FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-3122
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OGDEN CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 13-5549268
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(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) Number)
TWO PENNSYLVANIA PLAZA, NEW YORK, NEW YORK 10121
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(Address or principal executive office) (Zip Code)
(212) 868-6000
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(Registrant's telephone number including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
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APPLICABLE ONLY TO CORPORATE ISSUES:
The number of shares outstanding of each of the issuer's classes of common
stock, as of September 30, 2000; 49,640,059 shares of Common Stock, $.50 par
value per share.
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
For the Nine Months Ended For the Three Months Ended
September 30, September 30,
------------- -------------
2000 1999 2000 1999
---- ---- ---- ----
(In thousands of dollars, except per share amounts)
Service revenues $ 655,750 $ 595,787 $ 220,252 $ 208,165
Net sales 32,647 39,975 12,697 13,437
Construction revenues 55,568 101,091 13,841 33,221
Net gain (loss) on disposition of businesses (1,044) 5,664 (410) 800
-------- -------- -------- --------
Total revenues 742,921 742,517 246,380 255,623
-------- -------- -------- --------
Operating costs and expenses 486,140 416,637 162,950 150,212
Costs of goods sold 28,605 43,791 10,482 14,652
Construction costs 62,989 97,332 18,720 32,123
Selling, administrative and general expenses 74,209 63,165 24,781 20,103
Debt service charges 69,738 70,879 23,365 24,180
-------- -------- -------- --------
Total costs and expenses 721,681 691,804 240,298 241,270
-------- -------- -------- --------
Consolidated operating income 21,240 50,713 6,082 14,353
Equity in net income of investees and joint ventures 15,814 9,372 8,357 3,428
Interest income 6,239 3,605 3,563 808
Interest expense (32,328) (25,411) (11,436) (9,038)
Other income (deductions) - net (22,706) 5,137 (5,302) (37)
-------- -------- -------- --------
Income (loss) from continuing operations before income taxes, minority
interests, and the cumulative effect of change in accounting
principle (11,741) 43,416 1,264 9,514
Income taxes 3,003 (11,558) 2,422 (525)
Minority interests (3,149) (3,178) (985) (636)
-------- -------- -------- --------
Income (loss) from continuing operations (11,887) 28,680 2,701 8,353
-------- -------- -------- --------
Discontinued operations:
Loss from operations of discontinued Aviation and Entertainment
segments (net of income taxes YTD, 1999, $15,022;
Qtr., 1999, $2,598) (883) (16,069)
Loss on disposal of Aviation and Entertainment segments, including
pre tax operating losses YTD, $55,834; Qtr., $9,125 (less
applicable income taxes YTD, ($29,272); Qtr.,($16,518)) (128,871) (37,072)
-------- -------- -------- --------
Loss from discontinued operations (128,871) (883) (37,072) (16,069)
-------- -------- -------- --------
Cumulative effect of change in accounting principle (net of income
taxes of ($1,313)) (3,820)
-------- -------- -------- --------
Net Income (Loss) (140,758) 23,977 (34,371) (7,716)
-------- -------- -------- --------
Other Comprehensive Income, Net of Tax:
Foreign currency translation adjustments (6,272) (5,577) 1,428 1,780
Less: Reclassification adjustment for losses included in discontinued
operations 25,332 25,332
Unrealized holding gains (losses) arising during period (295) (320) (278) 229
Less: Reclassification adjustment for gains included in net income (666) (666)
-------- -------- -------- --------
Other comprehensive income 18,765 (6,563) 26,482 1,343
-------- -------- -------- --------
Comprehensive Income (Loss) $ (121,993) $ 17,414 $ (7,889) $ (6,373)
======== ======== ======== ========
BASIC EARNINGS PER SHARE:
Income (loss) from continuing operations $ (0.24) $ 0.59 $ 0.05 $ 0.17
Income (loss) from discontinued operations (2.60) (0.02) (0.75) (0.33)
Cumulative effect of change in accounting principle (0.08)
-------- -------- -------- --------
Net Income (Loss) $ (2.84) $ 0.49 $ (0.70) $ (0.16)
======== ======== ======== ========
DILUTED EARNINGS PER SHARE:
Income (loss) from continuing operations $ (0.24) $ 0.58 $ 0.05 $ 0.17
Income (loss) from discontinued operations (2.60) (0.02) (0.75) (0.33)
Cumulative effect of change in accounting principle (0.08)
-------- -------- -------- --------
Net Income (Loss) $ (2.84) $ 0.48 $ (0.70) $ (0.16)
======== ======== ======== ========
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
September 30, December 31,
2000 1999
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(In thousands of dollars, except
share and per share amounts)
ASSETS
Current Assets:
Cash and cash equivalents $ 59,515 $ 101,020
Restricted cash - intended to repay debt 147,950
Restricted funds held in trust 121,843 103,662
Receivables (less allowances: 2000, $13,827 and 1999, $17,942) 282,774 294,051
Inventories 11,586 10,767
Deferred income taxes 36,939 36,189
Other 80,810 79,052
Net assets of discontinued operations 216,233 568,146
--------- ---------
Total current assets 957,650 1,192,887
Property, plant and equipment - net 1,806,839 1,841,811
Restricted funds held in trust 152,342 166,784
Unbilled service and other receivables 175,642 159,457
Unamortized contract acquisition costs 89,835 94,998
Goodwill and other intangible assets 15,028 12,520
Investments in and advances to investees and joint ventures 216,373 180,523
Other assets 62,801 78,168
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Total Assets $ 3,476,510 $ 3,727,148
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Current Liabilities:
Current portion of long-term debt $ 102,050 $ 113,815
Current portion of project debt 97,183 80,383
Accounts payable 54,277 75,169
Accrued expenses, etc. 307,349 360,155
Deferred income 32,222 45,806
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Total current liabilities 593,081 675,328
Long-term debt 353,809 344,945
Project debt 1,337,747 1,390,832
Deferred income taxes 363,064 380,812
Deferred income 174,751 182,663
Other liabilities 149,368 127,559
Minority interests 33,259 33,309
Convertible subordinated debentures 148,650 148,650
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Total Liabilities 3,153,729 3,284,098
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Shareholders' Equity:
Serial cumulative convertible preferred stock, par value $1.00
per share; authorized 4,000,000 shares; shares outstanding: 35,582
in 2000 and 39,246 in 1999, net of treasury shares of 29,820
in 2000 and 1999 36 39
Common stock, par value $.50 per share; authorized 80,000,000
shares; shares outstanding: 49,640,059 in 2000 and 49,468,195 in
1999, net of treasury shares of 4,270,515 and 4,405,103 in 2000
and 1999, respectively 24,820 24,734
Capital surplus 185,606 183,915
Earned surplus 114,374 255,182
Accumulated other comprehensive income (2,055) (20,820)
--------- ---------
Total Shareholders' Equity 322,781 443,050
--------- ---------
Total Liabilities and Shareholders' Equity $ 3,476,510 $ 3,727,148
========= =========
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Nine Months Ended Year Ended
September 30, 2000 December 31, 1999
--------------------- -----------------------
Shares Amounts Shares Amounts
------ ------- ------ -------
(In thousands of dollars, except per share amounts)
Serial Cumulative Convertible Preferred Stock, Par Value
$1.00 Per Share; authorized 4,000,000 Shares;
Balance at beginning of period 69,066 $ 69 72,038 $ 73
Shares converted into common stock (3,664) (3) (2,972) (4)
---------- ------ ---------- ------
Total 65,402 66 69,066 69
Treasury Shares (29,820) (30) (29,820) (30)
---------- ------ ---------- ------
Balance at end of period (aggregate involuntary
liquidation value, 2000, $717) 35,582 36 39,246 39
---------- ------ ---------- ------
Common Stock, Par Value $.50 Per Share;
Authorized, 80,000,000 shares:
Balance at beginning of period 53,873,298 26,937 53,507,952 26,754
Exercise of stock options 155,801 78
Shares issued for acquisition 15,390 8 191,800 96
Conversion of preferred shares 21,886 11 17,745 9
---------- ------ ---------- ------
Total 53,910,574 26,956 53,873,298 26,937
---------- ------ ---------- ------
Treasury shares at beginning of period 4,405,103 2,203 4,561,963 2,281
Purchase of treasury shares 102,000 51
Issuance of restricted stock (134,588) (67)
Exercise of stock options (258,860) (129)
---------- ------ ---------- ------
Treasury shares at end of period 4,270,515 2,136 4,405,103 2,203
---------- ------ ---------- ------
Balance at end of period 49,640,059 24,820 49,468,195 24,734
---------- ------ ---------- ------
Capital Surplus:
Balance at beginning of period 183,915 173,413
Exercise of stock options 8,061
Issuance of restricted stock 1,527
Shares issued for acquisition 172 4,904
Purchase of treasury shares (2,458)
Conversion of preferred shares (8) (5)
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Balance at end of period 185,606 183,915
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Earned Surplus:
Balance at beginning of period 255,182 367,984
Net Loss (140,758) (81,961)
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Total 114,424 286,023
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Preferred dividends-per share 2000, $1.40625 and 1999, $3.35 50 137
Common dividends-per share 1999, $.625 30,704
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Total dividends 50 30,841
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Balance at end of period 114,374 255,182
------- -------
Cumulative Translation Adjustment - Net (1,603) (20,663)
------- -------
Minimum Pension Liability Adjustment (307) (307)
------- -------
Net Unrealized Gain (Loss) on Securities Available for Sale (145) 150
------- -------
CONSOLIDATED SHAREHOLDERS' EQUITY $ 322,781 $ 443,050
======= =======
OGDEN CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Nine Months Ended
September 30,
-------------------------
2000 1999
------ -----
(In thousands of dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (140,758) $ 23,977
Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by
(Used in) Operating Activities of Continuing Operations:
Loss from discontinued operations 128,871 883
Depreciation and amortization 76,653 65,553
Deferred income taxes (561) 3,500
Cumulative effect of change in accounting principle 3,820
Other (320) (18,954)
Management of Operating Assets and Liabilities:
Decrease (Increase) in assets:
Receivables (1,191) (20,301)
Inventories (972) 1,614
Other assets 792 77
Increase (Decrease) in Liabilities:
Accounts payable (19,366) 22,316
Accrued expenses (81,508) (11,156)
Deferred income (14,814) 1,072
Other liabilities 958 (30,779)
-------- --------
Net cash provided by (used in) operating activities of
continuing operations (52,216) 41,622
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of business and other 4,577 9,760
Proceeds from sale of property, plant and equipment 6,233 3,061
Proceeds from sale of marketable securities available for sale 3,650 59,438
Proceeds from sale of investment 5,138
Entities purchased, net of cash acquired (69,494)
Investments in facilities (24,169) (27,906)
Other capital expenditures (16,685) (14,418)
Decrease in other receivables 3,625 846
Distributions from investees and joint ventures 7,793 10,510
Increase in investments in and advances to investees and joint ventures (27,979) (33,278)
-------- --------
Net cash used in investing activities of continuing operations (42,955) (56,343)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings for facilities 94,975 135,110
New debt 87,769
Decrease (increase) in funds held in trust (3,745) 14,364
Increase in restricted cash (147,950)
Payment of debt (136,215) (170,845)
Dividends paid (50) (46,210)
Purchase of treasury shares (2,509)
Proceeds from exercise of stock options 4,892
Other (3,199) (3,868)
-------- --------
Net cash provided by (used in) financing activities of continuing operations (196,184) 18,703
-------- --------
Net cash provided by (used in) discontinued operations 249,850 (66,026)
-------- --------
Net Decrease in Cash and Cash Equivalents (41,505) (62,044)
Cash and Cash Equivalents at Beginning of Period 101,020 181,169
-------- --------
Cash and Cash Equivalents at End of Period $ 59,515 $ 119,125
======== ========
OGDEN CORPORATION AND SUBSIDIARIES
SEPTEMBER 30, 2000
ITEM 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with the instructions to Form 10-Q and, therefore, do not include all
information and footnotes necessary for a fair presentation of financial
position, results of operations, and cash flows in conformity with generally
accepted accounting principles. However, in the opinion of management, all
adjustments consisting of normal recurring accruals necessary for a fair
presentation of the operating results have been included in the statements.
On January 1, 1999 Ogden Corporation (hereinafter together with its consolidated
subsidiaries referred to as "Ogden" or the "Company") adopted the American
Institute of Certified Public Accountants Statement of Position (SOP) 98-5
"Reporting on the Costs of Start-Up Activities." This SOP established accounting
standards for these costs and requires they generally be expensed as incurred.
The effect of the adoption of this SOP was a charge of $3,820,000 net of income
taxes of $1,313,000 recorded as a cumulative effect of change in accounting
principle in the accompanying financial statements.
The accompanying financial statements for the prior periods have been
reclassified as to certain amounts to conform with the 2000 presentation.
In June 1998, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS No. 133 established accounting and
reporting standards for derivative instruments and for hedging activities. In
June 2000, the FASB issued SFAS No. 138, which amends certain provisions of SFAS
No. 133. The Company will adopt SFAS No. 133 and the corresponding amendments
under SFAS No. 138 on January 1, 2001 and is in the process of determining the
impact that adoption of these SFASs will have on the Company's consolidated
financial position and results of operations. It is expected to have no impact
on cash flows.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin ("SAB") No. 101, "Revenue Recognition in Financial
Statements." This SAB provides guidance on the recognition, presentation, and
disclosure of revenue, and will be implemented by the Company in the quarter
ending December 31, 2000. The Company continues to study the SAB, however, it is
anticipated that its adoption will not materially affect the Company's
consolidated financial position and results of operations.
DISCONTINUED OPERATIONS:
On September 29, 1999, the Board of Directors of the Company approved a plan to
dispose of all of the operations of the Entertainment and Aviation segments and
to report the results of operations from those segments prospectively as
Discontinued Operations. Information for two segments previously reflected under
the segment headings "Energy" and "Other" are now reported as Continuing
Operations and will continue to be reported under those headings. At September
30, 2000, the Company had approximately $216,000,000 in net assets associated
with its discontinued operations. In addition, the Company had associated debt
with respect to the discontinued operations of approximately $38,000,000. Since
September 29, 1999 the Company has retained financial advisors to assist it in
determining how best to group the assets to maximize sales proceeds. As part of
that process, in the third quarter of 2000, the Company announced the sales of
its Aviation Ground Services business and its Aviation Fixed Base Operations
business. The Company expects to close those transactions in the fourth quarter
of this year. The Company is currently in various phases of negotiations with
respect to the disposition of the remaining Aviation and Entertainment
businesses. Also, certain aspects of the businesses will require the Company to
pay monies to terminate leases or cancel other contractual commitments. As a
result of the final negotiations on the above-mentioned transactions, and
further progress on the sale of the other Aviation and Entertainment businesses,
in the third quarter of 2000 the Company revised the net realizable value of
these segments and recorded an additional net charge of $34,300,000, principally
representing the removal from accumulated other comprehensive income of
cumulative foreign currency translation adjustments of $16,400,000, net of
income taxes, relating to businesses in discontinued operations. The net charge
of $34,300,000 also includes the additional net loss on disposal of the
discontinued operations, which includes the estimated net after tax operating
losses of the discontinued operations through their respective estimated dates
of disposal. These items, combined with net losses of $2,800,000 from those
segments' operations, resulted in a loss from discontinued operations of
$37,100,000 for the three months ended September 30, 2000.
Revenues and income (loss) from discontinued operations (expressed in thousands
of dollars) are as follows:
Nine Months Ended Three Months Ended
SEPTEMBER 30, SEPTEMBER 30,
----------------- ------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues $ 365,546 $624,126 $ 62,498 $253,656
========= ======== ======== ========
Income (Loss) Before
Income Taxes and Minority
Interest (158,053) 15,465 (53,587) (12,358)
Provision (Benefit) for
Income Taxes (29,272) 15,022 (16,518) 2,598
Minority Interests 90 1,326 3 1,113
-------- ------- ------- ------
(Loss) from Discontinued
Operations $(128,871) $ (883) $(37,072) $(16,069)
========= ======= ======== ========
Net assets of discontinued operations (expressed in thousands of dollars) were
as follows:
SEPTEMBER 30, 2000 DECEMBER 31, 1999
------------------ -----------------
Current Assets $104,064 $221,200
Property, Plant and Equipment - Net 78,340 375,211
Other Assets 190,753 336,700
Notes Payable, and Current Portion of
Long-Term Debt (35,098) (51,081)
Other Current Liabilities (96,385) (142,327)
Long-Term Debt (3,221) (108,681)
Other Liabilities (22,220) (62,876)
--------- --------
Net Assets of Discontinued Operations $216,233 $568,146
======== ========
SPECIAL CHARGES:
As a result of the Company's Board of Directors' plan to dispose of its Aviation
and Entertainment businesses and close its New York City headquarters, and its
plan to exit other non-core businesses, the Company incurred various expenses in
1999 which were recognized in its continuing and discontinued operations. Of
those charges, certain cash charges related to severance costs, mainly for New
York City-based employees, and contract termination costs of its former Chairman
and Chief Executive Officer, are being paid over time. The following is a
summary of those costs and related payments during the three months ended
September 30, 2000 (expressed in thousands of dollars):
Accrual
Reversals Amounts Paid
During Three During Three
Balance at Months Ended Months Ended Balance at
June 30, 2000 September 30,2000 September 30, 2000 September 30, 2000
------------- ----------------- ------------------ ------------------
Severance for
approximately
230 employees $37,000 $(5,600) $(3,000) $28,400
Contract Termination 8,200 (7,800) 400
------- ------- ------- -------
$45,200 $(5,600) $(10,800) $28,800
======= ======= ======= =======
The severance accrual reversals during the three months ended September 30, 2000
were comprised of $2,500,000 for continuing operations (principally Corporate
employees) and $3,100,000 for discontinued operations (Aviation and
Entertainment employees)and were principally due to lower than anticipated costs
for payroll taxes and benefits.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OPERATIONS:
Revenues and income (loss) from continuing operations by segment for the nine
months and the three months ended September 30, 2000 and 1999 (expressed in
thousands of dollars) were as follows:
Information Concerning Nine Months Ended Three Months Ended
Business Segments September 30, September 30,
----------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
Revenues:
Energy $706,270 $685,407 $233,889 $235,954
Other 36,651 57,110 12,491 19,669
-------- -------- -------- -------
Total Revenues $742,921 $742,517 $246,380 $255,623
======== ======== ======== ========
Income (Loss) from
Continuing Operations:
Energy $ 58,996 $ 65,861 $ 17,496 $ 17,804
Other (15,654) (2,140) (4,219) 431
-------- -------- -------- -------
Total 43,342 63,721 13,277 18,235
Equity in Net Income of
Investees and Joint
Ventures:
Energy 15,814 9,372 8,357 3,428
-------- -------- -------- -------
Total 59,156 73,093 21,634 21,663
Corporate Unallocated
Income and Expenses - net (44,808) (7,871) (12,497) (3,919)
Interest - net (26,089) (21,806) (7,873) (8,230)
-------- -------- -------- -------
Income (Loss) from
Continuing Operations Before
Income Taxes, Minority
Interests and the Cumulative
Effect of Change in
Accounting Principle $(11,741) $ 43,416 $ 1,264 $ 9,514
======== ======== ======== ========
REVENUES FROM CONTINUING OPERATIONS
Revenues for the quarter ended September 30, 2000 were $9,200,000 lower than the
comparable period of 1999. This decrease related to a decrease in the Energy
segment of approximately $2,100,000 and a decrease in the Other segment of
approximately $7,100,000. The Energy decrease was mainly attributable to a
decrease in construction revenues of $19,400,000 due mainly to a decrease in
water and wastewater activity ($7,800,000) due to the completion of a major
project, a decrease in waste-to-energy retrofit activity ($4,300,000) and a
decrease in civil construction activity ($7,300,000) due to the completion of
projects in 2000. Management anticipates that the remaining civil construction
projects will be completed by the end of 2000, with the exception of one project
that is expected to continue into 2001. Therefore, the Company anticipates a
continued decline in civil construction activity for the remainder of this year
as projects are completed. Also, in October 2000, the Company entered into a
definitive agreement to sell its domestic Environmental Consulting business. In
addition, retrofit construction activity will also decline, as facilities attain
compliance with the Clean Air Act Amendments of 1990, which is mandated by the
end of 2000. These decreases in the Energy segment's revenues were partially
offset by a $13,500,000 net increase at various facilities due to higher energy
rates, increased production, and contractual annual escalation adjustments, a
$2,800,000 increase associated with new plants in Thailand and The Philippines
that began operations in 1999, and an increase in the environmental consulting
business of $1,800,000. The lower revenues in the Other segment were primarily
due to the sale of Applied Data Technology, Inc. ("ADTI") at the end of March
2000, and reduced activity in Datacom's operations chiefly associated with the
Chapter XI bankruptcy filing in March 2000 of Genicom Corporation ("Genicom"),
its major customer. On August 3, 2000, the Company reached agreement with
Genicom whereby the Company paid $10,000 in exchange for a waiver of all
preference exposure. The Company has also reached agreement with the purchaser
of Genicom regarding the terms under which it will continue to supply product to
Genicom. With the resolution of the Genicom bankruptcy, the Company is now
preparing Datacom for sale.
The $400,000 increase in revenues for the nine months ended September 30, 2000
compared to the same period in 1999 was attributable to the Energy segment,
which increased by approximately $20,900,000, offset by a decrease in the Other
segment's revenues of $20,500,000. The Energy increase is primarily attributable
to revenues of $23,800,000 associated with new plants in Thailand and The
Philippines that began operations in 1999, increases at various facilities of
$25,500,000 due to increased production, higher energy pricing and contractual
annual escalation adjustments, an increase of $7,300,000 from the acquisition of
an additional 50% interest in a power plant in California, an insurance
settlement of $12,200,000 relating to the Lawrence, Massachusetts facility, and
an increase of $3,300,000 in revenues from the environmental consulting
business. These increases were partially offset by a gain in the comparable
period of 1999 of $5,700,000 on the sale of the Company's interest in a joint
venture, as well as reduced construction revenues of $45,500,000 which includes
a decrease in retrofit activity ($17,100,000), a decrease in civil construction
activity ($22,100,000) and a decrease in water and wastewater construction
($6,300,000). The lower revenues in the Other segment were mainly due to the
sale of ADTI at the end of March 2000 and reduced activity in Datacom's
operations.
CONSOLIDATED OPERATING INCOME FROM CONTINUING OPERATIONS
Consolidated operating income from continuing operations for the three months
ended September 30, 2000 decreased by approximately $8,300,000 from the
comparable quarter of 1999. The Energy segment's income from operations for the
three months ended September 30, 2000 decreased $300,000 compared to the three
months ended September 30, 1999. Energy's income from operations in the 2000
period included increases totaling $8,600,000 at several projects including new
plants that became operational during 1999, and the effect of accelerated
depreciation on certain air pollution control equipment being replaced in
connection with the Clean Air Act Amendments of 1990 that was recorded in the
1999 period. These increases in income from operations were offset by an
increase in development and overhead expenses of $2,400,000 primarily related to
the continued growth in the independent power business, and a decrease in income
from construction of $5,700,000 due mainly to reductions in civil construction
and retrofit activity. Income from operations in the Other segment decreased
$4,600,000 primarily due to accruals for workers' compensation insurance related
to businesses that have been disposed but were previously in the Other segment,
lower activity at Datacom, and the sale of ADTI at the end of March, 2000.
Selling, administrative and general expenses were $4,700,000 higher than the
comparable three-month period in 1999. This increase was primarily attributable
to an increase in corporate overhead comprised mainly of an increase in
professional fees, and amortization of information systems, offset partially by
an adjustment to corporate severance, and a decrease of $1,400,000 in the Energy
segment primarily due to a decrease in costs in the civil construction unit
resulting from management's wind down of this business and the absence of Year
2000-related costs in the current period. Debt service charges decreased
$800,000 for the three months ended September 30, 2000 compared to the same
period in 1999 due mainly to lower project debt outstanding caused by redemption
and maturity of project debt and certain refinancings. The Energy segment has
one interest rate swap agreement entered into as a hedge against interest rate
exposure on adjustable-rate project debt that resulted in additional debt
service expense of $260,000 and $460,000 for the three month periods ended
September 30, 2000 and 1999, respectively.
Consolidated operating income for the nine months ended September 30, 2000
decreased by $29,500,000 as compared to the nine months ended September 30,
1999. The Energy segment's income from operations for the nine months ended
September 30, 2000 decreased $6,900,000 compared to the nine months ended
September 30, 1999. The 2000 period included increased overhead and development
expenses of $3,800,000 primarily related to the continued growth in the
independent power business, and a decrease in income from construction of
$11,200,000 due mainly to reductions in civil construction, retrofit activity
and the completion of a water and wastewater project. The 1999 period included
the receipt of $9,300,000 for the termination and restructuring of a
waste-to-energy facility operating contract, adjustments of $9,000,000
associated with the favorable resolution of matters related to the Heber
facility, and a $5,700,000 gain on the sale of a joint venture interest. These
decreases in income from operations were partially offset by increases of
$19,900,000 at several projects including new plants that became operational
during 1999, and the $12,200,000 insurance settlement relating to the Lawrence
facility. Loss from operations of the Other segment increased $13,500,000 for
the nine months ended September 30, 2000 primarily due to lower activity at
Datacom and the $6,500,000 provision against receivables relating to Genicom's
Chapter XI bankruptcy proceeding, accruals for workers' compensation insurance,
and the sale of ADTI at the end of March, 2000.
Selling, administrative and general expenses increased $11,000,000 for the
nine-month period compared to the 1999 period mainly due to an increase in
professional fees, amortization of information systems, a loss on termination of
the corporate aircraft lease, and an increase in other overhead costs. Debt
service charges relating to non-recourse project debt decreased $1,100,000 for
the nine months ended September 30, 2000, compared with the same period in 1999
due mainly to lower project debt outstanding on various facilities caused by
redemption and maturity of project debt and certain refinancings. The Energy
segment's interest rate swap agreement resulted in additional debt service
expense of $840,000 and $1,600,000 for the nine-month periods ended September
30, 2000 and 1999, respectively.
INTEREST INCOME AND EXPENSE
Interest income from continuing operations increased $2,800,000 for the three
months ended September 30, 2000 compared to the same period in 1999, due mainly
to increased interest earned on proceeds from sales of assets.
Interest income from continuing operations increased $2,600,000 for the nine
months ended September 30, 2000 compared with the same period in 1999, due
primarily to interest income earned on proceeds from sales of assets partially
offset by interest income in 1999 on proceeds from an energy contract
prepayment.
Interest expense from continuing operations increased $2,400,000 and $6,900,000
for the three-month and nine-month periods ended September 30, 2000,
respectively, compared to the same periods in 1999. These increases were due
mainly to the Energy segment's increase in debt related to newly acquired or
newly operational plants, increased borrowings on the Company's revolving line
of credit, and higher interest rates on adjustable rate debt.
In addition, the Company had one interest rate swap agreement covering a
notional amount of $400,000 which converted the Entertainment segment's $400,000
variable rate-debt to a fixed rate, and expires in November 2000. The Company
also had two interest rate swap agreements covering a total notional amount of
approximately $4,300,000 (which are denominated in Hong Kong dollars) which
converted $4,300,000 of the Aviation segment's variable rate-debt to a fixed
rate, and expire in July 2001. Additional interest expense relating to these
three swap agreements was $50,000 and $185,000 for the three-month and
nine-month periods ended September 30, 2000, respectively.
EQUITY IN INCOME OF INVESTEES AND JOINT VENTURES
Equity in net income of investees and joint ventures increased by $4,900,000
compared to the three months ended September 30, 1999 due mainly to $3,800,000
from new projects or projects that were not owned during the entire 1999 period,
and increased generation on existing projects.
Equity in net income of investees and joint ventures increased by $6,400,000
compared to the nine months ended September 30, 1999 due to earnings of
$5,500,000 from new projects or projects not owned during the entire 1999 period
and earnings of $2,500,000 from increased generation on existing projects,
offset by the receipt of $1,600,000 pursuant to a settlement with a customer in
the nine months ended September 30, 1999.
OTHER INCOME (DEDUCTIONS) - NET
Other (deductions) - net was ($5,300,000)and ($37,000) for the three-month
periods ended September 30, 2000 and 1999, respectively. This $5,300,000
decrease in income is primarily due to a charge of $5,200,000 in the three
months ended September 30, 2000 representing fees and expenses incurred in
connection with the waiver by certain creditors of certain covenants, and the
extension of credit through November, 2000.
Other income (deductions) - net was ($22,700,000) and $5,100,000 for the
nine-month periods ended September 30, 2000 and 1999, respectively. This
$27,800,000 decrease in income is primarily due to charges of $16,500,000 in the
nine months ended September 30, 2000 representing creditors' fees and expenses,
$4,800,000 of charges representing other fees and expenses incurred in
connection with financing efforts to support the Company's proposed balance
sheet recapitalization plan, and, in 1999, a $5,100,000 gain on the sale of an
investment.
INCOME TAXES
The effective income tax rate for continuing operations was (191.6%)for the
three-month period ended September 30, 2000 as compared to 5.5% for the
comparable period in 1999. This fluctuation was mainly attributable to a
decrease in income in 2000 and the resultant impact of nondeductible permanent
differences.
The effective income tax rate for continuing operations was 25.5% for the
nine-month period ended September 30, 2000 as compared to 26.6% for the
comparable period in 1999. This decrease was mainly attributable to higher
foreign income taxed at rates lower than the Federal statutory rate.
DISCONTINUED OPERATIONS
Loss from discontinued operations for the three months ended September 30, 2000
was $37,100,000, a decrease in earnings of $21,000,000 from the comparable
period of 1999. Loss before interest and taxes from discontinued operations was
$52,400,000 in the quarter ended September 30, 2000 compared to loss before
interest and taxes of $11,700,000 in the same period of 1999. This $40,700,000
decrease in earnings was chiefly associated with a decrease of $53,000,000 in
income reflecting additional accrued losses on the disposal of discontinued
businesses, of which $25,300,000 represents cumulative foreign currency
translation adjustments and $8,500,000 represents a provision for additional
pretax net operating losses from October 1, 2000 through the estimated dates of
sales of the remaining businesses. Also, Entertainment's and Aviation's pretax
net operating loss in the three months ended September 30, 2000 exceeded the
accrual established in June 2000 for estimated future losses through date of
disposition, primarily due to lower than expected results primarily at casino
operations, and European and Hong Kong aviation locations. Entertainment's
results were also affected by the sale of the water parks and food and
beverage/venue management businesses in the second quarter of 2000.
Loss from discontinued operations for the nine months ended September 30, 2000
was $128,900,000, a decrease in earnings of $128,000,000. Loss before interest
and taxes from discontinued operations was ($154,400,000) in the first nine
months of 2000 compared to income before interest and taxes of $17,000,000 in
the first nine months of 1999. This $171,400,000 decrease in earnings was
chiefly associated with a decrease of $119,300,000 reflecting both accrued
losses on the disposal of discontinued businesses, of which $25,300,000
represents cumulative foreign currency translation adjustments, and $8,500,000
represents a provision for additional estimated pretax net operating losses from
October 1, 2000 through the estimated dates of sales of the remaining
businesses. In addition, the decrease in Entertainment's operations were due to
decreases in its food and beverage business of $10,000,000 due mainly to
decreases at certain amphitheaters and the sale of the business, a decrease in
its Parks operations of $8,200,000 mainly due to the sale of that business, and
increased legal, accounting, consulting and overhead costs, and additional
depreciation on MIS equipment totaling $8,400,000. The decrease in Aviation's
operations for the first nine months of 2000 compared to the first nine months
of 1999 primarily reflects the adjusted gain of $3,500,000 in the 1999 period on
the sales of the Spanish and inflight catering operations, the gain of
$4,000,000 in 1999 on the sale of an interest in the Hong Kong airport
operations, a decrease in activity in fueling and ground service operations of
$6,700,000, increased legal, accounting, consulting and overhead costs of
$7,100,000 in connection with the discontinuance of the business, and a
reduction in European operations of $2,600,000.
CAPITAL INVESTMENTS AND COMMITMENTS: For the nine months ended September 30,
2000, capital investments for continuing operations amounted to $40,900,000, of
which $40,400,000 was for Energy operations and $500,000 was for Other
operations.
At September 30, 2000, capital commitments for continuing operations amounted to
$13,000,000 for normal replacement and maintenance in Energy. Other capital
commitments for Energy as of September 30, 2000 amounted to approximately
$48,800,000. This amount includes a commitment to pay, in 2008, $10,600,000 for
a service contract extension at an energy facility. In addition, this amount
includes $19,400,000 and $2,400,000, respectively, for two oil-fired projects in
India; $3,200,000 for additional equity commitments related to a coal-fired
power project in The Philippines; $1,200,000 for a mass-burn waste-to-energy
facility in Italy; and approximately $12,000,000 to fund a debt service reserve.
Funding for the additional mandatory equity contributions to the coal-fired
power project in The Philippines is being provided through bank credit
facilities, which are due to be repaid in 2000. In addition, compliance with the
standards and guidelines under the Clean Air Act Amendments of 1990 will require
further Energy capital expenditures of approximately $8,000,000 through December
2000, subject to the final time schedules determined by the individual states in
which the Company's waste-to-energy facilities are located.
Commitments for discontinued operations amounted to $950,000 for normal
replacement and maintenance in Aviation.
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.
The Company did not include its interests in either the Arrowhead Pond in
Anaheim, California or the Corel Centre near Ottawa, Canada as part of the sale
of its Venue Management business. The Company manages the Arrowhead Pond under a
long-term contract. As part of this contract, the Company is a party, along with
the City of Anaheim, to a reimbursement agreement in connection with a letter of
credit in the amount of approximately $120,000,000. Under the reimbursement
agreement, the Company is responsible for draws, if any, under the letter of
credit caused by the Company's failure to perform its duties under its
management contract at that venue. The Company is exploring alternatives for
disposing of the Arrowhead Pond and Corel Centre, discussed below, along with
the related obligations.
During 1994, a subsidiary of Ogden entered into a 30-year facility management
contract at the Corel Centre pursuant to which it agreed to advance funds to a
customer and, if necessary, to assist the customer's refinancing of senior
secured debt incurred in connection with the construction of the facility. Ogden
is obligated to purchase such secured debt in the amount of $90,300,000 on
December 23, 2002, if the debt is not refinanced prior to that time. Ogden is
also required to repurchase the outstanding amount of certain subordinated
secured debt of such customer on December 23, 2002. At September 30, 2000, the
amount outstanding was $47,900,000. In addition, as of September 30, 2000, the
Company had guaranteed $3,300,000 of senior secured term debt of an affiliate
and principal tenant (the NHL Ottawa Senators) of this customer and had
guaranteed up to $3,300,000 of the tenant's secured revolving debt of which
there was no outstanding balance at September 30, 2000. Further, Ogden is
obligated to purchase $20,000,000 of the tenant's secured subordinated
indebtedness on January 29, 2004, if such indebtedness has not been repaid or
refinanced prior to that time. In October 1999, Ogden also agreed to advance a
secured loan to that tenant of up to approximately $8,300,000 if certain events
occur, of which $7,700,000 had been advanced at September 30, 2000. Separately,
Ogden has guaranteed approximately $3,600,000 of borrowings of a customer of
Metropolitan Entertainment Group, an Entertainment joint venture in which Ogden
has an equity interest. The Company expects this guarantee to be assumed by the
ultimate purchaser of this interest. Management does not expect that these
arrangements will have a material adverse effect on Ogden's Consolidated
Financial Statements.
LIQUIDITY/CASH FLOW: Net cash used in operating activities of continuing
operations was $93,800,000 higher than the comparable period of 1999 primarily
reflecting a decrease in income from continuing operations of $40,600,000, a
decrease in accounts payable and accrued expenses of $112,000,000, partially
offset by an increase in other liabilities of $31,700,000 and a decrease in
accounts receivable of $19,100,000. Net cash used in investing activities was
$13,400,000 lower primarily relating to a decrease in entities purchased of
$69,500,000 and a decrease in investments in and advances to investees and joint
ventures of $5,300,000, partially offset by a decrease in proceeds from the sale
of marketable securities available for sale of $55,800,000, a decrease in
proceeds from sales of business and other of $5,200,000, and a decrease in
proceeds from sale of investment of $5,100,000. Net cash used in financing
activities was $214,900,000 higher principally due to an increase in restricted
cash of $148,000,000, representing a portion of the proceeds from the sale of
businesses, lower net borrowings of $93,300,000, and an increase in restricted
funds held in trust of $18,100,000, partially offset by lower dividends paid of
$46,200,000. Net cash provided by discontinued operations increased $315,900,000
primarily due to proceeds from the sales of businesses and decreases in capital
expenditures and acquisitions in Aviation and Entertainment.
At September 30, 2000, the Company had approximately $227,000,000 in cash and
cash equivalents; $207,000,000 related to continuing operations of which
$148,000,000 was restricted and intended for debt repayment. In addition, the
Company has a revolving credit facility on which the Company had drawn
$50,000,000 at September 30, 2000. The Company has further agreed not to incur
any indebtedness other than that incurred under the revolving credit facility.
In order to make additional Energy investments other than certain specified
permitted investments, the Company will require a substantial majority of its
Credit Providers to consent to such investments.
The Company's current credit facility with its principal credit providers was
scheduled to expire on September 30, 2000. The Company has reached agreement in
principle with these credit providers to extend the facility through November
30, 2000 (the "November Extension") while the parties continue to negotiate the
terms of a new facility that is expected to continue through May 31, 2002 (the
"May 31, 2002 Facility"). The Company is very far advanced in the adoption of a
term sheet that extends all of its existing bank facilities through May 31,
2002. The Company is in the process of documenting that transaction, and we
expect to complete the documentation in December. Through November 30, 2000, the
Company has been given access to an additional $36,000,000 of cash raised from
asset sales from the cash amounts reflected on the September 30, 2000 balance
sheet as "Restricted Cash - Intended to Repay Debt". At the Company's request,
the $50,000,000 revolving credit facility provided as part of the original
extension has also been cancelled. The lenders have indicated that it is their
intent to provide credit support for certain springing letters of credit that
may be required in the event that the Company's long term debt rating is
downgraded below investment grade as part of the May 31, 2002 Facility. The
Company believes that it has adequate liquidity to fund its operations and make
certain investments in new projects through this period. Further, the Company
believes that the new facility under discussion with the Company's credit
providers will be sufficient to allow the Company to fund its operations and
make certain new investments although the amount of such investments will, to a
significant degree, be dependent upon the completion of the Company's asset
disposition program.
In connection with the waiver by certain creditors of the Company with respect
to certain covenants and the extension of credit from March 31, 2000 through the
end of July 2000, the Company anticipated that it would incur approximately
$15,000,000 in fees and expenses. The Company recognized these fees and expenses
over the duration of that extension. Accordingly, one-quarter of that amount, or
$3,750,000, has been recorded in the third quarter.
Subsequently, the Company received an extension of its credit facilities through
September 30, 2000 and then a further extension through November 30, 2000. In
connection with each of these extensions of its bank covenants, the Company
agreed to pay approximately an additional $1,500,000 in fees and expenses. The
Company expects that all of these fees and expenses, as well as the $15,000,000
previously incurred will be credited against the closing fees payable with
respect to the bank facility currently under discussion with the Company's
credit providers to run through May 2002. As a result, the Company does not
expect to pay any material additional fees to its principal credit providers on
the closing of the May 31, 2002 Facility, although it is likely that it will
incur additional expenses in connection with such closing. Consistent with its
prior practice, the Company has recognized the anticipated expenses over the
period to which such extension relates. As a result, the Company has recorded an
additional charge of $1,500,000 in the third quarter and anticipates recording
an additional charge of $1,500,000 in the fourth quarter.
The Company is currently in various phases of negotiations for the remaining
Aviation businesses and most other assets included within discontinued
operations.
The Company has also determined to sell all of the operations currently
reflected in the Other segment and decided to sell its domestic Environmental
Consulting business and its Spanish subsidiary, and to wind down the operations
of its civil construction business, which are reported in its Energy segment. To
that end, the Company closed the sale transaction of its ADTI unit at the end of
March 2000, entered into a definitive agreement in October 2000 to sell its
domestic Environmental Consulting business, and is in various phases of the
disposition process for the other operations mentioned above. Accordingly, the
Company expects to have sufficient proceeds to fund normal operations (including
certain permitted energy investments). The Company continues to explore possible
new credit facilities and/or obtaining equity for such purposes, including
discussions with its existing Credit Providers.
Under certain agreements entered into by the Company, if the Company's
outstanding debt securities are no longer rated investment grade, the Company
may be required to post additional collateral or letters of credit. The failure
to post such letters could result in a forfeiture of certain contracts or could
result in a default under the agreements requiring the posting of such letters.
Such a default would also be a default under the Company's credit facilities.
With the consent of its Credit Providers, the Company could cash collateralize
these obligations or potentially utilize sales proceeds for such purpose;
alternatively, the Credit Providers could provide such letters directly. The
Credit Providers have agreed to work with the Company to explore solutions to
this issue should it arise.
The Company believes its recent agreement with its Credit Providers is
consistent with its prior stated intention of using the proceeds from the sales
of the Entertainment and Aviation businesses to pay down existing debt.
ANY STATEMENTS IN THIS COMMUNICATION WHICH MAY BE CONSIDERED TO BE "FORWARD
LOOKING STATEMENTS," AS THAT TERM IS DEFINED IN THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, ARE SUBJECT TO CERTAIN RISK AND UNCERTAINTIES.
THE FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE
SUGGESTED BY ANY SUCH STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, THOSE
DISCUSSED OR IDENTIFIED FROM TIME TO TIME IN THE COMPANY'S PUBLIC FILINGS WITH
THE SECURITIES AND EXCHANGE COMMISION AND MORE GENERALLY, GENERAL ECONOMIC
CONDITIONS, INCLUDING CHANGES IN INTERST RATES AND THE PERFORMANCE OF THE
FINANCIAL MARKETS; CHANGES IN DOMESTIC AND FOREIGN LAWS, REGULATIONS, AND TAXES,
CHANGES IN COMPETITION AND PRICING ENVIRONMENTS; AND REGIONAL OR GENERAL CHANGES
IN ASSET VALUATIONS.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company has various legal proceedings involving matters arising in
the ordinary course of business. The Company does not believe that there are any
pending legal proceedings, other than ordinary routine litigation incidental to
its business, to which the Company is a party or to which any of its property is
subject, the outcome of which would have a material adverse effect on the
Company's consolidated position or results of operation.
The Company's operations are subject to various Federal, state and local
environmental laws and regulations, including the Clean Air Act, the Clean Water
Act, the Comprehensive Environmental Response Compensation and Liability Act
(CERCLA) and Resource Conservation and Recovery Act (RCRA). Although the
Company's operations are occasionally subject to proceedings and orders
pertaining to emissions into the environment and other environmental violations,
the Company believes that it is in substantial compliance with existing
environmental laws and regulations.
In connection with certain previously divested operations, the Company
may be identified, along with other entities, as being among potentially
responsible parties responsible for contribution for costs associated with the
correction and remediation of environmental conditions at various hazardous
waste disposal sites subject to CERCLA. In certain instances the Company may be
exposed to joint and several liability for remedial action or damages. The
Company's ultimate liability in connection with such environmental claims will
depend on many factors, including its volumetric share of waste, the total cost
of remediation, the financial viability of other companies that also sent waste
to a given site and its contractual arrangement with the purchaser of such
operations.
The potential costs related to all of the foregoing matters and the
possible impact on future operations are uncertain due in part to the complexity
of government laws and regulations and their interpretations, the varying costs
and effectiveness of cleanup technologies, the uncertain level of insurance or
other types of recovery, and the questionable level of the Company's
responsibility.
Although the ultimate outcome and expense of any litigation, including
environmental remediation, is uncertain, the Company believes that the following
proceedings will not have a material adverse effect on the Company's
consolidated financial position or results of operations.
(a) Environmental Matters
(i) As a result of a criminal investigation by the U.S. Department of
Justice, on September 6, 2000, Ogden Aviation Fueling Company of Virginia, Inc.
entered a guilty plea to a single count misdemeanor under the Clean Water Act as
a result of a spill of aviation fuel from a holding tank in October 1996 at a
former tank farm it operated at Dulles International Airport in Washington, D.C.
Under the terms of a written plea agreement, Ogden Aviation Fueling Company of
Virginia, Inc. agreed to pay a fine of $200,000. Sentencing is scheduled for
November 28, 2000.
(ii) In 1999, Ogden Aviation Fueling Company of Virginia, Inc. and
Ogden Aviation Services, Inc. were served with a lawsuit entitled "AIRFRANCE,
ET. AL. V. OGDEN AVIATION FUELING COMPANY OF VIRGINIA, INC. AND OGDEN AVIATION
SERVICES, INC." (Circuit Ct., Fairfax Co., Index No. 183590) in which certain of
the airlines seek recovery of cleanup costs arising from a spill of aviation
fuel from a holding tank in October 1996 at the former tank farm operated by
Ogden at Dulles International Airport for which they reimbursed Ogden. The
plaintiffs include United Air Lines, Inc., the largest carrier that operated out
of Dulles in 1996, as well as nine other airlines Air France, America West
Airlines, Inc., Austrian Airlines, British Airways PLC, Continental Airlines,
Inc., Lufthansa A.G., Northwest Airlines, Inc., United Parcel Service Co., and
Virgin Atlantic Airways, Ltd.
The suit claims damages in the amount of at least $731,149.76, plus
interest. This dollar amount reflects the portion of the spill cleanup paid by
the named plaintiffs. The suit alleges damages on two theories: (1) breach of
contract in that Ogden was not authorized under the contract to charge the
airlines spill related costs; and (2) equitable relief in that Ogden has been
unjustly enriched at the expense of the airlines.
After a five-day trial in September 2000, the Court granted judgment
against Ogden Aviation Fueling Company of Virginia, Inc. in the amount of
$721,206.95 plus pre-judgment & post judgment interest. Ogden filed a notice to
appeal to the Supreme Court of Virginia on October 29, 2000.
(iii) On January 4, 2000 and January 21, 2000, United Air Lines, Inc.
("United") and American Airlines, Inc. ("American") named Ogden New York
Services, Inc. ("Ogden New York"), in two separate lawsuits filed in the Supreme
Court of the State of New York. The lawsuits seek judgment declaring that Ogden
New York is responsible for petroleum contamination at airport terminals
formerly or currently leased by United and American. Ogden New York moved to
consolidate the two lawsuits on April 27, 2000.
Both United and American allege that Ogden negligently caused
discharges of petroleum at the airport and that Ogden is obligated to indemnify
the airlines pursuant to the Fuel Services Agreements between Ogden and the
respective airline. United and American further allege that Ogden is liable
under New York's Navigation Law which imposes liability on persons responsible
for discharges of petroleum and under common law theories of indemnity and
contribution.
The United complaint is asserted against Ogden, American, Delta,
Northwest and American Eagle. United is seeking $1,540,000 in technical
contractor costs and $432,000 in legal expenses related to the investigation and
remediation of contamination at the airport, as well as a declaration that Ogden
and the airline defendants are responsible for all or a portion of future costs
that United may incur.
The American complaint, which is asserted against both Ogden and
United, sets forth essentially the same legal basis for liability as the United
complaint. American is seeking reimbursement of all or a portion of $4,600,000
allegedly expended in cleanup costs and legal fees it expects to incur to
complete an investigation and cleanup that it is conducting under an
administrative order with the State Department of Environmental Conservation.
The estimate of those sums alleged in the complaint is $70,000,000. Ogden moved
to consolidate the United and American action on April 27, 2000. The Court
granted Ogden's motion on August 30, 2000.
Ogden disputes the allegations and believes that the damages sought are
excessive in view of the Airlines' responsibility for the contamination under
their respective leases and permits with the Port Authority. On May 1, 2000
Ogden filed a motion to dismiss the complaints on the ground that the
controlling agreements limit the Airlines' recovery against Ogden to the
coverage afforded under Ogden's insurance policies.
(iv) On December 23, 1999 Allied Services, Inc. was named as a third
party defendant in an action filed in the Superior Court of the State of New
Jersey. The third-party complaint alleges that Allied generated hazardous
substances to a reclamation facility known as the Swope Oil and Chemical Company
Site, and that contamination migrated from the Swope Oil Site to the Pennsauken
Landfill and surrounding areas.
Third-party plaintiffs seek contribution and indemnification from
Allied and over 90 other third-party defendants for costs incurred and to be
incurred to cleanup the Pennsauken landfill and surrounding areas.
As a result of uncertainties regarding the source and scope of
contamination, the large number of potentially responsible parties and the
varying degrees of responsibility among various classes of potentially
responsible parties, the Company's share of liability, if any, cannot be
determined at this time.
(v) On January 12, 1998, the Province of Newfoundland filed an
Information Against Airconsol Aviation Services Limited ("Airconsol") alleging
that Airconsol violated provincial environmental laws in connection with a fuel
spill on or about January 14, 1997 at Airconsol's fuel facility at the Deer
Lake, Canada Airport. Airconsol contested the allegations and prevailed. The
Court voided the Information. The Crown has appealed the Court's decision. The
Company will continue to contest its alleged liability on appeal.
(vi) The Company and/or certain subsidiaries have been advised by
various authorities that they are responsible for investigation, remediation
and/or corrective action in connection with fueling operations at various
airports. Although the Company and/or its subsidiaries do not acknowledge any
legal obligation to do so, the Company and/or its subsidiaries are cooperating
with the government agencies in each matter to seek fair and reasonable
solutions. In addition, the cost to the Company and/or its subsidiaries to
comply with applicable environmental laws and regulations is generally
reimbursed to the Company and/or its subsidiaries through the airlines.
(vii) On May 25, 2000 the California Regional Water Quality Control
Board, Central Valley Region, issued a cleanup and abatement order to
Pacific-Ultrapower Chinese Station ("Chinese Station"), a general partnership of
which an Ogden subsidiary owns 50% and which operates a wood-burning power plant
located in Jamestown, California. This order arises from the use of boiler
bottom ash, or "tramp material," generated by Chinese Station as fill material
by a neighboring industrial park. The order was issued jointly to Chinese
Station and to the industrial park. Chinese Station filed a petition for review
of the order in June, 2000 that is pending. As required by the order, Chinese
Station is undertaking an environmental site assessment to determine the need
for and scope of any necessary corrective actions. This matter remains under
investigation by the Regional Water Quality Control Board and other state
agencies with respect to alleged violations associated with the management of
the tramp material.
(b) Shareholder Litigation
On September 22, October 1, and October 12, 1999, complaints (the
"Complaints") denominated as class actions (the "Actions") were filed in the
United States District Court for the Southern District of New York (the "Court")
against the Company, the Company's former Chairman and Chief Executive, R.
Richard Ablon, and Robert M. DiGia (incorrectly identified in the Complaints as
the Chief Financial Officer and Senior Vice President of the Company). The
Complaints, which are largely identical to one another, were brought by alleged
shareholders of the Company and purported to assert claims under the federal
securities laws. In general, the Complaints alleged that the Company and the
individual defendants disseminated false and misleading information during the
period of March 11, 1999 through September 17, 1999 (the "Class Period") with
respect to the Company's intended reorganization plans and its financial
condition. The Complaints sought the certification of a class of all purchasers
of Ogden Corporation common stock during the Class Period. By order dated
December 22, 1999, the Actions were consolidated for all purposes and lead
plaintiffs and lead counsel were appointed. On February 28, 2000 plaintiffs
filed a consolidated amended compliant. The amended complaint repeated the
allegations made in the original complaints and added new allegations with
respect to the timing of the reporting of certain losses experienced by Ogden,
and added Raymond E. Dombrowski, Jr., Ogden's Senior Vice President and Chief
Financial Officer, as a defendant. There has been no discovery in the Actions.
On April 28, 2000 all defendants filed a motion to dismiss the Actions, with
prejudice.
On October 4, 2000, the Court issued a decision granting the
defendants' motion in full, and dismissing the Actions with prejudice. A
judgment to that effect was entered on October 9, 2000.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3 ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Ogden's Restated Certificate of Incorporation as amended.*
3.2 Ogden's By-Laws, as amended through April 8, 1998.*
4 INSTRUMENTS DEFINING RIGHTS OF SECURITY HOLDERS.
4.1 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of June 1, 1987, and Offering Memorandum
dated June 12, 1987, relating to U.S. $85 million principal
amount of 6% Convertible Subordinated Debentures Due 2002.*
4.2 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of October 15, 1987, and Offering Memorandum
dated October 15, 1987 relating to U.S. $75 million principal
amount of 5-3/4% Convertible Subordinated Debentures Due
2002.*
4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to
The Bank of New York, Trustee, relating to Ogden's $100
million principal amount of 9-1/4% Debentures due 2022.*
10 MATERIAL CONTRACTS
10.1 (a) U.S. $95 million Term Loan and Letter of Credit and
Reimbursement Agreement among Ogden, Deutsche Bank AG, New
York Branch, and the signatory Banks thereto, dated March 26,
1997.*
(b) Credit Agreement by and among Ogden, The Bank of New York,
as Agent, and the signatory Lenders thereto dated as of June
30, 1997.*
(i) Amendment No. 1 and Waiver No. 1 under Credit Agreement,
effective as of August 18, 1999.
(ii) Amendment No. 2 to Credit Agreement, effective as of
December 20, 1999.
(iii) Amendment No. 3 to Credit Agreement, effective as of March
31, 2000.
(iv) Amendment No. 4 to Credit Agreement, dated as of June 30,
2000.
(v) Amendment No. 5 to Credit Agreement, dated as of July 31,
2000.
(vi) Amendment No. 6 to Credit Agreeemnt, dated as of September
30, 2000.
10.2 Rights Agreement between Ogden Corporation and Manufacturers
Hanover Trust Company, dated as of September 20,1990.*
(i) Amended and Restated Rights Agreement between Ogden
Corporation and The Bank of New York, dated as of
September 28, 2000.
10.3 Executive Compensation Plans and Agreements.
(a) (i) Ogden Corporation 1990 Stock Option Plan Amended and
Restated as of January 19, 1994.*
(ii) Amendment adopted and effective as of September 18,
1997.*
(b) Ogden Corporation 1999 Stock Incentive Plan Amended and
Restated as of January 1, 2000.*
(c) Ogden Services Corporation Select Savings Plan Trust
Amendment and Restatement as of January 1, 1995.*
(i) Amendment Number One to the Ogden Services Corporation
Select Savings Plan, effective January 1, 1998.*
(d) Ogden Corporation Restricted Stock Plan and Restricted
Stock Agreement.*
(e) Ogden Corporation Restricted Stock Plan for Non-Employee
Directors and Restricted Stock Agreement.*
(f) Ogden Corporation Core Executive Benefit Program.*
(g) Ogden Projects Supplemental Pension and Profit Sharing
Plans.*
(h) Ogden Projects Core Executive Benefit Program.*
(i) Ogden Corporation Executive Performance Incentive Plan.*
(j) Ogden Key Management Incentive Plan.*
10.4 Employment Agreements
(a) Employment Letter Agreement between Ogden Corporation and
Lynde H. Coit, Senior Vice President and General Counsel,
dated March 1, 1999.*
(b) Employment Agreement between R. Richard Ablon, President,
Chairman and C.E.O., and Ogden dated as of January
1,1998.*
(c) Separation Agreement between Ogden and Philip G. Husby,
Senior Vice President and C.F.O., dated as of September
17, 1998.*
(d) Employment Agreement between Scott G. Mackin, Executive
Vice President and Ogden Corporation dated as of October
1, 1998.*
(e) Employment Agreement between Ogden Corporation and David
L. Hahn, Senior Vice President - Aviation, dated December
1, 1995.*
(i) Letter Amendment to Employment Agreement between
Ogden Corporation and David L. Hahn, Senior Vice
President - Aviation effective as of October 1,
1998.*
(f) Employment Agreement between Ogden Corporation and Rodrigo
Arboleda, Senior Vice President dated January 1,1997.*
(i) Letter Amendment to Employment Agreement between
Ogden Corporation and Rodrigo Arboleda, Senior Vice
President, effective as of October 1, 1998.*
(g) Employment Agreement between Ogden Energy Group, Inc. and
Bruce W. Stone, dated May 1, 1999.*
(h) Employment Agreements between Ogden and Jesus Sainz,
Executive Vice President, effective as of January 1,
1998.*
(i) Letter Amendment to Employment Agreement between
Ogden Corporation and Jesus Sainz, Executive Vice
President, effective as of October 1, 1998.*
(i) Employment Agreement between Peter Allen, Senior Vice
President, and Ogden Corporation dated July 1, 1998.*
(j) Employment Agreement between Ogden Corporation and Raymond
E. Dombrowski, Jr., Senior Vice President and C.F.O.,
dated as of September 21, 1998.*
11 Detail of Computation of Earnings Per Share Applicable to
Common Stock.
27 Financial Data Schedule (EDGAR Filing Only).
* Incorporated by reference as set forth in the Exhibit Index of this
Form 10-Q.
(b) Reports on Form 8-K
Form 8-K Current Reports filed on July 31, 2000, September
13, 2000 and October 2, 2000 are incorporated herein by
reference.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
OGDEN CORPORATION
(Registrant)
Date: November 14, 2000 By /s/ RAYMOND E. DOMBROWSKI, JR.
----------------------------------
Raymond E. Dombrowski, Jr.
Senior Vice President
and Chief Financial Officer
Date: November 14, 2000 By: /s/ WILLIAM J. METZGER
----------------------------------
William J. Metzger
Vice President and
Chief Accounting Officer
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
3 ARTICLES OF INCORPORATION AND BY-LAWS.
3.1 Ogden's Restated Certificate Filed as Exhibit (3)(a)
of Incorporation as amended. to Ogden's Form 10-K for
the fiscal year ended
December 31, 1988 and
incorporated herein by
reference. Filed as
Exhibit 3.2 to Ogden's
Form 10-Q for the
quarterly period ended
March 31, 1998 and
incorporated herein by
reference.
3.2 Ogden By-Laws as amended. Filed as Exhibits (C)(3)
and (C)(4) to Ogden's
Form 8-K filed with the
Securities and Exchange
Commission on July 7,
1987 and incorporated
herein by reference.
4 INSTRUMENTS DEFINING RIGHTS OF
SECURITY HOLDERS
4.1 Fiscal Agency Agreement between Filed as Exhibits (C)(3)
Ogden and Bankers Trust Company, and (C)(4) to Ogden's
dated as of June 1, 1987 and Form 8-K filed with the
Offering Memorandum dated June 12, Securities and Exchange
1987, relating to U.S. $85 million Commission on July 7,
principal amount of 6% Convertible 1987 and incorporated
Subordinated Debentures Due 2002. herein by reference.
4.2 Fiscal Agency Agreement between Filed as Exhibit (4) to
Ogden and Bankers Trust Company, Ogden's Form S-3
dated as of October 15, 1987, and Registration Statement
Offering Memorandum dated October filed with the Securities
15, 1987, relating to U.S. $75 and Exchange Commission
million principal amount of 5-3/4% on December 4, 1987,
Convertible Subordinated Debentures Registration No.
Due 2002. 33-18875, and
incorporated herein by
reference.
4.3 Indenture dated as of March 1, 1992 Filed as Exhibit (4)(C)
from Ogden Corporation to The Bank to Ogden's Form 10-K for
of New York, Trustee, relating to fiscal year ended
Ogden's $100 million principal December 31, 1991, and
amount of 9-1/4% Debentures Due incorporated herein by
2022. reference.
10 MATERIAL CONTRACTS
10.1(a) U.S. $95 million Term Loan and Filed as Exhibit 10.6 to
Letter of Credit and Reimbursement Ogden's Form 10-Q for the
Agreement among Ogden, the Deutsche quarterly period ended
Bank AG, New York Branch, and the March 31, 1997 and
signatory Banks thereto, dated March incorporated herein by
26, 1997. reference.
10.1(b) Credit Agreement among Ogden, The Filed as Exhibit 10.1(i)
Bank of New York, as Agent, and the to Ogden's Form 10-Q for
signatory Lenders thereto, dated as the quarterly period
of June 30, 1997. ended June 30, 1997 and
incorporated herein by
reference.
(i) Amendment No. 1 and Waiver No. Filed as Exhibit 10.1(i)
1 under Credit Agreement, to Ogden's Form 10-Q for
effective as of August 18, the quarterly period
1999. ended June 30, 1997 and
incorporated herein by
reference.
(ii) Amendment No. 2 to Credit Filed as Exhibit
Agreement, effective as of 10(b)(ii) to Ogden's Form
December 20, 1999. 10-Q for the quarterly
period ended June 30,
2000 and incorporated
herein by reference.
(iii) Amendment No. 3 to Credit Filed as Exhibit
Agreement, effective as of 10(b)(iii) to Ogden's
March 31, 2000. Form 10-Q for the
quarterly period ended
June 30, 2000 and
incorporated herein by
reference.
(iv) Amendment No. 4 to Credit Transmitted herewith as
Agreement dated as of June 30, Exhibit 10.1(b)(iv).
2000.
(v) Amendment No. 5 to Credit Transmitted herewith as
Agreement dated as of July 31, Exhibit 10.1(b)(v).
2000.
(vi) Amendment No. 6 to Credit Transmitted herewith as
Agreement dated as of September Exhibit 10.1(b)(vi).
30, 2000
10.2 Rights Agreement between Ogden Filed as Exhibit (10)(h)
Corporation and Manufacturers to Ogden's Form 10-K for
Hanover Trust Company, dated as of the fiscal year ended
September 20, 1990 and amended December 31, 1990 and
August 15, 1995 to provide The Bank incorporated herein by
of New York as successor agent. reference.
(i) Amended and Restated Rights Filed as Exhibit 1 to
Agreement between Ogden Amendment No. 1 to Ogden's
Corporation and The Bank of Form 8-A filed with the
New York, dated as of Securities and Exchange
September 28, 2000. Commission on September 29,
2000 and incorporated
herein by reference.
10.3 EXECUTIVE COMPENSATION PLAN AND
AGREEMENTS.
(a) (i) Ogden Corporation 1990 Stock Filed as Exhibit
Option Plan Amended and 10.6(b)(i) to Ogden's
Restated as of January 19, Form 10-Q as for the
1994. quarterly period ended
September 30, 1994 and
incorporated herein by
reference.
(ii) Amendment to the Ogden Filed as Exhibit
Corporation 1990 Stock 10.7(a)(ii) to Ogden's
Option Plan as Amended and Form 10-K for fiscal
Restated effective as of period ended December 31,
September 18, 1997. 1997 and incorporated
herein by reference.
(b) Ogden Corporation 1999 Stock Filed as Exhibit
Incentive Plan Amended and 10.3(b)(i) to Ogden's
Restated as of January 1, Form 10-K for the fiscal
2000. year ended December 31,
1999 and incorporated
herein by reference.
(c) Ogden Services Corporation Filed as Exhibit
Select Savings Plan Trust 10.7(e)(i) to Ogden's
Amendment and Restatement as Form 10-K for the fiscal
of January 1, 1995. year ended December 31,
1994 and incorporated
herein by reference.
(i) Amendment Number One to Filed as Exhibit
the Ogden Services Filed 10.7(c)(ii) to Ogden's
as Exhibit 10.7 (c)(ii) to Form 10-K for the fiscal
Ogden's Corporation Select year ended December 31,
Savings Plan, effective 1997 and incorporated
January 1, Form 10-K for herein by reference.
the fiscal year ended
1998. December 31, 1997
and incorporated herein
(d) Ogden Corporation Restricted Filed as Exhibit
Stock Plan and Restricted 10.3(e)(i) to Ogden's
Stock Agreement. Form 10-K for the fiscal
year ended December 31,
1999 and incorporated
herein by reference.
(e) Ogden Corporation Restricted Filed as Exhibit
Stock Plan for Non- Employee 10.3(e)(ii) to Ogden's
Directors and Restricted Stock Form 10-K for the fiscal
Agreement. year ended December 31,
1999 and incorporated
herein by reference.
(f) Ogden Corporation Core Filed as Exhibit 10.8(q)
Executive Benefit Program. to Ogden's Form 10-K for
fiscal year ended
December 31, 1992 and
incorporated herein by
reference.
(g) Ogden Projects Supplemental Filed as Exhibit 10.8(t)
Pension and Profit Sharing to Ogden's Form 10-K for
Plans. fiscal year ended
December 31, 1992 and
incorporated herein by
reference.
(h) Ogden Projects Core Executive Filed as Exhibit 10.8(v)
Benefit Program. to Ogden's Form 10-K for
fiscal year ended
December 31, 1992 and
incorporated herein by
reference.
(i) Ogden Corporation Executive Filed as Exhibit 10.3(m)
Performance Incentive Plan. to Ogden's Form 10-K for
the fiscal year ended
December 31, 1999 and
incorporated herein by
reference.
(j) Ogden Key Management Incentive Filed as Exhibit 10.7(p)
Plan. to Ogden's Form 10-K for
the fiscal year ended
December 31, 1997 and
incorporated herein by
reference.
10.4 Employment Agreements
(a) Employment Letter Agreement Filed as Exhibit 10.4(a)
between Ogden Corporation and to Ogden's Form 10-K for
Lynde H. Coit, Senior Vice the fiscal year ended
President and General Counsel December 31, 1998 and
dated March 1, 1999. incorporated herein by
reference.
(b) Employment Agreement between Filed as Exhibit 10.3(h)
R. Richard Ablon and Ogden to Ogden's Form 10-Q for
dated as of January 1, 1998. the quarterly period
ended June 30, 1998 and
incorporated herein by
reference.
(c) Separation Agreement between Filed as Exhibit 10.8(c)
Ogden Corporation and Philip to Ogden's Form 10-Q for
G. Husby, Senior Vice the quarterly period
President and C.F.O., dated as ended September 30, 1998
of September 17, 1998. and incorporated herein
by reference.
(d) Employment Agreement between Filed as Exhibit 10.8(e)
Scott G. Mackin, Executive to Ogden's Form 10-Q for
Vice President, and Ogden the quarter ended
Corporation dated as of September 30, 1998 and
October 1, 1998. incorporated herein by
reference.
(e) Employment Agreement between Filed as Exhibit 10.8(i)
Ogden Corporation and David L. to Ogden's Form 10-K for
Hahn, Senior Vice President - fiscal year ended
Aviation, dated December 1, December 31, 1995 and
1995. incorporated herein by
reference.
(i) Letter Amendment to Filed as Exhibit
Employment Agreement between 10.8(f)(i) to Ogden's
Ogden Corporation and David Form 10-Q for the
L. Hahn, effective as of quarterly period ended
October 1, 1998. September 30, 1998 and
incorporated herein by
reference.
(f) Employment Agreement between Filed as Exhibit
Ogden Corporation and Filed as 10.8(j) to Ogden's
Exhibit 10.8(j) to Ogden's Form 10-K for the
Form Rodrigo Arboleda, Senior quarterly period ended
Vice President dated January September 30, 1996 and
10-K for fiscal year ended incorporated herein by
December 31, 1, 1997. 1996 and reference.
incorporated herein by
reference.
(i) Letter Amendment to Filed as Exhibit
Employment Agreement 10.8(g)(i) to Ogden's
between Ogden Corporation Form 10-Q for the
and Rodrigo Arboleda, quarterly period ended
Senior Vice President, September 30, 1998 and
effective as of October incorporated herein by
1, 1998. reference.
(g) Employment Agreement between Filed as Exhibit 10.4(g)
Ogden Energy Group, Inc. and to Ogden's Form 10-K for
Bruce W. Stone, dated May 1, fiscal year ended
1999. December 31, 1999 and
incorporated herein by
reference.
(h) Employment Agreements between Filed as Exhibit 10.8(m)
Ogden and Jesus Sainz, to Ogden's Form 10-K for
Executive Vice President, the fiscal year ended
effective as of January 1, December 31, 1997 and
1998. incorporated herein by
reference.
(i) Letter Amendment to Filed as Exhibit 10.8(j)(i)
Employment Agreement to Ogden's Form 10-Q for
between Ogden Corporation the quarter ended
and Jesus Sainz, Executive September 30, 1998 and
Vice President, effective incorporated herein by
as of October 1, 1998. reference.
(i) Employment Agreement between Filed as Exhibit
Peter Allen, Senior Vice 10.3(M)(1) to Ogden's
President, and Ogden Form 10-Q for the
Corporation dated July 1, quarterly period ended
1998. June 30, 1998 and
incorporated herein by
reference.
(j) Employment Agreement between Filed as Exhibit 10.4(m)
Ogden Corporation and Raymond to Ogden's Form 10-Q for
E. Dombrowski, Jr., Senior the quarter ended
Vice President and C.F.O., September 30, 1998 and
dated as of September 21, incorporated herein by
1998. reference.
11 Ogden Corporation and Subsidiaries Transmitted herewith as
Detail of Computation of Earnings Exhibit 11.
Per Share Applicable to Common
Stock.
27 Financial Data Schedule. Transmitted herewith as
Exhibit 27.