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 March 31, 2001
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 1-3122
Covanta Energy Corporation
------------------------ --------------------------
(Exact name of registrant as specified in its charter)
Delaware 13-5549268
- --------------------------- ---------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
40 Lane Road, Fairfield, NJ 07004
-------------------------------------------------
(Address or principal executive office) (Zip code)
(973) 882-9000
---------------------------------------------------
(Registrant's telephone number including area code)
Not Applicable
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by checkmark 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 |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's classes of common
stock, as of March 31, 2001; 49,754,810 shares of Common Stock, $.50 par value
per share.
PART 1 - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
COVANTA ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
FOR THE THREE MONTHS ENDED
MARCH 31,
---------------------------
2001 2000
------ ------
(In Thousands of Dollars,
Except Per Share Data)
Service revenues $ 139,648 $ 144,849
Electricity and steam sales 83,891 59,298
Equity in income of investees and joint ventures 4,482 3,010
Construction revenues 9,423 22,846
Other sales - net 11,478 9,629
Other - net 18
Net gain (loss) on sale of businesses 1,855 (634)
---------- ----------
Total revenues 250,777 239,016
---------- ----------
Plant operating expenses 134,193 129,623
Construction costs 6,757 21,358
Depreciation and amortization 23,777 28,867
Debt service charges 20,735 21,768
Other operating costs and expenses 11,910 5,913
Costs of goods sold 10,930 10,181
Selling, administrative and general expenses 17,087 12,867
Project development expenses 1,726 3,362
Other - net 750 45
---------- ----------
Total costs and expenses 227,865 233,984
---------- ----------
Consolidated operating income 22,912 5,032
Interest expense - net (7,440) (8,485)
---------- ----------
Income (loss) from continuing operations before
income taxes and minority interests 15,472 (3,453)
Income taxes (4,658) 603
Minority interests (1,399) (1,324)
---------- ----------
Income (loss) from continuing operations 9,415 (4,174)
Loss from discontinued operations
(net of income tax benefit of $7,677 in 2000) (25,310)
---------- ----------
Net Income (loss) 9,415 (29,484)
---------- ----------
Other Comprehensive Income (Loss), Net of Tax:
Foreign currency translation adjustments
(net of income taxes of $127 in 2001) (724) (4,874)
Unrealized Gains (Losses) on Securities:
Unrealized holding losses arising during period (17)
---------- ----------
Other comprehensive income (loss) (724) (4,891)
---------- ----------
Comprehensive income (loss) $ 8,691 $ (34,375)
========== ==========
Basic Earnings Per Share:
Income (loss) from continuing operations $ 0.19 $ (0.08)
Loss from discontinued operations (0.51)
---------- ----------
Net Income (Loss) $ 0.19 $ (0.59)
========== ==========
Diluted Earnings Per Share:
Income (loss) from continuing operations $ 0.19 $ (0.08)
Loss from discontinued operations (0.51)
---------- ----------
Net Income (Loss) $ 0.19 $ (0.59)
========== ==========
COVANTA ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 2001 December 31, 2000
-------------- -----------------
(In Thousands of Dollars,
Except Per Share Amounts)
Assets
Current Assets:
Cash and cash equivalents $ 91,147 $ 80,643
Restricted cash 194,118
Restricted funds held in trust 106,307 96,280
Receivables (less allowances: 2001, $28,128 and
2000, $19,234) 253,258 247,914
Deferred income taxes 37,132 36,514
Prepaid expenses and other current assets 81,849 77,239
Net assets held for sale 92,801 70,614
----------- -----------
Total current assets 662,494 803,322
Property, plant and equipment - net 1,927,616 1,789,430
Restricted funds held in trust 154,026 157,061
Unbilled service and other receivables 166,259 155,210
Unamortized contract acquisition costs 87,026 88,702
Goodwill and other intangible assets 20,214 14,944
Investments in and advances to investees and joint ventures 192,545 223,435
Other assets 91,586 63,347
----------- -----------
Total Assets $ 3,301,766 $ 3,295,451
=========== ===========
Liabilities and Shareholders' Equity
Liabilities:
Current Liabilities:
Current portion of long-term debt $ 31,490 $ 145,289
Current portion of project debt 106,039 99,875
Accounts payable 43,480 41,106
Accrued expenses, etc. 330,444 308,681
Deferred income 47,485 38,517
----------- -----------
Total current liabilities 558,938 633,468
Long-term debt 292,186 310,126
Project debt 1,368,761 1,290,388
Deferred income taxes 318,046 315,931
Deferred income 170,788 172,050
Other liabilities 155,877 158,992
Minority interests 47,736 34,290
Convertible subordinated debentures 148,650 148,650
----------- -----------
Total Liabilities 3,060,982 3,063,895
----------- -----------
Shareholders' Equity:
Serial cumulative convertible preferred stock, par value
$1.00 per share; authorized, 4,000,000 shares; shares
outstanding: 35,312 in 2001 and 35,582 in 2000, net
of treasury shares of 29,820 in 2001 and 2000 35 36
Common Stock, par value $.50 per share; authorized,
80,000,000 shares; shares outstanding: 49,754,810 in
2001 and 49,645,459 in 2000, net of treasury shares
of 4,157,375 and 4,265,115, respectively 24,877 24,823
Capital surplus 187,429 185,681
Notes receivable from key employees for common stock issuance (1,049) (1,049)
Unearned restricted stock compensation (1,247)
Earned surplus 35,227 25,829
Accumulated other comprehensive loss (4,488) (3,764)
----------- -----------
Total Shareholders' Equity 240,784 231,556
----------- -----------
Total Liabilities and Shareholders' Equity $ 3,301,766 $ 3,295,451
=========== ===========
COVANTA ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE MONTHS ENDED YEAR ENDED
March 31, 2001 December 31, 2000
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 65,402 $ 66 69,066 $ 69
Shares converted into common stock (270) (1) (3,664) (3)
---------- ---------- ---------- ----------
Total 65,132 65 65,402 66
Treasury shares (29,820) (30) (29,820) (30)
---------- ---------- ---------- ----------
Balance at end of period
(aggregate involuntary
liquidation value - 2001, $712) 35,312 35 35,582 36
---------- ---------- ---------- ----------
Common Stock, Par Value $.50 Per Share;
Authorized, 80,000,000 Shares:
Balance at beginning of period 53,910,574 26,956 53,873,298 26,937
Shares issued for acquisition 15,390 8
Conversion of preferred shares 1,611 1 21,886 11
---------- ---------- ---------- ----------
Total 53,912,185 26,957 53,910,574 26,956
---------- ---------- ---------- ----------
Treasury shares at beginning of period 4,265,115 2,133 4,405,103 2,203
Issuance of restricted stock (92,108) (46) (139,988) (70)
Exercise of stock options (15,632) (7)
---------- ---------- ---------- ----------
Treasury shares at end of period 4,157,375 2,080 4,265,115 2,133
---------- ---------- ---------- ----------
Balance at end of period 49,754,810 24,877 49,645,459 24,823
---------- ---------- ---------- ----------
Capital Surplus:
Balance at beginning of period 185,681 183,915
Exercise of stock options 193
Issuance of restricted stock 1,557 1,602
Shares issued for acquisition 172
Conversion of preferred shares (2) (8)
---------- ----------
Balance at end of period 187,429 185,681
---------- ----------
Notes receivable from key employees
for common stock issuance (1,049) (1,049)
---------- ----------
Unearned restricted stock compensation:
Issuance of restricted common stock (1,368)
Amortization of unearned restricted
stock compensation 121
---------- ----------
Balance at end of period (1,247)
---------- ----------
Earned Surplus:
Balance at beginning of period 25,829 255,182
Net income (loss) 9,415 (229,285)
---------- ----------
Total 35,244 25,897
---------- ----------
Preferred dividends - per share 2001, $.46875,
and 2000, $1.875 17 68
---------- ----------
Balance at end of period 35,227 25,829
---------- ----------
Cumulative Translation Adjustment - Net (4,079) (3,355)
---------- ----------
Minimum Pension Liability Adjustment (409) (409)
---------- ----------
TOTAL SHAREHOLDERS' EQUITY $ 240,784 $ 231,556
========== ==========
COVANTA ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------
2001 2000
------ -----
(In Thousands of Dollars)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 9,415 $ (29,484)
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities of Continuing Operations:
Loss from discontinued operations 25,310
Depreciation and amortization 23,777 28,867
Deferred income taxes 1,669 42
Provisions for doubtful accounts 10,028 939
Other 4,257 (5,663)
Management of Operating Assets and Liabilities:
Decrease (Increase) in Assets:
Receivables (18.097) 21,846
Inventories (1,512)
Other assets (8,861) (1,754)
Increase (Decrease) in Liabilities:
Accounts payable (7,124) (3,398)
Accrued expenses 3,897 (11,766)
Deferred income 2,342 1,146
Other liabilities (9,550) (9,478)
-------- ---------
Net cash provided by operating activities of continuing operations 11,753 15,095
-------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of businesses 9,947 4,848
Proceeds from sale of marketable securities available for sale 3,574
Investments in facilities (4,329) (10,873)
Other capital expenditures (3,912) (4,188)
Decrease in other receivables 23
Distributions from investees and joint ventures 5,050 4,137
Increase in investments in and advances to investees and joint ventures (13,923) (2,284)
-------- ---------
Net cash used in investing activities of continuing operations (7,144) (4,786)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowing for facilities 55,766
Other new debt 3,415 652
(Increase) decrease in funds held in trust (7,104) 5,483
Payment of debt (184,046) (83,037)
Dividends paid (17) (17)
Decrease in restricted cash 194,118
Proceeds from exercise of stock options 200
Other (671) (603)
-------- ---------
Net cash provided by (used in) financing activities of continuing operations 5,895 (21,756)
-------- ---------
Net cash used in discontinued operations (9,350)
-------- ---------
Net Increase (Decrease) in Cash and Cash Equivalents 10,504 (20,797)
Cash and Cash Equivalents at Beginning of Period 80,643 101,020
-------- ---------
Cash and Cash Equivalents at End of Period $ 91,147 $ 80,223
======== =========
ITEM 1 - BASIS OF PRESENTATION
The accompanying unaudited consolidated 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.
The Company recorded total interest expense and total interest income of $11.3
million and $3.9 million, and $9.5 million and $1.0 million for the three-month
periods ended March 31, 2001 and 2000, respectively.
On January 1, 2001, Covanta Energy Corporation (the "Company") adopted Statement
of Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Instruments and Hedging Activities" and has identified all derivatives within
its scope. SFAS No. 133, as amended and interpreted, establishes accounting and
reporting standards for derivative instruments, including certain derivatives
embedded in other contracts, and for hedging activities. All derivatives are
required to be recorded in the balance sheet as either an asset or liability
measured at fair value, with changes in fair value recognized currently in
earnings unless specific hedge accounting criteria are met. Special accounting
for qualifying hedges allows derivative gains and losses to offset related
results on the hedged item in the statement of income, and requires that a
company must formally document, designate and assess the effectiveness of
derivatives that receive hedge accounting.
The Company's policy is to enter into derivatives to protect the Company against
fluctuations in interest rates and foreign currency exchange rates as they
relate to specific assets and liabilities. The Company's policy is to not enter
into derivative instruments for speculative purposes.
The adoption of SFAS No. 133 as of January 1, 2001 did not have a material
impact on the results of operations of the Company and increased both assets and
liabilities recorded on the January 1, 2001 balance sheet by approximately $12.3
million. The $12.3 million relates to the Company's interest rate swap agreement
that economically fixes the interest rate on certain adjustable-rate revenue
bonds reported in Project debt. The asset and liability recorded at January 1,
2001 were increased by $1.5 million during the three months ended March 31, 2001
to adjust for an increase in the swap's fair value at March 31, 2001. The swap
agreement was entered into in September 1995 and expires in January 2019. Any
payments made or received under the swap agreement, including fair value amounts
upon termination, are included as an explicit component of the client
community's obligation under the related service agreement. Accordingly, all
payments under the swap agreement are a pass-through to the client community.
Under the swap agreement, the Company will pay an average fixed rate of 9.8% for
2001 through January 2005 and 5.18% thereafter through January 2019, and will
receive a floating rate based on current municipal interest rates, similar to
the rate on the adjustable-rate revenue bonds, unless certain triggering events
occur (primarily credit events), which result in the floating rate converting to
either a set percentage of LIBOR or a set percentage of the BMA Municipal Swap
Index, at the option of the swap counterparty. In the event the Company
terminates the swap prior to its maturity, the floating rate used for
determination of settling the fair value of the swap would also be based on a
set percentage of one of these two rates at the option of the counterparty. For
the three-month periods ended March 31, 2001 and 2000, the floating rates on the
swap averaged 3.27% and 3.59%, respectively. The notional amount of the swap at
March 31, 2001 and December 31, 2000 was $80.2 million and is reduced in
accordance with the scheduled repayments of the applicable revenue bonds.
Currently there are ongoing discussions surrounding the implementation and
interpretation of SFAS No. 133 by the Financial Accounting Standards Board's
Derivatives Implementation Group. The Company implemented SFAS No. 133 based on
current rules and guidance in place of January 1, 2001 and through March 31,
2001.
In December 1999, the staff of the Securities and Exchange Commission issued
Staff Accounting Bulletin (SAB) No. 101, "Revenue Recognition in Financial
Statements." SAB No. 101 provides guidance on the recognition, presentation, and
disclosure of revenue, and was implemented by the Company in the quarter ended
December 31, 2000. There was no impact from adoption of SAB No. 101 on the
Company's financial position or results of operations.
The accompanying financial statements for prior periods have been reclassified
as to certain amounts, including various revenues and expenses, to conform with
the 2001 presentation, which is more tailored for a stand-alone energy company.
Discontinued Operations and Assets Held for Sale:
On September 17, 1999, the Company announced that it intended to sell its
aviation and entertainment businesses and on September 29, 1999, the Board of
Directors of the Company formally adopted a plan to sell the operations of its
aviation and entertainment units, which were previously reported as separate
business segments. As a result of the adoption of this plan, the financial
statements present the results of these operations as discontinued until
December 31, 2000.
At December 31, 2000, the Company had substantially completed its sales of the
discontinued operations and, therefore, reclassified the remaining unsold
aviation and entertainment businesses in the accompanying December 31, 2000
balance sheet to present those businesses as net assets held for sale. Those
businesses include: the venue management businesses at the Arrowhead Pond Arena
in Anaheim, California, and the Corel Centre near Ottawa, Canada; the Company's
interest in certain entertainment assets in Argentina; its aviation fueling
business; and the Company's interests in aviation businesses in Spain and
Colombia. The aviation business in Italy was sold in February 2001 for
approximately $10.0 million, and the Company's interest in the aviation business
in Spain was sold in May 2001 for approximately $1.8 million. These noncore
businesses are reported in the "Other" segment at December 31, 2000 and for the
three months ended March 31, 2001. Other noncore businesses included in Net
Assets Held for Sale are Datacom, Inc. (Datacom), a contract manufacturing
company located in Mexico, and Compania General de Sondeos, S.A. (CGS), an
environmental and infrastructure company in Spain. Datacom and CGS are reported
in the Other segment and Energy segment, respectively, in the three-month
periods ended March 31, 2001 and 2000. The Company expects to sell all of these
remaining businesses during 2001. Revenues and loss from discontinued operations
(expressed in thousands of dollars) for the three months ended March 31, 2000,
were as follows:
Revenues $ 155,605
========
Loss Before Income
Taxes and Minority Interests (33,033)
Benefit for Income Taxes (7,677)
Minority Interests (46)
---------
Loss from Discontinued
Operations $(25,310)
=========
Revenues and loss before income taxes from assets held for sale (expressed in
thousands of dollars) for the three months ended March 31, 2001, which are
included in continuing operations in 2001, were as follows:
Revenues $ 25,542
=========
Loss Before Income Taxes $ (1,265)
=========
On January 1, 2001, the Company stopped recording depreciation and amortization
expense related to assets held for sale which had the effect of decreasing the
loss before income taxes by approximately $1.3 million.
Net assets held for sale (expressed in thousands of dollars) at March 31, 2001
and December 31, 2000 were as follows:
March 31, 2001 December 31, 2000
-------------- -----------------
Current Assets $ 76,669 $ 73,237
Property, Plant and Equipment - net 21,098 19,939
Other Assets 64,745 73,310
Notes Payable and Current Portion of
Long-Term Debt (3,517) (28,651)
Other Current Liabilities (51,935) (52,053)
Long-Term Debt (655) (670)
Other Liabilities (13,604) (14,498)
-------- --------
Net Assets Held for Sale $ 92,801 $ 70,614
======== ========
The increase in net assets held for sale during the three months ended March 31,
2001 is due mainly to the contribution of $25.0 million to an entertainment
operation in order to pay certain of that operation's debt in connection with
the closing of the Master Credit Facility (see Liquidity/Cash Flow below).
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 noncore businesses, the Company incurred various expenses in
1999 which were recognized in its continuing and discontinued operations. In
addition, the Company incurred various expenses in 2000 relating to its
decisions to reorganize its development office in Hong Kong and its Energy
headquarters in New Jersey. Certain of those charges related to severance costs
for its New York City employees and Energy employees, contract termination costs
of its former Chairman and Chief Executive Officer, office closure costs, and
professional services related to the Energy reorganization, will mostly be
paid out over the next two years. The following is a summary of those costs and
related payments during the three months ended March 31, 2001 (expressed in
thousands of dollars):
AMOUNTS PAID
DURING THREE
BALANCE AT MONTHS ENDED BALANCE AT
DEC. 31, 2000 MARCH 31, 2001 MARCH 31, 2001
---------------- -------------- --------------
Severance for approximately
200 employees $ 27,500 $ 3,000 $ 24,500
Severance for approximately
80 Energy employees 10,300 1,900 8,400
Contract termination settlement 400 400
Bank fees 2,100 2,100
Office closure costs 4,000 500 3,500
Professional services relating to
Energy reorganization 1,500 1,300 200
---------- ---------- ----------
$ 45,800 $ 6,700 $ 39,100
========== ========== ==========
Receivables from California Utilities:
During 2000, events affecting the energy market in California impacted the
creditworthiness of two California utilities to which the Company sells power.
Those two utilities are Pacific Gas & Electric Co. ("PG&E") and Southern
California Edison ("SCE"). These events have resulted in these utilities
delaying payment for power they have purchased from the Company. On March 27,
2001 the California Public Utilities Commission approved a substantial rate
increase and directed that the utilities begin paying timely for power purchases
commencing April 2001. SCE is paying currently for power purchases from March
27, 2001. On April 6, 2001, PG&E, one of California's largest electric
utilities, filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
PG&E is now paying currently for power purchases from April 6, 2001. As of March
31, 2001, the Company had outstanding receivables from these two utilities of
approximately $55.1 million (including the Company's 50% interest in several
partnerships) net of reserves of approximately $19.4 million. Of these net
receivables, $11.7 million was due from PG&E. From April 1 to May 9, 2001, the
Company had received payments relating to the March 31, 2001 balances due from
SCE of approximately $1.9 million. Payment of those remaining March 31, 2001
receivables for California power sales is likely to be obtained only in
connection with resolution of that state's power crisis and resolution of PG&E's
bankruptcy. Therefore, the amounts received and the timeliness of payment are
subject to legal, regulatory and legislative developments. Although the matter
is not free of doubt, the Company believes it will ultimately receive payment of
these receivables.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OPERATIONS
Revenues and income (loss) from operations by segment for the three months ended
March 31, 2001 and 2000 (expressed in thousands of dollars) were as follows:
Information Concerning Three Months Ended March 31,
Business Segments 2001 2000
- ----------------------------------------------------------------------------
Revenues:
Energy $ 223,887 $ 225,178
Other 26,890 13,838
----------- -----------
Total Revenues $ 250,777 $ 239,016
=========== ===========
Income (loss) from Operations:
Energy $ 27,887 $ 13,228
Other (1,225) (2,611)
----------- -----------
Total Income from Operations 26,662 10,617
Corporate unallocated income
and expenses-net (3,750) (5,585)
Interest-net (7,440) (8,485)
----------- -----------
Income (loss) from continuing
operations before income taxes
and minority interests $ 15,472 $ (3,453)
=========== ===========
Continuing Operations: Revenues for the first three months of 2001 were $11.8
million higher than the comparable period of 2000 primarily reflecting an
increase in Other segment revenues of $13.1 million, partially offset by a
decrease in Energy segment revenues of $1.3 million.
Service revenues in 2001 decreased $5.2 million compared to the first quarter of
2000. Energy service revenues in 2001 decreased $14.9 million primarily due to a
decrease of $18.5 million related to the environmental consulting business which
was sold in November 2000, partially offset by an increase of $3.6 million due
mainly to contractual annual escalation adjustments at many plants, increased
growth in the supplemental waste business and a water service operating
agreement with the city of Bessemer, Alabama, which began in October 2000. The
Other segment's service revenues increased $9.7 million mainly due to the
inclusion in continuing operations of $14.6 million related to unsold aviation
and entertainment businesses in 2001, which were included in discontinued
operations in 2000, partially offset by a decrease of $4.9 million due to the
sale of Applied Data Technology, Inc. (ADTI) in the first quarter of 2000.
Electricity and steam sales revenue increased $24.6 million compared to the same
period in 2000, attributable mainly to increased production and favorable energy
pricing experienced primarily at plants in California as well as increased
pricing experienced at certain waste-to-energy plants with merchant energy
capacity.
Equity in income of investees and joint ventures for the three months ended
March 31, 2001 increased $1.5 million compared to the same period in 2000. The
increase is primarily attributable to the Quezon project in the Philippines,
which commenced operations in the second quarter of 2000, partially offset by
equity losses related to unsold aviation and entertainment joint ventures.
Construction revenues for the three months ended March 31, 2001 decreased $13.4
million from the comparable period in 2000. The decrease is attributable to the
completion of the retrofit construction activity mandated by the Clean Air Act
Amendments of 1990, the decision to wind-down activities in the civil
construction business, and the completion of construction of a wastewater
project in the third quarter of 2000.
Other sales - net increased $1.8 million compared to the first quarter of 2000
due mainly to increased activity in the operations of Datacom associated with
Genicom Corporation (Genicom), its major customer.
Net gain on sale of businesses for the three months ended March 31, 2001
included the gain of $1.9 million on the sale of the aviation ground handling
operations at the Rome, Italy airport. The net loss on sale of businesses in the
comparable period of 2000 included a loss of $.6 million on the sale of ADTI.
Total costs and expenses in the first quarter of 2001 decreased by $6.1 million
compared to the first quarter of 2000. This decrease reflects a decrease in the
Energy segment of $15.9 million and a decrease in corporate unallocated overhead
of $1.8 million, partially offset by an increase in the Other segment of $11.6
million due mainly to the inclusion of unsold aviation and entertainment
businesses in 2001.
The Energy segment's plant operating expenses increased by $4.6 million in the
three months ended in March 31, 2001 compared to the same period of 2000.
Operating expenses increased by approximately $20.1 million primarily due to
increased fuel costs attributable to higher natural gas and oil prices, higher
generation, primarily at waste-wood plants in California, and the effect of
increased provisions for doubtful accounts of approximately $7.9 million,
related mainly to receivables from California utilities (see Liquidity Cash Flow
below). This increase was partially offset by a decrease of $15.5 million in the
environmental business, which was sold in November of 2000.
Construction costs decreased by $14.6 million for the three months ended 2001
compared to the comparable period of 2000. The decrease is due to the decline in
the civil construction business, which management anticipates will cease in
2001, the completion of the retrofit construction activity mandated by the Clean
Air Act Amendments of 1990 and completion of the construction of a wastewater
project in the third quarter of 2000.
Depreciation and amortization expense decreased by $5.1 million in the first
quarter 2001 compared to the comparable period in 2000. This decrease is
primarily related to a decrease in corporate depreciation and amortization,
which in 2000 included $2.9 million of accelerated amortization of a new data
processing system. Also, Energy's depreciation and amortization expense
decreased by $1.5 million in the three months ended March 31, 2001 compared to
2000 primarily due to accelerated depreciation in 2000 related to certain air
pollution control equipment being replaced in connection with the Clean Air Act
Amendments of 1990.
Debt service charges decreased by $1.0 million in the first quarter of 2001
compared to the comparable period of 2000. The decrease is primarily due to
lower project debt related to various facilities caused by redemption and
maturity of bonds. The Energy segment had one interest rate swap agreement
outstanding that resulted in additional debt service expense of $.5 million and
$.4 million for the three month periods ended March 31, 2001 and 2000,
respectively.
Other operating costs and expenses for the first three months of 2001 increased
$6.0 million due to activity in the Other segment. This increase was due mainly
to the inclusion of unsold aviation and entertainment businesses in 2001, which
were included in discontinued operations in 2000. This increase was partially
offset by the effect of the sale of ADTI in 2000.
Costs of goods sold for the first quarter of 2001 increased $.7 million compared
to the first quarter of 2000 due to activity in the Other segment, mainly
increased activity at Datacom.
Selling, administrative and general expenses for the first three months of 2001
increased $4.2 million compared to the same period of 2001 due mainly to the
inclusion in continuing operations of the unsold aviation and entertainment
businesses in 2001. That increase was partially offset by a decrease in
unallocated corporate overhead expenses that was fundamentally the result of a
decrease in most overhead costs due to the wind-down of the Company's New York
office. Selling, administrative and general expenses for the Energy segment
decreased $1.8 million compared to the first quarter of 2000 principally due to
the sale in November 2000 of the environmental consulting business.
Project development expenses in the three months ended March 31, 2001 decreased
by $1.6 million from the same period in 2000. The decrease is mainly due to a
decrease in overhead and other costs related to development in the Asian market.
Other expenses-net increased $.7 million compared to the first quarter of 2000.
This increase is due mainly to the amortization of the Company's costs in
securing its Revolving Credit and Participation Agreement (the "Agreement") in
March 2001. Such costs are being amortized over the term of the Agreement, which
matures May 31, 2002.
Interest expense-net in the first quarter of 2001 decreased $1.0 million
compared to the same period of 2000. Corporate interest expense-net decreased
$1.9 million primarily due to lower average debt outstanding, and an increase in
interest income on cash balances which were classified as Restricted Cash on the
December 31, 2000 balance sheet. The Energy segment's interest expense - net
increased by $.9 million in 2001 compared to 2000 due to interest on debt
associated with the Quezon project, which became operational in the second
quarter of 2000. This debt was fully paid in March 2001.
The effective tax rate for the three months ended March 31, 2001 was 30.1%
compared to 17.5% for the same period of 2000. This increase in the effective
rate was primarily due to pretax earnings in the current year period, versus
pretax losses in the 2000 period for which certain tax benefits were not
recognized.
Discontinued Operations: In the first quarter of 2000, all aviation and
entertainment businesses were accounted for as discontinued operations while
such businesses were accounted for in continuing operations in the first quarter
of 2001. In the first quarter of 2000 the loss from discontinued operations
totaled $25.3 million. The loss before interest and taxes from discontinued
operations was $31.9 million, primarily reflecting a provision of $17.9 million
for estimated pretax losses from April 1, 2000 through the then anticipated
dates of sales of those businesses. The remaining loss was primarily
attributable to legal, accounting and consulting expenses, and overhead costs
incurred in connection with the discontinuance of those businesses, and
accelerated amortization of the data processing systems used in those
businesses.
Property , plant and equipment - net increased $138.2 million during the first
three months of 2001 due mainly to the consolidation of two energy project
companies that were previously accounted for under the equity method.
CAPITAL INVESTMENTS AND COMMITMENTS
For the three months ended March 31, 2001, capital investments amounted to $8.2
million, virtually all of which related to Energy.
At March 31, 2001, capital commitments amounted to $11.4 million for normal
replacement and growth in Energy and $.1 million for Corporate and Other
operations. Other capital commitments for Energy as of March 31, 2001 amounted
to approximately $15.4 million. This amount includes a commitment to pay, in
2008, $10.6 million for a service contract extension at an energy facility. In
addition, this amount includes $4.6 million for an oil-fired project in India
and $.2 million for a mass-burn waste-to-energy facility in Italy.
Covanta 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 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 Covanta's Consolidated Financial Statements. (See
Liquidity/Cash Flow below.)
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 in June 2000. 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 $119.0
million. 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 which include its
obligation to pay shortfalls, if any, if net revenues of the venue are
insufficient to pay debt service underlying the venue. The Company is exploring
alternatives for disposing of these operations along with the reimbursement
agreement and related obligations.
During 1994, a subsidiary of Covanta 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.
Covanta is obligated to purchase such senior debt in the amount of $86.2 million
on December 23, 2002, if the debt is not refinanced prior to that time. Covanta
is also required to repurchase the outstanding amount of certain subordinated
secured debt of such customer in the amount of $45.7 million on December 23,
2002. In addition, as of March 31, 2001, the Company had guaranteed $3.2 million
of senior secured term debt of an affiliate and principal tenant (the NHL Ottawa
Senators) of this customer. Further, Covanta is obligated to purchase $19.0
million of the tenant's secured subordinated indebtedness on January 29, 2004,
if such indebtedness has not been repaid or refinanced prior to that time. The
Company is also exploring alternatives for disposing of these operations along
with the related obligations.
Management does not expect that these arrangements will have a material adverse
effect on Covanta's Consolidated Financial Statements.
LIQUIDITY/CASH FLOW
Net cash provided by operating activities of continuing operations for the
quarter ended March 31, 2001 was $11.8 million compared to the first quarter of
2000 of $15.1 million, resulting in a decrease of $3.3 million. This decrease
primarily reflects an increase in accounts receivable of $39.9 million, due
mainly to receivables from California utilities (see below). This decrease was
partially offset by an increase in net income from continuing operations of
$13.6 million, an increase in accounts payable and accrued expenses of $11.9
million, and an increase in provisions for doubtful accounts of $9.1 million.
Net cash used in investing activities of continuing operations was $2.4 million
higher than the comparable period of 2000 primarily relating to an increase of
$11.6 million in investments in and advances to investees and joint ventures,
and a decrease of $3.6 million in proceeds from the sales of marketable
securities available for sale, partially offset by an increase in proceeds from
the sale of businesses of $5.1 million, and lower capital expenditures of $6.8
million.
Net cash provided by financing activities of continuing operations for the first
quarter of 2001 was $5.9 million compared to cash used in financing activities
of $21.8 million in the first quarter of 2000. This increase of $27.7 million is
due primarily to a decrease in restricted cash of $194.1 million (used to repay
debt), partially offset by an increase in funds held in trust of $12.6 million
and a decrease in outstanding debt of $154.0 million.
In addition, cash used in discontinued operations in the first quarter of 2000
totaled $9.4 million representing mainly operating losses of those businesses.
During the first quarter of 2001, the Company sold its aviation ground handling
business in Rome, Italy for approximately $10.0 million. In May 2001, the
Company sold its interest in the aviation business in Spain for approximately
$1.8 million.
In connection with several of the sales of its noncore businesses, the Company
is also entitled to certain deferred payments, subject to certain contingencies.
In addition, the Company has contingent obligations under most of the related
sale agreements with respect to liabilities arising before and, in some cases,
after the consummation of the sale.
At March 31, 2001, the Company had approximately $101.8 million in cash and cash
equivalents, of which $10.6 million related to net assets held for sale. In
addition, the Company had a revolving credit facility of approximately $146
million on which the Company had not drawn at March 31, 2001. That facility is
further described below.
The Company's Revolving Credit and Participation Agreement (the "Master Credit
Facility") which matures on May 31, 2002 and is secured by substantially all of
the Company's assets, provides the Company with the credit line of approximately
$146 million, including a subfacility which may only be used to provide certain
letters of credit that may be required to be posted by the Company in the event
that the Company's long-term debt rating is downgraded below investment grade.
The Company may utilize the balance of the credit facility for continued
investment in existing and, to a more limited extent, new energy projects, as
well as for working capital and other general corporate purposes. The Company's
ability to make investments in new energy projects is subject to several
financial covenants relating to the Company's cash position, net worth and
compliance with leverage and interest coverage tests. During the first quarter
of 2001, in connection with the closing of the Master Credit Facility, the
Company repaid approximately $157 million of outstanding bank and other
indebtedness on the closing date of the Master Credit Facility. This debt amount
was repaid from the amount that had been on the Company's balance sheet under
the heading "Restricted Cash".
The Company expects to complete the sale of its aviation fueling business and
its other remaining noncore businesses in 2001. Sales of its noncore businesses
are not totally within the Company's control. In addition, the successful
completion of the sales processes for noncore assets may be impacted by general
economic conditions in the markets in which these assets must be sold, and in
some instances necessary regulatory and third-party consents.
Recently, events affecting the California energy markets resulted in delays in
payments for power sold to two utilities. Those two utilities are Pacific Gas &
Electric Co. ("PG&E") and Southern California Edison ("SCE"). On March 27, 2001,
the California Public Utilities Commission approved a substantial rate increase
and directed the utilities to begin making current payments for power sales
starting in April 2001. SCE is paying currently for power purchases from March
27, 2001. On April 6, 2001, PG&E, one of California's largest electric
utilities, filed for protection under Chapter 11 of the U.S. Bankruptcy Code.
PG&E is now paying currently for power purchases from April 6, 2001. As of March
31, 2001, the Company's outstanding net receivables from these two utilities
totaled approximately $55.1 million (including the Company's 50% interest in
several partnerships) net of reserves of approximately $19.4 million. Of these
net receivables, $11.7 million was due from PG&E. From April 1 to May 9, 2001,
the Company had received payments relating to the March 31, 2001 balances due
from SCE of $1.9 million. Payment of those remaining March 31, 2001 receivables
for California power sales is likely to be obtained only in connection with
resolution of that state's power crisis and resolution of that utility's
bankruptcy. Therefore, the amounts received and the timeliness of payment are
subject to legal, regulatory and legislative developments. Although the matter
is not free of doubt, the Company believes it will ultimately receive payment of
these receivables.
Under its Master Credit Facility, the Company agreed to meet budgeted cash
flows. The Company's ability to meet these tests could be adversely affected if
payment of receivables for California power sales or completion of asset sales
are significantly delayed. However, even if payments of these receivables or
these asset sales are further delayed, the Company believes that it can meet
these covenants by seeking access to capital markets and through scheduling the
incurrence of expenditures.
In addition, under the Master Credit Facility newly identified investment
commitments can be made once stated asset sale objectives are achieved. Although
the Company believes these sales objectives will be met in 2001, if the Company
is not permitted to make newly identified investment commitments in 2001 due to
delays in completing asset sales, it does not expect any substantial impact on
the Company's anticipated business activities in the current year or in 2002.
Under certain agreements previously reported, the Company is required to provide
letters of credit if its debt securities are no longer rated investment grade.
The Master Credit Facility provides a subfacility which the Company believes is
adequate for this purpose.
The Master Credit Facility expires May 31, 2002. At that time, outstanding
revolving loans, if any, under this facility must be repaid and all letters of
credit issued thereunder and other obligations must be satisfied or released.
The Company expects to be able to replace this facility on a timely basis.
Further, to date the Company has been able to work with its creditors to assure
compliance with obligations that might have been adversely impacted by payment
delay, and it expects that it will continue to be able to do so unless the
status of the California utilities substantially deteriorates.
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 COMMISSION AND MORE GENERALLY, GENERAL ECONOMIC
CONDITIONS, INCLUDING CHANGES IN INTEREST 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 the 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. In addition, with respect to its aviation fueling business (which
the Company has not yet divested), the Company and/or certain subsidiaries have
been advised by various authorities that they are responsible for investigation,
remediation and/or corrective action 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 such matter to seek fair and reasonable solutions.
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) 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 at New York's Kennedy International Airport. These
cases have been consolidated for joint trial. Both United and American
allege that Ogden New York negligently caused discharges of petroleum
at the airport and that Ogden New York is obligated to indemnify the
airlines pursuant to the Fuel Services Agreements between Ogden New
York and the respective airline. United and American further allege
that Ogden New York 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 New York, 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 New York 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 New York
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 complaint alleges damages
in excess of $70,000,000.
The Company disputes the allegations and believes that the damages
sought are overstated in view of the Airlines' responsibility for the
alleged contamination and that the Company has other defenses under
their respective leases, contracts and permits with the Port Authority
of New York and New Jersey.
(ii) On December 23, 1999, Allied Services, Inc. ("Allied") 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. Third-party plaintiffs seek contribution and
indemnification from Allied and over 90 other third-party defendants
for costs incurred and to be incurred for cleanup. This action was
stayed, pending the outcome of first- and second-party claims. 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.
(iii) 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.
(iv) On May 25, 2000, the California Regional Water Quality Control Board,
Central Valley Region ("Board"), issued a cleanup and abatement order
to Pacific-Ultrapower Chinese Station ("Chinese Station"), a general
partnership of which a Company subsidiary owns 50% and which operates
a wood-burning power plant located in Jamestown, California. This
order arises from the use as fill material, by Chinese Station's
neighboring property owner, of boiler bottom ash generated by Chinese
Station. The order was issued jointly to Chinese Station and to the
neighboring property owner. As required by the order, Chinese Station
has prepared an environmental site assessment and a clean closure work
plan for the removal of the material and has applied for required
permits. The Board, on April 18, 2001, issued a Notice of Violation to
Chinese Station and the neighboring property owner alleging that as a
result of time delays in completing the cleanup activities respondents
have a potential civil liability, as of that date, of $690,000. This
matter remains under investigation by the Board and other state
agencies with respect to alleged civil and criminal violations
associated with the management of the material. Chinese Station
believes it has valid defenses.
(v) On December 26, 2000, I. Schumann & Co. named Ogden Corporation, Ogden
Alloys, Inc., Ogden Metals, Inc. and American Motorists Insurance
Company in a lawsuit filed in the United States District Court for the
Northern District of Ohio. The lawsuit seeks reimbursement for
response costs at a site formerly owned and operated by the Company's
subsidiary related entities, damages for breach of contract and
judgment declaring that the Company and its named subsidiaries is
responsible for certain future remediation costs. The plaintiff is
seeking response costs in excess of $3,000,000 and unspecified damages
from the Company. The Company believes it has valid defenses and has
moved to dismiss the complaint.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3.0 Articles of Incorporation and By-laws.
3.1 (a) The Company's Restated Certificate of Incorporation
as amended.*
(b) Certificate of Ownership and Merger, merging
Ogden-Covanta, Inc. into Ogden Corporation, dated
March 7, 2001.*
3.2 The Company's By-Laws, as amended through April 8,
1998.*
4.0 Instruments Defining Rights of Security Holders.
4.1 Fiscal Agency Agreement between the Company and Bankers
Trust Company, dated as of June 1, 1987, and Offering
Memorandum dated June 12, 1987, relating to U.S. $85
million 6% Convertible Subordinated Debentures Due
2002.*
4.2 Fiscal Agency Agreement between the Company and Bankers
Trust Company, dated as of October 15, 1987, and Offering
Memorandum, dated October 15, 1987, relating to U.S. $75
million 5-3/4% Convertible Subordinated Debentures Due
2002.*
4.3 Indenture dated as of March 1, 1992 from the Company to
Wells Fargo Bank Minnesota, National Association, as
Trustee (as successor in such capacity to The Bank of New
York, Trustee), relating to U.S. $100 million principal
amount of 9 1/4% Debentures Due 2022.*
4.4 Amended and Restated Rights Agreement between the Company
and The Bank of New York, dated as of September 28,
2000.*
10.0 Material Contracts
10.1 Revolving Credit and Participation Agreement, dated as of
March 14, 2001, among the Company, the Lenders listed
therein, Bank of America, N.A., as Administrative Agent,
Co-Arranger and Co-Book Runner and Deutsche Bank AG, New
York Branch, as Documentation Agent, Co-Arranger and
Co-Book Runner.*
10.2 Employment Agreements
(a) Letter Agreement between the
Company and Raymond E. Dombrowski, Jr.
dated January 22, 2001 (filed herewith
as Exhibit 10.2(a)).
11 Detail of Computation of Earnings per Share Applicable to
Common Stock (filed herewith as Exhibit 11)
* INCORPORATED BY REFERENCE AS SET FORTH IN THE EXHIBIT INDEX OF THIS
QUARTERLY REPORT ON FORM 10-Q.
(b) Reports on Form 8-K
Form 8-K Current Reports filed on January 4, 2001, March 8, 2001, March
15, 2001, March 16, 2001, March 30, 2001 and April 9, 2001 are
incorporated herein by reference.
SIGNATURES
----------
Pursuant to the requirements of the Securities Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
COVANTA ENERGY CORPORATION
(Registrant)
Date: May 15, 2001 By: /s/ EDWARD W. MONEYPENNY
----------------------------------
Edward W. Moneypenny
Executive Vice President
and Chief Financial Officer
Date: May 15, 2001 By: /s/ WILLIAM J. METZGER
---------------------------------
William J. Metzger
Vice President and
Chief Accounting Officer
EXHIBIT INDEX
-------------
EXHIBIT NO. DESCRIPTION OF DOCUMENT FILING INFORMATION
- ----------- ----------------------- ------------------
3 Articles of Incorporation and By-Laws.
3.1 (a) The Company's Restated Certificate of Filed as Exhibit (3)(a) to the Company's Form 10-K for
Incorporation as amended. the fiscal year ended December 31, 1988 and
incorporated herein by reference.
(b) Certificate of Ownership and Merger, Merging Filed as Exhibit 3.1(b) to the Company's Form 10-K for
Ogden-Covanta, Inc., into Ogden Corporation, dated the fiscal year ended December 31, 2000 and
March 7, 2001. incorporated herein by reference.
3.2 The Company's By-Laws as amended. Filed as Exhibit 3.2 to the Company's Form 10-Q for
the quarterly period ended March 31, 1998 and
incorporated herein by reference.
4 Instruments Defining Rights of Security Holders.
4.1 Fiscal Agency Agreement between the Company and Filed as Exhibits (C)(3) and (C)(4) to the Company's
Bankers Trust Company, dated as of June 1, 1987 and Form 8-K filed with the Securities and Exchange
Offering Memorandum dated June 12, 1987, relating Commission on July 7, 1987 and incorporated herein by
to U.S. $85 million 6% Convertible Subordinated reference.
Debentures Due 2002.
4.2 Fiscal Agency Agreement between the Company and Filed as Exhibit (4) to the Company's Form S-3
Bankers Trust Company, dated as of October 15, Registration Statement filed with the Securities and
1987, and Offering Memorandum, dated October 15, Exchange Commission on December 4, 1987, Registration
1987, relating to U.S. $75 million 5-3/4% No. 33-18875, and incorporated herein by reference.
Convertible Subordinated Debentures Due 2002.
4.3 Indenture dated as of March 1, 1992 from the Filed as Exhibit (4)(C) to the Company's Form 10-K for
Company to Wells Fargo Bank Minnesota, National the fiscal year ended December 31, 1991 and
Association, as Trustee (as successor in such incorporated herein by reference.
capacity to The Bank of New York, Trustee),
relating to U.S. $100 million 9-1/4% Debentures Due
2022.
4.4 Amended and Restated Rights Agreement between the Filed as Exhibit 1 to Amendment No. 1 to the Company's
Company and The Bank of New York, dated as of Form 8-A filed with the Securities and Exchange
September 28, 2000. Commission on September 29, 2000 and incorporated
herein by reference.
10 Material Contracts.
10.1 Revolving Credit and Participation Agreement, Filed as Exhibit 10.1(b) to the Company's
dated March 14, 2001, among the Company, the Form 10-K for the fiscal year ended
Lenders listed therein, Bank of America, N.A., December 31, 2000 and as incorporated
Administrative Agent, Co-Arranger and Co Book herein by reference.
Runner, and Deutsche Bank AG, New York Branch,
as Documentation Agent, Co-Arranger and Co-Book
Runner.
10.2 Employment Agreements.
(a) Letter Agreement dated January 22, 2001 Filed herewith as Exhibit 10.2(a).
between the Company and Raymond E. Dombrowski, Jr.
11 Detail of Computation of Earnings Per Share Filed herewith as Exhibit 11.
Applicable to Common Stock.