UNITED STATES
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, 2002.
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, 2002 and 2001
and for the Year Ended December 31, 2002
Supplemental Schedule
December 31, 2002
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, 2002 and 2001 2
Statement of Changes in Net Assets Available for Benefits for the
Year Ended December 31, 2002 3
Notes to Financial Statements 4-9
SUPPLEMENTAL SCHEDULE -
Form 5500, Schedule H, Part IV, Line 4 (i) - Schedule of Assets
(Held at End of Year) December 31, 2002 10
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, 2002 and 2001, and the
related statement of changes in net assets available for benefits for the year
ended December 31, 2002. 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,
2002 and 2001, and the changes in net assets available for benefits for the year
ended December 31, 2002 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 2002 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
June 27, 2003
THE OGDEN 401(k) PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 2002 AND 2001
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2002 2001
ASSETS -
Investments (Note 3) $ 34,035,570 $ 51,135,230
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Receivables:
Employer contributions 231 39,925
Participant contributions 1,038 36,035
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Total receivables 1,269 75,960
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NET ASSETS AVAILABLE FOR BENEFITS $ 34,036,839 $ 51,211,190
============= =============
See notes to financial statements.
THE OGDEN 401(k) PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEAR ENDED DECEMBER 31, 2002
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ADDITIONS:
Additions to net assets attributed to -
Interest and dividends $ 193,440
Contributions:
Participant 739,927
Employer 379,162
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Total additions 1,312,529
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DEDUCTIONS:
Deductions from net assets attributed to:
Net depreciation in fair value of investments (Note 3) (5,003,078)
Benefits paid to participants (8,819,965)
Administrative expenses (36,367)
Net transfer to other plans (Note 1) (4,627,470)
-------------
Total deductions (18,486,880)
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NET DECREASE IN NET ASSETS
AVAILABLE FOR BENEFITS (17,174,351)
NET ASSETS AVAILABLE FOR BENEFITS:
BEGINNING OF YEAR 51,211,190
-------------
END OF YEAR $ 34,036,839
=============
See notes to financial statements.
THE OGDEN 401(k) PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 2002 AND 2001
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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.
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 with a safe harbour 401(k) feature.
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 March 21, 2003 the Plan was merged into the Covanta Energy Savings Plan.
On April 1, 2002, Covanta and 123 of its domestic subsidiaries, 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"). Since April 1, 2002, thirty-one additional
subsidiaries of Covanta filed for reorganization under Chapter 11 of the
Bankruptcy Code. In addition, four subsidiaries, which had filed petitions
on April 1, 2002, have been sold as part of the bankruptcy proceeding. It is
possible that additional subsidiaries will file petitions for reorganization
under Chapter 11 and be included as part of Covanta's plan of
reorganization.
Covanta and these subsidiaries, (collectively 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, and
if necessary renew the terms of the Debtor in Possession Credit 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 Credit Facility includes provisions enabling
Covanta and its subsidiaries, including the Company, to obtain funding for
making employer matching contributions to the Plan.
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.
On various dates in 2002, 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 $4,627,470.
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.
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/she has
completed 12 months of employment and 1,000 hours of service.
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 2002 is
$200,000. For 2002 and 2001, participant pre-tax contributions could not
exceed $11,000 and $10,500, respectively, in accordance with Internal
Revenue Service ("IRS") regulations. The Company matches 100 percent up to
the first 3% of a participant's annual compensation and 50% up to the next
2% of a participant's annual compensation which is deferred into the Plan.
A participant's elective contributions and Company contributions are
invested, at the direction of the participant.
If a participant does not direct the investment of his or her account, he or
she is deemed to have an elected investment in the Government Securities
Fund.
Loans to Participants - Loans are made to participants at a minimum of $500
and up to the lesser of 50% 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 (10-year maximum on loans for a primary residence).
Participants were prohibited from borrowing funds accumulated in the Covanta
Stock Fund (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%. Loans to participants, which comprise the Loan Fund, are
reported at cost, which approximates fair value.
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 five years of
service.
Participant contributions are immediately 100 percent vested.
Retirement Dates - A participant's normal retirement date is the
participant's 65th birthday. A participant may elect early retirement at age
55 with 10 years of credited service.
Form of Benefits - Benefits are paid in one lump sum following a
participant's retirement or termination of service. Any account with a
balance of less than $5,000 following a participant's termination of service
will be automatically distributed. If a participant terminates employment on
or after his or her retirement date or by reason of death or disability,
such participant's account will become 100% vested.
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 his or her 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.
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
Basis of Accounting - 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.
Investment Funds - Plan assets are held by American Express Trust Company
(the "Trustee").
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 the outstanding principal 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 is valued at contract value (cost plus
accrued interest), which approximates fair value.
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.
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.
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, 2002 and 2001 that represented 5% or more of the Plan's net
assets:
2002 2001
Investments at fair value:
*AXP Growth Fund $ 4,364,576 $ 7,905,144
*American Express Equity Index Fund II 5,653,361 10,575,176
*AXP Mutual Fund Balanced Portfolio 1,939,283 3,198,526
*AET U.S. Government Securities Fund II 3,885,034 5,029,366
*American Express Trust Income Fund II 15,538,175 18,544,875
*Permitted party-in-interest
During 2002, the Plan's investments (including gains and losses on
investments bought and sold as well as held during the year) depreciated in
value by $5,003,078 as follows:
*American Express Equity Index Fund II $ (2,031,331)
*AXP New Dimensions Fund (346,865)
*AXP Mutual Fund Balanced Portfolio (513,664)
*AXP Growth Fund (1,712,331)
*American Express Trust Income Fund II 797,844
*Covanta Stock Fund (1,044,110)
Templeton Foreign Fund (152,621)
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$ (5,003,078)
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*Permitted party-in-interest
4. INVESTMENT CONTRACTS
The American Express Trust Income Fund II primarily invests in investment
contracts providing a guaranteed return on principal invested over a
specified time period. All investments contracts in the American Express
Trust Fund II are fully benefit-responsive and are record at their fair
values. Generally, fair value approximates contract value contributions made
plus interest accrued at the contract rates less withdrawals and fees. If
however, an event has occurred that may impair the ability of the contract
issuer to perform in accordance with contract terms, fair value may be less
the contract value. The crediting interest rates at December 31, 2002 for
the various investment contracts ranged from 1.53% to 7.78%.
5. NON-PARTICIPANT DIRECTED INVESTMENTS
Information about the net assets at December 31, 2002 and 2001 and
significant components of the changes in net assets relating to the
non-participant directed investments for the year ended December 31, 2002
are as follows:
2002 2001
Net assets:
Covanta Stock Fund $ 1,894 $ 502,762
========== ===========
Change in net assets:
Contributions $ 33,394
Loan repayment 428
Net realized and unrealized depreciation of assets (526,717)
Benefits paid to participants (4,332)
Administrative expenses (37)
Transfers to participant-directed investments (3,604)
----------
Net change $(500,868)
==========
6. PLAN TERMINATION
On November 21, 2002, the Administrative Committee approved the merger of
the Plan into the Covanta Energy Savings Plan.
On March 21, 2003 the Plan was merged into the Covanta Energy Savings Plan.
In order to effect this merger, the Trustee of the Plan transferred all
assets of the Trust to the Trustee of the Covanta Energy Savings Plan.
Notwithstanding any other provision of the Plan to the contrary, each
Participant shall be entitled to the benefits and protections provided by
Section 16 "Amendment or Termination of the Plan and the Trust" of the Plan.
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"). In March 2002, the Plan Administrator has applied for, but not yet
received an IRS determination on the Plan. 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 (the "Exchange") for 2001 and the first quarter
of 2002, and on the National Quotation Bureau's Pink Sheets for the last
three quarters of 2002.
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 EIN 13-3058273
Plan No. 0001
FORM 5500, SCHEDULE H, PART IV, LINE 4 (i) -
SCHEDULE OF ASSETS (HELD AT END OF YEAR)
DECEMBER 31, 2002
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Description Number
of of Market
Identity of Issue Investment Shares/Units Cost Value
General Investments:
*Covanta Stock Fund Common Stock 299,537 $ 3,594
*AET U.S. Government Securities Fund II Money Market 3,885,035 3,885,034
*American Express Equity Index Fund II Collective Trust 228,502 $ 8,056,767 5,653,361
*Loan Fund Loans** N/A 242,461
*American Express Trust Income Fund II GIC 676,794 15,538,175
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Total General Investments 25,322,625
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Regulated Investment Companies:
*AXP Growth Fund Mutual Fund 212,595 4,364,576
*AXP Mutual Fund Balanced Portfolio Mutual Fund 249,265 1,939,283
*AXP New Dimensions Fund Mutual Fund 52,640 1,014,376
Templeton Foreign Fund Mutual Fund 167,835 1,394,710
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Total Regulated Investment Companies 8,712,945
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TOTAL $ 34,035,570
=============
* Permitted party-in-interest
** Notes receivable from participants (with interest rates from 5.75% to 10.5%;
maturity from 2002 to 2012)
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: June 27, 2003 By: /s/ Stephen M. Gansler
------------------------- --------------------------------------------
Stephen M. Gansler
Plan Administrator
EXHIBIT INDEX
Exhibit Number Description of Exhibit
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23.1 Consent of Independent Auditors
99.0 Certification pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002