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Amendment No. 2
to
FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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
OGDEN CORPORATION
-----------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 13-5549268
- --------------------------------- -----------------------------------
(State or Other Jurisdiction (I.R.S. Employee Identification No.)
of Incorporation or Organization)
TWO PENNSYLVANIA PLAZA, NEW YORK, N.Y. 10121
- ---------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number including area code - (212) 868-6000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of each class Which Registered
------------------------
Common Stock, par value
$.50 per share New York Stock Exchange
$1.875 Cumulative Convertible
Preferred Stock (Series A) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES |X| NO |_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. |_|
The aggregate market value of registrant's voting stock, held by non-affiliates
based on the New York Stock Exchange closing price as reported in the
consolidated transaction reporting system as of the close of business on March
31, 2000 was as follows:
Common Stock, par value $.50 per share $511,488,044
$1.875 Cumulative Convertible
Preferred Stock (Series A) $2,798,775
The number of shares of the registrant's Common Stock outstanding as of March
31, 2000 was 49,495,891 shares. The following documents are hereby incorporated
by reference into this Form 10-K:
The only change to Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY
DATA is to add an Independent Auditors' Report on the Consolidated Financial
Statement Schedule and an Independent Auditors' consent.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
Page
------
Statements of Consolidated Income and Comprehensive Income
for the Years ended December 31, 1999, 1998 and 1997 63
Consolidated Balance Sheets - December 31, 1999 and 1998 64
Statement of Shareholders' Equity - for the Years
ended December 31, 1999, 1998 and 1997 65
Statement of Consolidated Cash Flows
for the Years ended December 31, 1999, 1998 and 1997 66
Notes to Consolidated Financial Statements 67-126
Independent Auditors' Report 127
Report of Management 128
Quarterly Results of Operations 129
Financial Statement Schedules 130-132
Schedules II - Valuation and Qualifying Accounts
for the Years ended December 31, 1999, 1998 and 1997
Independent Auditors' Report 132A
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the
consolidated financial statements or notes thereto
Ogden Corporation and Subsidiaries
STATEMENTS OF CONSOLIDATED INCOME
AND COMPREHENSIVE INCOME
- -----------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1999 1998 1997
- --------------------------------------------------------------------------------------------------------------- ----------------
Service revenues.............................................. $820,233,000 $ 783,051,000 $ 807,786,000
Net sales..................................................... 54,997,000 67,113,000 133,374,000
Construction revenues......................................... 119,455,000 44,861,000
Net gain on sale of businesses................................ 5,665,000 1,471,000 17,211,000
--------------- ---------------- ----------------
Total revenues................................................ 1,000,350,000 896,496,000 958,371,000
--------------- ---------------- ----------------
Operating costs and expenses.................................. 618,370,000 543,868,000 599,708,000
Costs of goods sold........................................... 65,676,000 57,685,000 87,954,000
Construction costs............................................ 120,774,000 39,855,000
Selling, administrative, and general expenses................. 123,164,000 92,712,000 89,768,000
Debt service charges.......................................... 95,003,000 100,363,000 101,658,000
--------------- ---------------- ----------------
Total costs and expenses...................................... 1,022,987,000 834,483,000 879,088,000
--------------- ---------------- ----------------
Consolidated operating income (loss).......................... (22,637,000) 62,013,000 79,283,000
Equity in income of investees and joint ventures.............. 13,005,000 19,340,000 1,784,000
Interest income............................................... 4,790,000 12,785,000 8,616,000
Interest expense.............................................. (35,487,000) (32,597,000) (29,661,000)
Other income (deductions)-net................................. 3,298,000 1,317,000 303,000
--------------- ---------------- ----------------
Income (loss) from continuing operations before income taxes,
minority interests and the cumulative effect of change in
accounting principle........................................ (37,031,000) 62,858,000 60,325,000
Income taxes.................................................. 6,917,000 (21,557,000) (21,715,000)
Minority interests ........................................... (6,176,000) (4,053,000) (1,823,000)
--------------- ---------------- ----------------
Income (loss)from continuing operations....................... (36,290,000) 37,248,000 36,787,000
Income (loss) from discontinued operations (net of income
taxes of: 1999, $6,000; 1998, $40,240,000; and
1997, $31,385,000).......................................... (41,851,000) 49,722,000 38,886,000
Cumulative effect of change in accounting principle
(net of income taxes of $1,313,000)......................... (3,820,000)
--------------- ---------------- ----------------
NET INCOME (LOSS)............................................. (81,961,000) 86,970,000 75,673,000
--------------- ---------------- ----------------
Other Comprehensive Income, Net of Tax:
Foreign currency translation adjustments...................... (4,631,000) (2,170,000) (8,094,000)
Unrealized Gains (Losses) on Securities:
Unrealized holding gains (losses) arising during period....... (60,000) 470,000 1,637,000
Less: reclassification adjustment for losses (gains)
included in net income...................................... 275,000 (2,046,000)
Minimum pension liability adjustment.......................... 409,000 (392,000) 241,000
--------------- ---------------- ----------------
Other comprehensive income.................................... (4,007,000) (2,092,000) (8,262,000)
--------------- ---------------- ----------------
Comprehensive income (loss)................................... $ (85,968,000) $ 84,878,000 $ 67,411,000
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Basic Earnings Per Share:
Income (loss) from continuing operations...................... $ (0.74) $ 0.74 $ 0.73
Income (loss) from discontinued operations.................... (0.85) 1.00 0.78
Cumulative effect of change in accounting principle........... (0.08)
--------------- ---------------- ----------------
Net Income (Loss)............................................. $ (1.67) $ 1.74 $ 1.51
--------------- ---------------- ----------------
--------------- ---------------- ----------------
Diluted Earnings Per Share:
Income (loss) from continuing operations...................... $ (0.74) $ 0.73 $ 0.72
Income (loss) from discontinued operations.................... (0.85) 0.98 0.76
Cumulative effect of change in accounting principle........... (0.08)
--------------- ---------------- ----------------
Net Income (Loss)............................................. $ (1.67) $ 1.71 $ 1.48
--------------- ---------------- ----------------
--------------- ---------------- ----------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
63
Ogden Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
- -------------------------------------------------------------------------------------------------------------------------
ASSETS December 31, 1999 1998
- -------------------------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents................................................. $ 101,020,000 $ 181,169,000
Marketable securities available for sale.................................. 44,685,000
Restricted funds held in trust............................................ 103,662,000 110,553,000
Receivables(less allowances:1999,$17,942,000 and 1998,$18,130,000)........ 294,051,000 274,307,000
Inventories............................................................... 10,767,000 20,162,000
Deferred income taxes..................................................... 36,189,000 47,921,000
Other..................................................................... 65,713,000 49,448,000
Net assets of discontinued operations..................................... 568,146,000 455,726,000
------------------ ------------------
Total current assets................................................... 1,179,548,000 1,183,971,000
Property, plant, and equipment-net........................................ 1,841,811,000 1,736,241,000
Restricted funds held in trust............................................ 166,784,000 180,922,000
Unbilled service and other receivables.................................... 159,457,000 159,409,000
Unamortized contract acquisition costs.................................... 102,137,000 69,260,000
Goodwill and other intangible assets...................................... 12,520,000 41,935,000
Investments in and advances to investees and joint ventures............... 180,523,000 149,663,000
Other assets.............................................................. 84,368,000 126,153,000
------------------ ------------------
Total Assets.............................................................. $ 3,727,148,000 $ 3,647,554,000
------------------ ------------------
------------------ ------------------
- -------------------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
- -------------------------------------------------------------------------------------------------------------------------
Liabilities:
Current Liabilities:
Current portion of long-term debt......................................... $ 113,815,000 $ 21,888,000
Current portion of project debt........................................... 80,383,000 63,201,000
Dividends payable......................................................... 15,403,000
Accounts payable.......................................................... 75,169,000 50,556,000
Federal and foreign income taxes payable.................................. 21,776,000
Accrued expenses, etc..................................................... 360,155,000 236,774,000
Deferred income........................................................... 45,806,000 45,090,000
------------------ ------------------
Total current liabilities.............................................. 675,328,000 454,688,000
Long-term debt............................................................ 344,945,000 348,594,000
Project debt.............................................................. 1,390,832,000 1,367,528,000
Deferred income taxes..................................................... 380,812,000 392,850,000
Deferred income........................................................... 182,663,000 201,563,000
Other liabilities......................................................... 127,559,000 158,875,000
Minority interests........................................................ 33,309,000 25,706,000
Convertible subordinated debentures....................................... 148,650,000 148,650,000
------------------ ------------------
Total liabilities...................................................... 3,284,098,000 3,098,454,000
------------------ ------------------
Shareholders' Equity:
Serial cumulative convertible preferred stock, par value $1.00 per share,
authorized, 4,000,000 shares; shares outstanding: 39,246 in 1999 and
42,218 in 1998, net of treasury shares of 29,820 in 1999 and 1998......... 39,000 43,000
Common stock, par value $.50 per share; authorized, 80,000,000 shares;
outstanding: 49,468,195 in 1999 and 48,945,989 in 1998, net of treasury
shares of 4,405,103 and 4,561,963, respectively........................... 24,734,000 24,473,000
Capital surplus........................................................... 183,915,000 173,413,000
Earned surplus............................................................ 255,182,000 367,984,000
Accumulated other comprehensive income.................................... (20,820,000) (16,813,000)
------------------ ------------------
Total Shareholders' Equity................................................ 443,050,000 549,100,000
------------------ ------------------
Total Liabilities and Shareholders' Equity................................ $ 3,727,148,000 $ 3,647,554,000
------------------ ------------------
------------------ ------------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
64
Ogden Corporation and Subsidiaries
STATEMENTS OF SHAREHOLDERS' EQUITY
- -----------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1999 1998 1997
- -----------------------------------------------------------------------------------------------------------------------------------
SHARES AMOUNTS SHARES AMOUNTS SHARES AMOUNTS
- -----------------------------------------------------------------------------------------------------------------------------------
SERIAL CUMULATIVE CONVERTIBLE
PREFERRED STOCK, PAR VALUE $1.00
PER SHARE; AUTHORIZED, 4,000,000 SHARES
Balance at beginning of year .......... 72,038 $ 73,000 74,166 $ 75,000 77,509 $ 78,000
Shares converted into common stock .... (2,972) (4,000) (2,128) (2,000) (3,343) (3,000)
----------- ------------ ----------- ------------ ----------- -----------
Total ................................. 69,066 69,000 72,038 73,000 74,166 75,000
Treasury shares ....................... (29,820) (30,000) (29,820) (30,000) (29,820) (30,000)
----------- ------------ ----------- ------------ ----------- -----------
Balance at end of year (aggregate
involuntary liquidation value--
1999, $791,000) ....................... 39,246 39,000 42,218 43,000 44,346 45,000
----------- ------------ ----------- ------------ ----------- -----------
COMMON STOCK, PAR VALUE $.50 PER SHARE;
AUTHORIZED, 80,000,000 SHARES:
Balance at beginning of year .......... 53,507,952 26,754,000 53,430,246 26,715,000 53,350,650 26,675,000
Exercise of stock options ............. 155,801 78,000 65,000 33,000 59,640 30,000
Shares issued for acquisition ......... 191,800 96,000
Conversion of preferred shares ........ 17,745 9,000 12,706 6,000 19,956 10,000
----------- ------------ ----------- ------------ ----------- -----------
Total ................................. 53,873,298 26,937,000 53,507,952 26,754,000 53,430,246 26,715,000
----------- ------------ ----------- ------------ ----------- -----------
Treasury shares at beginning of year .. 4,561,963 2,281,000 3,135,123 1,568,000 3,606,123 1,803,000
Purchase of treasury shares ........... 102,000 51,000 2,121,100 1,060,000
Exercise of stock options ............. (258,860) (129,000) (694,260) (347,000) (471,000) (235,000)
----------- ------------ ----------- ------------ ----------- -----------
Treasury shares at end of year ........ 4,405,103 2,203,000 4,561,963 2,281,000 3,135,123 1,568,000
----------- ------------ ----------- ------------ ----------- -----------
Balance at end of year ................ 49,468,195 24,734,000 48,945,989 24,473,000 50,295,123 25,147,000
----------- ------------ ----------- ------------ ----------- -----------
CAPITAL SURPLUS:
Balance at beginning of year........... 173,413,000 212,383,000 202,162,000
Exercise of stock options.............. 8,061,000 16,355,000 10,228,000
Shares issued for acquisition.......... 4,904,000
Purchase of treasury shares............ (2,458,000) (55,321,000)
Conversion of preferred shares......... (5,000) (4,000) (7,000)
-------------- -------------- ------------
Balance at end of year................. 183,915,000 173,413,000 212,383,000
-------------- -------------- ------------
EARNED SURPLUS:
Balance at beginning of year........... 367,984,000 343,237,000 330,302,000
Net income (loss)...................... (81,961,000) 86,970,000 75,673,000
-------------- -------------- ------------
Total.................................. 286,023,000 430,207,000 405,975,000
-------------- -------------- ------------
Preferred dividends-per share 1999,
1998, and 1997, $3.35.................. 137,000 144,000 152,000
Common Dividends-per share 1999,
$.625; 1998 and 1997, $1.25.......... 30,704,000 62,079,000 62,586,000
------------- -------------- ------------
Total dividends........................ 30,841,000 62,223,000 62,738,000
------------- ------------- ------------
Balance at end of year................. 255,182,000 367,984,000 343,237,000
------------- -------------- ------------
CUMULATIVE TRANSLATION ADJUSTMENT-NET. (20,663,000) (16,032,000) (13,862,000)
-------------- -------------- ------------
MINIMUM PENSION LIABILITY ADJUSTMENT... (307,000) (716,000) (324,000)
-------------- -------------- ------------
NET UNREALIZED GAIN (LOSS) ON
SECURITIES AVAILABLE FOR SALE....... 150,000 (65,000) (535,000)
-------------- -------------- ------------
TOTAL SHAREHOLDERS' EQUITY............. $443,050,000 $549,100,000 $566,091,000
-------------- -------------- ------------
-------------- -------------- ------------
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
65
Ogden Corporation and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
- ------------------------------------------------------------------------------------------------------------------------------
For the years ended December 31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................................ $ (81,961,000) $ 86,970,000 $ 75,673,000
Adjustments to Reconcile Net Income (Loss) to Net Cash
Provided by Operating Activities of Continuing Operations:
(Income) loss from discontinued operations ....................... 41,851,000 (49,722,000) (38,886,000)
Depreciation and amortization .................................... 94,905,000 79,981,000 76,446,000
Deferred income taxes ............................................ (16,944,000) 18,820,000 21,384,000
Cumulative effect of change in accounting principle .............. 3,820,000
Write-down of assets for sale .................................... 36,150,000
Severance and other employment charges ........................... 32,602,000
Other ............................................................ 3,170,000 (8,601,000) (11,744,000)
Management of Operating Assets and Liabilities:
Decrease (Increase) in Assets:
Accounts receivable .............................................. (25,365,000) (1,522,000) 78,366,000
Inventories ...................................................... 2,208,000 1,132,000 20,125,000
Other assets ..................................................... 18,834,000 (25,110,000) 4,785,000
Increase (Decrease) in Liabilities:
Accounts payable ................................................. 19,572,000 (7,584,000) 2,719,000
Accrued expenses ................................................. 35,921,000 27,799,000 (65,983,000)
Deferred income .................................................. (3,698,000) 192,137,000 (3,393,000)
Other liabilities ................................................ (51,214,000) 12,887,000 (1,501,000)
------------- ------------- -------------
Net cash provided by operating activities of continuing operations 109,851,000 327,187,000 157,991,000
------------- ------------- -------------
Cash Flows From Investing Activities:
Entities purchased, net of cash acquired ......................... (59,436,000) (900,000) (58,190,000)
Proceeds from sale of marketable securities available for sale ... 66,355,000 14,232,000 13,970,000
Proceeds from sale of businesses and other ....................... 10,560,000 225,000 35,155,000
Proceeds from sale of property, plant, and equipment .............. 1,175,000 181,000 1,318,000
Proceeds from sale of investment ................................. 5,138,000
Investments in facilities ........................................ (50,749,000) (18,847,000) (28,459,000)
Other capital expenditures ....................................... (15,048,000) (17,675,000) (14,030,000)
Decrease in other receivables .................................... 820,000 2,865,000 11,252,000
Investments in marketable securities available for sale .......... (1,815,000) (58,917,000) (13,970,000)
Distributions from investees and joint ventures .................. 12,459,000 8,479,000 45,749,000
Increase in investments in and advances to investees
and joint ventures ............................................... (43,997,000) (32,458,000) (55,506,000)
------------- ------------- -------------
Net cash used in investing activities of continuing operations ... (74,538,000) (102,815,000) (62,711,000)
------------- ------------- -------------
Cash Flows From Financing Activities:
Borrowings for Energy Facilities ................................. 150,894,000 506,518,000 57,358,000
Other new debt ................................................... 90,508,000 34,525,000 102,266,000
Payment of debt .................................................. (205,089,000) (601,396,000) (213,809,000)
Dividends paid ................................................... (46,241,000) (62,541,000) (62,564,000)
Purchase of treasury shares ...................................... (2,509,000) (56,381,000)
Decrease in funds held in trust .................................. 21,019,000 40,415,000 928,000
Proceeds from exercise of stock options .......................... 8,268,000 16,735,000 10,493,000
Other ............................................................ (4,412,000) (5,922,000) (5,447,000)
------------- ------------- -------------
Net cash provided by (used in) financing activities
of continuing operations ......................................... 12,438,000 (128,047,000) (110,775,000)
------------- ------------- -------------
Net cash provided by (used in) discontinued operations ........... (127,900,000) (59,880,000) 70,714,000
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ............. (80,149,000) 36,445,000 55,219,000
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR ................... 181,169,000 144,724,000 89,505,000
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF YEAR ......................... $ 101,020,000 $ 181,169,000 $ 144,724,000
============= ============= =============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
66
Ogden Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION, COMBINATIONS, ETC.: The Consolidated Financial
Statements include the accounts of Ogden Corporation and its subsidiaries
(Ogden or the Company or the Corporation). Companies in which Ogden has
equity investments of 50% or less are accounted for using the "Equity
Method," if appropriate. All intercompany transactions and balances have been
eliminated.
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 presentation of
the financial results has been reclassified in the accompanying financial
statements to show these operations as discontinued and the prior periods have
been restated. (See Note 2.)
In 1999, in transactions accounted for as purchases, Ogden acquired the shares
of a Philippine diesel-fired power plant, a 74% interest in a Thailand gas-fired
facility, a 90% interest in a Thailand company that operates and maintains
several power plant facilities, the unowned 50% partnership interests in the
Heber Geothermal Company, which owns a geothermal power plant in California, and
Heber Field Company in California for a total cost of $58,500,000. The
operations of these companies have been included in the accompanying financial
statements from the dates of acquisition. If Ogden had acquired these companies
at January 1, 1998, consolidated revenues, net income (loss) and diluted
earnings (loss) per share would have been $1,004,900,000, ($85,568,000) and
($1.74) for 1999 and $919,259,000, $81,633,000 and $1.60 for 1998.
67
In 1998, in transactions accounted for as purchases, Ogden acquired the
shares of a civil construction company for a total cost of $900,000. The
operations of this company have been included in the accompanying financial
statements from date of acquisition. If Ogden had acquired this company at
January 1, 1997, consolidated revenues, net income and diluted earnings per
share would have been $897,524,000, $87,406,000 and $1.72 for 1998 and
$959,931,000, $75,752,000 and $1.49 for 1997.
In 1997, in transactions accounted for as purchases, Ogden acquired the
shares of Pacific Energy, Inc., as well as a 60% interest in four
cogeneration plants in China for a total cost of $118,967,000. The operations
of these companies have been included in the accompanying financial
statements from dates of acquisition. If Ogden had acquired these companies
at January 1, 1997, consolidated revenues, net income, and diluted earnings
per share would have been $1,000,762,000, $84,077,000, and $1.65 for 1997.
In connection with an earlier restructuring plan, the Binghamton, New York
and Cork, Ireland operations of Datacom, Inc. (Datacom, previously known as
Atlantic Design Company), a contract manufacturing company, were sold in
January 1998; the Facility Services group's operations in New York City were
sold in July 1997; and the Charlotte, North Carolina, operations of Datacom,
were sold in September 1997.
USE OF ESTIMATES: The preparation of consolidated financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all cash balances
and highly liquid investments having original maturities of three months or
less.
68
MARKETABLE SECURITIES: Marketable securities are classified as available for
sale and recorded at current market value. Net unrealized gains and losses on
marketable securities available for sale are credited or charged to
Other Comprehensive Income (see Note 3).
CONTRACTS AND REVENUE RECOGNITION: Service revenues primarily include only the
fees for cost-plus contracts and other types of contracts. Both service revenues
and operating expenses exclude reimbursed expenditures of zero, $1,800,000 and
$30,794,000 for the years ended December 31, 1999, 1998 and 1997, respectively.
Subsidiaries engaged in governmental contracting recognize revenues from
cost-plus-fixed-fee contracts on the basis of direct costs incurred plus
indirect expenses and the allocable portion of the fixed fee. Revenues under
time and material contracts are recorded at the contracted rates as the labor
hours and other direct costs are incurred. Revenues under fixed-price contracts
are recognized on the basis of the estimated percentage of completion of
services rendered. Service revenues also include the fees earned under contracts
to operate and maintain the waste-to-energy facilities and to service the
facilities' debt, with additional fees earned based on excess tonnage processed
and energy generation. Long-term unbilled service receivables related to
waste-to-energy operations are discounted in recognizing the present value for
services performed currently. Such unbilled receivables amounted to $151,257,000
and $149,341,000 at December 31, 1999 and 1998, respectively. Subsidiaries
engaged in long-term construction contracting record income on the
percentage-of-completion method of accounting and recognize income as the work
progresses. Anticipated losses on contracts are recognized as soon as they
become known.
INVENTORIES: Inventories, consisting primarily of raw materials, work in
progress and finished goods, are recorded principally at the lower of first-in,
first-out cost or market.
PROPERTY, PLANT, AND EQUIPMENT: Property, plant, and equipment is stated at
cost. For financial reporting purposes, depreciation is provided by the
straight-line method over the estimated useful lives of the assets, which range
generally from three years for computer equipment to 50 years for
waste-to-energy facilities. Accelerated depreciation is generally used for
Federal income tax purposes.
69
Leasehold improvements are amortized by the straight-line method over the terms
of the leases or the estimated useful lives of the improvements as appropriate.
Landfills are amortized based on the quantities deposited into each landfill
compared to the total estimated capacity of such landfill. Property, plant, and
equipment is periodically reviewed to determine recoverability by comparing the
carrying value to expected future cash flows.
CONTRACT ACQUISITION COSTS: Costs associated with the acquisition of specific
contracts are amortized over their respective contract terms.
BOND ISSUANCE COSTS: Costs incurred in connection with the issuance of revenue
bonds are amortized over the terms of the respective debt issues.
RESTRICTED FUNDS: Restricted funds represent proceeds from the financing and
operations of energy facilities. Funds are held in trust and released as
expenditures are made or upon satisfaction of conditions provided under the
respective trust agreements.
INTEREST RATE SWAP AGREEMENTS: Amounts received or paid relating to swap
agreements during the year are credited or charged to interest expense or debt
service charges, as appropriate.
GOODWILL: Goodwill is amortized by the straight-line method over periods ranging
from 15 to 25 years.
RETIREMENT PLANS: Ogden and certain subsidiaries have several retirement plans
covering substantially all of their employees. Certain subsidiaries also
contribute to multiemployer plans for unionized hourly employees that cover,
among other benefits, pensions and postemployment health care.
INCOME TAXES: Ogden files a consolidated Federal income tax return, which
includes all eligible United States subsidiary companies. Foreign subsidiaries
are taxed according to regulations existing in the countries in which they do
business. Provision has not been made for United States income taxes on
70
distributions, which may be received from foreign subsidiaries, which are
considered to be permanently invested overseas.
LONG-LIVED ASSETS: Ogden accounts for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed of by evaluating the carrying value of its
long-lived assets in relation to the operating performance and future
undiscounted cash flows of the underlying businesses when indications of
impairment are present. Long-lived assets to be disposed of are evaluated in
relation to the estimated net realizable value.
EARNINGS PER SHARE: Basic Earnings (Loss) per Share is represented by net income
(loss) available to common shareholders divided by the weighted-average number
of common shares outstanding during the period. Diluted earnings (loss) per
share reflects the potential dilution that could occur if securities or stock
options were exercised or converted into common stock during the period, if
dilutive (see Note 23).
REPORTING ON COSTS OF START-UP ACTIVITIES: The American Institute of Certified
Public Accountants (AICPA) issued Statement of Position (SOP) 98-5 "Reporting on
the Costs of Start-Up Activities" in April 1998. This SOP established accounting
standards for these costs and requires that they generally be expensed as
incurred. Ogden adopted SOP 98-5 on January 1, 1999. The effect of adopting the
SOP is shown as a cumulative effect of a change in accounting principle and is
reflected as a net charge to income of $3,820,000 in 1999.
ACCOUNTING FOR DERIVATIVE INSTRUMENTS: In June 1998, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments andHedging Activities." This
SFAS establishes accounting and reporting standards for derivative
instruments, including certain derivative instruments embedded in other
contracts, and hedging activities and requires recognition of all derivative
instruments as assets or liabilities and requires measurement of those
instruments at fair value. Ogden will adopt SFAS No. 133 in January, 2001.
The Corporation is in the process of determining the impact adoption of this
standard will have on Ogden's financial position and results of operations.
71
RECLASSIFICATION: The accompanying financial statements have been reclassified
to conform with the 1999 presentation, principally for discontinued operations.
72
2.DISCONTINUED OPERATIONS
As a result of the adoption of the plan to discontinue the operations of the
Entertainment and Aviation businesses, the Company's financial statement
presentation has changed. Information for two units previously reported under
the segment headings "Energy" and "Other" is now reported as Continuing
Operations and will continue to be reported under those headings. Results
previously reported for "Entertainment" and "Aviation" are now reported as
Discontinued Operations.
Management expects the process of selling the discontinued operations to be
substantially completed in the third quarter of 2000 and will involve the sale
of various individual and groups of entities or operations. Based upon a number
of assumptions and judgments, management believes that these dispositions will,
in the aggregate after costs of disposition, be at book value or greater.
Therefore, results from discontinued operations will be recognized currently and
gains or losses on disposal of portions of the discontinued operations will be
deferred until substantially all assets of the discontinued operations have been
sold.
Revenues and income (loss) from discontinued operations (expressed in thousands
of dollars) were as follows:
YEARS ENDED DECEMBER 31
------------------------------------------------------
1999 1998 1997
Revenues $ 807,430 $ 795,879 $ 791,354
========== ========= ==========
Operating income (loss) $ (35,183) $ 87,203 $ 64,079
----------- --------- ---------
Income (Loss) Before Income Taxes and
Minority Interests $ (40,169) $ 90,172 $ 70,453
Income Taxes 6 40,240 31,385
Minority Interests 1,676 210 182
------------ ------------- -------------
Income (Loss) from Discontinued Operations $ (41,851) $ 49,722 $ 38,886
=========== ========= =========
73
Net assets of discontinued operations (expressed in thousands of dollars)
were as follows:
December 31
----------------------------------------
1999 1998
Current Assets $ 221,200 $ 226,953
Property, Plant and Equipment - Net 375,211 251,402
Other Assets 336,700 253,409
Notes Payable and Current Portion of
Long-Term Debt (51,081) (53,347)
Other Current Liabilities (142,327) (121,152)
Long-Term Debt (108,681) (42,693)
Other Liabilities (62,876) (58,846)
--------- ---------
Net Assets of Discontinued Operations $ 568,146 $ 455,726
========= =========
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3. INVESTMENTS IN MARKETABLE SECURITIES AVAILABLE FOR SALE
At December 31, 1999 and 1998, marketable equity and debt securities held for
current and noncurrent uses, such as non-qualified pension liabilities and
deferred compensation plan, are classified as current assets and long-term
assets (see Note 7), respectively. Net unrealized gains and losses on
marketable equity and debt securities held for current and noncurrent uses
are charged to Other Comprehensive Income.
Marketable securities at December 31, 1999 and 1998 (expressed in thousands of
dollars), include the following:
1999 1998
- --------------------------------------------------------------------------------------------
Market Market
Value Cost Value Cost
- --------------------------------------------------------------------------------------------
Classified as Current Assets:
Mutual and bond funds $44,685 $44,714
------- -------
Total Classified as Current Assets $44,685 $44,714
======= =======
Classified as Noncurrent Assets:
Mutual and bond funds $ 6,777 $ 6,627 $27,451 $27,673
------- ------- ------- -------
Total Classified as Noncurrent Assets $ 6,777 $ 6,627 $27,451 $27,673
======= ======= ======= =======
At December 31, 1999 and 1998, unrealized gains (losses) were $150,000 and
($251,000), respectively. The deferred tax benefits on these gains (losses) at
December 31, 1999 and 1998 were zero and $186,000, respectively, resulting in
net (credits) charges of ($150,000) and $65,000, respectively, to Accumulated
Other Comprehensive Income.
Proceeds, realized gains, and realized losses from the sales of securities
classified as available for sale for the years ended December 31, 1999, 1998,
and 1997, were $66,355,000, $743,000, and $1,963,000; $14,232,000, zero, and
zero; and $13,970,000, $3,444,000, and zero; respectively. For the purpose of
determining realized gains and losses, the cost of securities sold was based on
specific identification.
75
4. UNBILLED SERVICE AND OTHER RECEIVABLES
Unbilled service and other receivables (expressed in thousands of dollars)
consisted of the following:
1999 1998
- ---------------------------- -------- --------
Unbilled service receivables $151,257 $150,389
Notes receivable 8,200 9,020
-------- --------
Total $159,457 $159,409
======== ========
Long-term unbilled service receivables are for services, which have been
performed for municipalities, that are due by contract at a later date and are
discounted in recognizing the present value of such services. Current unbilled
service receivables, which are included in Receivables, amounted to $49,305,000
and $41,822,000 at December 31, 1999 and 1998, respectively. Long-term notes
receivable primarily represent notes received relating to the sale of noncore
businesses.
76
5. RESTRICTED FUNDS HELD IN TRUST
Funds held by trustees include proceeds received from financing the construction
of waste-to-energy facilities; debt service reserves for payment of principal
and interest on project debt; lease reserves for lease payments under operating
leases; and deposits of revenues received. Such funds are invested principally
in United States Treasury bills and notes and United States government agencies
securities.
Fund balances (expressed in thousands of dollars) were as follows:
1999 1998
- -------------------------------------- -------- -------- -------- --------
Current Noncurrent Current Noncurrent
- -------------------------------------- -------- -------- -------- ----------
Construction funds $ 1,074 $ 14,604
Debt service funds 56,624 $121,929 24,871 $131,873
Revenue funds 23,932 13,626
Lease reserve funds 4,112 22,774 10,075 14,488
Other funds 17,920 22,081 47,377 34,561
-------- -------- ------- --------------
Total $103,662 $166,784 $110,553 $180,922
======== ======== ======= ==============
77
6. PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment (expressed in thousands of dollars) consisted of
the following:
1999 1998
- ---------------------------------------------- ---------- ----------
Land $ 8,111 $ 6,137
Energy facilities 2,112,057 1,948,329
Buildings and improvements 111,490 102,963
Machinery and equipment 121,587 109,577
Landfills 12,955 17,959
Construction in progress 49,836 26,614
---------- ----------
Total 2,416,036 2,211,579
Less accumulated depreciation and amortization 574,225 475,338
---------- ----------
Property, plant, and equipment-net $1,841,811 $1,736,241
========== ==========
78
7. OTHER ASSETS
Other assets (expressed in thousands of dollars) consisted of the following:
1999 1998
- ---------------------------------------- -------- --------
Unamortized bond issuance costs $ 41,352 $ 43,420
Noncurrent securities available for sale 6,777 27,451
Deposits on potential acquisition 13,478
Deferred financing costs 11,858 12,248
Other 24,381 29,556
-------- --------
Total $ 84,368 $126,153
======== ========
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8. ACCRUED EXPENSES, ETC.
Accrued expenses, etc. (expressed in thousands of dollars), consisted of the
following:
1999 1998
- ---------------------------------------------- -------- --------
Operating expenses $ 83,646 $ 51,787
Severance and employment litigation settlement 50,532
Insurance 24,476 21,398
Debt service charges and interest 31,008 24,580
Municipalities' share of energy revenues 28,160 36,300
Payroll 14,763 17,138
Payroll and other taxes 17,200 21,080
Lease payments 15,193 16,038
Construction costs 11,636 3,377
Pension and profit sharing 8,391 9,958
Other 75,150 35,118
-------- --------
Total $360,155 $236,774
======== ========
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9. DEFERRED INCOME
Deferred income (expressed in thousands of dollars) consisted of the following:
1999 1998
- ------------------------------------------------ -------------------- --------------------
Current Noncurrent Current Noncurrent
- ------------------------------------------------ -------- ---------- ------- ----------
Power sales agreement prepayment $ 9,001 $165,311 $ 9,001 $174,328
Sale and leaseback arrangements 1,523 17,352 1,523 18,876
Advance billings to municipalities 6,733 11,523
Other 28,549 23,043 8,359
-------- --------- ------- --------
Total $ 45,806 $182,663 $ 45,090 $201,563
======== ======== ======= =========
The gains from sale and leaseback transactions consummated in 1986 and 1987 were
deferred and are being amortized as a reduction of rental expense over the
respective lease terms. Advance billings to various customers are billed one or
two months prior to performance of service and are recognized as income in the
period the service is provided. In 1998, Ogden received a payment for future
energy deliveries required under a power sales agreement. This prepayment is
being amortized over the life of the agreement.
81
10. LONG-TERM DEBT
Long-term debt (expressed in thousands of dollars) consisted of the following:
1999 1998
- -------------------------------------------------- -------- -------- -----
Adjustable-rate revenue bonds due 2014-2024 $124,755 $124,755
9.25% debentures due 2022 100,000 100,000
Revolving credit facility 50,000
Other long-term debt 70,190 123,839
-------- --------
Total $344,945 $348,594
======== ========
The adjustable-rate revenue bonds are adjusted periodically to reflect current
market rates for similar issues, generally with an upside cap of 15%. The
average rates for this debt were 3.21% and 3.38% in 1999 and 1998, respectively.
These bonds were issued under agreements that contain various restrictions, the
most significant being the requirements to comply with certain financial ratios
and to maintain Shareholders' Equity of at least $440,000,000. At December 31,
1999, Ogden was in compliance with all requirements and had $3,050,000 in excess
of the required amount of Shareholders' Equity. This covenant has been amended
to require a minimum Shareholders' Equity of $400,000,000 through July 31, 2000
(see Note 12).
At December 31, 1999, the Company had drawn $50,000,000 on its $200,000,000
principal revolving credit facility due in 2002. The interest rate on this
facility at December 31, 1999 was 6.225% and was based on the six-month LIBOR
plus 0.225% (see Note 12).
Other long-term debt includes an obligation for approximately $28,450,000,
representing the equity component of a sale and leaseback arrangement relating
to a waste-to-energy facility. This arrangement is accounted for as a financing,
has an effective interest rate of 5%, and extends through 2017. Other
long-term debt also includes $22,450,000 resulting from the sale of limited
partnership interests in and
82
related tax benefits of a waste-to-energy facility, which has been accounted for
as a financing for accounting purposes. This obligation has an effective
interest rate of 10% and extends through 2015.
The remaining other long-term debt of $19,290,000 consists primarily of notes
payable, loans and capital leases associated with the acquisition of Energy
assets. These instruments bear interest at rates ranging from 6% to 8.6% with
various maturity dates.
At December 31, 1999 Ogden had one long-term interest rate swap agreement
covering a notional amount of $1,600,000, which expires November 30, 2000. This
swap was entered into to convert Ogden's $1,600,000 variable-rate debt to a
fixed rate. Ogden pays a fixed rate of 5.83% paid on a quarterly basis and
receives a floating rate of three months LIBOR on a quarterly basis. At December
31, 1999, the three-month LIBOR rate was 5.81%. The counterparty to this
interest rate swap is a major financial institution. Management believes its
credit risk associated with nonperformance by the counterparty is not
significant. Ogden also had a swap agreement to convert its fixed-rate
$100,000,000 9.25% debentures into variable-rate debt which expired December
16, 1998. Amounts paid on swap agreements amounted to zero, $100,000, and
$400,000, for 1999, 1998, and 1997, respectively, and were charged to
interest expense. The effect on Ogden's weighted-average borrowing rate for
1999, 1998, and 1997 was an increase of zero, .04%, and .09%, respectively.
83
The maturities of long-term debt (expressed in thousands of dollars) at December
31, 1999, were as follows:
2000 $113,815
2001 14,672
2002 51,633
2003 1,279
2004 1,253
Later years 276,108
--------
Total 458,760
Less current portion 113,815
--------
Total long-term debt $344,945
========
84
11. PROJECT DEBT
Project debt (expressed in thousands of dollars) consisted of the following:
1999 1998
- ---------------------------------------------------------------------------- ---------- ----------
Revenue Bonds Issued by and Prime Responsibility of Municipalities:
3.4 - 6.75% serial revenue bonds due 2001 through 2011 $ 442,205 $ 341,284
4.65 - 7.625% term revenue bonds due 2001 through 2015 412,838 557,595
Adjustable-rate revenue bonds due 2006 through 2013 80,220 80,220
------- ----------
Total 935,263 979,099
------- ----------
Revenue Bonds Issued by Municipal Agencies with Sufficient Service
Revenues Guaranteed by Third Parties -
5.0 - 8.9% serial revenue bonds due 2001 through 2008 90,666 98,091
------- ----------
Other Revenue Bonds:
4.5 - 5.5% serial revenue bonds due 2001 through 2015 98,720 104,414
5.5 - 6.7% term revenue bonds due 2014 through 2019 68,020 58,020
------- ----------
Total 166,740 162,434
------- ----------
Other project debt 198,163 127,904
------- ----------
Total long-term project debt $1,390,832 $1,367,528
======= ==========
Project debt associated with the financing of waste-to-energy facilities is
generally arranged by municipalities through the issuance of tax-exempt and
taxable revenue bonds. The category, "Revenue Bonds Issued by and Prime
Responsibility of Municipalities," includes bonds issued with respect to which
debt service is an explicit component of the client community's obligation under
the related service agreement. In the event that a municipality is unable to
satisfy its payment obligations, the bondholders' recourse with respect to the
Corporation is limited to the waste-to-energy facilities and restricted funds
pledged to secure such obligations. The category, "Revenue Bonds Issued by
Municipal Agencies with Sufficient Service Revenues Guaranteed by Third
Parties," includes bonds issued to finance two facilities for which contractual
obligations of third parties to deliver waste ensure sufficient revenues to pay
debt
85
service, although such debt service is not an explicit component of the third
parties' service fee obligations.
The category "Other Revenue Bonds" includes bonds issued to finance one facility
for which current contractual obligations of third parties to deliver waste
provide sufficient revenues to pay debt service related to that facility through
2011, although such debt service is not an explicit component of the third
parties' service fee obligations. The Company anticipates renewing such
contracts prior to 2011.
Payment obligations for the project debt associated with waste-to-energy
facilities are limited recourse to the operating subsidiary and nonrecourse to
the Corporation, subject to construction and operating performance guarantees
and commitments. These obligations are secured by the revenues pledged under
various indentures and are collateralized principally by a mortgage lien and a
security interest in each of the respective waste-to-energy facilities and
related assets. At December 31, 1999, such revenue bonds were collateralized by
property, plant, and equipment with a net carrying value of $1,427,550,000, a
credit enhancement of approximately $5,200,000 for which Ogden has certain
reimbursement obligations, and restricted funds held in trust of approximately
$231,200,000 (see Note 5).
The interest rates on adjustable-rate revenue bonds are adjusted periodically to
reflect current market rates. The average adjustable rate for such revenue bonds
was 5.5% and 5.4% in 1999 and 1998, respectively.
Other project debt includes an obligation of a special-purpose limited
partnership acquired by special-purpose subsidiaries of Ogden and represents the
lease of a geothermal power plant, which has been accounted for as a financing.
This obligation, which amounted to $55,921,000 at December 31, 1999, has an
effective interest rate of 5.3% and extends through 2008 with options to renew
for additional periods and has a fair market value purchase option at the
conclusion of the initial term. Payment obligations under this lease arrangement
are limited to assets of the limited partnership and revenues derived from a
power sales agreement with a third party, which are expected to provide
sufficient
86
revenues to make rental payments. Such payment obligations are secured by all
the assets, revenues, and other benefits derived from the geothermal power
plant, which had a net carrying value of approximately $80,579,000 at December
31, 1999. Other project debt also includes $12,940,000 due to a financial
institution as part of the refinancing of project debt in the category "Revenue
Bonds Issued by and Prime Responsibility of Municipalities." The debt service
associated with this loan is included as an explicit component of the client
community's obligation under the related service agreement. A portion of the
funds was retained in the Corporation's restricted funds and is loaned to the
community each month to cover the community's monthly service fees. The
Corporation's repayment for the other part of the loan is limited to the extent
repayment is received from the client community. This obligation has an
effective interest rate of 7.05% and extends through 2005. In addition, other
project debt includes $3,600,000, which is due to financial institutions and
bears interest at an adjustable rate equal to the three-month LIBOR rate plus
3.5% (9.5% at December 31, 1999). The debt extends through 2001 and is secured
by substantially all the assets of a diesel-fired power plant in the
Philippines, which had a net carrying value of approximately $47,410,000 at
December 31, 1999.
Other project debt includes $34,386,000 due to financial institutions which
bears interest at an adjustable rate that was the two-month LIBOR rate plus
1.2% (7.10% at December 31, 1999). The debt extends through 2005 and is secured
by substantially all the assets of a subsidiary that owns various power plants
in the United States, which had a carrying value of approximately $90,358,000 at
December 31, 1999, and a credit enhancement of $10,000,000.
Other project debt includes $57,878,000 due to banks of which $45,343,000 is
denominated in US dollars and $12,535,000 is denominated in Thai Baht. This
debt relates to a Thailand gas-fired energy facility acquired in 1999. The US
dollar debt bears interest at the three-month LIBOR plus 3.5% (9.5% at
December 31, 1999) and the Thai Baht debt bears an interest rate of Thai bank
MLR plus 1.75% (10.25% at December 31, 1999). The MLR, which is the melded
Maximum Lending Rate of the consortium of Thai banks that have lent to the
project, was approximately 8.5% at December 31, 1999. The debt extends
87
through 2012, is non recourse to Ogden and is secured by all project assets,
which had a net carrying value of approximately $97,800,000 at December 31,
1999.
Other project debt includes $33,438,000 related to the purchase of the MCI
power plant in the Philippines. This debt bears interest at rates equal to
the six-month LIBOR plus spreads that increase from plus 3.5% until February
10, 2000, to plus 4.5% thereafter until the final maturity on August 10, 2002.
The rate was 9.26% at December 31, 1999. This debt is nonrecourse to Ogden
and is secured by all assets of the project, which had a net carrying value of
$48,055,000 at December 31, 1999, and all revenues and contracts of the
project and by pledge of the Company's ownership in the project.
At December 31, 1999, the Company had one interest rate swap agreement as a
hedge against interest rate exposure on certain adjustable-rate revenue bonds.
The swap agreement expires in January 2019. This swap agreement relates to
adjustable rate revenue bonds in the category "Revenue Bonds Issued by and Prime
Responsibility of Municipalities" and any payments made or received under the
swap agreement are therefore included as an explicit component of the client
community's obligation under the related service agreement. Under the swap
agreement, the Company pays a fixed rate of 5.18% per annum on a semi-annual
basis and receives a floating rate based on a defined LIBOR-based rate. At
December 31, 1999, the floating rate on the swap was 5.05%. The notional amount
of the swap at December 31, 1999 was $80,220,000 and is reduced in accordance
with the scheduled repayments of the applicable revenue bonds. In addition, the
Company terminated two other interest rate swap agreements during 1998. The swap
agreements resulted in increased debt service expense of $1,659,000, $824,000
and $300,000 for 1999, 1998 and 1997, respectively, including $211,000 paid to
terminate two swap agreements during the year ended December 31, 1998. The
effect on Ogden's weighted average borrowing rate on project debt was an
increase of .11%, .06% and .02% for 1999, 1998 and 1997, respectively. The
counterparty to the swap is a major financial institution. The Company
believes the credit risk associated with nonperformance by the counterparty
is not significant.
88
The maturities on long-term project debt (expressed in thousands of dollars) at
December 31, 1999 were as follows:
2000 $ 80,383
2001 100,062
2002 98,870
2003 100,634
2004 101,877
Later years 989,389
--------------
Total 1,471,215
Less current portion 80,383
--------------
Total long-term project debt $ 1,390,832
==============
89
12. CREDIT AGREEMENTS
At December 31, 1999, the Company had an unused revolving credit line of $150
million under its principal revolving credit facility at various borrowing
rates including prime, the Eurodollar rate plus .225% and certificate of
deposit rates plus .35%. Ogden is not required to maintain compensating
balances; however, Ogden pays a facility fee of 1/8 of 1% on its principal
revolving credit line, which expires July 1, 2002. The Company agreed with
its revolving credit lenders at year-end to not make further draws under its
principal revolving credit facility in consideration of obtaining certain
waivers of financial covenants contained in that document. In addition, the
Company and all of its credit providers (including its revolving credit
lenders and certain other banks that have similar covenants in their
respective facilities) agreed to amend certain covenants relating to limits
on indebtedness as a percentage of its capitalization, interest coverage as a
function of income from continuing operations and its minimum Shareholders'
Equity, all through the end of July 2000, and to permit the sales of the
Aviation and Entertainment segments provided certain minimum prices are
obtained. Consequently, all the Company's credit providers have agreed to
permit the Company to sell its Aviation and Entertainment businesses and
retain the first $100 million in cash proceeds to fund operations and to
extend the waivers of the financial covenants through the end of July 2000.
Moreover, the revolving credit lenders have agreed to provide the Company
with access to $50,000,000 of credit on a secured basis, in addition to the
outstanding $50,000,000 which is unsecured. The rate on the $50,000,000
secured facility has been set at either the Eurodollar Rate plus 3% or the
prime rate plus 1%. In addition, the Company will pay a 2% fee for the
secured facility, which matures on July 31, 2000.
The Company expects to obtain a new facility on or before July 31, 2000, more
tailored to its Energy business. The Company continues to have discussions
concerning possible new credit facilities and/or obtaining equity for such
purpose.
90
13. CONVERTIBLE SUBORDINATED DEBENTURES
Convertible subordinated debentures (expressed in thousands of dollars)
consisted of the following:
1999 1998
- -------------------------------------- -------- --------
6% debentures due June 1, 2002 $ 85,000 $ 85,000
5 3/4% debentures due October 20, 2002 63,650 63,650
-------- --------
Total $148,650 $148,650
-------- --------
-------- --------
The 6% convertible subordinated debentures are convertible into Ogden common
stock at the rate of one share for each $39.077 principal amount of debentures.
These debentures are redeemable at Ogden's option at 100% of face value. The
5 3/4% convertible subordinated debentures are convertible into Ogden common
stock at the rate of one share for each $41.772 principal amount of debentures.
These debentures are redeemable at Ogden's option at 100% of face value.
91
14. PREFERRED STOCK
The outstanding Series A $1.875 Cumulative Convertible Preferred Stock is
convertible at any time at the rate of 5.97626 common shares for each preferred
share. Ogden may redeem the outstanding shares of preferred stock at $50 per
share, plus all accrued dividends. These preferred shares are entitled to
receive cumulative annual dividends at the rate of $1.875 per share, plus an
amount equal to 150% of the amount, if any, by which the dividend paid or any
cash distribution made on the common stock in the preceding calendar quarter
exceeded $.0667 per share.
92
15. COMMON STOCK AND STOCK OPTIONS
In 1986, Ogden adopted a nonqualified stock option plan (the "1986 Plan"). Under
this plan, options and/or stock appreciation rights were granted to key
management employees to purchase Ogden common stock at prices not less than the
fair market value at the time of grant, which became exercisable during a
five-year period from the date of grant. Options were exercisable for a period
of ten years after the date of grant. As adopted and as adjusted for stock
splits, the 1986 Plan called for up to an aggregate of 2,700,000 shares of Ogden
common stock to be available for issuance upon the exercise of options and stock
appreciation rights, which were granted over a ten-year period ending March 10,
1996. At December 31, 1998, all of the authorized shares of this plan had been
granted.
In October 1990, Ogden adopted a nonqualified stock option plan (the "1990
Plan"). Under this plan, nonqualified options, incentive stock options, and/or
stock appreciation rights and stock bonuses may be granted to key management
employees and outside directors to purchase Ogden common stock at an exercise
price to be determined by the Ogden Compensation Committee, which become
exercisable during a five-year period from the date of grant. These options
are exercisable for a period of ten years after the date of grant. Pursuant to
the 1990 Plan, which was amended in 1994 to increase the number of shares
available by 3,200,000 shares, an aggregate of 6,200,000 shares of Ogden common
stock became available for issuance upon the exercise of such options, rights,
and bonuses, which may be granted over a ten-year period ending October 11,
2000; 183,000 shares were available for grant at December 31, 1999.
In 1999, Ogden adopted a nonqualified stock option plan (the "1999 Plan"). Under
this plan, nonqualified options, incentive stock options, limited stock
appreciation rights (LSARs) and performance-based cash awards may be granted to
employees and outside directors to purchase Ogden common stock at an exercise
price not less than 100% of the fair market value of the common stock on the
date of grant which become exercisable over a three-year period from the date
of grant. These options are exercisable for a period of ten years after the
date of grant. In addition, performance based cash awards may also be granted
to employees and outside directors. As adopted, the 1999 plan calls for up to
an aggregate of 4,000,000
93
shares of Ogden common stock to be available for issuance upon the exercise of
such options and LSAR's, which may be granted over a ten-year period ending May
19, 2009. At December 31, 1999, 2,563,000 shares were available for grant.
Effective January 1, 2000 the 1999 Plan was amended and restated, subject to
shareholder approval, to change the name of the plan to the "1999 Stock
Incentive Plan" and to include the award of restricted stock to key employees
based on the attainment of pre-established performance goals. The maximum
number of shares of common stock that is available for awards of restricted
stock is 1,000,000. No awards of restricted stock have been made under the
plan.
Under the foregoing plans, Ogden issued 6,282,400 LSARs in conjunction with
the stock options granted. These LSARs are exercisable only during
the period commencing on the first day following the occurrence of any of the
following events and terminate 90 days after such date: the acquisition by
any person of 20% or more of the voting power of Ogden's outstanding
securities; the approval by Ogden shareholders of an agreement to merge or to
sell substantially all of its assets; or the occurrence of certain changes in
the membership of the Ogden Board of Directors. The exercise of these limited
rights entitles participants to receive an amount in cash with respect to
each share subject thereto, equal to the excess of the market value of a
share of Ogden common stock on the exercise date or the date these limited
rights became exercisable, over the related option price.
In February, 2000 Ogden adopted the Restricted Stock Plan for Non-Employee
Directors (the "Directors Plan") and the Restricted Stock Plan for key
employees (the "Key Employees Plan"). Awards of restricted stock will be made
from treasury shares of Ogden common stock, par value $.50 per share.
Restricted shares awarded under the Directors Plan vest 100% at the end of
three months from the date of the award. Shares of restricted stock awarded
under the Key Employees Plan are subject to a two-year vesting schedule, 50%
one year following the date of award and 50% two years following the date of
award. As of December 31, 1999, no shares of restricted stock had been
awarded under these plans. Between January 1, 2000 and February 29, 2000, an
aggregate of 80,700 restricted shares were awarded under the Key Employees
Plan and an aggregate of 27,218 restricted shares were awarded under the
Directors Plan.
In connection with the acquisition of the minority interest of Ogden Energy
Group, Inc. (OEGI), Ogden assumed the pre-existing OEGI stock option plan then
outstanding and converted these options into options to acquire shares of Ogden
common stock. All of these options were exercised or cancelled at August 31,
1999.
The Corporation has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost has
been recognized for these stock option plans. Had compensation cost for the
options granted in 1999, 1998, and 1997 under these plans been determined
consistent with the provisions of SFAS No. 123, using the binomial
option-pricing model with the following weighted-average assumptions -- dividend
yield of 0.0%, 4.8% and 6.2%; volatility of 33.52%, 27.22% and 25.84%; risk-free
interest rate of 5.89%, 5.42% and 6.43%; and a weighted-average expected life of
7.5 years -- the effect on net income and diluted earnings per share would have
been $1,334,000 and $0.03 for 1999, $626,000 and $.01 for 1998, and $334,000 and
$.01 for 1997. The
94
weighted-average fair value of options granted during 1999, 1998, and 1997 was
$4.53, $3.84 and $2.56, respectively.
95
Information regarding the Corporation's stock option plans is summarized as
follows:
Weighted-
Option Average
Price Exercise
Per Share Outstanding Exercisable Price
- ---------------------------------------- ----------------- --------------------- --------------------- --------------
1986 Plan:
December 31, 1996, balance $18.31-$28.54 875,500 806,200 $19.93
Became exercisable $22.50 23,100
Cancelled $28.54 (10,000) (10,000) $28.54
-------------- -------- -------- ------
December 31, 1997, balance $18.31-$28.54 865,500 819,300 $19.74
Became exercisable $22.50 19,100
Exercised $18.32-$26.40 (217,000) (217,000) $18.92
Cancelled $22.50-$28.54 (28,000) (20,000) $27.32
------------- ------- ------- ------
December 31, 1998, balance $18.31-$28.54 620,500 601,400 $19.69
Became exercisable $22.50 19,100
Cancelled $28.54 (50,000) (50,000) $28.54
------------- ------- -------- ------
December 31, 1999, balance $18.31-$22.50 570,500 570,500 $19.01
------------- ------- ------- ------
1990 Plan:
December 31, 1996, balance $18.31-$31.50 3,657,000 2,470,200 $20.21
Granted $20.19 570,000 $20.19
Became exercisable $18.31-$31.50 385,400
Exercised $18.31-$21.93 (471,000) (471,000) $18.62
Cancelled $18.31-$23.56 (72,000) (11,000) $21.90
------------- -------- -------- ------
December 31, 1997, balance $18.31-$31.50 3,684,000 2,373,600 $20.39
Granted $25.97-$29.38 923,000 $26.29
Became exercisable $20.06-$31.50 460,900
Exercised $18.31-$23.56 (538,900) (538,900) $19.05
Cancelled $20.06-$20.31 (7,500) ( 2,000) $20.17
------------- ------- -------- ------
December 31, 1998, balance $18.31-$31.50 4,060,600 2,293,600 $20.56
Granted $26.78 655,000 $26.78
Became exercisable $20.06-$29.38 589,800
Exercised $18.31-$23.56 (242,600) (242,600) $19.47
Cancelled $20.06-$31.50 (198,500) $23.21
------------- --------- -------- ------
December 31, 1999, balance $18.31-$29.38 4,274,500 2,640,800 $21.14
------------- --------- --------- ------
1999 Plan:
Granted $8.66-$26.59 1,437,400 $13.13
------------ --------- ---------- ------
December 31, 1999, balance $8.66-$26.59 1,437,400 $13.13
------------ --------- ---------- ------
Conversion of OEGI Plan:
December 31, 1996, balance $14.17-$29.46 243,461 243,461 $14.70
Exercised $14.17 (59,640) (59,640) $14.17
Cancelled $29.46 (8,400) (8,400) $29.46
------------- --------- ----------- --------
December 31, 1997, balance $14.17 175,421 175,421 $14.17
Exercised $14.17 (3,360) (3,360) $14.17
------------- --------- ---------- ---------
December 31, 1998, balance $14.17 172,061 172,061 $14.17
Exercised $14.17 (172,061) (172,061) $14.17
------------- --------- ---------- ---------
December 31, 1999, balance 0 0 0 0
------------ -------- -------- --------
Total December 31, 1999 $8.66 - $29.38 6,282,400 3,211,300 $20.76
============== ========= ========= ======
96
The following table summarizes information about stock options outstanding at
December 31, 1999:
Options Outstanding Options Exercisable
------------------------------------------------- ------------------------------
Number of Weighted-Average Number of
Range of Exercise Shares Remaining Weighted-Average Shares Weighted-Average
Prices Outstanding Contractual Life Exercise Price Outstanding Exercise Price
- ----------------- ----------- ---------------- ---------------- ----------- ----------------
$ 8.66-$15.56 1,412,400 9.9 years $12.89 0 $0
$18.31-$29.38 4,870,000 4.9 years $22.27 3,211,300 $20.76
- ------------- --------- --------- ------ --------- ------
$ 8.66-$29.38 6,282,400 6.0 years $20.16 3,211,300 $20.76
- ------------- --------- --------- ------ --------- ------
- ------------- --------- --------- ------ --------- ------
The weighted-average exercise prices for all exercisable options at December 31,
1999, 1998, and 1997, were $20.76, $20.04, and $19.56, respectively.
At December 31, 1999, there were 12,961,485 shares of common stock reserved for
the exercise of stock options and the conversion of preferred shares and
debentures.
In 1998, Ogden's Board of Directors authorized the purchase of shares of the
Corporation's common stock in an amount up to $200,000,000. Through January
2000, 2,223,000 shares of common stock were purchased at total cost of
$58,890,000.
97
16. PREFERRED STOCK PURCHASE RIGHTS
In 1990, the Board of Directors declared a dividend of one preferred stock
purchase right (Right) on each outstanding share of common stock. Among other
provisions, each Right may be exercised to purchase a one one-hundredth share of
a new series of cumulative participating preferred stock at an exercise price of
$80, subject to adjustment. The Rights may only be exercised after a party has
acquired 15% or more of the Corporation's common stock or commenced a tender
offer to acquire 15% or more of the Corporation's common stock. The Rights do
not have voting rights, expire October 2, 2000, and may be redeemed by the
Corporation at a price of $.01 per Right at any time prior to the acquisition of
15% of the Corporation's common stock.
In the event a party acquires 15% or more of the Corporation's outstanding
common stock in accordance with certain defined terms, each Right will then
entitle its holders (other than such party) to purchase, at the Right's
then-current exercise price, a number of the Corporation's common shares having
a market value of twice the Right's exercise price. At December 31, 1999,
49,468,195 Rights were outstanding.
98
17. FOREIGN EXCHANGE
Foreign exchange translation adjustments for 1999, 1998, and 1997, amounting
to $4,631,000, $2,170,000, and $8,094,000, respectively, have been charged
directly to Other Comprehensive Income. Foreign exchange transaction
adjustments, amounting to ($7,000), zero, and $30,000, have been charged
(credited) directly to income for 1999, 1998, and 1997, respectively.
99
18. DEBT SERVICE CHARGES
Debt service charges for Ogden's project debt (expressed in thousands of
dollars) consisted of the following:
1999 1998 1997
- ------------------------------------------------------- ----------- ------------ -----------
Interest incurred on taxable and tax-exempt borrowings $ 90,430 $ 96,939 $ 99,284
Interest earned on temporary investment of certain
restricted funds 1,991 4,192 3,992
----------- ------------ -----------
Net interest incurred 88,439 92,747 95,292
Interest capitalized during construction in property,
plant, and equipment 631
----------- ------------ -----------
Interest expense-net 88,439 92,747 94,661
Amortization of bond issuance costs 6,564 7,616 6,997
----------- ------------ -----------
Debt service charges $ 95,003 $ 100,363 $ 101,658
=========== ============ ===========
100
19. PENSIONS AND OTHER POSTRETIREMENT BENEFITS
Ogden has retirement plans that cover substantially all of its employees. A
substantial portion of hourly employees of Ogden Services Corporation
participate in defined contribution plans. Other employees participate in
defined benefit or defined contribution plans. The defined benefit plans provide
benefits based on years of service and either employee compensation or a flat
benefit amount. Ogden's funding policy for those plans is to contribute annually
an amount no less than the minimum funding required by ERISA. Contributions are
intended to provide not only benefits attributed to service to date but also for
those expected to be earned in the future.
In 1992, the Corporation discontinued its policy of providing postretirement
health care and life insurance benefits for all salaried employees, except those
employees who were retired or eligible for retirement at December 31, 1992.
In 1999, the Corporation discontinued a defined benefit retirement plan for
certain Ogden Corporation salaried employees and paid benefits due to employees
at December 31, 1999.
The following table sets forth the details of Ogden's defined benefit plans' and
other postretirement benefit plans' funded status and related amounts recognized
in Ogden's Consolidated Balance Sheets (expressed in thousands of dollars):
101
PENSION BENEFITS OTHER BENEFITS
---------------------- ----------------------
1999 1998 1999 1998
-------- -------- -------- --------
CHANGE IN BENEFIT OBLIGATION:
Benefit obligation at beginning of year $ 26,869 $ 22,850 $ 8,580 $ 10,771
Service cost 2,866 2,434 39 35
Interest cost 1,871 1,620 593 547
Plan amendments 382
Effect of curtailment (3,081)
Effect of settlement (7,047)
Actuarial (gain) loss (1,618) 154 (374) (2,474)
Benefits paid (786) (571) (414) (299)
-------- -------- -------- --------
Benefit obligation at end of year 19,074 26,869 8,424 8,580
-------- -------- -------- --------
CHANGE IN PLAN ASSETS:
Plan assets at fair value at beginning of year 16,827 14,790
Actual return on plan assets 1,749 1,647
Company contributions 7,653 962 414 299
Effect of settlement (7,047)
Benefits paid (786) (571) (414) (299)
-------- -------- -------- --------
Plan assets at fair value at end of year 18,396 16,828
-------- -------- -------- --------
RECONCILIATION OF PREPAID (ACCRUED) AND
TOTAL RECOGNIZED:
Funded status of the plan (678) (10,041) (8,424) (8,580)
UNRECOGNIZED:
Net transition (asset) obligation (107)
Prior service cost 76 818
Net (gain) loss (4,346) (2,503) (1,206) (956)
-------- -------- -------- --------
Net amount recognized $ (5,055) ($11,726) $ (9,630) $ (9,536)
======== ======== ======== ========
AMOUNTS RECOGNIZED IN THE CONSOLIDATED
BALANCE SHEET CONSIST OF:
Accrued benefit liability $ (5,055) ($11,726) $ (9,630) ($ 9,536)
-------- -------- -------- --------
Net amount recognized $ (5,055) ($11,726) $ (9,630) ($ 9,536)
======== ======== ======== ========
WEIGHTED-AVERAGE ASSUMPTIONS AS OF
DECEMBER 31:
Discount rate 7.75% 6.75% 7.75% 6.75%
Expected return on plan assets 8.00% 8.00%
Rate of compensation increase 4.50% 4.00% 4.50% 4.00%
102
For management purposes, annual rates of increase of 8.5% and 7.5% in the per
capita cost of health care benefits were assumed for 1999 for covered
employees under age 65 and over age 65, respectively. The rates were assumed
to decrease gradually to 5.5% and 5% for employees under age 65 and over age
65, respectively, in 2005 and remain at that level.
The projected benefit obligation, accumulated benefit obligation, and fair value
of plan assets for the pension plans with accumulated benefit obligations in
excess of plan assets were $2,502,000, $2,676,000 and zero, respectively, as of
December 31, 1999 and $6,431,000, $10,481,000 and zero, respectively, as of
December 31, 1998.
Contributions and costs for defined contribution plans are determined by benefit
formulas based on percentage of compensation as well as discretionary
contributions and totaled $9,002,000, $8,257,000, and $8,652,000 in 1999, 1998,
and 1997, respectively. Plan assets at December 31, 1999, 1998, and 1997,
primarily consisted of common stocks, United States government securities, and
guaranteed insurance contracts.
Pension costs for Ogden's defined benefit plans and other postretirement benefit
plans included the following components (expressed in thousands of dollars):
PENSION BENEFITS OTHER BENEFITS
------------------------------- -------------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ------- ------- -------
COMPONENTS ON NET PERIODIC BENEFIT COST:
Service cost $ 2,866 $ 2,434 $ 1,923 $ 39 $ 35 $ 54
Interest cost 1,871 1,620 1,340 593 547 713
Expected return on plan assets (1,441) (1,191) (899)
Amortization of unrecognized:
Net transition (asset) obligation 27 27 27
Prior service cost 233 416 378
Net (gain) loss (33) (22) (62) (124) (170) 9
------- ------- ------- ------- ------- -------
Net periodic benefit cost $ 3,523 $ 3,284 $ 2,707 $ 508 $ 412 $ 776
======= ======= ======= ======= ======= =======
Curtailment gain $(2,493)
Settlement gain (51)
103
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one percentage point change in the assumed
health care trend rate would have the following effects (expressed in thousands
of dollars):
One Percentage One Percentage
Point Increase Point Decrease
-------------- --------------
Effect on total service and interest
cost components $ 15 $ (14)
Effect on postretirement benefit obligation $ 206 $(194)
104
20. SPECIAL CHARGES
In September 1999, the Company's Board of Directors approved a plan to
dispose of its Aviation and Entertainment businesses and close its New York
City headquarters, and in December 1999 approved a plan to exit other
non-core businesses so that Ogden can focus its resources on its Energy
business.
As a result of these decisions, the Company has incurred various expenses
which have been recognized in its continuing and discontinued operations.
These expenses include severance costs mainly for its New York City employees
of $41,500,000; contract termination costs of its former Chairman and Chief
Executive Officer of $17,500,000; the write-down to estimated net realizable
value of other non-core businesses of $36,200,000 based upon the estimated
proceeds from the sale of such businesses; and the accelerated amortization
of a new data processing system of $2,300,000 based upon a revised useful
life of 15 months starting October 1, 1999. Such expenses also include the
costs to abandon expansion plans of its Entertainment business totaling
$17,800,000, which includes the forfeiture of the non-refundable deposit and
related costs totaling $10,500,000 in connection with the termination of the
proposed acquisition of Volume Services America (VSA). In addition, charges
totaling $13,200,000 were recorded to recognize losses prior to the decision
to discontinue the Entertainment business relating to the sale of assets and
to the write-down of unamortized contract acquisition costs at two venues.
In addition, Datacom, Inc. (Datacom), a subsidiary of Ogden which primarily
manufactures products for its major customer Genicom Corporation (Genicom),
recorded write-downs of its inventories and accounts receivable from Genicom of
$10,500,000, primarily as a result of Genicom's poor financial position in 1999
evidenced by Genicom's announcement of its violation of its credit facilities in
the third quarter and its subsequent filing for protection from creditors under
the provisions of Chapter 11 of the Bankruptcy Code on March 10, 2000. As of
December 31, 1999, Datacom had net inventory in connection with the Genicom
contract of approximately $8,000,000, commitments to purchase parts for use in
the assembly of inventory for sale to Genicom of approximately $8,000,000, and
accounts receivable net of allowances of approximately $7,500,000. Since Datacom
is a principal supplier of
105
goods to Genicom, the Company is in conversation with the credit institutions
and others about continuing to ship products to Genicom and the related
payment terms. The Company believes that it will be successful in resuming
its business relationship with Genicom and will realize the net carrying
value of its accounts receivable and inventory on hand at December 31, 1999.
The following is a summary of the principal special charges recognized in
1999 and the remaining accruals at December 31, 1999 (expressed in thousands
of dollars):
Total Amounts Balance at
Continuing Discontinued Special Paid in December
Operations Operations Charges 1999 31, 1999
---------- ------------ ---------- ------- ----------
Cash charges:
Severance for approximately 220 employees $16,400 $25,100 $41,500 $ 1,100 $40,400
Contract termination settlement 17,500 17,500 1,800 15,700
Termination of VSA acquisition 10,500 10,500 10,500 0
------- ------- ------- -------- -------
Cash charges 33,900 35,600 69,500 $ 13,400 $56,100
------- ------- ------- ======== =======
Noncash charges:
Write-downs of non-core businesses:
OEES goodwill ($23,000) and property and other
assets ($5,400); ADTI goodwill ($7,800) 36,200 36,200
Datacom inventory ($7,200), and
receivables ($3,300) 10,500 10,500
Entertainment asset sales and abandonment:
Sale of the Grizzly Nature Center
($4,200) and a casino in Aruba ($2,500);
and unrecoverable contract
acquisition costs ($6,500) 13,200 13,200
Abandonment of Entertainment expansion:
Casino facilities in South Africa 7,300 7,300
Accelerated amortization of new data
processing system 500 1,800 2,300
---------- --------- ----------
Noncash charges 47,200 22,300 69,500
---------- --------- ----------
Total charges $ 81,100 $ 57,900 $ 139,000
========== ========= ==========
For continuing operations, severance accruals, the provision for contract
termination settlement, the write-down of non-core businesses, the accelerated
depreciation of a new data processing system and the provisions relating to
Datacom receivables are included in selling, administrative, and general
106
expenses, and a provision relating to Datacom's inventory is included in cost
of sales in the accompanying 1999 Statement of Consolidated Income and
Comprehensive Income.
The amount accrued for severance is based upon the Company's written severance
policy and the positions eliminated. The accrued severance does not include any
portion of the employees' salaries through their severance dates. Based upon
current severance dates and the severance accrual remaining at December 31,
1999, the Company expects to pay these amounts largely in 2000.
The amount accrued for the contract termination costs of the Company's former
Chairman and Chief Executive Officer is based upon a settlement agreement
reached in December 1999. Pursuant to the settlement agreement, the Company
forgave demand notes dated August 1999 in the face amount of approximately
$1,800,000, and with the exception of certain insurance benefits, expects to
pay these amounts largely in 2000.
107
21. INCOME TAXES
The components of the provision (benefit) for income taxes (expressed in
thousands of dollars) were as follows:
1999 1998 1997
-------- -------- --------
Current:
Federal $ 4,552 $ (1,354) $ (8,703)
State 4,108 3,191 7,358
Foreign 1,367 900 1,676
-------- -------- --------
Total current 10,027 2,737 331
-------- -------- --------
Deferred:
Federal (13,809) 17,459 24,127
State (3,543) 1,436 (2,743)
Foreign 408 (75)
-------- -------- --------
Total deferred (16,944) 18,820 21,384
-------- -------- --------
Total provision (benefit) for income taxes $ (6,917) $ 21,557 $ 21,715
======== ======== ========
The provision for income taxes (expressed in thousands of dollars) varied from
the Federal statutory income tax rate due to the following:
108
1999 1998 1997
--------------------- --------------------- ----------------------
Percent of Percent of Percent of
Income Income Income
Amount of Before Amount of Before Amount of Before
Tax Taxes Tax Taxes Tax Taxes
--------- ---------- --------- ---------- --------- ----------
Taxes at statutory rate $(12,961) 35.0% $ 22,074 35.0% $ 21,177 35.0%
State income taxes, net of
Federal tax benefit 367 (1.0) 3,007 4.8 2,999 4.9
Taxes on foreign earnings (3,469) 9.3 (2,384) (3.8) (1,550) (2.5)
Amortization of goodwill 651 (1.7) 691 1.1 665 1.1
Write-down of goodwill 10,795 (29.1) 1,750 2.9
Benefit relating to sale of stock
of former subsidiary (3,581) (5.9)
Energy credits (2,338) 6.3 (2,511) (3.9)
Other--net 38 (.1) 680 1.0 255 .4
-------- ------ -------- ------ -------- -------
Provision (benefit) for
income taxes $ (6,917) 18.7% $ 21,557 34.2% $ 21,715 35.9%
======== ====== ======== ====== ======== ======
109
The components of the net deferred income tax liability (expressed in thousands
of dollars) as of December 31, 1999 and 1998, were as follows:
1999 1998
-------- --------
Deferred Tax Assets:
Deferred Income $ 7,234 $ 6,828
Accrued expenses 89,140 84,469
Other liabilities 32,834 34,271
Investment tax credits 7,042
Alternative minimum tax credits 32,298 45,032
-------- --------
Total deferred tax assets 168,548 170,600
-------- --------
Deferred Tax Liabilities:
Unbilled accounts receivable 51,088 52,003
Property, plant, and equipment 430,867 433,693
Other 31,216 29,833
-------- --------
Total deferred tax liabilities 513,171 515,529
-------- --------
Net deferred tax liability $344,623 $344,929
======== ========
110
Deferred tax assets and liabilities (expressed in thousands of dollars) are
presented as follows in the accompanying balance sheets:
1999 1998
--------- ---------
Net deferred tax liability--noncurrent $ 380,812 $ 392,850
Less net deferred tax asset--current (36,189) (47,921)
--------- ---------
Net deferred tax liability $ 344,623 $ 344,929
========= =========
At December 31, 1999, for Federal income tax purposes, the Corporation had
investment and energy tax credit carryforwards of approximately $7,042,000,
which will expire in 2006 through 2009, and alternative minimum tax credit
carryforwards of approximately $32,298,000 which have no expiration date.
Deferred Federal income taxes have been reduced by these amounts.
111
22. LEASES
Total rental expense amounted to $54,301,000, $42,331,000, and $39,015,000
(net of sublease income of $5,242,000, $3,398,000, and $1,815,000) for 1999,
1998, and 1997, respectively. Principal leases are for leaseholds, sale and
leaseback arrangements on waste-to-energy facilities, trucks and automobiles,
and machinery and equipment. Some of these operating leases have renewal
options.
The following is a schedule (expressed in thousands of dollars), by year, of
future minimum rental payments required under operating leases that have initial
or remaining noncancelable lease terms in excess of one year as of December 31,
1999:
2000 $ 49,352
2001 49,556
2002 47,020
2003 45,423
2004 36,480
Later years 432,516
--------
Total $660,347
========
These future minimum rental payment obligations include $430,636,000 of future
nonrecourse rental payments that relate to energy facilities of which
$277,828,000 are supported by third-party commitments to provide sufficient
service revenues to meet such obligations. The remaining $152,808,000 relates to
a waste-to-energy facility at which the Company serves as operator and directly
markets one-half of the facility's disposal capacity. This facility currently
generates sufficient revenues from short- and medium-term contracts to meet
rental payments. The Company anticipates renewing the short- and medium-term
contracts or entering into new contracts to generate sufficient revenues to meet
those remaining future rental payments. Also included are $42,896,000 of
nonrecourse rental payments relating to an energy facility operated by a
special-purpose subsidiary, which are supported by contractual power purchase
obligations of a third party and which are expected to provide sufficient
112
revenues to make the rent payments. These nonrecourse rental payments (in
thousands of dollars) are due as follows:
2000 $ 34,554
2001 36,006
2002 36,488
2003 36,664
2004 25,940
Later years 303,880
--------
Total $473,532
========
113
23. EARNINGS PER SHARE
Basic earnings per share was computed by dividing net income, reduced by
preferred stock dividend requirements, by the weighted average of the number of
shares of common stock outstanding during each year.
Diluted earnings per share was computed on the assumption that all convertible
debentures, convertible preferred stock, and stock options converted or
exercised during each year or outstanding at the end of each year were converted
at the beginning of each year or at the date of issuance or grant, if dilutive.
This computation provided for the elimination of related convertible debenture
interest and preferred dividends.
The reconciliation of the income and common shares included in the computation
of basic earnings per common share and diluted earnings per common share for
years ended December 31, 1999, 1998, and 1997, is as follows:
114
1999 1998 1997
------------------------------------ -------------------------------- ----------------------------------
Per- Per- Per
Income Shares Share Income Shares Share Income Shares Share
(Numerator) (Denominator) Amount (Numerator) (Denominator) Amount (Numerator) (Denominator) Amount
------------ ------------- ------ ----------- ------------- ------ ----------- ------------- ------
Income (loss) from
continuing operations $ (36,290,000) $37,248,000 $36,787,000
Less: preferred
stock dividend 137,000 144,000 152,000
------------- ----------- -----------
BASIC EARNINGS
(LOSS)PER SHARE (36,427,000) 49,235,000 $(0.74) 37,104,000 49,836,000 $ 0.74 36,635,000 50,030,000 $ 0.73
====== ====== ======
Effect of Dilutive
Securities:
Stock options (A) 807,000 538,000
Convertible
preferred stock (A) 144,000 257,000 152,000 275,000
6% convertible
debentures (A) (A) (A)
5 3/4% convertible
debentures (A) (A) (A)
------------- ---------- ------ ----------- ---------- ------ ----------- ---------- -----
DILUTED EARNINGS
(LOSS) PER SHARE $ (36,427,000) 49,235,000 $(0.74) $37,248,000 50,900,000 $ 0.73 $36,787,000 50,843,000 $0.72
============= ========== ====== =========== ========== ====== =========== ========== =====
(A) Antidilutive
Outstanding stock options to purchase common stock with an exercise price
greater than the average market price of common stock were not included in
the computation of diluted earnings per share. The balance of such options
was 2,954,000 in 1999, 75,000 in 1998, and 80,000 in 1997. Shares of common
stock to be issued, assuming conversion of convertible preferred shares, the
6% convertible debentures, and the 5 3/4% convertible debentures, were not
included in computations of diluted earnings per share if to do so would have
been antidilutive. The common shares excluded from the calculation were
2,175,000 in 1999, 1998 and 1997 for the 6% convertible debentures; 1,524,000
in 1999, 1998 and 1997 for the 5 3/4% convertible debentures; 308,000 in 1999
for stock options; and 245,000 in 1999 for convertible preferred stock.
115
24. COMMITMENTS AND CONTINGENT LIABILITIES
Ogden and certain of its subsidiaries have issued or are party to performance
bonds and guarantees and related contractual obligations undertaken mainly
pursuant to agreements to construct and operate certain waste-to-energy,
entertainment, and other facilities. In the normal course of business, they are
involved in legal proceedings in which damages and other remedies are sought.
Management does not expect that these contractual obligations, legal
proceedings, or any other contingent obligations incurred in the normal course
of business will have a material adverse effect on Ogden's Consolidated
Financial Statements.
The Company did not include certain of its operations at either the Arrowhead
Pond in Anaheim, California or the Corel Centre near Ottawa, Canada as part
of its agreement to sell its Food and Beverage/Venue Management business
which was announced in March 2000. The Company manages the Arrowhead Pond
under a long-term contract. As part of that contract, the Company is a party,
along with the City of Anaheim, to a reimbursement agreement under a letter
of credit in the amount of approximately $120,000,000. Under the
reimbursement agreement, the Company is responsible for draws, if any, under
the letter of credit caused by the Company's failure to perform its duties
under its management contract at that venue. The Company is exploring
alternatives for disposing of these operations along with the reimbursement
agreement and related obligations.
During 1994, a subsidiary of Ogden entered into a 30-year facility management
contract at the Corel Centre, pursuant to which it agreed to advance funds to a
customer, and if necessary, to assist the customer's refinancing of senior
secured debt incurred in connection with the construction of the facility. Ogden
is obligated to purchase such senior debt in the amount of $97,100,000 on
December 23, 2002, if the debt is not refinanced prior to that time. Ogden is
also required to repurchase the outstanding amount of certain subordinated
secured debt of such customer on December 23, 2002. At December 31, 1999, the
amount outstanding was $51,600,000. In addition, as of December 31, 1999, the
Corporation had guaranteed $3,500,000 of senior secured term debt of an
affiliate and principal tenant (the NHL Ottawa Senators) of this customer and
had guaranteed up to $3,500,000 of the tenant's secured
116
revolving debt. Further, Ogden is obligated to purchase $20,800,000 of the
tenant's secured subordinated indebtedness on January 29, 2004, if such
indebtedness has not been repaid or refinanced prior to that time. In October
1999, Ogden also agreed to advance a secured loan to that tenant of up to
approximately $8,400,000 if certain events occur. Separately, Ogden has
guaranteed approximately $3,800,000 of borrowings of Metropolitan
Entertainment Group, an Entertainment joint venture in which Ogden has an
equity interest. Management expects this guarantee to be assumed by the
ultimate purchaser of this interest. Management does not expect that these
arrangements will have a material adverse effect on Ogden's Consolidated
Financial Statements.
Under certain agreements previously entered into by the Company, if the
Company's outstanding debt securities are no longer rated investment grade,
it may be required to post additional collateral or letters of credit. The
failure to take such actions could result in a forfeiture of certain
contracts or could result in a default under the agreements requiring the
posting of such letters. Such a default would also be a default under certain
of the Company's credit facilities. The Company would need the consent of its
Credit Providers to obtain the funds necessary to post the letters of credit
if they become due, obtain equity, or potentially utilize sales proceeds for
such purpose. The Company's Credit Providers have agreed to work with the
Company to explore solutions to this issue should it arise.
At December 31, 1999, capital commitments for continuing operations amounted
to $29,000,000 for normal replacement and growth in Energy. Other capital
commitments for Energy as of December 31, 1999 amounted to approximately
$96,600,000. This amount includes a commitment to pay, in 2008, $10,600,000
for a service contract extension at an energy facility. In addition, this
amount includes $28,000,000 for a 50% interest in a project in Thailand;
$18,500,000 and $15,300,000, respectively, for two oil-fired projects in
India; $5,000,000 for additional equity commitments related to Energy's
interest in a coal-fired power project in the Philippines; $3,500,000 for a
mass-burn waste-to-energy facility in Italy; $1,900,000 for a natural
gas-fired diesel engine cogeneration project in Spain; and $13,800,000 for
standby letters of credit in support of debt service reserve requirements.
Funding for the remaining mandatory equity contributions to the coal-fired
power project in the Philippines is being provided through bank credit
facilities, which must be repaid in 2000. In addition, compliance with the
standards and guidelines under the Clear Air Act Amendments of 1990 will
require further Energy capital expenditures of approximately $30,000,000
through December 2000, subject to the final time schedules determined by the
individual states in which the Corporation's waste-to-energy facilities are
located.
117
Commitments for discontinued operations amounted to $37,000,000 for normal
replacement and growth in Aviation ($100,000) and Entertainment
($36,900,000), the latter relating primarily to Entertainment's Jazzland
theme park in New Orleans. As part of its agreement to sell the themed
attractions, the Company has agreed to complete the construction of its
Jazzland theme park. The Corporation also has a $2,500,000 contingent equity
contribution for Entertainment's investment at Isla Magica. The Corporation
has no further obligations with respect to its previous agreement to acquire
VSA. The Company acquired a 50% interest in an Aviation ground handling
business in Rome Italy and in March 2000, made a contractually required
investment of $6,600,000 in connection therewith.
118
25. INFORMATION CONCERNING BUSINESS SEGMENTS
As of September 29, 1999, the Corporation adopted a plan to discontinue the
operations of its Aviation and Entertainment segments. As a result of this
decision, these segments are now reflected as discontinued operations. The
Corporation now has two reportable segments, Energy and Other.
Ogden's Energy segment seeks to develop, own or operate energy generating
facilities in the United States and abroad that utilize a variety of fuels, as
well as water and wastewater facilities that will similarly serve communities on
a long-term basis. The Energy segment also includes environmental consulting
and engineering, and construction activities which are being sold and
discontinued, respectively.
The Other segment is primarily comprised of non-core businesses of the
Corporation. Ogden substantially completed the disposition of its non-core
businesses during 1997 and early 1998, principally through the sale of the
remaining Facility Services operations (New York Region) which provided
facility management, maintenance, janitorial and manufacturing support
services; and the sale of the Charlotte, North Carolina, Binghamton, New York
and Cork, Ireland operations of Datacom. Datacom continues to provide
contract manufacturing at its remaining facility located in Reynosa, Mexico
near the boarder with McAllen, Texas. Applied Data Technology, Inc. ("ADTI"),
located in San Diego, California, is a leading supplier of air combat
maneuvering instrumentation systems and after-action reporting and display
systems. The Company sold this business in March 2000.
119
Revenues and income from continuing operations (expressed in thousands of
dollars) for the years ended December 31, 1999, 1998 and 1997 were as follows:
1999 1998 1997
----------- ----------- -----------
Revenues:
Energy $ 922,099 $ 804,043 $ 712,272
Other 78,251 92,453 246,099
----------- ----------- -----------
Total revenues $ 1,000,350 $ 896,496 $ 958,371
=========== =========== ===========
Income (Loss) from Operations:
Energy $ 54,602 $ 100,513 $ 100,081
Other (22,731) (4,982) 1,010
----------- ----------- -----------
Total income from operations 31,871 95,531 101,091
Equity in Income of Investees and Joint Ventures:
Energy 13,005 19,251 1,605
Other 89 179
----------- ----------- -----------
Total 44,876 114,871 102,875
Corporate unallocated income and expenses--net 51,210 32,201 21,505
Interest--net 30,697 19,812 21,045
----------- ----------- -----------
Income (Loss) from Continuing Operations Before Income Taxes,
Minority Interests and the Cumulative Effect of Change in
Accounting Principle $ (37,031) $ 62,858 $ 60,325
=========== =========== ===========
Ogden's revenues include $59,887,000, $62,148,000, and $53,600,000 from the
United States government contracts for the years ended December 31, 1999, 1998,
and 1997, respectively.
Total revenues by segment reflect sales to unaffiliated customers. In computing
income from operations, none of the following have been added or deducted:
unallocated corporate expenses, nonoperating interest expense, interest income,
and income taxes.
120
A summary (expressed in thousands of dollars) of identifiable assets,
depreciation and amortization, and capital additions of continuing operations
for the years ended December 31, 1999, 1998, and 1997, is as follows:
Identifiable Depreciation and Capital
Assets Amortization Additions
------------ ---------------- ---------
1999
Energy $3,010,723 $ 86,735 $ 64,655
Other 51,440 2,007 735
Corporate 96,839 6,163 407
---------- ---------- ----------
Consolidated $3,159,002 $ 94,905 $ 65,797
========== ========== ==========
1998
Energy $2,858,816 $ 75,809 $ 32,237
Other 72,680 1,909 2,051
Corporate 260,332 2,263 2,234
---------- ---------- ----------
Consolidated $3,191,828 $ 79,981 $ 36,522
========== ========== ==========
1997
Energy $2,808,571 $ 72,835 $ 39,967
Other 109,587 2,736 2,295
Corporate 179,518 875 227
---------- ---------- ----------
Consolidated $3,097,676 $ 76,446 $ 42,489
========== ========== ==========
121
Ogden's areas of operations are principally in the United States. Operations
outside of the United States are primarily in Asia, Latin America and Europe.
No single foreign country or geographic area is significant to the
consolidated operations. A summary of revenues and identifiable assets by
geographic area for the years ended December 31, 1999, 1998 and 1997
(expressed in thousands of dollars) is as follows:
1999 1998 1997
---------- ---------- -----------
Revenues:
United States $ 900,642 $ 827,344 $ 911,327
Asia 80,811 47,344 11,331
Latin America 11,375 11,025 11,362
Europe 7,522 10,783 22,003
Other 2,348
---------- ---------- ----------
$1,000,350 $ 896,496 $ 958,371
========== ========== ==========
Identifiable Assets:
United States $2,749,888 $2,979,825 $2,930,539
Asia 399,136 200,913 141,547
Latin America 2,784 890 11,221
Europe 7,194 10,200 13,582
Other 787
---------- ---------- ----------
Total $3,159,002 $3,191,828 $3,097,676
========== ========== ==========
122
26. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
(Expressed in thousands of dollars) 1999 1998 1997
- ------------------------------------------------------------------- ----------------- -----------------
Cash Paid for Interest and Income Taxes:
Interest (net of amounts capitalized).................. $147,597 $131,178 $136,114
Income taxes........................................... 22,278 14,419 24,193
Noncash Investing and Financing Activities:
Conversion of preferred shares for common shares....... 4 2 3
Acquisition of property, plant, and equipment for debt. 21,660
Detail of Entities Acquired:
Fair value of assets acquired.......................... 165,829 900 147,428
Liabilities assumed.................................... (106,393) (89,238)
Net cash paid for acquisitions......................... 59,436 900 58,190
123
27. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosure of the estimated fair value of financial instruments is
made in accordance with the requirements of SFAS No. 107, "Disclosures About
Fair Value of Financial Instruments." The estimated fair-value amounts have been
determined using available market information and appropriate valuation
methodologies. However, considerable judgment is necessarily required in
interpreting market data to develop estimates of fair value. Accordingly, the
estimates presented herein are not necessarily indicative of the amounts that
Ogden would realize in a current market exchange.
The estimated fair value (expressed in thousands of dollars) of financial
instruments at December 31, 1999 and 1998, is summarized as follows:
124
1999 1998
- ----------------------------------------------------------------- -------------- ---------------- -------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
- ----------------------------------------------------------------- -------------- ---------------- -------------
Assets:
Cash and cash equivalents $101,020 $101,020 $181,169 $181,169
Marketable Securities 6,777 6,777 72,136 72,136
Receivables 453,508 445,627 433,716 430,282
Restricted funds 270,446 233,319 291,475 290,141
Other assets 310 310
Liabilities:
Debt 458,760 485,634 370,482 418,056
Convertible subordinated debentures 148,650 123,275 148,650 142,581
Project debt 1,471,215 1,487,025 1,430,729 1,539,765
Other liabilities 1,838 1,838 2,648 2,648
Off Balance-Sheet Financial Instruments:
Unrealized losses on interest rate swap agreements 8,913 14,542
Unrealized gains on interest rate swap agreements 4
Guarantees 7,449 9,190
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
For cash and cash equivalents, and marketable securities, the carrying value of
these amounts is a reasonable estimate of their fair value. The fair value of
long-term unbilled receivables is estimated by using a discount rate that
approximates the current rate for comparable notes. The fair value of noncurrent
receivables is estimated by discounting the future cash flows using the current
rates at which
125
similar loans would be made to such borrowers based on the remaining maturities,
consideration of credit risks, and other business issues pertaining to such
receivables. The fair value of restricted funds held in trust is based on quoted
market prices of the investments held by the trustee. Other assets, consisting
primarily of insurance and escrow deposits, and other miscellaneous financial
instruments used in the ordinary course of business, are valued based on quoted
market prices or other appropriate valuation techniques.
Fair values for debt were determined based on interest rates that are
currently available to the Corporation for issuance of debt with similar
terms and remaining maturities for debt issues that are not traded on quoted
market prices. With respect to convertible subordinated debentures, fair
values are based on quoted market prices. The fair value of project debt is
estimated based on quoted market prices for the same or similar issues. Other
liabilities are valued by discounting the future stream of payments using the
incremental borrowing rate of the Corporation. The fair value of the
Corporation's interest rate swap agreements is the estimated amount that the
Corporation would receive or pay to terminate the swap agreements at the
reporting date based on third-party quotations. The fair value of Ogden
financial guarantees provided on behalf of customers (see Note 24) are valued
by discounting the future stream of payments using the incremental borrowing
rate of the Corporation.
The fair-value estimates presented herein are based on pertinent information
available to management as of December 31, 1999 and 1998. Although management is
not aware of any factors that would significantly affect the estimated
fair-value amounts, such amounts have not been comprehensively revalued for
purposes of these financial statements since that date, and current estimates of
fair value may differ significantly from the amounts presented herein.
126
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Shareholders of Ogden Corporation:
We have audited the accompanying consolidated balance sheets of Ogden
Corporation and subsidiaries (the "Company") as of December 31, 1999 and
1998, and the related consolidated statements of shareholders' equity,
consolidated income and comprehensive income, and cash flows for each of the
three years in the period ended December 31, 1999. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the financial position of the Company at December 31, 1999 and 1998,
and the results of their operations and cash flows for each of the three years
in the period ended December 31, 1999 in conformity with generally accepted
accounting principles.
As more fully described in Notes 2, 12 and 20 to the financial statements,
the Company has adopted plans to discontinue its Entertainment and Aviation
business segments and dispose of certain other non-core assets, utilize the
proceeds to pay down debt, and focus solely on its Energy business.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for the costs of start-up activities in 1999.
Deloitte & Touche LLP
New York, New York
March 30, 2000
127
Ogden Corporation and Subsidiaries
REPORT OF MANAGEMENT
Ogden's management is responsible for the information and representations
contained in this annual report. Management believes that the financial
statements have been prepared in conformity with generally accepted accounting
principles appropriate in the circumstances to reflect in all material respects
the substance of events and transactions that should be included and that the
other information in the annual report is consistent with those statements. In
preparing the financial statements, management makes informed judgments and
estimates of the expected effects of events and transactions currently being
accounted for.
In meeting its responsibility for the reliability of the financial
statements, management depends on the Corporation's internal control
structure. This structure is designed to provide reasonable assurance that
assets are safeguarded and transactions are executed in accordance with
management's authorization and recorded properly to permit the preparation of
financial statements in accordance with generally accepted accounting
principles. In designing control procedures, management recognizes that
errors or irregularities may nevertheless occur. Also, estimates and
judgments are required to assess and balance the relative cost and expected
benefits of such controls. Management believes that the Corporation's
internal control structure provides reasonable assurance that errors or
irregularities that could be material to the financial statements are
prevented and would be detected within a timely period by employees in the
normal course of performing their assigned functions.
The Board of Directors pursues its oversight role for these financial statements
through the Audit Committee, which is composed solely of nonaffiliated
directors. The Audit Committee, in this oversight role, meets periodically with
management to monitor their responsibilities. The Audit Committee also meets
periodically with the independent auditors and their internal auditors, both of
whom have free access to the Audit Committee without management present.
The independent auditors elected by the shareholders express an opinion on our
financial statements. Their opinion is based on procedures they consider to be
sufficient to enable them to reach a conclusion as to the fairness of the
presentation of the financial statements.
Scott G. Mackin Raymond E. Dombrowski, Jr.
President and Chief Executive Officer Senior Vice President and
Chief Financial Officer
128
Ogden Corporation and Subsidiaries
QUARTERLY RESULTS OF OPERATIONS
1999 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands of dollars, except per-share amounts)
Total revenues from continuing operations....................... $234,824 $252,070 $255,623 $ 257,833
----------- ----------- ----------- -----------
Gross profit.................................................... $ 53,684 $ 72,437 $ 58,636 $ 10,773
----------- ----------- ----------- -----------
Income (loss) from continuing operations before cumulative
effect of change in accounting principle........................ $ 4,059 $ 16,268 $ 8,353 $ (64,970)
Income (loss) from discontinued operations...................... 6,462 8,724 (16,069) (40,968)
Cumulative effect of change in accounting principle............. (3,820)
----------- ----------- ----------- -----------
Net income (loss)............................................... $ 6,701 $ 24,992 $ (7,716) $ (105,938)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic earnings (loss) per common share:
Income (loss) from continuing operations before cumulative
effect of change in accounting principle........................ $ 0.08 $ 0.33 $ 0.17 $ (1.31)
Income (loss) from discontinued operations...................... 0.13 0.18 (0.33) (0.83)
Cumulative effect of change in accounting principle............. (0.08)
----------- ----------- ----------- -----------
Total........................................................... $ 0.13 $ 0.51 $ (0.16) $ (2.14)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted earnings (loss) per common share:
Income (loss) from continuing operations before cumulative
effect of change in accounting principle........................ $ 0.08 $ 0.33 $ 0.17 $ (1.31)
Income (loss) from discontinued operations...................... 0.13 0.17 (0.33) (0.83)
Cumulative effect of change in accounting principle............. (0.08)
----------- ----------- ----------- -----------
Total........................................................... $ 0.13 $ 0.50 $ (0.16) $ (2.14)
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
1998 Quarter Ended March 31 June 30 Sept. 30 Dec. 31
- ------------------------------------------------------------------------------------------------------------------------------
(In thousands of dollars, except per-share amounts)
Total revenues from continuing operations....................... $211,263 $229,545 $217,632 $238,056
----------- ----------- ----------- -----------
Gross profit.................................................... $ 55,766 $ 62,361 $ 71,196 $ 65,765
----------- ----------- ----------- -----------
Income from continuing operations .............................. $ 2,705 $ 6,051 $ 14,059 $ 14,433
Income from discontinued operations............................. 8,995 21,009 14,096 5,622
----------- ----------- ----------- -----------
Net income...................................................... $ 11,700 $ 27,060 $ 28,155 $ 20,055
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Basic earnings per common share:
Income from continuing operations .............................. $ 0.05 $ 0.12 $ 0.28 $ 0.29
Income from discontinued operations............................. 0.18 0.42 0.29 0.12
----------- ----------- ----------- -----------
Total........................................................... $ 0.23 $ 0.54 $ 0.57 $ 0.41
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Diluted earnings per common share:
Income from continuing operations .............................. $ 0.05 $ 0.12 $ 0.28 $ 0.29
Income from discontinued operations............................. 0.17 0.41 0.28 0.11
----------- ----------- ----------- -----------
Total........................................................... $ 0.22 $ 0.53 $ 0.56 $ 0.40
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
129
ITEM 14.(a)2). FINANCIAL STATEMENT SCHEDULES
OGDEN CORPORATION AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1999
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
------------------------------------
BALANCE AT CHARGED TO
BEGINNING CHARGED TO COSTS OTHER BALANCE AT
DESCRIPTION OF PERIOD AND EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
ALLOWANCES DEDUCTED IN THE BALANCE SHEET
FROM THE ASSETS TO WHICH THEY APPLY:
DOUBTFUL RECEIVABLES-CURRENT $18,135,000 $ 5,130,000 $ 3,468,000 (E) $ 2,094,000 (A) $17,942,000
6,697,000 (C)
DEFERRED CHARGES ON PROJECTS 13,070,000 13,070,000 (D)
----------------------------------------------------------------------------------------
TOTAL $31,205,000 $ 5,130,000 $ 3,468,000 $21,861,000 $17,942,000
========================================================================================
ALLOWANCES NOT DEDUCTED:
PROVISION FOR RESTRUCTURING $ 274,000 $ 274,000 (C)
RESERVES RELATING TO TAX INDEMNIFICATION
AND OTHER CONTINGENCIES IN CONNECTION
WITH THE SALE OF LIMITED PARTNERSHIP
INTERESTS IN AND RELATED
TAX BENEFITS OF A
WASTE-TO-ENERGY FACILITY 300,000 $ 300,000
OTHER 1,850,000 1,850,000 (B)
----------------------------------------------------------------------------------------
TOTAL $ 2,424,000 $ 2,124,000 $ 300,000
======================================================================================
NOTES:
(A) WRITE-OFFS OF RECEIVABLES CONSIDERED UNCOLLECTIBLE.
(B) PAYMENTS CHARGED TO ALLOWANCES.
(C) REVERSAL OF PROVISIONS NO LONGER REQUIRED.
(D) WRITE-OFF OF DEFERRED CHARGES.
(E) TRANSFER FROM OTHER ACCOUNTS.
130
ITEM 14.(a)2). FINANCIAL STATEMENT SCHEDULES
OGDEN CORPORATION AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1998
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN C
COLUMN A COLUMN B ADDITIONS COLUMN D COLUMN E
--------------------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING COSTS AND OTHER BALANCE AT
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS END OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
ALLOWANCES DEDUCTED IN THE BALANCE SHEET
FROM THE ASSETS TO WHICH THEY APPLY:
DOUBTFUL RECEIVABLES-CURRENT $14,643,000 $ 7,336,000 $ 3,318,000 (A) $18,135,000
526,000 (E)
DOUBTFUL RECEIVABLES-NONCURRENT 3,000,000 3,000,000 (A)
DEFERRED CHARGES ON PROJECTS 10,741,000 2,609,000 280,000 (D) 13,070,000
------------------------------------------------------------------------------------
TOTAL $28,384,000 $ 9,945,000 $ 7,124,000 $31,205,000
====================================================================================
ALLOWANCES NOT DEDUCTED:
ESTIMATED COST OF DISPOSAL OF ASSETS $ 296,000 $ 296,000 (B)
PROVISION FOR RESTRUCTURING 1,141,000 867,000 (B) $ 274,000
RESERVES RELATING TO TAX INDEMNIFICATION
AND OTHER CONTINGENCIES IN CONNECTION WITH
THE SALE OF LIMITED PARTNERSHIP INTERESTS IN
AND RELATED TAX BENEFITS OF A
WASTE-TO-ENERGY FACILITY 3,000,000 2,700,000 (C) 300,000
OTHER 3,979,000 $ 100,000 1,223,000 (B) 1,850,000
1,006,000 (C)
------------------------------------------------------------------------------------
TOTAL $ 8,416,000 $ 100,000 $ 6,092,000 $ 2,424,000
====================================================================================
NOTES:
(A) WRITE-OFFS OF RECEIVABLES CONSIDERED UNCOLLECTIBLE.
(B) PAYMENTS CHARGED TO ALLOWANCES.
(C) REVERSAL OF PROVISIONS NO LONGER REQUIRED.
(D) WRITE-OFF OF DEFERRED CHARGES.
(E) TRANSFER TO OTHER ACCOUNTS.
131
ITEM 14.(a)2). FINANCIAL STATEMENT SCHEDULES
OGDEN CORPORATION AND SUBSIDIARIES SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEAR ENDED DECEMBER 31, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
--------------------------
BALANCE AT CHARGED TO CHARGED TO
BEGINNING AND COSTS OTHER BALANCE AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- -----------------------------------------------------------------------------------------------------------------------------------
ALLOWANCES DEDUCTED IN THE BALANCE SHEET
FROM THE ASSETS TO WHICH THEY APPLY:
DOUBTFUL RECEIVABLES-CURRENT $30,321,000 $ 1,974,000 $11,652,000 (A) $14,643,000
6,000,000 (C)
DOUBTFUL RECEIVABLES-NONCURRENT 6,000,000 3,000,000 (C) 3,000,000
DEFERRED CHARGES ON PROJECTS 8,638,000 6,707,000 4,604,000 (D) 10,741,000
-----------------------------------------------------------------------------------
TOTAL $44,959,000 $ 8,681,000 $25,256,000 $28,384,000
===================================================================================
ALLOWANCES NOT DEDUCTED:
ESTIMATED COST OF DISPOSAL OF ASSETS $ 863,000 $ 567,000 (B) $ 296,000
PROVISION FOR RESTRUCTURING 2,507,000 1,213,000 (B) 1,141,000
153,000 (C)
RESERVES RELATING TO TAX INDEMNIFICATION
AND OTHER CONTINGENCIES IN CONNECTION WITH
THE SALE OF LIMITED PARTNERSHIP INTERESTS IN
AND RELATED TAX BENEFITS OF A
WASTE-TO-ENERGY FACILITY 3,000,000 3,000,000
OTHER 5,500,000 $ 2,832,000 1,953,000 (B) 3,979,000
1,900,000 (C)
500,000 (E)
----------------------------------------------------------------------------------
TOTAL $11,870,000 $ 2,832,000 $ 6,286,000 $ 8,416,000
==================================================================================
NOTES:
(A) WRITE-OFFS OF RECEIVABLES CONSIDERED UNCOLLECTIBLE.
(B) PAYMENTS CHARGED TO ALLOWANCES.
(C) REVERSAL OF PROVISIONS NO LONGER REQUIRED.
(D) WRITE-OFF OF DEFERRED CHARGES.
(E) WRITE-OFF TO OTHER ACCOUNTS.
132
Independent Auditors' Report
The Board of Directors and Shareholders of Ogden Corporation:
We have audited the consolidated financial statements of Ogden Corporation
and subsidiaries (the "Company") as of December 31, 1999 and 1998, and for
each of the three years in the period ended December 31, 1999, and have
issued our report thereon dated March 30, 2000; such report is included as
part of this Annual Report on Form 10-K/A for the year ended December 31,
1999. Our audits also included the consolidated financial statement schedule
of Ogden Corporation and subsidiaries, listed in Item 14. This consolidated
financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits.
In our opinion, such consolidated financial statement schedule, when
considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
New York, New York
March 30, 2000
132A
SIGNATURES
Pursuant to the requirements of Section 13 and 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
OGDEN CORPORATION
DATE: JUNE 12, 2000
By SCOTT G. MACKIN*
------------------------
Scott G. Mackin
President and Chief Executive
Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Scott G. Mackin
and William J. Metzger, or either of them as his or her true and lawful
attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him or her and in his or her name, place and stead, in any
and all capacities, to sign any and all amendments (including post-effective
amendments) to this Report on Form 10-K, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, or their
or his substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated.
SIGNATURE TITLE DATE
SCOTT G. MACKIN* President, Chief Executive Officer and Director June 12, 2000
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SCOTT G. MACKIN
RAYMOND E. DOMBROWSKI, JR.* Senior Vice President and Chief Financial Officer June 12, 2000
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RAYMOND E. DOMBROWSKI, JR.
/S/ WILLIAM J. METZGER Vice President and Chief Accounting Officer June 12, 2000
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WILLIAM J. METZGER
DAVID M. ABSHIRE* Director June 12, 2000
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DAVID M. ABSHIRE
ANTHONY J. BOLLAND* Director June 12, 2000
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ANTHONY J. BOLLAND
NORMAN G. EINSPRUCH* Director June 12, 2000
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NORMAN G. EINSPRUCH
GEORGE L. FARR* Director June 12, 2000
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GEORGE L. FARR
JEFFREY F. FRIEDMAN* Director June 12, 2000
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JEFFREY F. FRIEDMAN
ATTALLAH KAPPAS* Director June 12, 2000
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ATTALLAH KAPPAS
JUDITH D. MOYERS* Director June 12, 2000
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JUDITH D. MOYERS
HOMER A. NEAL* Director June 12, 2000
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HOMER A. NEAL
ROBERT E. SMITH* Director June 12, 2000
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ROBERT E. SMITH
HELMUT F.O. VOLCKER* Director June 12, 2000
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HELMUT F.O. VOLCKER
* By: /s/ William J. Metzger
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Attorney-in-fact