SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
ANNUAL REPORT
PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
/x/ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934.
For the fiscal year ended December 31, 2001.
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from __________ to __________.
Commission file number 1-3122
A. Full title of the plan and the address of the plan, if different from that
of the issuer named below:
The Ogden 401(k) Plan
B. Name of issuer of the securities held pursuant to the plan and the address
of its principal executive office:
Covanta Energy Corporation
40 Lane Road
Fairfield, NJ 07007
The Ogden 401(k) Plan
Independent Auditors' Report
Financial Statements
As of December 31, 2001 and 2000
and for the Year Ended December 31, 2001
Supplemental Schedule
December 31, 2001
THE OGDEN 401(k) PLAN
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS:
Statements of Net Assets Available for Benefits as of
December 31, 2001 and 2000 2
Statement of Changes in Net Assets Available for Benefits
for the Year Ended December 31, 2001 3
Notes to Financial Statements 4-7
SUPPLEMENTAL SCHEDULE-
Form 5500, Schedule H, Part IV, Line 4i - Schedule of Assets
Held at End of Year as of December 31, 2001 8
INDEPENDENT AUDITORS' REPORT
The Ogden 401(k) Plan
We have audited the accompanying statements of net assets available for benefits
of The Ogden 401(k) Plan (the "Plan") as of December 31, 2001 and 2000, and the
related statement of changes in net assets available for benefits for the year
ended December 31, 2001. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of December 31,
2001 and 2000, and the changes in net assets available for benefits for the year
ended December 31, 2001 in conformity with accounting principles generally
accepted in the United States of America.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule listed in the
Table of Contents is presented for the purpose of additional analysis and is not
a required part of the basic financial statements, but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. This schedule is the responsibility of the Plan's management. Such
schedule has been subjected to the auditing procedures applied in our audit of
the basic 2001 financial statements and, in our opinion, is fairly stated in all
material respects when considered in relation to the basic financial statements
taken as a whole.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
July 10, 2002
THE OGDEN 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2001 AND 2000
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2001 2000
ASSETS:
Investments (Note 3) $ 51,135,230 $ 87,823,337
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Receivables:
Employer contributions 39,925 121,612
Participant contributions 36,035 65,051
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Total receivables 75,960 186,663
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NET ASSETS AVAILABLE FOR BENEFITS $ 51,211,190 $ 88,010,000
============ ============
See notes to financial statements.
THE OGDEN 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2001
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ADDITIONS:
Additions to net assets attributed to-
Interest and dividends $ 506,190
Contributions:
Participant 1,149,297
Employer 532,047
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Total additions 2,187,534
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DEDUCTIONS:
Deductions from net assets attributed to:
Net depreciation in fair value of investments (Note 3) (8,023,995)
Benefits paid to participants (13,072,174)
Administrative expenses (80,459)
Net transfer to other plans (17,809,716)
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Total deductions (38,986,344)
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NET DECREASE IN NET ASSETS
AVAILABLE FOR BENEFITS (36,798,810)
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR 88,010,000
------------
END OF YEAR $ 51,211,190
============
See notes to financial statements.
THE OGDEN 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2001 AND 2000
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1. DESCRIPTION OF THE PLAN
The following is a brief description of The Ogden 401(k) Plan (the
"Plan"). Participants should refer to the Plan document for more complete
information.
a. General Information - Ogden Services Corporation (the "Company"), a
wholly owned subsidiary of Covanta Energy Corporation ("Covanta") is
the Plan's sponsor. The Plan is an employee savings plan providing for
both employer and participants contributions. The Plan is subject to
the provisions of the Employee Retirement Income Security Act of 1974
("ERISA").
The Plan was established as the Ogden Food Service Corporation Savings
and Security Plan by Ogden Food Service Corporation on January 1, 1982.
Effective January 1, 1996, the Company changed the Plan's name from the
Ogden Profit Sharing Plan to The Ogden 401(k) Plan. The Plan was
amended and restated effective January 1, 1991 to conform with the Tax
Reform Act of 1986.
Effective January 1, 1999, the Plan was amended as a result of several
administrative and plan design changes. The Company determined that it
would be in the best interest of Ogden Resource Recovery Support
Services, Inc. and ADT Global Services, Inc. (collectively, "Prior
Participating Companies"), and their employees, to establish separate
defined contribution plans. Effective January 1, 1999, the Plan assets
of the Prior Participating Companies were transferred from the Plan to
the Resource Recovery 401(k) Plan and ADT Global Services 401(k) Plan,
respectively.
On various dates in 2001, the Company sold certain subsidiaries. Some
of the participants in the Plan were employees who became participants
of other plans sponsored by these subsidiaries. Amounts transferred to
these unrelated Plans amounted to $17,809,716.
Covanta has announced a financial restructuring plan resulting from its
comprehensive review of strategic alternatives. As the first element of
that plan, on April 1, 2002, Covanta and 123 of its domestic
subsidiaries (the "Debtors"), which include the Company, filed
voluntary petitions for reorganization under Chapter 11 of the United
States Bankruptcy Code (the "Bankruptcy Code") with the United States
Bankruptcy Court for the Southern District of New York (the "Bankruptcy
Court"). The Debtors are currently operating their businesses as
debtors in possession pursuant to the Bankruptcy Code. The Debtors'
dependence upon, among other things, confirmation of a plan of
reorganization, their ability to comply with the terms of their debtor
in possession financing facility, and their ability to generate
sufficient cash flows from operations, asset sales and financing
arrangements to meet their obligations, raise substantial doubt about
their ability to continue as going concerns. The Debtors' debtor in
possession financing facility includes provisions enabling Covanta and
its subsidiaries, including the Company, to obtain funding for making
employer matching contributions to the Plan (see Note 1 (d)).
As a result of publicly disclosed information concerning Covanta and
uncertainty of future rules and regulations which may apply to the
Plan's investment in Covanta's common stock, the Investment Committee
determined that it was in the best interest of the Plan and its
participants to discontinue the Covanta Stock Fund as an investment
option under the Plan effective March 18, 2002. Additionally, the Plan
was amended to discontinue the Company matching contributions in the
form of Covanta common stock and to allow Plan participants to maintain
their investment in the Covanta Stock Fund or, at their discretion,
redirect their investment to another investment fund offered under the
Plan. On May 16, 2002, the Securities and Exchange Commission granted
the application of the New York Stock Exchange, Inc. (the "NYSE") for
removal of Covanta's common stock from listing and registration on the
NYSE. The removal of such stock became effective at the opening of the
trading session on May 17, 2002.
b. Administration of the Plan - Administrative and Investment Committees
are appointed by the Board of Directors (the "Board") of the Company
and serve as fiduciaries of the Plan. The Administrative Committee has
responsibility for administering the Plan, and the Investment Committee
has responsibility for reviewing the performance of the Plan's
investments. Costs related to the administration of the Plan may be
paid out of Plan assets if the Company does not pay such expenses
directly.
c. Participation - Full-time and part-time employees of participating
companies who are not covered under a collective bargaining agreement
with a recognized union and have attained age 21 are eligible to
participate in the Plan on the first day of the calendar month
following the date he or she has completed twelve months of employment
and 1,000 hours of service.
d. Contributions - Participants may elect to contribute to the Plan from
one to fifteen percent of their annual compensation on a pre-tax basis.
The maximum annual compensation that can be applied to the 401(k)
deferral for 2001 is $170,000. For 2001, participant pre-tax
contributions could each not exceed $10,500 in accordance with Internal
Revenue Service ("IRS") regulations. The Company matches 100 percent up
to the first 3 percent of a participant's annual compensation that is
invested based on participant investment elections. On January 1, 1999,
the Company implemented an additional company match of 50 percent up to
the next 2 percent of a participant's annual compensation in Covanta
common stock for participants who are eligible and who elect to
contribute.
A participant's elective contributions and Company contributions and
discretionary profit sharing contributions are invested, at the
direction of the participant, in accordance with one of the following
options:
o 100 Percent in one of the investment funds; or
o In more than one investment fund allocated in multiples of 1 percent.
If a participant does not make such an election, he or she is deemed to
have elected investment in the Government Securities Fund.
e. Loans to Participants - Loans are made to participants at a minimum of
$500 and up to the lesser of 50 percent of the vested balance or
$50,000, less the highest of any outstanding loan balance in the
previous 12 months, even if repaid. Loans cannot exceed the limitations
of the Tax Reform Act of 1986. The terms of the loans are a minimum of
one year and a maximum of five years or sixty months (ten year maximum
on loans for a primary residence). Participants were prohibited from
borrowing funds accumulated in the Covanta Stock Fund (see Note 8). The
maximum number of loans outstanding at one time for an employee is two.
The interest rate charged is The Wall Street Journal's prime rate plus
1 percent. Loans to participants, which comprise the Loan Fund, are
reported at cost, which approximates fair value.
f. Vesting - Employees eligible to participate in the Plan become 100
percent vested in Company contributions made on or after January 1,
1999. Matching contributions contributed on behalf of the participants
for payroll dates December 31, 1998 and earlier will be fully vested
after 5 years of service.
Participant contributions are immediately 100 percent vested.
g. Retirement Dates - A participant's normal retirement date is the
participant's sixty-fifth birthday. A participant may elect early
retirement at age 55 with 10 years of credited service.
h. Form of Benefits - Benefits are paid in one lump sum generally.
i. Distribution from the Plan Because of Hardship - Withdrawals are
permitted if a participant establishes, to the satisfaction of the
Administrative Committee, a financial need for funds for which there is
no other money available such as: (i) to purchase a primary residence,
(ii) to pay uninsured medical expenses for the participant or immediate
family, (iii) to prevent mortgage foreclosure on, or eviction from
their primary residence, or (iv) to pay post-secondary educational
expenses for the participant, spouse, children or dependents.
j. Payments from the Plan's Trust - Upon termination of service of a
participant on or after retirement date or by reason of death or
disability, an amount equal to the value of the participant's account
as of the valuation date next following the date of termination of
service, whether or not such participant has a vested interest in such
account, is paid from the trust at age 59-1/2 or older.
k. Forfeitures - Forfeitures arising under the Plan during the year are
first used to reduce employer contributions for the year and then used
to pay administrative expenses of the Plan.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accounting and reporting policies followed in the preparation of
the financial statements of the Plan are in conformity with accounting
principles generally accepted in the United States of America. The
following is a description of the more significant of these policies:
a. Investment Funds - Plan assets are held by American Express Trust
Company (the "Trustee").
b. Investment Valuation and Income Recognition - The Plan's investments
are stated at fair value. Shares of mutual funds and the collective
trust ("American Express Equity Index Fund II") are valued at quoted
market prices, which represent the net asset value of shares held by
the Plan at year-end. Participant loans are valued at outstanding
principle balance due for loans taken from individual accounts, which
approximates fair value. Purchase and sales of securities are recorded
on a trade date basis. Dividends are recorded on the ex-dividend date.
Amounts for securities that have no quoted market prices represent
estimated fair value. The approximate value of the Covanta Stock Fund
is the quoted market price of Covanta's stock.
The American Express Trust Income Fund II which invests in
benefit-responsive investments and is valued at contract value (cost
plus accrued interest), which approximates fair value.
c. Use of Estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States of America requires management to make estimates and assumptions
that affect the reported amounts of net assets available for benefits
and changes therein. Actual results could differ from the estimates and
assumptions used.
d. Risks and Uncertainties - The Plan provides for various investment
options (Note 3). Investment securities, in general, are exposed to
various risks, such as interest rate, credit and overall market
volatility. Due to the level of risk associated with certain investment
securities, it is reasonably possible that changes in value of
investment securities will occur in the near term and that such changes
would materially affect participants' account balances and the amounts
reported in the statements of net assets available for benefits.
e. Accounting for Derivative Instruments - The Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting
Standards ("SFAS") No. 133, Accounting for Derivative Instruments and
Hedging Activities, in June 1998. SFAS No. 133, as amended and
interpreted, establishes accounting and reporting standards for
derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. It requires
entities, including employee benefit plans, to recognize all
derivatives as either assets or liabilities in the statement of net
assets available for benefits and to measure those instruments at fair
value. Effective January 1, 2001, the Plan adopted this statement. The
adoption of SFAS No. 133 had no impact on the financial statements of
the Plan for the year ended December 31, 2001.
f. Expenses - Administrative expenses of the Plan, are paid by either the
Plan or the Plan's sponsor as provided in the Plan document.
3. INVESTMENTS
The following is a summary of the Plan's investments held by the
Trustee at December 31, 2001 and 2000 that represent 5 percent or more
of the Plan's net assets:
2001 2000
Investments at fair value:
*AXP Growth Fund $ 7,905,144 $18,715,324
*American Express Equity Index Fund II 10,575,176 18,261,231
*AXP Mutual Fund Balanced Portfolio 3,198,526 5,324,939
*AET U.S. Government Securities Fund II 5,029,366 8,680,355
*American Express Trust Income Fund II 18,544,875 -
*Fiduciary Capital Management Fixed Income Fund - 22,793,995
*Permitted party-in-interest
During 2001, the Plan's investments (including gains and losses on
investments bought and sold as well as held during the year)
depreciated in value by $8,023,995 as follows:
*American Express Equity Index Fund II $ (1,627,799)
*AXP New Dimensions Fund (532,528)
*AXP Mutual Fund Balanced Portfolio (608,152)
*Other American Express/American Express Trust
Company Funds (4,365,267)
*Covanta Stock Fund (1,983,870)
Other Assets 1,093,621
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$(8,023,995)
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*Permitted party-in-interest
4. INVESTMENT CONTRACTS
The Fiduciary Capital Management Fixed Income Fund ("Fixed Income
Fund") invested in investment contracts providing a guaranteed return
on principal invested over a specified time period. The Fixed Income
Fund was discontinued effective December 11, 2001. The Plan
participants were given the option of transferring their investment to
another investment fund offered under the Plan, or any investment not
transferred was automatically redirected to the American Express Trust
Index Fund II. The crediting interest rates at December 31, 2001 for
the various investment contracts ranged from 6.54% to 7.32%.
Investment contracts in the Fixed Income Fund are fully
benefit-responsive and are recorded at contract value which equals
principal plus accrued interest. If the investment contracts were
reported at fair value, the investment contracts in the Fixed Income
Fund would have approximated $3,355,677 at December 31, 2000.
5. NONPARTICIPANT DIRECTED INVESTMENTS
Information about the net assets at December 31, 2001 and 2000 and
significant components of the changes in net assets relating to the
nonparticipant-directed investments for the year ended December 31,
2001 and 2000 are as follows:
2001 2000
Net assets:
Covanta Stock Fund $ 502,762 $ 2,060,024
========= ===========
2001
Change in net assets:
Contributions $ 132,740
Net realized and unrealized depreciation of assets (1,018,895)
Benefits paid to participants (201,945)
Administrative expenses (2,917)
Transfers to participant-directed investments (485,743)
------------
Net change $(1,576,760)
============
6. PLAN TERMINATION
The Company expects to continue the Plan indefinitely, but reserves the
right to modify, suspend or terminate the Plan at any time, which
includes the right to vary the amount of, or to terminate, the
Company's contributions to the Plan. In no event shall assets of the
Plan be used for any purpose other than to benefit participants or
beneficiaries. In the event of the Plan's termination or discontinuance
of contributions thereunder, the interest of each participant to
benefits accrued to such date, to the extent then funded, is fully
vested and nonforfeitable.
7. FEDERAL INCOME TAX STATUS
The Internal Revenue Service has determined and informed the Company by
letter dated June 14, 1995 that the Plan and related trust are designed
in accordance with applicable sections of the Internal Revenue Code
(the "Code"). The Plan has been amended since receiving the
determination letter. However, the Plan Administrator and the Plan's
counsel believe that the plan is designed and is currently being
operated in compliance with the applicable requirements of the Code.
Therefore, no provision for income taxes has been included in the
Plan's financial statements.
8. PARTY-IN-INTEREST TRANSACTIONS
The Covanta Stock Fund invested in Covanta common stock which was
traded on the New York Stock Exchange and maintained a small cash
balance invested in a money market fund for liquidity purposes (see
Note 1).
The Plan invests in certain mutual funds managed by the Trustee.
Certain officers and employees of the Company (who may also be
participants in the Plan) perform administrative services related to
the operation, record keeping and financial reporting of the Plan. The
Company pays these individuals salaries and also pays other
administrative expenses on behalf of the Plan. Certain fees, including
fees for the investment management services, to the extent not paid by
the Company, are paid by the Plan.
These transactions are not deemed prohibited party-in-interest
transactions, because they are covered by statutory administrative
exemptions from the Code's and ERISA's rules on prohibited
transactions.
******
THE OGDEN 401(k) PLAN
FORM 5500, SCHEDULE H, PART IV, LINE 4i -
SCHEDULE OF ASSETS HELD AT END OF YEAR
DECEMBER 31, 2001
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Description Number
of of Market
Identity of Issue Investment Shares/Units Cost Value
General Investments:
*Covanta Stock Fund Common Stock 393,179 $ 996,403
AET U.S. Government Securities Fund II Money Market 5,029,366 5,029,366
*American Express Equity Index Fund II Collective Trust 332,031 2,458,536 10,575,176
*Loan Fund Loans** N/A 715,547
*American Express Trust Income Fund II GIC 847,417 18,544,875
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Total General Investments 35,861,367
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Regulated Investment Companies:
*AXP Growth Fund Mutual Fund 292,783 7,905,144
*AXP Mutual Fund Balanced Portfolio Mutual Fund 339,907 3,198,526
*AXP New Dimensions Fund Mutual Fund 83,025 2,040,762
Templeton Foreign Fund Mutual Fund 230,209 2,129,431
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Total Regulated Investment Companies 15,273,863
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TOTAL $ 51,135,230
============
* Permitted party-in-interest
** Notes receivable from participants (with
interest from 6.5% to 10.5%; maturity
from 2002 to 2010)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the trustees (or other persons who administer The Ogden 401(k) Plan) have duly
caused this annual report to be signed on its behalf by the undersigned hereunto
duly authorized.
The Ogden 401(k) Plan
Date: July 15, 2002 By: /s/ Louis M. Walters
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Louis M. Walters
Member of The Ogden 401(k) Plan
Administrative Committee
EXHIBIT INDEX
Exhibit Number Description of Exhibit
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23.1 Consent of Independent Auditors