures are redeemable at
Ogden's option at 102.4% of principal amount during the year
commencing June 1, 1995, 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 1994,
the Corporation purchased $3,100,000 face value of these debentures
at prevailing market rates. The net gain on the acquisition of
these securities amounted to $620,000 and is included in Other
Income.
13. Preferred Stock
The outstanding Series A $1.875 Cumulative Convertible
Preferred Stock is convertible at any time at the rate of 5.97626
common shares for each preferred share. Ogden may redeem the
outstanding shares of preferred stock at $50 per share, plus all
accrued dividends. These preferred shares are entitled to receive
cumulative annual dividends at the rate of $1.875 per share, plus an
amount equal to 150% of the amount, if any, by which the dividend
paid or any cash distribution made on the common stock in the
preceding calendar quarter exceeded $.667 per share.
14. Common Stock and Stock Options
In 1986, Ogden adopted a nonqualified stock option plan
(the "1986 Plan"). Under 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
10-year period ending March 10, 1996. At December 31, 1995, all of
the authorized shares of this plan had been granted.
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, which was amended in 1994 to increase the
number of shares available by 3,200,000 shares, an aggregate of
6,200,000 shares of Ogden common stock is available for issuance
upon the exercise of such options, rights, and bonuses, which may be
granted over a 10-year period ending October 11, 2000; 2,158,200
shares were available for grant at December 31, 1995.
Under the foregoing plans, Ogden issued 4,466,300
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 were
granted under the ERCI plans. These options expired in 1993.
In connection with the acquisition of the minority
interest of OPI, Ogden assumed the pre-existing OPI stock option
plan then outstanding and converted these options into options to
acquire shares of Ogden common stock. No further options will be
granted under this plan.
In October 1995, the Financial Accounting Standards
Board issued SFAS No. 123, "Accounting for Stock-Based
Compensation," which is required to be adopted in the Corporation's
1996 financial statements. The Corporation expects to adopt only
the disclosure provisions of this Statement.
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, 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
Granted 22.50 115,500 (115,500)
Became exercisable 134,000
Exercised 14.98 (18,644) (18,644)
December 31, 1994, balance 14.98-28.54 1,127,543 878,043 ---
Became exercisable 18.31-28.54 157,100
Exercised 14.98 (16,618) (16,618) ---
December 31, 1995, balance 14.98-28.54 1,110,925 1,018,525
1990 Plan:
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
Increase in authorized
option shares 3,200,000
Granted 21.50-22.50 1,169,500 (1,169,500)
Became exercisable 507,500
Exercised 18.31-20.31 (109,000) (109,000)
Cancelled 18.31-23.56 (115,000) (32,000) 115,000
December 31, 1994, balance 18.31-23.56 3,585,500 1,799,800 2,382,500
Granted 20.06-22.69 409,000 (409,000)
Became exercisable 699,900
Exercised 18.31-20.31 (129,000) (129,000)
Cancelled 18.31-23.56 (184,700) (34,000) 184,700
December 31, 1995, balance 18.31-23.56 3,680,800 2,336,700 2,158,200
Conversion of ERCI Plan:
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, 1994,
and 1995, balance --- --- --- ---
Conversion of OPI Plan:
December 29, 1994 14.17-29.46 266,561 266,561 ---
December 31, 1994
and 1995, balance 14.17-29.46 266,561 266,561 ---
Total December 31, 1995 14.17-29.46 5,058,286 3,621,786 2,158,200
At December 31, 1995, there were 11,211,067 shares of common
stock reserved for the exercise of stock options and the conversion
of preferred shares and debentures.
15. Preferred Stock Purchase Rights
In 1990, the Board of Directors declared a dividend of one
preferred stock purchase right (Right) on each outstanding share of
common stock. Among other provisions, each Right may be exercised
to purchase a one one-hundredth share of a new series of cumulative
participating preferred stock at an exercise price of $80, subject
to adjustment. The Rights may only be exercised after a party has
acquired 15% or more of the Corporation's common stock or commenced
a tender offer to acquire 15% or more of the Corporation's common
stock. The Rights do not have voting rights, expire October 2,
2000, and may be redeemed by the Corporation at a price of $.01 per
Right at any time prior to the acquisition of 15% of the
Corporation's common stock.
In the event a party acquires 15% or more of the
Corporation's outstanding common stock in accordance with certain
defined terms, each Right will then entitle its holders (other than
such party) to purchase, at the Right's then-current exercise price,
a number of the Corporation's common shares having a market value of
twice the Right's exercise price. At December 31, 1995, 49,468,000
preferred stock purchase rights were outstanding.
16. Sale of Limited Partnership Interests
In 1994, revenues include $26,100,000 from the sale of
limited partnership interests in and related tax benefits of the
Onondaga County waste-to-energy facility, which was partially offset
by the recapture of investment tax credits and minority interests.
17. Foreign Exchange
Foreign exchange translation adjustments for 1995, 1994,
and 1993, amounting to $(1,258,000), $3,240,000, and $(2,095,000),
respectively, have been credited (charged) directly to Shareholders'
Equity. Foreign exchange transaction adjustments, amounting to
$1,590,000 and $(1,844,000), have been credited (charged) directly
to income for 1995 and 1994, respectively.
18. Debt Service Charges
Debt service charges for Ogden's project debt (expressed in
thousands of dollars) consisted of the following:
1995 1994 1993
Interest incurred on taxable and
tax-exempt borrowings $112,029 $109,586 $107,846
Interest earned on temporary investment
of borrowings during construction, etc. 4,908 6,782 9,985
Net interest incurred 107,121 102,804 97,861
Interest capitalized during construction
in property, plant, and equipment 1,512 8,893 5,538
Interest expense net 105,609 93,911 92,323
Amortization of bond issuance costs 6,241 6,447 6,341
Debt service charges $111,850 $100,358 $ 98,664
19. 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):
1995 1994
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
Benefits Assets Benefits Assets
Accumulated Benefit
Obligation:
Vested $ 7,015 $ 9,724 $ 5,408 $ 7,800
Nonvested 389 501 311 413
Total $ 7,404 $10,225 $ 5,719 $ 8,213
Projected benefit
obligation for services
rendered to date $10,773 $14,319 $ 8,278 $11,733
Plan assets at fair value 10,325 5,581 7,832 5,138
Underfunded projected
benefits $ 448 $ 8,738 $ 446 $ 6,595
Source of Underfunded
Status:
Unrecognized net (loss)
from past experience
different from that
assumed and effects of
changes in assumptions $ (480) $(1,241) $(1,251) $ (625)
Unrecognized net
transition asset
(obligation) at
January 1, 1986, being
recognized over 13 years 494 (400) 566 (390)
Pension liability costs (961) (4,146) (412) (1,997)
Unrecognized prior service
costs 499 (2,951) 651 (3,583)
Underfunded projected
benefits $ 448 $ 8,738 $ 446 $ 6,595
At December 31, 1995 and 1994, the accumulated benefit
obligation of certain pension plans exceeded plan assets. The
Corporation's liability for those plans was increased by $2,033,000
and $1,677,000 at December 31, 1995 and 1994, respectively. Such
amounts were offset by intangible assets and reductions in
Shareholders' Equity, net of income taxes of $760,000 and $441,000
at December 31, 1995 and 1994, respectively.
Pension costs for Ogden's defined plans included the
following components (expressed in thousands of dollars):
1995 1994 1993
Service cost on benefits earned
during the period $2,078 $1,979 $1,610
Interest cost on projected
benefit obligation. 1,716 1,629 1,457
Net amortization and deferral 2,584 (436) 40
Actual return on plan assets (3,260) 32 (979)
Net periodic pension cost $3,118 $3,204 $2,128
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 1995, 8 1/4% and 5% for 1994, and 7 1/2% and 4
1/2% for 1993, 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
$10,358,000, $12,052,000, and $13,061,000 in 1995, 1994, and 1993,
respectively. Plan assets at December 31, 1995, 1994, and 1993,
primarily consisted of common stocks, United States government
securities, and guaranteed insurance contracts.
With respect to union employees, the Corporation is
required under contracts with various unions to pay, generally based
on hours worked, retirement, health, and welfare benefits. These
multiemployer defined benefit and defined contribution plans are not
controlled or administered by the Corporation. The amount charged
to expense for such plans during 1995, 1994, and 1993 was
$27,900,000, $30,100,000, and $32,000,000, respectively.
20. 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 years ended December 31, 1995 and 1994, the
components of the periodic expense for these benefits were as follows:
Recognition of Components of Net Periodic Postretirement
Benefit Costs for the Years Ended December 31:
1995 1994
Service costs $131,966 $162,107
Interest 755,944 775,142
Amortization of unrecognized net (gain) loss (22,113) 67,820
Total $865,797 $1,005,069
As of December 31, 1995 and 1994, the actuarial recorded
liabilities for these postretirement benefits, none of which have
been funded, were as follows:
Accumulated Postretirement Benefit Obligation:
Retirees $ 4,352,614 $3,884,885
Eligible active participants 4,832,637 4,581,234
Other active 1,740,792 1,480,725
Total accumulated postretirement obligation 10,926,043 9,946,844
Unrecognized net loss 611,978 117,947
Accrued postretirement benefit liability $10,314,065 $9,828,897
The accumulated postretirement benefit obligation was
determined using discount rates of 7 1/2% and 8 1/4%; an
estimated increase in compensation levels of 4 1/2% and 5% for 1995
and 1994, respectively; and a health care cost rate of approximately
14 1/2%, decreasing in subsequent years until it reaches 6% in the
year 2008 and thereafter. The effect of a one percentage point
increase in the assumed health care cost trend rates for each future
year on the aggregate of the service and interest cost components of
net periodic postretirement health care benefit cost and the
accumulated postretirement benefit obligation for health care
benefits would be $77,711 and $716,704, respectively.
21. Impairment of Long-Lived Assets
Ogden adopted the provisions of SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed of," in the fourth quarter of 1995. SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles held and
used by an entity, including any goodwill related to these assets,
be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying value of such assets may
not be recoverable. In performing this review for recoverability,
the Corporation estimated future cash flows expected from the use
of such assets and their eventual disposition. If the sum of
expected future cash flows (undiscounted) was less than the carrying
value of the assets, an impairment loss was recognized. The Statement
also requires that long-lived assets and certain identifiable
intangibles to be disposed of be reported at the lower of carrying
value or fair value less the costs to sell.
The effect of recognizing SFAS No. 121 resulted in a
pretax charge of $45,300,000 and an after-tax charge of $34,700,000,
or $.70 per share. This charge included estimated losses on the
disposal of noncore businesses, as announced in the fourth quarter
of 1995, of $32,800,000 and the write-down of other long-lived
assets of $12,500,000. The loss of $32,800,000 on the assets to be
disposed of was based on the Corporation's estimate of realizable or
liquidation values of the operations and bids received from
prospective purchasers. The impairment loss of $12,500,000 on other
long-lived assets represents the difference between the carrying
amount of the assets and their estimated fair values, which was
determined based on operating projections and future discounted cash
flows. The remaining carrying value of these assets is not
significant. These amounts were charged to cost of goods sold
($4,500,000) and operating expenses ($40,800,000) in the
accompanying financial statements.
22. Other Charges
During 1995, the Corporation recognized unusual charges of
$37,500,000, which were reduced by a $13,500,000 gain on the sale of
a noncore business in the fourth quarter for a net charge of
$24,000,000. The charge of $37,500,000 includes, in the second
quarter, $17,100,000 at Ogden Communications, Inc. (OCI), for the
write-off of receivables of $10,300,000 and related costs recorded
in connection with a telecommunications project at OCI, as well as a
loss on the disposal of inventory of $3,900,000 and costs related to
the curtailment of operations of $2,900,000; and in the fourth
quarter, $8,200,000 for costs, principally severance pay relating to
restructuring activities, and $12,200,000 representing the
write-down of deferred charges relating to a previously awarded
waste-to-energy project that is not expected to be completed;
unusual waste-to-energy repair costs; and an adjustment of inventory
balances resulting from a physical inventory. The $17,100,000
charge at OCI resulted from a review of the activities of this unit
during which the Corporation concluded that contracts and other
documentation did not provide a basis for recovering any of the
accounts receivable related to the telecommunications project and
that the sale of inventory would not recover its full carrying
value. In addition, the Corporation decided to discontinue the
business of OCI and estimated the costs relating thereto.
These amounts were charged to sales allowances
($10,300,000); operating costs ($3,800,000); cost of goods sold
($6,000,000); and selling, administrative, and general expenses
($3,900,000) in the accompanying financial statements. The gain on
the sale of the noncore business of $13,500,000 was included as a
reduction of operating expenses.
In December 1991, the Corporation discontinued 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.
In December 1993, the Corporation discontinued its
fixed-site hazardous waste business. Provision was made in 1993 for
the write-down of assets, primarily development costs, resulting in
a pretax loss of $12,629,000.
In addition, 1995 operating expenses include
$3,500,000 for the settlement of litigation relating to the
discontinuance of the fixed-site hazardous waste business. For
the year ended December 31, 1993, the $250,000 net loss from both
discontinued operations is reported as Operating Costs and
Expenses in the Statements of Consolidated Income.
23. Income Taxes
The components of the provision for income taxes
(expressed in thousands of dollars) were as follows:
1995 1994 1993
Current:
Federal......................... $6,444 $10,141 $ 453
State........................... 5,038 11,616 6,999
Foreign......................... 4,602 2,422 1,476
Total current................... 16,084 24,179 8,928
Deferred:
Federal......................... 17,120 36,520 43,295
State........................... 1,033 1,184 4,303
Total deferred.................. 18,153 37,704 47,598
Total provision for income taxes.. $34,237 $61,883 $56,526
The current provision for Federal income tax results
principally from the alternative minimum tax. 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. As a consequence, 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 provision for income taxes (expressed in thousands
of dollars) varied from the Federal statutory income tax rate due to
the following:
1995 1994 1993
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 $14,184 35.0% $48,777 35.0% $43,925 35.0%
Adjustment of deferred
income tax benefits 4,066 3.2
State income taxes, net of
Federal tax benefit 3,946 9.7 8,320 6.0 7,346 5.8
Recapture (benefit) of
investment tax credits 1,807 1.3 (1,807) (1.4)
Foreign taxes and non-
deductible foreign losses 6,694 16.5 1,425 1.0 1,982 1.6
Amortization of goodwill 1,206 3.0 1,030 .7 838 .7
Write-down of goodwill 5,263 13.0
Pooling-related taxes and
costs 1,807 4.5
Other net 1,137 2.8 524 .4 176 .1
Provision for income taxes $34,237 84.5% $61,883 44.4% $56,526 45.0%
The components of the net deferred income tax liability
(expressed in thousands of dollars) as of December
31, 1995 and 1994, were as follows:
1995 1994
Deferred Tax Assets:
Deferred income..................... $ 14,387 $ 16,291
Accrued expenses.................... 47,125 51,055
Other liabilities................... 13,500 16,779
Investment tax credits.............. 28,930 31,064
Alternative minimum tax credits..... 27,521 19,387
Net operating loss carryforwards.... 120,298 137,488
Total deferred tax assets........... 251,761 272,064
Deferred Tax Liabilities:
Unbilled accounts receivable........ 48,734 47,119
Property, plant, and equipment...... 448,334 445,699
Other............................... 33,114 33,860
Total deferred tax liabilities...... 530,182 526,678
Net deferred tax liability.......... $278,421 $254,614
Deferred tax assets and liabilities are presented as follows
in the accompanying balance sheets:
1995 1994
Net deferred tax liability noncurrent... $310,400 $281,065
Less net deferred tax asset current..... 31,979 26,451
Net deferred tax liability.............. $278,421 $254,614
At December 31, 1995, for Federal income tax purposes, the
Corporation had investment and energy tax credit carryforwards
of approximately $28,930,000 and net operating loss carryforwards
of approximately $299,170,000, which will expire in 2004 through
2008. Deferred Federal income taxes have been reduced by the tax
effect of these amounts.
24. Leases
Total rental expense amounted to $93,396,000, $77,190,000,
and $73,138,000 (net of sublease income of $193,000, $328,000, and
$2,606,000) for 1995, 1994, and 1993, respectively. Included in
rental expense are amounts based on contingent factors (principally
sales) in excess of minimum rentals, amounting to $21,676,000,
$15,181,000, and $19,836,000 for 1995, 1994, and 1993, respectively.
Principal leases are for leaseholds, sale and leaseback
arrangements on waste-to-energy facilities, trucks and automobiles,
airplane, and machinery and equipment. Some of these operating
leases have renewal options.
The following is a schedule (expressed in thousands of
dollars), by year, of future minimum rental payments required under
operating leases that have initial or remaining noncancelable lease
terms in excess of one year as of December 31, 1995:
1996............................... $ 65,007
1997............................... 62,854
1998............................... 61,528
1999............................... 54,042
2000............................... 44,564
Later years........................ 350,596
Total.............................. $638,591
These future minimum rental payment obligations include
$108,183,000 of future nonrecourse rental payments that
relate to a waste-to-energy facility, which are supported by
third-party commitments to provide sufficient service revenues to
meet such obligations. Also included are $85,792,000 of nonrecourse
rental payments relating to a hydroelectric power generating
facility operated by a special-purpose subsidiary, which are
supported by contractual power purchase obligations of a third party
and which are expected to provide sufficient revenues to make the
rent payments. These nonrecourse rental payments (in thousands of
dollars) are due as follows:
1996............................... $ 18,698
1997............................... 19,197
1998............................... 19,492
1999............................... 20,797
2000............................... 21,402
Later years........................ 94,389
Total.............................. $193,975
25. 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:
1995 1994 1993
Primary................... 49,385,000 43,610,000 43,378,000
Assuming full dilution.... 49,691,000 43,939,000 43,776,000
26. Commitments and Contingent Liabilities
Ogden and certain of its subsidiaries have issued or are
party to performance bonds and guarantees and related contractual
obligations undertaken mainly pursuant to agreements to construct
and operate certain waste-to-energy, entertainment, and other
facilities. In the normal course of business, they are involved in
legal proceedings in which damages and other remedies are sought.
Management does not expect that these contractual obligations, legal
proceedings, or any other contingent obligations incurred in the
normal course of business will have a material adverse effect on
Ogden's Consolidated Financial Statements.
During 1994, a subsidiary of the Corporation entered
into a 30-year facility management contract pursuant to which it
agreed to advance funds to a customer, if necessary, to assist
refinancing senior secured debt incurred in connection with
construction of the facility. Such refinancing requirements are not
expected to exceed $75,000,000 at maturity of the senior secured
debt, which is expected to be on or about March 1, 2001. In
addition, at December 31, 1995, the Corporation has guaranteed
indebtedness of $6,200,000 of an affiliate and principal tenant of
this customer. 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) and has guaranteed
borrowings of certain customers amounting to approximately
$29,200,000. Management does not expect that these arrangements
will have a material adverse effect on Ogden's Consolidated
Financial Statements.
As of December 31, 1995, capital commitments amounted
to $53,400,000 for normal replacement, modernization, and growth in
Services' ($42,100,000) and Projects' ($11,300,000) operations. In
addition, compliance with recently promulgated standards and
guidelines under the Clean Air Act Amendments of 1990 may require
additional capital expenditures of $30,000,000 during the next four
years.
27. Information Concerning Business Segments
Ogden classifies its business segments as Services and
Projects. The Services segment includes principally ground
services, fueling, cargo, food catering, and related services to the
aviation industry; food and beverage, janitorial, maintenance, and
other services related to the management and operations of arenas,
stadiums, amphitheaters, and parks; management, maintenance,
security, janitorial, and related services to commercial office
buildings and industrial and other facilities; and professional
technical and environmental consulting services to a wide range of
customers. The Projects segment includes all of Ogden's
waste-to-energy activities, its independent power business, the
operation of two geothermal power stations and related well field
activities and a hydroelectric power station, its water and wastewater
project business, and its construction activities all of which
activities are commonly managed by Projects.
The operations of these two segments are performed
principally in the United States.
Revenues and income from continuing operations
(expressed in thousands of dollars) for the years ended December 31,
1995, 1994, and 1993, were as follows:
1995 1994 1993
Revenues:
Services................... $1,560,987 $1,379,450 $1,330,104
Projects................... 624,006 725,097 705,756
Total revenues............. $2,184,993 $2,104,547 $2,035,860
Income from Operations:
Services................... $ (17,832) $ 50,674 $ 60,193
Projects................... 79,382 104,137 80,272
Total income from operations.... 61,550 154,811 140,465
Equity in Net Income of Investees
and Joint Ventures:
Services........................ 2,443 2,045 3,418
Projects........................ 4,423 5,638 3,477
Total........................... 68,416 162,494 147,360
Corporate unallocated income and
expenses net (12,525) (12,184) (10,751)
Corporate interest net....... (15,365) (10,946) (11,108)
Consolidated Income from
Continuing Operations
Before Income Taxes and
Minority Interest $ 40,526 $ 139,364 $ 125,501
In 1995, income from operations of Services and
Projects reflects pretax charges of $56,900,000 and $12,400,000,
respectively, reflecting the adoption of SFAS No. 121 and other
unusual charges (see Notes 21 and 22).
Services' revenues include $250,300,000, $248,500,000,
and $245,100,000 from the United States government contracts for the
years ended December 31, 1995, 1994, and 1993, respectively.
Total revenues by segment reflect sales to unaffiliated
customers. In computing income from operations, none of the
following have been added or deducted: unallocated corporate
expenses, nonoperating interest expense, interest income, and income
taxes.
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,
1995, 1994, and 1993, is as follows:
Identifiable Depreciation and Capital
Assets Amortization Additions
1995
Services.......... $ 903,218 $ 45,344 $ 57,424
Projects.......... 2,558,411 63,397 35,391
Corporate......... 191,042 863 11
Consolidated...... $3,652,671 $109,604 $ 92,826
1994
Services.......... $ 800,011 $ 39,658 $ 37,207
Projects.......... 2,556,655 49,061 82,418
Corporate......... 288,220 1,826 22
Consolidated...... $3,644,886 $ 90,545 $119,647
1993
Services.......... $ 719,964 $ 35,973 $ 33,877
Projects.......... 2,361,499 47,186 81,852
Corporate......... 259,266 2,484 471
Consolidated...... $3,340,729 $ 85,643 $116,200
28. Supplemental Disclosure of Cash Flow Information
(Expressed in thousands of dollars) 1995 1994 1993
Cash Paid for Interest and Income Taxes:
Interest (net of amounts capitalized) $140,878 $119,188 $114,381
Income taxes 9,885 8,298 3,197
Noncash Investing and Financing
Activities:
Conversion of preferred shares for
common shares 4 3 5
Conversion of debentures for common
shares 1,287
Contract acquisition costs, etc. 22,539
Future contract obligations (22,539)
Purchase of Minority Interest:
Common stock issued 94,446
Adjustment to net assets for excess
of purchase price over book value
of net assets acquired 21,589
Detail of Entities Acquired:
Fair value of assets acquired 32,293 158,212 76,875
Liabilities assumed (16,819) (125,808) (22,651)
Net cash paid for acquisitions 15,474 32,404 54,224
29. Fair Value of Financial Instruments
The following disclosure of the estimated fair value of
financial instruments is made in accordance with the requirements of
SFAS No. 107, "Disclosures About Fair Value of Financial
Instruments." The estimated fair-value amounts have been determined
using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily
required in interpreting market data to develop estimates of fair
value. Accordingly, the estimates presented herein are not
necessarily indicative of the amounts that Ogden would realize in
a current market exchange.
The estimated fair value (expressed in thousands of
dollars) of financial instruments at December 31, 1995 and 1994, is
summarized as follows:
1995 1994
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
Assets:
Cash and cash equivalents $ 96,782 $ 96,782 $ 117,359 $ 117,359
Marketable securities
available for sale 30,477 30,477 99,086 99,086
Receivables 789,397 791,712 743,480 748,807
Restricted funds 313,789 315,987 318,699 317,631
Other assets 4,957 4,957 12,900 12,900
Liabilities:
Long-term debt 299,247 322,016 307,876 298,648
Convertible subordinated
debentures 148,650 137,608 148,650 119,770
Project debt 1,606,977 1,694,722 1,639,267 1,661,813
Other liabilities 76,944 79,449 34,906 28,794
Off Balance-Sheet Financial
Instruments:
Unrealized losses on interest
rate swap agreements 6,839 9,355
Unrealized gains on interest
rate swap agreements 1,103 8,716
The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for
which it is practicable to estimate that value:
For cash and cash equivalents, the carrying value of
these amounts is a reasonable estimate of their fair value. The
fair value of long-term unbilled receivables is estimated by using a
discount rate that approximates the current rate for comparable
notes. 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 were
determined based on interest rates that are currently available to
the Corporation for issuance of debt with similar terms and
remaining maturities for debt issues that are not traded 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 based on third-party quotations.
The fair value of Ogden financial guarantees provided on behalf of
ITO and customers (see Note 26) 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,
1995 and 1994. 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.
Independent Auditors' Report
Deloitte & Touche llp
Two World Financial Center
New York, NY 10281
The Board of Directors and Shareholders of Ogden Corporation:
We have audited the accompanying consolidated balance sheets of Ogden
Corporation and subsidiaries as of December 31, 1995 and 1994 and the related
statements of shareholders' equity, consolidated income and cash flows for
each of the three years in the period ended December 31, 1995. 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,
1995 and 1994 and the results of their operations and cash flows for each
of the three years in the period ended December 31, 1995 in conformity with
generally accepted accounting principles.
As discussed in Note 1 to the financial statements, in 1995 the
Corporation adopted Statement of Financial Accounting Standards No. 121
relating to long-lived assets and long-lived assets to be disposed of. In
1994 the Corporation changed its methods of accounting for postemployment
benefits to conform with Statement of Financial Accounting Standards No. 112
and for certain investments in debt and equity securities to conform with
Statement of Financial Accounting Standards No. 115. 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.
February 5, 1996
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.
R. Richard Ablon Philip G. Husby
President and Senior Vice President,
Chief Executive Officer Chief Financial Officer, and
Treasurer
Ogden Corporation and Subsidiaries
Quarterly Results of Operations
1995 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
(In thousands of dollars,
except per-share amounts)
Total revenues........ $502,408 $537,645 $588,402 $556,538
Gross profit.......... $85,650 $82,406 $106,547 $31,330
Net income............ $12,092 $10,080 $23,828 $(38,556)
Earnings (loss) per
common share......... $0.24 $0.21 $0.48 $(0.78)
Earnings (loss) per
common share
assuming full dilution $0.24 $0.21 $0.48 $(0.78)
1994 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
(In thousands of dollars,
except per-share amounts)
Total revenues.......... $478,424 $526,424 $544,296 $555,403
Gross profit............ $86,381 $95,975 $95,852 $99,779
Income before cumulative
effect of a change
in accounting principle $15,328 $17,640 $18,742 $16,116
Cumulative effect of a change
in accounting principle (1,520)
Net income............... $13,808 $17,640 $18,742 $16,116
Earnings (Loss) Per Common
Share:
Income before cumulative
effect of a change
in accounting principle $0.35 $0.40 $0.43 $0.37
Cumulative effect of a change
in accounting principle (0.03)
Total.................... $0.32 $0.40 $0.43 $0.37
Earnings (Loss) Per Common
Share Assuming Full Dilution:
Income before cumulative
effect of a change
in accounting principle $0.34 $0.40 $0.43 $0.37
Cumulative effect of a change
in accounting principle (0.03)
Total..................... $0.31 $0.40 $0.43 $0.37
The cumulative effect of a change in accounting principle reflects the
adoption of SFAS No. 112, "Employers' Accounting for Postemployment
Benefits," effective January 1, 1994.
Ogden Corporation and Subsidiaries
Price Range of Stock and Dividend Data
1995 1994
High Low High Low
Common:
First Quarter.......... 21 1/2 18 1/2 24 3/8 21 3/4
Second Quarter......... 22 3/8 19 7/8 23 3/8 19 7/8
Third Quarter.......... 23 7/8 22 23 1/8 20 1/2
Fourth Quarter......... 24 19 7/8 21 5/8 17 3/4
Preferred:
First Quarter.......... 120 113 1/2 137 137
Second Quarter......... Not Traded 128 1/2 128 1/2
Third Quarter.......... 134 3/8 134 3/8 131 1/2 131 1/2
Fourth Quarter......... 139 133 5/8 122 122
Quarterly common stock dividends of $.3125 per share were paid to
shareholders of record for the four quarters of 1995 and 1994,
the dividends for the last quarters of 1995 and 1994 being paid in January of
the subsequent years. Quarterly dividends of $.8376 were paid for the four
quarters of 1995 and 1994 on the $1.875 preferred stock.
Ogden common and $1.875 preferred stocks are listed on the New York Stock
Exchange.