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, 1996
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
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(Exact name of registrant as specified in its charter)
Delaware 13-5549268
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Two Pennsylvania Plaza, New York, N.Y. 10121
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code - (212) 868-6100
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
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Common Stock, par value New York Stock Exchange
$.50 per share
$1.875 Cumulative Convertible New York Stock Exchange
Preferred Stock (Series A)
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. [X]
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
3, 1997 was as follows:
Common Stock, par value $.50 per share $988,350,223
$1.875 Cumulative Convertible
Preferred Stock (Series A) $ 9,245,005
The number of shares of the registrant's Common Stock outstanding as of March 3,
1997 was 49,810,846 shares.
The following documents are hereby incorporated by reference into this Form
10-K:
(1) Portions of the Registrant's Annual Report to Shareholders for the year
ended December 31, 1996 (Parts II and IV).
(2) Portions of the Registrant's 1997 Proxy Statement to be filed with the
Securities and Exchange Commission (Part III).
INDEX
PART I PAGE
- ------ ----
Item 1. Business
Services Group 1 - 10
Entertainment 2 - 7
Aviation 8 - 10
Operational Restructuring 10
Energy Group 11 - 23
Independent Power 11 - 15
Waste to Energy 15 - 19
Water and Wastewater 20 - 21
Environmental Consulting and Engineering 21
International Business Development 22 - 23
Other Information 24 - 31
Markets, Competition and General Business Conditions 24 - 25
Equal Employment Opportunity 25
Employee and Labor Relations 26
Environmental Regulatory Laws 26 - 28
Energy and Water Regulation 29 - 31
Flow Control 31
Ash Residue 31
Item 2. Properties 32 - 34
Item 3. Legal Proceeding and Environmental Matters 35 - 36
Item 4. Submission of Matters to a Vote of Security Holders 36
Executive Officers of Ogden 36 - 39
PART II
Item 5. Market For Ogden's Common Equity and Related
Stockholder Matters 39
Item 6. Selected Financial Data 39
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 39
Item 8. Financial Statements and Supplementary Data 39
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 39
PART III
Item 10. Directors and Executive Officers of Ogden 40
Item 11. Executive Compensation 40
Item 12. Security Ownership of Certain Beneficial Owners
and Management 40
Item 13. Certain Relationships and Related Transactions 40
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K 40 - 45
PART I
Item 1. BUSINESS
Ogden Corporation, a Delaware corporation (hereinafter together with
its consolidated subsidiaries referred to as "Ogden" or the "Company"), is a
global company engaged in providing a wide range of services through its
operating groups within each of its two business segments, Services and Energy
(formerly Projects). The Services segment is composed of Ogden's Entertainment
group and Aviation group and the Energy segment consists of Ogden's Independent
Power group, Waste-to-Energy group, Water and Wastewater group and Environmental
Consulting and Engineering group. A description of the operations of each of the
foregoing groups is set forth herein.
Set forth in the following table is the amount of revenue
attributable to each of the operating groups within Ogden's Services and Energy
business segments for each of the last three fiscal years (in thousands of
dollars):
YEARS ENDED DECEMBER 31,
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SERVICES: 1994 1995 1996
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AVIATION $ 413,337 $ 480,620 $ 443,321
ENTERTAINMENT 245,187 301,315 391,933
TECHNOLOGY 212,098 251,243 187,435
FACILITY MANAGEMENT 357,272 374,804 263,752
OTHER 10,811 7,257 7,196
NET GAIN ON DISPOSITION OF
BUSINESSES 13,613
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TOTAL SERVICES $1,238,705 $1,415,239 $1,306,800
--------------------------------------
ENERGY:
WASTE-TO-ENERGY $ 459,478 $ 494,921 $ 536,221
INDEPENDENT POWER 26,368 57,443 61,341
ENVIRONMENTAL 140,745 145,748 121,575
WATER AND WASTEWATER 1,742 1,742
CONSTRUCTION ACTIVITIES 213,125 69,900 3,402
GAIN ON SALE OF LIMITED
PARTNERSHIP INTERESTS 26,126
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TOTAL ENERGY $ 865,842 $ 769,754 $ 724,281
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TOTAL SERVICES AND ENERGY $2,104,547 $2,184,993 $2,031,081
======================================
The amounts of revenue, operating profit or loss and identifiable
assets attributable to each of Ogden's two business segments for each of the
last three fiscal years is set forth on pages 38 and 39 of Ogden's 1996 Annual
Report to Shareholders, certain specified portions of which are incorporated
herein by reference.
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SERVICES
The operations of Ogden's Services segment are performed primarily
through its Entertainment and Aviation groups. The operations and services
provided by the Entertainment group and Aviation group are performed through
joint ventures, partnerships and wholly-owned subsidiaries within each of the
groups. Each group provides a wide range of services to private and public
facilities throughout the United States and many foreign countries. In foreign
countries the development, construction, ownership and the providing of services
may expose Ogden to potential risks that typically are not involved in such
activities in the United States. The Entertainment and Aviation groups seek to
manage and mitigate these risks through political and financial analysis of the
foreign country; the analysis of key participants in each operation; insurance;
participation by international finance institutions; and joint ventures with
other companies. Payment for services is often made in whole or part in the
domestic currencies of the foreign country and the conversion of such currencies
into U.S. dollars may not be assured by a governmental or other creditworthy
foreign country agency. In addition, fluctuations in value of such currencies
against the U.S. dollar may cause the operation to yield less return than
expected. Also, the transfer of earnings and profits in any form beyond the
borders of the foreign country may be subject to special taxes or limitations
imposed by the laws of the foreign country.
Some customers of these two groups are billed on cost-plus or
fixed-price basis. Where services are performed on a cost-plus basis, the
customer reimburses the appropriate group for all acceptable reimbursable
expenditures made in connection with the job and also pays a fee, which may be a
percentage of the reimbursable expenditures, a specific dollar amount, or a
combination of the two.
Many contracts in the Aviation group may be written on a
month-to-month basis or provide for a longer or indefinite term but are
terminable by either party on notice varying from 30 to 180 days.
ENTERTAINMENT
The Entertainment group consists principally of interests in themed
attractions; live theater; concerts; gaming; large format theaters and films;
performing artist management; recorded music and video development; as well as
food, beverage and novelty concession operations; and facility management at
arena, stadiums, amphitheaters, civic/convention centers and other recreational
facilities. These services are provided to a wide variety of public and private
facilities including stadiums, convention and exposition centers, arenas, parks,
amphitheaters, and fairgrounds located in the United States, Mexico, Canada,
Argentina, Germany, Australia, Spain and the United Kingdom. Entertainment also
operates a racetrack and five off-track betting parlors in Illinois.
The facility management and concession arrangements under which this
group operates are individually negotiated and vary widely as to terms and
duration. Concession
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contracts and leases usually provide for payment by Entertainment of commissions
or rentals based on a stipulated percentage of gross sales or net profits,
sometimes with a minimum rental or payment. Most of the facility management
contracts are on a cost-plus-a-fee basis but a number of such contracts provide
for a sharing of profits and losses between Entertainment and the facility
owner.
Entertainment offers its customers a wide range of
project-development options, including the operational design review,
consultation during construction, and assistance with financing arrangements, as
well as operations of facilities, usually in return for long-term services and
concession contracts. In some cases Ogden Corporation guarantees Entertainment's
performance of these contracts as well as the financing arrangements.
Location Based Entertainment
Entertainment is involved in the development and operation of
nature-themed attractions and merchandising throughout the United States.
Grizzly Park, a nature-based entertainment center located at the entrance to
Yellowstone National Park is owned and operated by Entertainment. Within Grizzly
Park are, among other attractions, the Grizzly Discovery Center, a natural
habitat with grizzly bears and gray wolves, and a variety of stores and
restaurants.
The American Wilderness Experience(TM) is a newly developed
nature-themed attraction concept which has targeted five sites for development,
all at megamalls developed by The Mills Corporation in the United States. The
first is scheduled to open at the Ontario Mills mall in California during mid
1997. The other sites slated for development with The Mills Corporation include
Arizona Mills (Phoenix, Arizona), Grapevine Mills (Dallas, Texas), Gurnee Mills
(Chicago, Illinois) and Sawgrass Mills (Fort Lauderdale, Florida). These
nature-themed attractions will be developed and operated by Entertainment and
will feature live animals, foliage, scents and climates indigenous to each
environment, motion-simulation rides, themed retailing and restaurants.
Through a long-term leasehold interest, Entertainment operates
Silver Springs and Wild Waters, two nature-based attractions located near Ocala,
Florida. Silver Springs, located on a 250-acre park, is open 365 days a year and
features attractions consisting of jungle cruise boat rides, jeep safari rides,
animal shows, gift shops and eateries. Wild Waters, located on a six acre park,
features a variety of slides, a wave pool, miniature golf, food services and
other attractions and is open March through Labor Day.
In 1995, the Port Authority of New York and New Jersey awarded
Entertainment an eleven and one-half year lease to renovate and operate the
107th Floor Observation Deck at the World Trade Center in New York City. The
Observation Deck, after undergoing a $6 million renovation, was opened to the
public in March 1997. The renovations include wide-screen, high- definition
television theaters that will take visitors on an aerial sightseeing tour of New
York City
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and environs; interactive, multi-lingual kiosks at various viewing points; a
nightly rooftop light show; and exhibits showcasing the region's pre-eminence in
international trade, finance and the arts. The lease agreement provides that
Entertainment will pay the Port Authority an annual fee plus a percentage of
gross revenues above a certain level.
Entertainment through a joint venture operates La Rural de Palermo,
a 28-acre fair and exhibition center located in Buenos Aires, Argentina. The
joint venture will continue the existing fair and exhibition business on the
property while developing a master plan for the development of the property to
include an entertainment attraction. Entertainment owns a 50% interest in the
joint venture and serves as the managing partner. As such, Entertainment directs
day-to-day operations and is responsible for creating and implementing the
development plan for this property.
Entertainment also owns an equity interest in Parques
Tecnocultiroles, S.A. ("Partecsa"), a Spanish Corporation based in Seville,
Spain. Partecsa was awarded a 30-year contract to convert, remodel, manage and
operate a 200-acre theme park located in Seville, Spain where the 1992
Exposition Fair was held. The park is scheduled to open in 1997.
Food, Beverage and Novelty Services at Stadiums, Arenas and Amphitheaters
Food, beverage and novelty services are provided by Entertainment in
the United States and Canada at a number of locations including those listed in
the following table:
Name Location
---- --------
Wrigley Field Chicago, Illinois
Rich Stadium Buffalo, New York
USAir Arena Landover, Maryland
Milwaukee Exposition and Convention Center Milwaukee, Wisconsin
Los Angeles Convention Center Los Angeles, California
The Kingdome Seattle, Washington
Veterans Stadium Philadelphia, Pennsylvania
Market Square Arena Indianapolis, Indiana
McNichols Arena Denver, Colorado
Cobo Hall Detroit, Michigan
Tempe Diablo Stadium Tempe, Arizona
University of Oklahoma Stadium Norman, Oklahoma
The MGM Grand Gardens Arena Las Vegas, Nevada
Saint John Regional Exhibition Centre New Brunswick, Canada
General Motors Place Vancouver, British Columbia
Mile High Stadium Denver, Colorado
Victory Field Indianapolis, Indiana
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Entertainment will be the exclusive food and beverage provider for
the MCI Center under construction in downtown Washington, D.C. which is
scheduled to open in the fall of 1997. This new 20,000-seat facility will serve
as the home of the Washington Bullets National Basketball Association team and
the Washington Capitals National Hockey League team. Entertainment will provide
concession services to the general seating area as well as in-seat services to
110 suites and more than 2,000 club seats.
Entertainment owns a 50% interest in the Australian and New Zealand
business of the International Facility Corporation Pty Ltd. ("IFC"), a private
facility management firm based in Brisbane, Australia. IFC is the managing
general partner for all of the Entertainment/IFC joint venture accounts in
Australia and New Zealand. These accounts include the Brisbane Entertainment
Centre, the Newcastle Entertainment Centre, the Cairns Convention Centre, and a
significant interest in Convex, operator of the Brisbane Convention and
Exposition Centre. IFC is also acting as a consultant for the design and
construction and will be providing ongoing management of the Olympic 2000
Stadium in Sydney, Australia.
Entertainment also provides food and beverage services at
amphitheaters throughout the United States, including those listed in the
following table:
Name Location
---- --------
Starlake Amphitheatre Pittsburgh, PA
Fiddlers Green Amphitheatre Englewood, CO
Sandstone Amphitheatre Kansas City, MO
Cynthia Woods Mitchell Pavilion Woodlands,TX
Meadows Music Theater (All-Seasons) Hartford, CT
Camden Amphitheatre (All-Seasons) Camden, NJ
Polaris Amphitheatre Columbus, OH
Nissan Amphitheatre Manassas, VA
Molson Amphitheatre Toronto, Canada
Virginia Beach Amphitheatre Virginia Beach, VA
Facility Management and Concession Services
Entertainment, through long-term management agreements, operates and
manages, and in some cases provides concession services, at various convention
centers, arenas and public facilities including the following:
Name Location
---- --------
Arrowhead Pond Anaheim, CA
Corel Centre Ottawa, Canada
Pensacola Civic Center Pensacola, FL
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Sullivan Arena Anchorage, Alaska
Egan Convention Center Anchorage, Alaska
Rosemont Horizon Chicago, IL
Target Center Minneapolis, MN
Northlands Coliseum Edmonton, Alberta
The Great Western Forum Los Angeles, CA
Newcastle Arena Newcastle, England
NYNEX arena Manchester Manchester, England
Bridgewater Hall* Manchester, England
Stadium Australia Sydney, Australia
Arena Oberhausen Oberhausen, Germany
* This performing arts center is operated by a joint venture company
comprised of Entertainment and the Halle Concerts Society of
England.
The Corel Centre (formerly the Ottawa Palladium), a 19,000-seat
multipurpose indoor arena in Ottawa, Canada, which is owned by a third party,
opened in January of 1996, and Entertainment commenced operations under a
30-year contract to provide complete facility management and concession services
at this arena, which is the home of the Ottawa Senators of the National Hockey
League. Pursuant to the 30-year contract, Entertainment has agreed that the
Corel Centre, under Entertainment's management, will generate a minimum amount
of revenues and has agreed to advance funds, if necessary, to its customer to
assist in refinancing senior secured debt incurred in connection with
construction of the facility. Such refinancing requirements are currently
scheduled to amount to $75 million at maturity of the senior secured debt, which
is expected to be on or about January 1, 2001. Ogden anticipates that these
arrangements will be renegotiated to provide for an Ogden obligation to purchase
such senior secured debt in the amount of $95 million at the end of March 2000
if the debt is not refinanced. In addition, Ogden has guaranteed indebtedness of
$16.1 million of an affiliate and principal tenant of Entertainment's customer.
The owners of the Corel Centre are parties to a 30-year license agreement with
the owner of the Ottawa Senators, pursuant to which the Ottawa Senators began to
play their home games at the arena in January 1996.
Pursuant to a management agreement between the City of Anaheim,
California and a wholly-owned subsidiary of Ogden, Entertainment manages and
operates the Arrowhead Pond, a facility owned by and located within the City of
Anaheim. Ogden has agreed that the Arrowhead Pond, under Entertainment's
management, will generate a minimum amount of revenues computed in accordance
with this 30-year management agreement with the City. The Arrowhead Pond is a
multi-purpose facility capable of accommodating professional basketball and
hockey, concerts and other attractions, and has a maximum seating capacity of
approximately 19,400. Entertainment also has a 30-year lease agreement with The
Walt Disney Company at the Arrowhead Pond pursuant to which the Anaheim Mighty
Ducks, a National Hockey League team owned by The Walt Disney Company, plays its
home games.
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In Mexico, Entertainment provides food and beverage concessions at
the Sports Palace, a 22,000 seat arena, located in Mexico City, as well as the
new Autodrome Fundidora Amphitheater in Monterey, Mexico that is able to
accommodate 18,000 people.
Other Activities
Metropolitan Entertainment Company Inc. ("Metropolitan"), is a
leading concert promoter in New York, New Jersey, Connecticut, and parts of
Massachusetts in which Entertainment owns a 50% interest. Metropolitan and
Entertainment, through their joint venture called the Metropolitan Entertainment
Group ("MEG"), conduct concert promotion activities, operate amphitheaters in
the eastern United States and concentrate on national and global music tours,
artist management, Broadway and television productions, recording, and music
publishing. MEG, through a long-term lease, operates the 20,000 capacity Darien
Lake Performing Arts Center located in Darien Lake, New York. MEG has also
established its own record label, Hybrid Recordings.
Entertainment leases and operates a thoroughbred and harness
racetrack and five off-track betting parlors in Illinois where it telecasts
races from Fairmount Park and other racing facilities. Restaurants and other
food and beverage services are provided by Entertainment at these facilities. A
large portion of the track's revenue is derived from its share of the
pari-mutuel handle, which can be adjusted by state legislation. Other income is
derived from admission charges, parking, programs and concessions.
Entertainment also provides concessions at zoos located in Seattle,
Washington; Cleveland, Ohio; and Columbia, South Carolina.
Entertainment also is engaged in the large-format film and theater
business. These large-format films are usually shown on screens six stories high
in specially designed theaters. Entertainment and Toronto-based Imax Corporation
have entered into a letter of intent to co- develop, build and operate fifteen
(15) large-format IMAX(R) theaters domestically and internationally over the
next five years. Entertainment has also formed a three-year co-production
agreement with two-subsidiaries of Sony Corporation of America for several
large-format films.
Entertainment's first venture into the gaming business occurred in
1996 when it began to operate the casino at the Americana Beach Resort in Aruba.
Entertainment's focus on gaming will be primarily on international properties
linked to wider entertainment endeavors.
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AVIATION
The Aviation group provides specialized support services to airlines
at locations throughout the United States, Canada, Europe, Latin America and the
Pacific Rim. The specialized support services provided by this group include
comprehensive ground handling, ramp, passenger, cargo and warehouse, aviation
fueling and in-flight catering services. These services are performed through
joint ventures, consortiums, contracts with individual airlines, consolidated
agreements with several airlines, and contracts with various airport
authorities.
The Aviation group's operations have undergone and continue to
undergo review and refinement through the sale of certain under-performing
operations such as: (i) its ground services operations at New York's Kennedy
International Airport; (ii) its VIP lounge in Chile; (iii) its in-flight kitchen
operations at the Miami International Airport and at several airports in Spain;
and (iv) certain of its skycap and security service operations at 15 airports
throughout the United States.
Ground Handling and Specialized Support Services
Ground handling services include diversified ramp operations such as
baggage unloading and loading, aircraft cleaning, aircraft maintenance, flight
planning, de-icing, cargo handling, warehouse operations and passenger-related
services such as ticketing, check-in, security and pre-board services, passenger
lounge operations, cargo/warehouse services and other miscellaneous services.
Global expansion by the Aviation group has resulted in providing
comprehensive ground handling and related services at many international
locations throughout Europe, Canada, South America, Asia and other countries.
Set forth below is a sampling of major foreign airports where Aviation currently
conducts ground handling operations:
Airport Location
- ------- --------
Heathrow Airport England
Schiphol International Airport Netherlands
Auckland International Airport New Zealand
Jorge Chaves International Airport Lima, Peru
Guarulhos International Airport Sao Paulo, Brazil
Galeao International Airport Rio de Janeiro, Brazil
Pearson International Airport Toronto, Canada
Mirabel and Dorval Airports Montreal, Canada
Simon Bolivar International Airport Caracas, Venezuela
Mexico International Airport Mexico City, Mexico
Chek Lap Kok Hong Kong*
Macau International Airport Macau
* Expected to open in 1998.
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Aviation also performs ground handling operations at eight different
airports throughout Germany; the Czech Republic through a 50% interest in a
Prague-based airport handling company; ground handling operations at the Arturo
Merino Benitez Airport in Santiago, Chile and through a joint venture with a
Turkish company, aircraft cleaning, security and commissary supplies to carriers
at Ataturk Airport in Istanbul and other locations in Turkey. Ogden Aviation
continues to perform services at St. Maarten's Princess Juliana International
Airport. In Aruba through a corporation jointly owned by Aviation and Air Aruba,
Aviation provides ramp and passenger services at Reina Beatrix International
Airport. Other ground handling operations include the La Union Airport in Puerto
Plata, Dominican Republic; the Belo Horizonte International Airport, Brazil;
eleven (11) Airports in Mexico; and through a joint venture with Aldeasa S.A. of
Spain provides cargo handling and warehousing services at airports located in
Madrid and Barcelona, Spain.
Fueling Services
Aviation operates fueling facilities, including storage and hydrant
fueling systems for the fueling of aircraft. This operation assists airlines in
designing, arranging financing for, and installing underground fueling systems.
These fueling operation services are principally performed in the North American
market, including the maintenance and operation of a new Fuel Farm located at
the San Diego International Airport. However, Aviation is the sole fueling
handling agent at Tocumen International Airport in Panama City, Panama and fuels
aircrafts at the Luis Munoz International Airport in San Juan, Puerto Rico. .
In-Flight Catering
Aviation operates 11 in-flight kitchens for over 85 airline
customers at a number of locations, including the following:
Airport Location
------- --------
John F. Kennedy International New York
LaGuardia New York
Newark International New Jersey
Los Angeles International California
San Francisco International California
Washington Dulles International Washington, D.C.
McCarren International (Las Vegas) Nevada
Airport Privatization and Related Projects
A consortium, composed of Ogden Aviation Services, Inc., Macau
Aviation Services Corporation, EVA Airways, Air Macau and several local
companies and prominent businessmen, was awarded a 19-year contract, with a
16-year exclusivity arrangement, pursuant to which the consortium provides ramp
and cargo handling, passenger services, and aircraft line maintenance service at
the new Macau International Airport, which opened and began operations
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in November 1995. The consortium, of which Aviation Services is the managing
partner with a 29% participation, is providing all necessary passenger and ramp
equipment, has constructed a cargo warehouse and is in process of building cargo
and engineering facilities, an aircraft hangar and a state-of-the-art training
center at the airport. The consortium's investment in infrastructure
improvements and equipment in the new Macau airport is expected to exceed $40
million.
Aviation is also part of a consortium, of which Aviation has a 19%
interest, that has been awarded a 20-year concession contract by the Civil
Aviation Authority of Colombia to finance, build and operate a second runway at
the El Dorado Airport, in Bogota, Colombia. Aviation's consortium partners,
including Spain's Dragados y Contrucciones SA and Colombia's Conconcreto, are
building the 3.8-kilometer runway at an estimated cost of $97 million.
Construction, which began in 1996, is expected to be completed by May 1998. The
consortium will maintain the new runway, and the pre-existing runway, for
approximately 17 years in return for runway landing fees.
Applied Data Technology
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. ADTI's range systems are
installed at Navy and Air Force aircraft training ranges to facilitate
air-to-air combat exercises and monitor, record and graphically display the
exact maneuvers of the aircraft on the ranges and simulate the various weapons
systems aboard the aircraft. These range automated systems are used by the U.S.
Navy and Air Force to train pilots for combat conditions and by the Department
of Defense in training pilots to avoid "friendly fire" incidents. ADTI's systems
are currently installed at four of the 14 domestic ranges, including the range
at the Top Gun school at Miramar, California. The range systems business
includes new ranges, expansion and upgrade of existing ranges, product support
and related programs.
OPERATIONAL RESTRUCTURING
Ogden's Services segment has completed the disposition of most of
its non-core businesses, including W.J. Schafer Associates, Inc., Ogden
Professional Services Corporation, Facility Services (except the New York
Region), Ogden BioServices Corporation, Universal Ogden Services (a 50% owned
joint venture), and Analytical Technologies, Inc. The disposition of other
non-core businesses, principally Atlantic Design Company, Inc., which provides
contract manufacturing; Facility Services (New York Region) which provides
facility management, maintenance, janitorial and manufacturing support services;
and certain in-flight kitchen operations, skycap services and security services
provided by its Aviation group, are expected to be sold during 1997.
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ENERGY
The operations of Ogden's Energy segment are conducted by Ogden
Energy Group, Inc. through four principal business areas: independent power,
waste-to-energy, water and waste water and environmental consulting and
engineering (collectively the "Energy Group"). Since the early 1980's,
affiliates and subsidiaries of the Energy Group have been engaged in developing
and in some cases owning energy-generating projects fueled by municipal solid
waste, and providing long term services from these projects to communities. The
Energy Group is now the largest full service vendor (i.e., builder/operator) in
the world for waste-to-energy projects, based on both number of facilities as
well as throughput capacity. In addition, since 1989, subsidiaries have been
engaged in developing, owning and/or operating independent power production
projects. The Company seeks to utilize the expertise gained from these
activities in developing, owning or operating energy generating facilities in
the United States and abroad that utilize a variety of other fuels, as well as
water and wastewater facilities that will similarly serve communities on a long
term basis.
The Energy Group generally seeks to participate in projects in which
it can make an equity investment and become the operator; its returns will be
derived from equity distributions and/or operating fees. It also seeks to have a
role in the development of the projects. The types of projects in which the
Energy Group seeks to participate sell the electrical power services they
generate, or the waste or water-related services they provide, under long term
contracts or market concessions to utilities, government agencies providing
power distribution, creditworthy industrial users, or local government units
providing waste disposal or water and wastewater services. For power projects
utilizing a combustible fuel or geothermal sources, the Energy Group seeks
projects which have a secure supply of fuel or geothermal brine through
long-term supply arrangements or by obtaining control of the fuel source. The
Energy Group generally looks to finance its projects using equity or capital
commitments provided by it or other investors, combined with nonrecourse debt
for which the lender's sole source of payment is project revenues and assets.
The number of projects being pursued at any given time by the Energy
Group will, naturally, fluctuate. The complexities and uniqueness of
international project development in particular requires that the Energy Group
continually assess the likelihood of successful project financing throughout the
development stage and weigh that against the expected benefits. In addition, the
Energy Group may, depending upon circumstances and at the appropriate time,
elect to dispose of a portion of an equity interest it may have in a project
after financing.
INDEPENDENT POWER
The Energy Group's independent power business is conducted by its
wholly-owned subsidiary, Ogden Energy, Inc. ("OEI"). OEI develops, operates
and/or invests in independent (i.e., nonutility) electric energy generation
("Independent Power Production" or "IPP") projects which sell their output to
utilities, electricity distribution companies or industrial consumers in the
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United States and abroad. The activities of this group do not include the
development of generating facilities fueled by solid waste, which are conducted
by the waste-to-energy group, discussed below.
The Energy Group presently has interests in IPP projects with an
aggregate generating capacity of 1172 MW (gross) either operating or under
construction in the United States, Central and South America, and The
Philippines. It continues to seek to expand its ownership and operation of IPP
projects in these and other regions, primarily with focus on development
opportunities in the Pacific Rim, Southeast Asia and India. The Energy Group's
IPP business is facilitated through field offices in Hong Kong; Manila, The
Philippines; Taipei, Taiwan, and Sao Paulo, Brazil.
(a) IPP Projects.
Quezon.
During 1996 and early 1997, the Energy Group successfully completed
the development stage of its largest international project to date. A
consortium, of which the Energy Group is a member has developed and is now
constructing a 480 MW coal-fired electric generating facility in the Republic of
the Philippines (the "Quezon Project"). The other members of the consortium are
affiliates of International Generating Company, an affiliate of Bechtel
Enterprises, Inc. and PMR Limited Co., a Philippines partnership. The consortium
entered into a power purchase agreement with Manila Electric Company
("Meralco"), the largest electric distribution company in The Philippines, which
serves the area surrounding and including metropolitan Manila. Under the terms
of the agreement, Meralco is obligated, for a period of 25 years, to purchase
stated minimum annual quantities of electricity produced by the facility on
terms and at prices set forth in the agreement. The consortium has entered into
contracts for the supply of coal at stated prices for a portion of the term of
the power purchase agreement.
The power purchase agreement has been approved by the Philippines
Energy Regulatory Board. The project has received an environmental clearance
certificate, the primary environmental permit required for construction and
operation, together with all permits required to commence ground-clearing and
grading activities. Site acquisition has been substantially completed. Total
cost of development and construction of the Quezon Project is expected to be
approximately $800 million. A notice to proceed with construction of the
facility has been issued to the turnkey contractors, which are affiliates of
Bechtel Enterprises, Inc., and construction of the facility commenced on
December 27, 1996. An Energy Group subsidiary will operate the Quezon Project on
behalf of the consortium for a 25 year term from the commencement of commercial
operation.
On December 30, 1996, the consortium concluded negotiations with and
executed financing agreements with construction and term lenders to the Quezon
Project, including Union Bank of Switzerland and the US Export-Import Bank. On
February 11, 1997 the financing was
13
closed, subject to certain conditions subsequent which must be satisfied prior
to the initial loan disbursement. All conditions to release of loan proceeds are
expected to be satisfied in due course.
The Energy Group will receive certain limited amounts of revenue
from the Quezon Project during construction. Operating revenue is expected to
commence upon commercial operation, projected for January 2000.
Operating Facilities.
The Energy Group's operating IPP projects utilize a variety of
energy sources: water (hydroelectric), natural gas, geothermal energy, and
petroleum distillates. The Quezon Project when completed will utilize coal.
The Group's hydroelectric projects include the New Martinsville,
West Virginia project, which is operated through a wholly-owned subsidiary. The
output is sold under a long term contract with Monongohela Power Company. The
Energy Group has an ownership interest in the Don Pedro project in Costa Rica
through an equity investment in Energia Global, Inc. ("EGI"). Don Pedro is owned
by EGI and is operated by an affiliate of the Energy Group. A second
hydroelectric project, Rio Vulcan, is scheduled to commence operation in 1997
and also will be operated by an Energy Group affiliate. The electric output from
both of these facilities is sold to Instituto Costarricense de Electricidad.
The Energy Group's natural gas projects include the Brandywine
Maryland facility which began operation in 1996. This facility is operated by a
subsidiary of the Energy Group, and its output is sold to Potomac Electric Power
Company. The other natural gas projects are located in Bolivia, where affiliates
of the Energy Group own an interest in Empresa Valle Hermoso ("EVH") which was
formed by the Bolivian government as part of the capitalization of the
government-owned utility ENDE. EVH owns and operates 215 MW of gas-fired
generating capacity. An affiliate of OEI participates in a joint venture that
supplies EVH with management services support.
The Energy Group is the lessee of two geothermal facilities in
California, both of which are operated by the Group's affiliates, and a
geothermal resource which is adjacent to and supplies fluid to both geothermal
facilities. The electricity from both projects, the Heber and SIGC facilities,
is sold under long-term contracts with Southern California Edison.
In 1996, the Energy Group added diesel fuel facilities to its
portfolio through the acquisition of equity interests in two projects in the
Philippines: the Bataan Cogeneration project and the Island Power project. These
projects will be operated by an affiliate of the Energy Group. The Bataan
Cogeneration project has a long-term contract to sell its electrical output to
the National Power Corporation (with which it also has entered into a fuel
management agreement for fuel supply) and the Bataan Export Processing Zone
Authority, while the Island Power project has a long-term power contract with
the Occidental Mindoro Electric Cooperative.
14
(b) Project Summaries. Certain information with respect to the
Energy Group's IPP projects as of March 1, 1997 is summarized in the following
table:
IPP PROJECTS
Date of
Acquisition/
Energy Commencement
In Operation: Location Source Size Nature of Interest of Operations
------------- -------- ------ ---- ------------------ -------------
1. New Martinsville West Virginia Hydro 40MW Lessee/Operator 1991
2. Heber (1)(2) California Geothermal 52MW 50% Lessee/ 1989
Operator
3. SIGC (2) California Geothermal 48MW Lessee/Operator 1994
4. Don Pedro Costa Rica Hydro 16MW Operator 1996
5. Island Power Philippines Diesel 7MW Part Owner/ 1996
Corporation(3)(4) Operator
6. Bataan Philippines Diesel 58MW Owner/Operator 1996
Cogeneration (3)
7. Empresa Valle Bolivia Natural Gas 215MW Part Owner/ 1995
Hermoso (5) Operations Mgmt.
8. Brandywine Maryland Natural Gas 240MW Operator 1996
Under Construction:
- -------------------
1. Quezon (6) Philippines Coal 480MW Operator/Part 2000(est.)
Owner
2. Rio Vulcan Costa Rica Hydro 16MW Operator 1997(est.)
(1) An OEI affiliate is a 50% partner in the project entity which leases the
facility from a third-party lessor. The lease expires in 2000 and is
subject to a 15-year renewal at the OEI affiliate's option.
(2) An OEI affiliate is a 50% partner of the lessee of the resource supplying
fluid to the project, and the lessor is the same third-party that leases
the Heber project to that project entity.
(3) These projects are currently undergoing refurbishment. Accordingly, as of
March 1, 1997, not all units of these projects were running at capacity.
(4) An OEI affiliate has an approximately 40% ownership interest in this
project.
15
(5) The OEI affiliate owns an approximately 24% interest in a consortium that
purchased 50% of Empresa Valle Hermoso. The remaining 50% is owned by
Bolivian pension funds.
(6) An OEI affiliate has an approximately 26% ownership interest in the
project.
(c) Other Development Efforts. The Energy Group is actively pursuing
several projects, some of which have achieved significant development milestones
such as executed power purchase agreements, or receipt of key governmental
approvals. As with all development efforts, however, there are in each case
numerous conditions to be satisfied prior to financing, some of which are not
within the Energy Group's control. As such, no assurance can be given that these
projects will ultimately be developed successfully.
WASTE-TO-ENERGY
The Energy Group's waste-to-energy operations have been consolidated
in a wholly-owned subsidiary, Ogden Waste to Energy, Inc. ("OWTE").
Waste-to-energy facilities combust municipal solid waste to make saleable energy
in the form of electricity or steam. This group completed construction of its
first waste-to-energy project in 1986. It currently operates 28 waste-to-energy
projects at 27 locations. The Energy Group's affiliates are the owners or
lessees of 17 of its projects. OWTE has the exclusive right to market in the
United States the proprietary, mass-burn technology of Martin GmbH fur
Umwelt-und Energietechnik ("Martin"). All of the facilities the Energy Group has
constructed use this Martin technology. In addition, the Energy Group operates
facilities using other technologies.
Generally, OWTE, through wholly-owned subsidiaries ("Operating
Subsidiaries"), provides waste-to-energy services pursuant to long-term service
contracts ("Service Agreements") with local governmental units sponsoring the
waste-to-energy project ("Client Communities"). Certain of its facilities do not
have sponsoring Client Communities.
(a) Terms and Conditions of Service Agreements.
Each Service Agreement is different in order to reflect the specific
needs and concerns of the Client Community, applicable regulatory requirements,
and other factors. The following description sets forth terms that are generally
common to these agreements:
o The Operating Subsidiary designs the facility, helps to
arrange for financing, and then constructs and equips the
facility on a fixed price and schedule basis.
o The Operating Subsidiary operates the facility and generally
guarantees it will meet minimum processing capacity and
efficiently standards, energy production levels, and
environmental standards. The Operating Subsidiary's failure to
meet these guarantees or to otherwise observe the material
terms of the Service Agreement (unless caused by the Client
Community or by events beyond its control ("Unforeseen
16
Circumstances")) may result in liquidated damages being
charged to the Operating Subsidiary or, if the breach is
substantial, continuing and unremedied, the termination of the
Service Agreement. In the case of such Service Agreement
termination, the Operating Subsidiary may be obligated to
discharge project indebtedness;
o The Client Community is generally required to deliver minimum
quantities of municipal solid waste ("MSW") to the facility
and is obligated to pay a service fee for its disposal,
regardless of whether that quantity of waste is delivered to
the facility. The service fee escalates to reflect indexes of
inflation. In many cases the Client Community must also pay
for transportation of the residue to the disposal site.
Generally, expenses resulting from the delivery of
unacceptable and hazardous waste on the site, are also borne
by the Client Community. In addition, the Client Community is
also generally responsible to pay increased expenses and
capital costs resulting from Unforeseen Circumstances, subject
to limits which may be specified in the Service Agreement;
o Ogden Corporation typically guarantees each Operating
Subsidiary's performance under its respective Service
Agreement.
o The Client Community reimburses the Operating Subsidiary for
certain costs specified in the Service Agreement including
taxes, governmental impositions (other than income taxes),
certain consumables, ash disposal and utility expenses. The
Client Community usually retains a portion of the energy
revenues (generally 90%) generated by the facility, with the
balance paid to the Operating Subsidiary. If the facility is
owned by the Operating Subsidiary, the Client Community also
pays as part of the Service Fee an amount equal to the debt
service due to be paid on the bonds issued to finance the
facility. At most facilities, the Energy Group may earn
additional fees from accepting waste from the Client Community
or others utilizing the capacity of the facility, which
exceeds the amount of waste committed by the Client Community.
Affiliates of the Energy Group operate transfer stations in
connection with some of its waste-to-energy facilities and, in connection with
the Montgomery County, Maryland project, use a railway system to transport MSW
and ash residue to and from the facility. In addition, affiliates lease and
operate a landfill located at its Haverhill, Massachusetts, facility, and lease,
but do not operate, a landfill in connection with its Bristol, Connecticut,
facility.
(b) Other Arrangements for Providing Waste-to-Energy Services. The
Energy Group owns two facilities that are not operated pursuant to Service
Agreements with Client Communities and may undertake in the future additional
such projects. In such projects, the Operating Subsidiary must obtain sufficient
waste under contracts with haulers or communities to ensure sufficient project
revenues. In these cases, the Operating Subsidiary is subject to risks
17
usually assumed by the Client Community, such as those associated with
Unforeseen Circumstances and the supply and price of municipal waste to the
extent not contractually assumed by other parties. The Group's current contracts
with waste suppliers for these two facilities provide that the tipping fee
charged for waste disposal service generally escalates with specified indices
but otherwise is subject to limited increases in the event that costs of
operation increase as a result of Unforeseen Circumstances. On the other hand,
in these cases, the Operating Subsidiary generally retains all of the energy
revenues from sales of power to utilities or industrial power users and disposal
fees for waste accepted at these facilities. Accordingly, the Energy Group
believes that such projects carry both greater risks and greater potential
rewards than projects in which there is a Client Community.
(c) Project Financing. Financing for domestic projects is generally
accomplished through the issuance of a combination of tax-exempt and taxable
revenue bonds issued by or on behalf of the Client Community. If the facility is
owned by the Operating Subsidiary the Client Community loans the bond proceeds
to the Operating Subsidiary and pays to the Operating Subsidiary amounts
necessary to pay debt service. For such facilities, project-related debt is
included as a liability in Ogden's consolidated financial statements. Generally,
such debt is secured by the revenues pledged under the respective indenture and
is collateralized by the assets of the Operating Subsidiary and otherwise
provides no recourse to Ogden, subject to construction and operating performance
guarantees and commitments.
(d) OWTE Projects. Certain information with respect to projects as
of March 1, 1997 is summarized in the following table:
WASTE-TO-ENERGY PROJECTS
Boiler Commencement
Units Tons per Day Units of Operations
- ----- ------------ ----- -------------
Tulsa, OK (I) (1) 750 2 1986
Haverhill/Lawrence,(8) 950 1 1984
MA-RDF
Marion County, OR 550 2(2) 1987
Hillsborough County, FL (3) 1,200 3(2) 1987
Tulsa, OK (II) (1)(4) 375 1 1987
Bristol, CT 650 2(2) 1988
Alexandria/Arlington, VA 975 3 1988
Indianapolis, IN 2,362 3(2) 1988
Hennepin County, MN (1)(5) 1,000 2 1990
Stanislaus County, CA 800 2 1989
Babylon, NY 750 2(2) 1989
Haverhill, MA-Mass Burn 1,650 2 1989
Warren County, NJ (5) 400 2 1990
Kent County, MI (3) 625 2(2) 1990
Wallingford, CT (5) 420 3(2) 1990
Fairfax County, VA 3,000 4(2) 1990
18
Huntsville, AL (3) 690 2(2) 1990
Lake County, FL 520 2(2) 1990
Lancaster County, PA (3) 1,200 3(2) 1991
Pasco County, FL (3) 1,050 3(2) 1991
Huntington, NY (6) 750 3(2) 1991
Hartford, CT (3)(7)(8) 2,000 3 1989
Detroit, MI (1)(8) 3,300 3 1989
Honolulu, MI (1)(8) 2,160 2 1990
Union County, NJ (3) 1,440 3 1994
Lee County, FL (3) 1,200 3(2) 1994
Onondaga County NY (6) 990 3 1995
Montgomery County, MD (3) 1,800 3(2) 1995
-----
Total 33,565
======
(1) Facility is owned by an owner/trustee pursuant to a sale/leaseback
arrangement.
(2) Facility has been designed to allow for the addition of another unit.
(3) Facility is owned by the Client Community.
(4) Phase II of the Tulsa facility, which was financed as a separate project,
expanded the capacity of the facility from two to three units.
(5) Operating Subsidiaries were purchased after completion, and use a
mass-burn technology that is not the Martin Technology.
(6) Owned by a limited partnership in which the limited partners are not
affiliated with Ogden.
(7) Under contracts with the Connecticut Resource Recovery Authority and
Northeast Utilities, the Operating Subsidiary operates only the boiler and
turbine for this facility.
(8) Operating contracts were acquired after completion. Facility uses a
refuse-derived fuel technology and does not employ the Martin Technology.
(e) Technology. The principal feature of the Martin Technology is
the reverse- reciprocating stoker grate upon which the waste is burned. The
patent for the basic stoker grate technology used in the Martin Technology
expired in 1989. The Energy Group has no information that would cause it to
believe that any other company uses the basic stoker grate technology that was
protected by the expired patent. Moreover, the Energy Group believes that
unexpired patents on other portions of the Martin technology and other
proprietary know how would limit the ability of other companies to effectively
use the basic stoker grate technology in competition with the Energy Group.
There are several unexpired patents related to the Martin Technology including:
(i) Grate Bar for Grate Linings, especially in Incinerators - expires, 1999;
(ii) Method and Arrangement for Reducing NOx Emissions from Furnaces - expires
2000; (iii) Method and Apparatus for Regulating the Furnace Output of
Incineration Plants - expires 2007; (iv) Method for Regulating the Furnace
Output in Incineration Plants - expires 2008; and (v) Feed Device with Filling
Hopper and Adjoining Feed Chute for Feeding Waste to Incineration Plants -
19
expires 2008. More importantly, the Energy Group believes that it is Martin's
know-how and worldwide reputation in the waste-to-energy field, and the Energy
Group know-how in designing, constructing and operating waste-to-energy
facilities, rather than the use of patented technology, that is important to the
Energy Group's competitive position in the waste-to-energy industry in the
United States. Ogden does not believe that the expiration of the patent covering
the basic stoker grate technology or patents on other portions of the Martin
Technology will have a material adverse effect on Ogden's financial condition or
competitive position.
The Energy Group believes that mass burn technology is now the
predominant technology used for the combustion of solid waste. Overall, there
are several other mass-burn technologies available in the market including those
of Von Roll, W&E, Takuma, Volund, Steinmueller, Deutsche Babcock, and Detroit
Stoker. In addition, other innovative non-mass burn technologies have been
developed from time-to-time. Such technologies may claim reduced air emissions,
but to date have been unproven on a large scale operation and appear likely to
be substantially more expensive. Martin seeks to implement improvements and
modifications to its technology in order to maintain its competitive position
with non-mass burn technologies. However, should such technologies develop that
offer competitive advantages to mass burn, the Energy Group's ability to respond
in the United States would be limited by the Cooperation Agreement--see (f)
below.
(f) The Cooperation Agreement. Under an agreement between Martin and
an Ogden affiliate (the "Cooperation Agreement"), the Energy Group's subsidiary,
Ogden Projects, Inc. ("OPI") has the exclusive rights to market the proprietary
technology (the "Martin Technology") of Martin in the United States, Canada,
Mexico, Bermuda, certain Caribbean countries, most of Central and South America,
and Israel. Martin is obligated to assist OPI in installing, operating, and
maintaining facilities incorporating the Martin technology. The fifteen year
term of the Cooperation Agreement renews automatically each year unless notice
of termination is given, in which case the Cooperation Agreement would terminate
15 years after such notice. Additionally, the Cooperation Agreement may be
terminated by either party if the other fails to remedy its material default
within 90 days or notice. The Cooperation Agreement is also terminable by Martin
if there is a change of control (as defined in the Cooperation Agreement) of
Ogden Martin Systems, Inc. ("OMS"), a wholly-owned subsidiary of OPI or any
direct or indirect parent of OMS not approved by its respective board of
directors. Although termination would not affect the rights of OPI to design,
construct, operate, maintain, or repair waste-to-energy facilities for which
contracts have been entered into or proposals made prior to the date of
termination, the loss of OPI's right to use the Martin Technology could have a
material adverse effect on OPI's future business and prospects.
(g) Other Development Efforts. The Energy Group has no firm
commitments in its waste-to-energy backlog as of December 31, 1996. As of
December 31, 1995, it had one project in its backlog, which the client
community, Mercer County, New Jersey, has since announced it intends to cancel.
20
WATER AND WASTEWATER
The Energy Group's water and wastewater business is conducted
through Ogden Yorkshire Water Company ("OYWC"). OYWC's mission is to develop,
design, construct, maintain, operate, and in some cases own, water and
wastewater treatment facilities and distribution and collection networks in the
United States, Canada, Latin America and elsewhere. Although OYWC was formed in
1994 as a joint venture with a British water utility, Yorkshire Water PLC, in
1996, Yorkshire Water PLC determined that it needed to refocus its efforts on
its core business in the United Kingdom, and terminated its ownership interest
in OYWC and its projects. Yorkshire Water PLC and its affiliates will, however,
continue to provide engineering, operations and marketing support and services
to OYWC under a contract which expires in 1999.
In the United States, OYWC seeks to participate in water projects in
which, under contracts with municipalities, it privatizes water or wastewater
facilities, agrees to build new or substantially augment existing facilities and
agrees to operate and maintain the facilities under long term contracts.
Although in certain situations it would consider entering into operational
contracts for facilities in which it has no ownership or long term leasehold
interest, and presently has such contracts with three small communities in New
York State, the Energy Group generally does not believe such contracts provide
adequate returns.
The development of the privatization market for water and wastewater
projects in the United States has been hampered by certain legal constraints,
primarily restrictions imposed by federal tax regulations that have historically
limited the ability of municipalities to enter into long term operating
contracts with private entities for facilities financed with tax exempt
municipal bonds. In early 1997, the Internal Revenue Service significantly
relaxed these restrictions. It is expected that these changes should allow
municipalities to more easily privatize existing water and wastewater systems.
OYWC believes there are opportunities for projects in the United States,
especially in circumstances where substantial new construction is required, and
in 1996 it submitted proposals to municipalities for several such opportunities.
In countries other than the United States, the Energy Group is
seeking water and wastewater opportunities in which it will provide services to
municipalities in which it can own an equity interest in water facilities under
a concession that grants it the right to provide service to, and collect
revenues from, consumers. The Energy Group believes that the lack of
creditworthiness of non-U.S. municipalities, which may result from their limited
ability to raise revenues or from other causes, makes the collection of tariffs
from the consumer a more secure source of revenue.
Under contractual arrangements, OYWC may be required to warrant
certain levels of performance and may be subject to financial penalties or
termination if it fails to meet these warranties. The Company may be required to
guarantee the performance of OYWC. OYWC seeks not to take responsibility for
conditions that are beyond its control.
(a) Water and Wastewater Projects. OYWC operates and maintains
wastewater treatment facilities for three small municipalities in New York
State. Such facilities cumulatively
21
process approximately 11.8 million gallons per day ("mgd"). In addition, OYWC
operates and maintains the municipal wastewater treatment facilities for several
other small government and privately owned concerns that cumulatively process
less than 1 mgd. All of the facilities are operated pursuant to short-term
contracts.
(b) Other Development Efforts. The Energy Group currently has no
firm commitments in its water and wastewater backlog. It has, however, received
a project award with respect to a 32 year concession serving a population in
excess of 700,000 in the City of Muscat, the capital of the Sultanate of Oman.
The project encompasses taking over the existing wastewater and sewage
facilities in Muscat, as well as the construction and operation of new water and
wastewater infrastructure. The infrastructure capital program would be phased in
over eight years, with the first phase projected to require approximately $285
million in new construction. OYWC's role would be as operator on behalf of a
joint venture to be formed. The joint venture's arrangement with the government
would be on a Build/Own/Operate/Transfer basis, and some equity capital,
expected to be approximately $12 million, would be required of OYWC. The
implementation of the Muscat project remains subject to several conditions
precedent, many of which are beyond the control of OYWC.
ENVIRONMENTAL CONSULTING AND ENGINEERING
The Energy Group's environmental consulting services are provided
through Ogden Environmental and Energy Services Co., Inc. ("OEES") which
provides a comprehensive range of environmental, infrastructure and energy
consulting, engineering and design services to industrial and commercial
companies, electric utilities and governmental agencies. These services include
analysis and characterization, remedial investigations, engineering and design,
data management, project management, and regulatory assistance which are
provided to a variety of clients in the public and private sectors in the United
States and abroad. Principal clients include major Federal agencies,
particularly the Department of Defense and the Department of Energy, as well as
major corporations in the chemical, petroleum, transportation, public utility
and health care industries and Federal and state regulatory authorities. United
States Government contracts may be terminated, in whole or in part, at the
convenience of the government or for cause. In the event of a convenience
termination, the government is obligated to pay the costs incurred under the
contract plus a fee based upon work completed.
Professional environmental engineering services, including program
management, environmental analysis, and restoration continues to be provided by
OEES to the United States Navy CLEAN Program (Comprehensive Long Term
Environmental Action Navy) pursuant to a 10-year contract awarded during 1991.
Thus far OEES has provided these services at Navy bases in Hawaii, Guam, Japan,
Hong Kong, the Philippines, Australia and Korea.
OEES also continues to oversee the removal of storage tanks and
contaminated soil from Air Force bases across the United States and in U.S.
territories.
22
INTERNATIONAL BUSINESS DEVELOPMENT
The Energy Group develops projects in many countries, and in doing
so seeks to implement its strategy for the development of its business in
selected international markets where private development is encouraged. It seeks
to do so by focusing on a limited number of opportunities which can be developed
in conjunction with high quality local and international partners. Offices have
been established in Hong Kong, Manila, Sao Paulo, and Taipei in order to service
foreign projects. Opportunities in foreign countries for the services provided
by the Group are highly dependent upon the elimination of historic legal and
political barriers to the participation of foreign capital and foreign companies
in the financing, construction, ownership and operation of infrastructure
facilities. For example, in many countries, the production, distribution and
delivery of electricity has traditionally been provided by governmental or
quasi-governmental agencies. Although a number of these countries have recently
liberalized their laws and policies with regard to the participation of private
interests and foreign capital in their electric sectors, not all have done so,
and not all that have done so may afford acceptable opportunities for the Energy
Group.
The development, construction, ownership and operation of facilities
in foreign countries also exposes the Company to several potential risks that
typically are not involved in such activities in the United States.
Many of the countries in which the Energy Group is or intends to be
active are lesser developed countries or developing countries. The financial
condition and creditworthiness of the potential purchasers of power and services
provided by the Energy Group which may be a governmental or private utility or
industrial consumer--or of the suppliers of fuel for projects in these
countries--may not be as strong as those of similar entities in developed
countries. The obligations of the purchaser under the power purchase agreement,
the service recipient under the related service agreement and the supplier under
the fuel supply agreement generally are not guaranteed by any host country or
other creditworthy governmental agency. Whenever such governmental guarantees
are not available, the Energy Group undertakes a credit analysis of the proposed
power purchaser or fuel supplier. It also seeks to cause such parties to
adequately secure the performance of their obligations through contractual
commitments and, where necessary, through the provision by such entities of
financial instruments such as letters of credit or arrangements regarding the
escrowing of the receivables of such parties in the case of power purchasers.
The Energy Group's IPP and waste-to-energy projects in particular
are dependent on the reliable and predictable delivery of fuel meeting the
quantity and quality requirements of the project facilities. The Energy Group
will typically seek to negotiate long-term contracts for the supply of fuel with
creditworthy and reliable suppliers under terms that will permit it to project
the future cost of fuel through the life of the contract. However, the
reliability of fuel deliveries may be compromised by one or more of several
factors that may be more acute or may occur more frequently in developing
countries than in developed countries, including a lack of sufficient
infrastructure to support deliveries under all circumstances, bureaucratic
delays in the import, transportation and storage of fuel in the host country,
customs and tariff disputes and local or
23
regional unrest or political instability. In most of the projects in which the
Energy Group participates internationally, it seeks to shift the consequences of
interruptions in the delivery of fuel, whether due to the fault of the fuel
supplier or due to reasons beyond the fuel supplier's control, to the
electricity purchaser or service recipient by securing a suspension of its
operating responsibilities under the applicable agreements and an extension of
its operating concession under such agreements and/or, in some instances, by
requiring the energy purchaser or service recipient to continue to make payments
in respect of fixed costs. In order to mitigate the effect of short term
interruptions in the supply of fuel, the Energy Group endeavors to provide
on-site storage of fuel in sufficient quantities.
Payment for services that the Energy Group provides will often be
made in whole or part in the domestic currencies of the host countries.
Conversion of such currencies into U.S. dollars generally is not assured by a
governmental or other creditworthy country agency, and may be subject to
limitations in the currency markets, as well as restrictions of the host
country. In addition, fluctuations in value of such currencies against the value
of the U.S. dollar may cause the Energy Group's participation in such projects
to yield less return than expected. Transfer of earnings and profits in any form
beyond the borders of the host country may be subject to special taxes or
limitations imposed by host country laws. The Energy Group seeks to participate
in projects in jurisdictions where limitations on the convertibility and
expatriation of currency have been lifted by the host country and where such
local currency is freely exchangeable on the international markets. In most
cases, components of project costs incurred or funded in the currency of the
United States are recovered without risk of currency fluctuation through
negotiated contractual adjustments to the price charged for electricity or
service provided.
In addition, the Energy Group will generally participate in projects
which provide services that are treated as a matter of national or key economic
importance by the laws and politics of many host countries. There is therefore
risk that the assets constituting the facilities of these projects could be
temporarily or permanently expropriated or nationalized by a host country, or
made subject to martial or exigent law or control.
The Energy Group will seek to manage and mitigate these risks
through all available means that it deems appropriate. They will include:
political and financial analysis of the host countries and the key participants
in each project; guarantees of relevant agreements with creditworthy entities;
political risk and other forms of insurance; participation by international
finance institutions, such as affiliates of the World Bank, in financing of
projects in which it participates; and joint ventures with other companies to
pursue the development, financing and construction of these projects.
24
OTHER INFORMATION
MARKETS, COMPETITION AND GENERAL BUSINESS CONDITIONS
Ogden's Entertainment, Aviation and Energy Groups business segments
can be adversely affected by general economic conditions, war, inflation,
adverse competitive conditions, governmental restrictions and controls, natural
disasters, energy shortages, weather, the adverse financial condition of
customers and suppliers, various technological changes and other factors over
which Ogden has no control.
The economic climate can also adversely affect several of Ogden's
operations, including, but not limited to, fewer airline flights, reduced
in-flight meals and flight cancellations in the Aviation group; and, reduced
event attendance in its Entertainment group. In addition, disputes between
owners of professional sports organizations and the professional players of such
organizations have affected and may continue to affect the operations of the
Entertainment group.
Competition for projects is intense in all markets in which the
Energy Group does business or intends to do business. There are numerous
companies in the United States and in foreign countries that pursue these
projects. Many of these companies have more experience, capital and other
resources than does Ogden.
The Energy Group expends substantial amounts for the development of
new businesses, some of which expenditures are capitalized. Generally, it
receives funds to undertake these activities from Ogden. Beyond staffing costs,
expenditures include the costs of contract and site acquisition, feasibility and
environmental studies, technical and financial analysis, and in some cases the
preparation of extensive proposals in response to public or private requests for
proposals. Development of projects involves substantial risk to the developers
which is not within their control. Success depends upon obtaining in a timely
manner acceptable contractual arrangements and financing, appropriate sites,
acceptable licenses, environmental permits and governmental approvals. Even
after the required contractual arrangements are achieved, implementation of the
contract often is subject to substantial conditions that may be outside the
control of the developer. If development opportunities in which the Energy Group
is involved are no longer viewed as viable, such costs are written off as an
expense. In some, but not all, circumstances, the Energy Group makes contractual
arrangements for the partial recovery of development costs if the project fails
to be implemented for reasons beyond its control.
The Energy Group's businesses are subject to a variety of
competitive and market influences, and these influences are different for each
of its principal business areas. Its IPP business faces a domestic market that
is expected to change substantially in the years ahead from a mature, highly
regulated and uncompetitive market for energy services to a less regulated and
more competitive market as utilities restructure for deregulation and
termination of their traditional monopolies. The international market for energy
services is characterized by a large demand and much competition for projects
within a relatively immature market framework.
25
The domestic market for waste-to-energy services has largely matured
and is now heavily regulated. New opportunities for domestic projects are
expected to be scarce for the foreseeable future. Foreign demand for waste to
energy projects is also expected to exist only in unique circumstances where
other disposal options are unavailable or unusually costly. This reflects a
number of factors that adversely affected communities' willingness to make
long-term capital commitments to waste disposal projects, including: declining
prices at which energy can be sold; declining alternative disposal costs;
uncertainties about the impact of recycling on the waste stream; and continuing
concerns arising from the Clean Air Act Amendments of 1990. Another factor
affecting the demand for new waste-to-energy projects was a 1994 United States
Supreme Court decision invalidating state and local laws and regulations
mandating that waste generated within a given jurisdiction be taken to a
designated facility. See "Flow Control". Notwithstanding the decline in
opportunities for new waste-to-energy facilities, OWTE believes there may be
opportunities at existing facilities for expansion. Many of these factors also
impact, to varying degrees, the competitiveness of the pricing established by
Client Communities at OWTE's operating projects. For example, in most of the
markets that OWTE currently serves, the cost of waste-to-energy services is
competitive with the cost of other disposal alternatives, mainly landfilling.
However, much of the landfilling done in the United States is done on a spot
market or through short-term contracts (less than 5 years), and the resulting
price volatility means that market prices may at times be lower than prices at
waste-to-energy facilities, which, like OWTE's, are typically based on long-term
contracts and pricing. In addition, the cost competitiveness of operating
waste-to-energy facilities also depends on the prices at which the facility can
sell the energy it generates, and the additional charges that some Client
Communities add to their fee structures.
The Energy Group's water and wastewater business faces an immature
but developing domestic market for private water and wastewater services, and,
like energy, a large foreign demand within an immature marketplace.
With these market dynamics, the Energy Group believes that its
primary but not exclusive development focus for new projects during the next
several years will be in the IPP area.
EQUAL EMPLOYMENT OPPORTUNITY
In recent years, governmental agencies (including the Equal
Employment Opportunity Commission) and representatives of minority groups and
women have asserted claims against many companies, including some Ogden
subsidiaries, alleging that certain persons have been discriminated against in
employment, promotions, training, or other matters. Frequently, private actions
are brought as class actions, thereby increasing the practical exposure. In some
instances, these actions are brought by many plaintiffs against groups of
defendants in the same industry, thereby increasing the risk that any defendant
may incur liability as a result of activities which are the primary
responsibility of other defendants. Although Ogden and its subsidiaries have
attempted to provide equal opportunity for all of its employees, the combination
of the foregoing factors and others increases the risk of financial exposure.
26
EMPLOYEE AND LABOR RELATIONS
As of March 1, 1997, Ogden and its subsidiaries had approximately
30,000 U.S. and Canadian employees.
Certain employees of Ogden are employed pursuant to collective
bargaining agreements with various unions. During 1996 Ogden successfully
renegotiated collective bargaining agreements in certain of its business sectors
with no strike-related loss of service. However, in January 1996, negotiations
between New York City commercial office building owners and Local 32B-32J
Service Employees international Union, AFL-CIO broke off following the December
31, 1995 expiration of the previous industry-wide collective bargaining
agreement. As a result thereof approximately 30,000 Union employees went on
strike on January 4, 1996. Ogden's New York Facility Management operations
employs approximately 1,700 Union employees which were affected by the strike
under contracts with the building owners. The strike was settled in February
1996 and there was no significant impact on Ogden's consolidated operations as a
result of this strike. Ogden considers relations with its employees to be good
and does not anticipate any further significant labor disputes in 1997.
ENVIRONMENTAL REGULATORY LAWS
(a) Domestic. The Energy Group business activities in the United
States are pervasively regulated pursuant to federal, state and local
environmental laws. Federal laws, such as the Clean Air Act and Clean Water Act,
and their state counterparts, govern discharges of pollutants to air and water.
Other federal, state, and local laws, comprehensively govern the generation,
transportation, storage, treatment, and disposal of solid waste, including
hazardous waste (such laws and the regulations thereunder, "Environmental
Regulatory Laws").
The Environmental Regulatory Laws and other federal, state, and
local laws, such as the Comprehensive Environmental Response Compensation and
Liability Act ("CERCLA") (collectively, "Environmental Remediation Laws"), make
the Energy Group potentially liable on a joint and several basis for any
environmental contamination which may be associated with its activities at
sites, including landfills, which the Energy Group's subsidiaries have owned,
operated, or leased or at which there has been disposal of residue or other
waste handled or processed by such subsidiaries. Through its subsidiaries, the
Energy Group leases and operates a landfill in Haverhill, Massachusetts, and
leases a landfill in Bristol, Connecticut, in connection with its projects at
those locations. Some state and local laws also impose liabilities for injury to
persons or property caused by site contamination. Some Service Agreements
provide for indemnification of the operating subsidiaries from some such
liabilities.
The Environmental Regulatory Laws require that many permits be
obtained before the commencement of construction and operation of
waste-to-energy, independent power and water and wastewater projects. There can
be no assurance that all required permits will be issued, and the process of
obtaining such permits can often cause lengthy delays, including delays caused
by third-party appeals challenging permit issuance. Failure to meet conditions
of these permits or of the Environmental Regulatory Laws and the corresponding
regulations can subject an
27
Operating Subsidiary to regulatory enforcement actions by the appropriate
governmental unit, which could include monetary penalties, and orders requiring
certain remedial actions or limiting or prohibiting operation. To date, the
Energy Group has not incurred material penalties, been required to incur
material capital costs or additional expenses, nor been subjected to material
restrictions on its operations as a result of violations of environmental laws,
regulations, or permits. Certain of the Environmental Regulatory Laws authorize
suits by private parties for damages and injunctive relief. Repeated unexcused
failure to comply with environmental standards may also constitute a default by
subsidiaries of the Energy Group.
The Environmental Regulatory Laws and federal and state governmental
regulations and policies governing their enforcement are subject to revision.
New technology may be required or stricter standards may be established for the
control of discharges of air or water pollutants or for solid waste or ash
handling and disposal. Thus as new technology is developed and proven, it may be
required to be incorporated into new facilities or major modifications to
existing facilities. This new technology may often be more expensive than that
used previously.
The Clean Air Act Amendments of 1990 required EPA to promulgate New
Source Performance Standards ("NSPS") and Emission Guidelines ("EG") applicable
to new and existing municipal waste combustion units for particulate matter
(total and fine), opacity, sulfur dioxide, hydrogen chloride, oxides of
nitrogen, carbon monoxide, dioxins and dibenzofurans.
The NSPS and EG, which were issued in final form in 1995, will
require capital improvements or operating changes to most of the waste-to-energy
facilities operated by OWTE to control emissions of nitrogen oxides, organics,
mercury and acid gases. The timing and cost of the modifications required at
OWTE facilities will depend on the provisions of implementing regulations that
states must adopt and EPA approve. The deadline for states to submit their
implementing regulations was December 19, 1996. On December 6, 1996, however,
the Court of Appeals for the D.C. Circuit vacated the NSPS and EG in its
decision in Davis County Solid Waste Management and Energy Recovery Special
Services District v. USEPA. A petition for reconsideration is pending. If the
Court does not reverse its ruling, states may suspend or repeal their
regulations until EPA revises and reissues the NSPS and EG in accordance with
the Court of Appeals' direction. Many states' laws require this result in any
event to prevent having regulations more stringent than federal requirements. It
is uncertain how long EPA will take to reissue the NSPS and EG, but the agency
has announced its intention to minimize the delay in achieving the enhanced
emissions controls for large facilities that the NSPS and EG would have
provided. The Company believes that EPA will probably reissue the NSPS and EG
for all its other facilities in substantially identical form as those that were
vacated, and that OWTE projects may have until early in 2002 to achieve
compliance.
The costs to meet new rules for existing facilities owned by Client
Communities generally will be borne by the Client Communities. For projects
owned or leased by Ogden and operated under a Service Agreement, the Client
Community has the obligation to fund such capital improvements, to which Ogden
may be required to make an equity contribution, generally 20%. In certain cases,
Ogden is required to fund the full cost of these capital improvements at those
facilities that are either not operated pursuant to a Service Agreement or whose
Service Agreement
28
does not require the costs to be borne by the Client Community. The Company
estimates that its commitments for these capital improvements will total
approximately $30 million over the four years following the reissuance of the
NSPS and EG by EPA. OWTE believes that most costs incurred to meet EG and
operating permit requirements at facilities it operates may be recovered from
Client Communities and other users of its facilities through increased service
fees permitted under applicable contracts. Such increased service fees will be
paid for either out of their general revenues or by increasing fees charged to
facility users by the Client Community. Because of the reluctance or inability
of some municipalities to increase taxes, or tipping fees if the market may not
bear the increase without some loss of waste deliveries, Client Communities may
seek to have OWTE subsidize the cost, or modify its contractual relationship.
Domestic drinking water facilities developed in the future by OYWC
will be subject to regulation of water quality by the EPA under the Federal Safe
Drinking Water Act and by similar state laws. Domestic wastewater facilities are
subject to regulation under the Federal Clean Water Act and by similar state
laws. These laws provide for the establishment of uniform minimum national water
quality standards, as well as governmental authority to specify the type of
treatment processes to be used for public drinking water. Under the Federal
Clean Water Act, OYWC may be required to obtain and comply with National
Pollutant Discharge Elimination System permits for discharges from its treatment
stations. Generally, under its current contracts, the client community is
responsible for fines and penalties resulting from the delivery to OYWC's
treatment facilities of water not meeting standards set forth in those
contracts.
The Environmental Remediation Laws prohibit disposal of hazardous
waste other than in small, household-generated quantities at OWTE's municipal
solid waste facilities. The Service Agreements recognize the potential for
improper deliveries of hazardous wastes and specify procedures for dealing with
hazardous waste that is delivered to a facility. Although certain Service
Agreements require the Operating Subsidiary to be responsible for some costs
related to hazardous waste deliveries, to date, no Operating Subsidiary has
incurred material hazardous waste disposal costs.
(b) International. Among the Energy Group's objectives is providing
energy generating and other infrastructure through environmentally protective
project designs, regardless of the location of a particular project. This
approach is consistent with the increasingly stringent environmental
requirements of multilateral financing institutions, such as the World Bank, and
also with the Energy Group's experience in domestic waste-to-energy projects,
where environmentally protective facility design and performance has been
required. The laws of other countries also may require regulation of emissions
into the environment, and provide governmental entities with the authority to
impose sanctions for violations, although these requirements are generally not
as rigorous as those applicable in the United States. Compliance with
environmental standards comparable to those of the United States may be
conditions to the provision of credit by multilateral banking agencies as well
as other lenders or credit providers. As with domestic project development,
there can be no assurance that all required permits will be issued, and the
process can often cause lengthy delays.
29
ENERGY AND WATER REGULATIONS
OWTE and OEI's domestic businesses are subject to the provisions of
federal, state and local energy laws applicable to their development, ownership
and operation of their domestic facilities, and to similar laws applicable to
their foreign operations. Federal laws and regulations govern transactions with
utilities, the types of fuel used and the power plant ownership. State
regulatory regimes govern rate approval and other terms under which utilities
purchase electricity from independent producers, except to the extent such
regulation is pre-empted by federal law.
Pursuant to Federal Public Utility Regulatory Policies Act
("PURPA"), the Federal Energy Regulatory Commission ("FERC") has promulgated
regulations that exempt qualifying facilities (facilities meeting certain size,
fuel and ownership requirements) from compliance with certain provisions of the
Federal Power Act ("FPA"), the Public Utility Holding Company Act of 1935
("PUHCA"), and, except under certain limited circumstances, state laws
regulating the rates charged by, or the financial and organizational activities
of, electric utilities. PURPA was enacted in 1978 to encourage the development
of cogeneration facilities and small facilities making use of non-fossil fuel
power sources, including waste-to-energy facilities. The exemptions afforded by
PURPA to qualifying facilities from the FPA and PUHCA and most aspects of state
electric utility regulation are of great importance to the Energy Group and its
competitors in the waste-to-energy and independent power industries.
State public utility commissions must approve the rates, and in some
instances other contract terms, by which public utilities purchase electric
power from the Group's projects. PURPA requires that electric utilities purchase
electric energy produced by qualifying facilities at negotiated rates or at a
price equal to the incremental or "avoided" cost that would have been incurred
by the utility if it were to generate the power itself or purchase it from
another source. PURPA does not require public utilities to enter into long-term
contracts.
In 1995, the FERC issued two orders in which it modified its
previous interpretation of PURPA and held that state laws and regulatory orders
directing utilities to purchase electricity from qualifying facilities at rates
in excess of the utility's projected avoided costs were pre-empted by PURPA and
that contracts providing for such above-avoided cost rates were void. The FERC
stated in both orders that it intends to apply its reinterpretation of PURPA
only on a prospective basis and that it generally will not entertain requests by
utilities to invalidate power sales agreements entered into pursuant to such
state laws and regulatory orders. The Energy Group does not believe any of the
power sales agreements related to its OWTE and OEI facilities is subject to
challenge based on the prospective nature of the orders. However, certain
utilities have challenged the legality of FERC's determination not to apply its
new policy on preemption to existing contracts. These appeals are currently
pending before the Circuit Court of Appeals for the District of Columbia.
Under PUHCA, any entity owning or controlling ten percent or more of
the voting securities of a "public utility company" or company which is a
"holding company" of a public utility company is subject to registration with
the Securities and Exchange Commission (the "SEC") and regulation by the SEC
unless exempt from registration. Under PURPA, most
30
projects that satisfy the definition of a "qualifying facility" are exempt from
regulation under PUHCA. Under the Energy Policy Act of 1992, projects that are
not qualifying facilities under PURPA but satisfy the definition of an "exempt
wholesale generator" ("EWG") are not public utility companies under PUHCA.
Finally, projects that satisfy the definition of "foreign utility companies" are
exempt from regulation under PUHCA. The Energy Group believes that all of its
projects involved in the generation, transmission and/or distribution of
electricity, both domestically and internationally, will qualify for an
exemption from PUHCA and that it will not be required to register with the SEC.
In the past there has been consideration in the U.S. Congress of
legislation to repeal PURPA entirely, or at least to repeal the obligation of
utilities to purchase power from Qfs. It is likely that similar legislation will
be introduced in the current Congress. There is strong support for
grandfathering existing QF contracts if such legislation is passed, and also
support for requiring utilities to conduct competitive bidding for new electric
generation if the PURPA purchase obligation is eliminated. Various bills have
also proposed repeal of PUHCA. Repeal of PUHCA would allow both independents and
vertically integrated utilities to acquire retail utilities in the United States
that are geographically widespread, as opposed to the current limitations of
PUHCA which require that retail electric systems be capable of physical
integration. Also, registered holding companies would be free to acquire
non-utility businesses, which they may not do now, with certain limited
exceptions. With the repeal of PURPA or PUHCA, competition for independent power
generators from vertically integrated utilities would likely increase.
In addition, the FERC, many state PUCs and Congress are currently
studying a number of proposals to restructure the electric utility industry in
the United States to permit utility customers to choose their utility supplier
in a competitive electric energy market. The FERC has issued a rulemaking
decision to require utilities to offer wholesale customers and suppliers open
access on their transmission lines on a comparable basis to the utilities' own
use of the line. All public utilities have already filed "open access" tariffs
to implement this requirement. The utilities contend that they should recover
from departing customers their fixed costs that will be "stranded" by the
ability of their wholesale customers (and perhaps eventually, their retail
customers) to choose new electric power suppliers. These include the costs
utilities are required to pay under many QF contracts which the utilities view
as excessive when compared with current market prices. Many utilities are
therefore seeking ways to lower these contract prices, or rescind or buy out
these contracts altogether, out of concern that their shareholders will be
required to bear all or part of such "stranded" costs. Regulatory agencies to
date have recognized the continuing validity of approved power purchase
agreements. Future U.S. electric rates may be deregulated in a restructured U.S.
electric utility industry and increased competition may result in lower rates
and less profit for U.S. electricity sellers developing new projects. Falling
electricity prices and uncertainty as to the future structure of the industry
can be expected to inhibit United States utilities from entering into long-term
power purchase contracts. On the other hand, deregulation could open up markets
for the sale of electricity previously available only to regulated utilities.
The effect of any such restructuring on the Energy Group cannot be predicted,
although Ogden does not believe that any such restructuring will have a material
adverse effect on its consolidated financial position.
31
The Energy Group presently has, and intends to continue to acquire,
ownership and operating interests in projects outside the United States. Most
countries have expansive systems for the regulation of the power business. These
generally include provisions relating to ownership, licensing, rate setting and
financing of generating and transmission facilities.
OYWC's business may be subject to the provisions of state, local
and, in the case of foreign operations, national utility laws applicable to the
development, ownership and operation of water supply and wastewater facilities.
Whether such laws apply depends upon the local regulatory scheme as well as the
manner in which OYWC provides its services. Where such regulations apply, they
may relate to rates charged, services provided, accounting procedures,
acquisitions and other matters. In the United States, rate regulations have
typically been structured to provide a predetermined return on the regulated
entities investments. In other jurisdictions, the trend is towards periodic
price reviews comparing rates to anticipated capital and operating revenues. The
regulated entity benefits from efficiencies achieved during the period for which
the rate is set.
FLOW CONTROL
Many states provide for local and regional solid waste planning and
require that new solid waste facilities may be constructed only in conformity
with these plans. Certain of these laws, sometimes referred to as legal flow
control, authorize state agencies to require delivery of waste generated within
their jurisdiction to designated facilities. In 1994, the United States Supreme
Court held that such laws were constitutionally invalid. Federal legislation
proposed to authorize flow control has not been adopted to date.
The rates OWTE charges its Client Communities are generally
competitive with other disposal options. Some Client Communities have
experienced erosion of waste deliveries, but overall 1996 deliveries to OWTE
facilities exceeded 1995 levels. Under most Service Agreements, the Client
Community bears the economic impact of waste delivery shortfalls. Client
Communities are now evaluating options to attract additional waste to
facilities. Certain of these options have been tested in the federal courts and
sustained.
Although it is likely that the Supreme Court's decision has
adversely affected the market for new waste-to-energy facilities, other factors
are believed by Ogden to be more significant for low projected market activity.
See Other Information: MARKETS, COMPETITION, AND GENERAL BUSINESS CONDITIONS.
ASH RESIDUE
In 1994, the United States Supreme Court held that municipal solid
waste ash residue demonstrated by testing to possess hazardous characteristics
is subject to RCRA's provisions for management as a hazardous waste relating to
transportation, disposal and treatment downstream of the point of generation.
The Supreme Court's ruling has not had a significant impact on OWTE's business.
32
Item 2. PROPERTIES
(a) Services
Ogden's executive offices are located at Two Pennsylvania Plaza, New
York, New York 10121, pursuant to a lease that expires on April 30, 2008,
subject to an option by Ogden to renew the lease for an additional five years.
The principal physical properties of Ogden are the fueling
installations operated by the Aviation group located at various airports in the
United States and Canada and the corporate premises of Ogden located at Two
Pennsylvania Plaza, New York, New York 10121 under lease, which expires on April
30, 2008 and which contains an option by Ogden to renew for an additional five
years.
Atlantic Design Company's corporate offices are located in
Charlotte, North Carolina. Atlantic Design owns a 51,000 square foot operating
facility on 3.5 acres of land in Vestal, New York. Atlantic Design also leases
operating facilities at various locations in Florida, New Jersey and New York.
The leases range from a term of one year to as long as ten years.
The Entertainment and Aviation groups own and lease buildings in
various areas in the United States and several foreign countries which house
office and warehousing operations. The leases range from a month-to-month term
to as long as five years. Ogden Services Corporation also owns a 12,000
square-foot warehouse and office facility located in Long Island City, New York.
The Aviation group's in-flight food service operation facilities,
aggregating approximately 600,000 square feet, are leased, except at Newark
which is owned.
Entertainment operates Fairmount Park racetrack pursuant to a
long-term lease which expires in 2017. Fairmount Park conducts thoroughbred and
harness racing on a 150-acre site located in Collinsville, Illinois, eight miles
from downtown St. Louis. Entertainment also owns a 148-acre site located at East
St. Louis, Illinois.
Entertainment also owns and operates Grizzly Park, a nature-based
entertainment facility located on approximately 25-acres near Yellowstone
National Park in West Yellowstone, Montana. Pursuant to a lease agreement with
the State of Florida, which expires in 2008, Entertainment also has a leasehold
interest in Silver Springs, a 250-acre nature-based park, and Wild Waters, a
6-acre park featuring a variety of water slides and events. Both parks are
located near Ocala, Florida.
(b) Energy
The principal executive offices of Ogden Energy Group, Inc. are
located in Fairfield, New Jersey, in an office building located on a 5.4-acre
site owned by OPI. It also leases approximately 47,000 square feet of office
space in Fairfax, Virginia.
33
The following table summarizes certain information relating to the
locations of the properties owned or leased by OPI or its subsidiaries as of
January 31, 1997(1).
Approximate
Site Size
Location in Acres Site Use Nature of Interest
- -------- -------- -------- ------------------
Fairfield, New Jersey 5.4 Office space Own
Marion County, Oregon 15.2 Waste-to-energy Own (2)
facility
Alexandria/Arlington,
Virginia 3.3 Waste-to-energy Acquiring the Alexandria
facility Authority's and the
Arlington Authority's
interest under Site lease
(expires Oct. 1, 2025)
pursuant to Conditional
Sale Agreement
Bristol, Connecticut 18.2 Waste-to-energy Own (2)
facility
Bristol, Connecticut 35.0 Landfill Site lease (expires Jul.
1, 2014)
Indianapolis,
Indiana 23.5 Waste-to-energy Site lease (expires Dec.,
facility 2008 subject to four 5-
year renewal options) (2)
Stanislaus County,
California 16.5 Waste-to-energy Site lease (expires Aug.
facility 20, 2021 subject to 15-
year renewal option) (2)
Babylon, New York 9.5 Waste-to-energy Site lease (expires Dec.
facility 19, 2010, with renewal
options)
Haverhill,
Massachusetts 12.7 Waste-to-energy Site lease (expires Mar.
facility 16, 1997, subject to
sixteen 5-year renewal
options) (2)
Haverhill,
Massachusetts 16.8 RDF processing Site lease (expires Mar.
facility 16, 1997, subject to
sixteen 5-year renewal
options) (2)
Haverhill,
Massachusetts 20.2 Landfill Site lease (expires Mar.
16, 1997, subject to
sixteen 5-year renewal
options) (2)
Lawrence,
Massachusetts 11.8 RDF power plant Own (2)
Lake County,
Florida 15.0 Waste-to-energy Own (2)
facility
Wallingford,
Connecticut 10.3 Waste-to-energy Site lease (expires Dec.
facility 1, 2026) (2)
Fairfax County,
Virginia 22.9 Waste-to-energy Acquiring Fairfax
facility Authority's interest under
Site Lease (expires Mar.
10, 2016) pursuant to
Conditional Sale Agreement
Imperial County,
California 83.0 Undeveloped land Own
Montgomery County,
Maryland 35.0 Waste-to-energy Site lease (expires Nov. 16,
facility 2030) (2)
34
Approximate
Site Size
Location in Acres Site Use Nature of Interest
- -------- -------- -------- ------------------
Huntington, New York 13.0 Waste-to-energy Site lease (expires Oct.
facility 28, 2012, subject to
successive renewal terms
through Jan. 28, 2029)(2)
Warren County,
New Jersey 19.8 Waste-to-energy Site lease (expires Nov.
facility 16, 2005 subject to
two ten-year renewals)(2)
Hennepin County,
Minnesota 14.6 Waste-to-energy Leases of site and
facility facility (expires Oct. 1,
2017 subject to renewal
options to December 20,
2024)(2)(3)
Stockton, California 4.5 Contaminated soil Site lease (expired
remediation remediation
facility February 1, 1994)
(discontinued)
Tulsa, Oklahoma 22.0 Waste-to-energy Leases of site and
facility facility (expires April
30, 2012 subject to
renewal options to August
2, 2026)(2)(3)
Onondaga County,
New York 12.0 Facility site Site lease expires
contemporaneously with
service agreement, subject
to renewal options to May
9, 2020(2)
New Martinsville,
West Virginia N/A Hydroelectric (See description under
Power
Generating
Facility "Energy Group
Independent Power")
Heber, California N/A Geothermal Power (See description under
Plant "Energy Group
Independent Power")
Heber, California N/A Geothermal Power (See description under
Plant "Energy Group
Independent Power")
Bataan, Philippines 3,049.32 Diesel Power Site Lease
sq. Plant
meters
- ----------
(1) Two Facilities not listed in the table were initially owned by political
subdivisions and were sold to a leveraged lessor. The leverage lessor
entered into lease agreements with the respective Operating subsidiaries
as accommodation leases. All of the lease obligations, including the
obligation to pay rent, are passed through to the client communities.
(2) The Operating Subsidiary's ownership or leasehold interest is subject to
material liens in connection with the financing of the related project.
(3) Sublease of site expires contemporaneously with facility lease.
35
Item 3. LEGAL PROCEEDINGS AND ENVIRONMENTAL MATTERS
(a) Legal Proceedings
Ogden Corporation and its subsidiaries (the "Company") are parties
to various legal proceedings involving matters arising in the ordinary course of
business. The Company does not believe that there are any pending legal
proceedings for damages against the Company the outcome of which would have a
material adverse effect on the Company's consolidated financial statements.
(b) Environmental Matters
The Company conducts regular inquiries of its subsidiaries regarding
litigation and environmental violations which include determining the nature,
amount and likelihood of liability for any such claims, potential claims or
threatened litigation.
In the ordinary course of its business, the Company may become
involved in Federal, state, and local proceedings relating to the laws
regulating the discharge of materials into the environment and the protection of
the environment. These include proceedings for the issuance, amendment, or
renewal of the licenses and permits pursuant to which a Company subsidiary
operates. Such proceedings also include actions brought by individuals or local
governmental authorities seeking to overrule governmental decisions on matters
relating to the subsidiaries' operations in which the subsidiary may be, but is
not necessarily, a party. Most proceedings brought against the Company by
governmental authorities or private parties under these laws relate to alleged
technical violations of regulations, licenses, or permits pursuant to which a
subsidiary operates. The Company believes that such proceedings will not have a
material adverse effect on the Company's consolidated financial statements.
The Company's operations are subject to various Federal, state and
local environmental laws and regulations, including the Clean Air Act, the Clean
Water Act, the Comprehensive Environmental Response Compensation and Liability
Act (CERCLA) and Resource Conservation and Recovery Act (RCRA). Although the
Company operations are occasionally subject to proceedings and orders pertaining
to emissions into the environment and other environmental violations, the
Company believes that it is in substantial compliance with existing
environmental laws and regulations.
In connection with certain previously divested operations, the
Company may be identified, along with other entities, as being among potentially
responsible parties responsible for contribution for costs associated with the
correction and remediation of environmental conditions at various hazardous
waste disposal sites subject to CERCLA. In certain instances the Company may be
exposed to joint and several liability for remedial action or damages. The
Company's ultimate liability in connection with such environmental claims will
depend on many factors, including its volumetric share of waste, the total cost
of remediation, the financial viability of
36
other companies that also sent waste to a given site and its contractual
arrangement with the purchaser of such operations.
The potential costs related to such matters and the possible impact
on future operations are uncertain due in part to the complexity of government
laws and regulations and their interpretations, the varying costs and
effectiveness of cleanup technologies, the uncertain level of insurance or other
types of recovery, and the questionable level of the Company's responsibility.
Although the ultimate outcome and expense of environmental remediation is
uncertain, the Company believes that currently required remediation and
continuing compliance with environmental laws will not have a material adverse
effect on the Company's consolidated financial statements.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the security holders of Ogden
during the fourth quarter of 1996.
EXECUTIVE OFFICERS OF OGDEN
Set forth below are the names, ages, position and office held and
year appointed, of all "executive officers" (as defined by Rule 3b-7 of the
Securities Exchange Act of 1934) of Ogden as of March 1, 1997:
CONTINUALLY
AN OGDEN
POSITION AND EXECUTIVE
NAME OFFICE HELD AGE AS OF 3/1/97 OFFICER SINCE
---- ----------- ---------------- -------------
R. Richard Ablon Chairman of the 47 1987
Board, President &
Chief Executive
Officer
Scott G. Mackin Executive Vice 40 1992
President
Bruce W. Stone Executive Vice 49 1997
President for Waste-
to-Energy Operations
and Managing
Director-Ogden
Energy Group, Inc.
37
Philip G. Husby Senior Vice 50 1991
President, Chief
Financial Officer and
Treasurer
Lynde H. Coit Senior Vice 42 1991
President and
General Counsel
Rodrigo Arboleda Senior Vice 56 1995
President - Business
Development, Latin
America
David L. Hahn Senior Vice 45 1995
President, Business
Development, East
Asia
Quintin G. Marshall Senior Vice 35 1995
President, Corporate
Development
Gary D. Perusse Senior Vice 48 1996
President - Risk
Management
Robert M. DiGia Vice President, 72 1965
Controller and Chief
Accounting Officer
Kathleen Ritch Vice President and 54 1981
Secretary
There is no family relationship by blood, marriage or adoption (not more
remote than first cousins) between any of the above individuals and any
Ogden director, except that R. Richard Ablon, an Ogden director and
Chairman of the Board, President and Chief Executive Officer, is the son
of Ralph E. Ablon, an Ogden director.
The term of office of all officers shall be until the next election of
directors and until their respective successors are chosen and qualified.
There are no arrangements or understandings between any of the above
officers and any other person pursuant to which any of the above was
selected as an officer.
38
The following briefly describes the business experience, the principal
occupation and employment of the foregoing Executive Officers during the
past five years:
R. Richard Ablon has been President and Chief Executive Officer of Ogden
since May 1990 and Chairman of the Board since May, 1996.
Scott G. Mackin has been considered an Executive Officer of Ogden since
1992 and was elected Executive Vice President of Ogden in 1997. He has
been President and Chief Operating Officer of Ogden Projects, Inc., now
the Energy Group since January 1991.
Bruce W. Stone was designated an Executive Officer of Ogden in 1997. Mr.
Stone served as Co-President and Chief Operating Officer of Ogden
Projects, Inc. and the Energy Group between October 5, 1990 and January
29, 1991 and currently serves as Executive Vice President and Managing
Director of Ogden Projects, Inc. and the Energy Group, a position he has
held since January 29, 1991.
Philip G. Husby has been Senior Vice President and Chief Financial Officer
of Ogden since January 1, 1991 and Treasurer since January 19, 1995.
Lynde H. Coit has been a Senior Vice President and General Counsel of
Ogden since January 17, 1991.
Rodrigo Arboleda was elected Senior Vice President of Ogden in January
1995. Since 1992, he has served as Senior Vice President-Business
Development for Latin America of Ogden Services Corporation.
David L. Hahn was elected Senior Vice President of Ogden in January 1995.
He previously served as Vice President-Marketing of Ogden Services
Corporation for more than the past five years.
Quintin G. Marshall was elected Senior Vice President - Corporate
Development of Ogden on January 16, 1997. Prior thereto, he served as
Ogden's Vice President - Investor Relations since October 1995. From May
1993 to October 1995 he served as Managing Director of CDA Investment
Technologies, a division of Thomson Financial. From July 1992 to May 1993
he served as Senior Vice President at Gavin Andersen & Company, an
investor relations consulting firm. From September 1986 to March 1992 he
served first as Managing Director and then Co-Chief Operation Officer of
Georgeson & Company, a proxy solicitation and consulting company.
Gary D. Perusse was elected Senior Vice President - Risk Management in
September, 1996. Prior thereto he had served as Director - Risk Management
of Ogden for more than the past five years.
39
Robert M. DiGia has been Vice President, Controller and Chief Accounting
Officer of Ogden for more than the past five years.
Kathleen Ritch has been Vice President and Secretary of Ogden for more
than the past five years.
PART II
Item 5. MARKET FOR OGDEN'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Page 43 of Ogden's 1996
Annual Report to Shareholders.
As of March 1, 1997, the approximate number of record holders of
Ogden common stock was 8,500.
Item 6. SELECTED FINANCIAL DATA
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Page 20 of Ogden's 1996
Annual Report to Shareholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Pages 16 through 19 of
Ogden's 1996 Annual Report to Shareholders.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pursuant to General Instruction G (2), the information called for by
this item is hereby incorporated by reference from Pages 20 through 40 and Page
43 of Ogden's 1996 Annual Report to Shareholders.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
40
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF OGDEN
Pursuant to General Instruction G (3), the information regarding
directors called for by this item is hereby incorporated by reference from
Ogden's 1997 Proxy Statement to be filed with the Securities and Exchange
Commission. The information regarding officers called for by this item is
included at the end of Part I of this document under the heading "Executive
Officers of Ogden."
Item 11. EXECUTIVE COMPENSATION
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1997 Proxy Statement
to be filed with the Securities and Exchange Commission.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1997 Proxy Statement
to be filed with the Securities and Exchange Commission.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Pursuant to General Instruction G (3), the information called for by
this item is hereby incorporated by reference from Ogden's 1997 Proxy statement
to be filed with the Securities and Exchange Commission.
Part IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) Listed below are the documents filed as a part of this report:
1). All financial statements contained on pages 21 through 40 and the
Independent Auditors' Report on page 41 of Ogden's 1996 Annual
Report to Shareholders are incorporated herein by reference.
2). Financial statement schedules as follows:
41
(i) Schedule II - Valuation and Qualifying Accounts for the years
ended December 31, 1996, 1995 and 1994.
3). Those exhibits required to be filed by Item 601 of Regulation S-K:
EXHIBITS
2.0 Plans of Acquisition, Reorganization, Arrangement, Liquidation or
Succession.
2.1 Agreement and Plan of Merger, dated as of October 31, 1989,
among Ogden, ERCI Acquisition Corporation and ERC
International, Inc.*
2.2 Agreement and Plan of Merger among Ogden Corporation, ERC
International, Inc., ERC Acquisition Corporation and ERC
Environmental and Energy Services Co., Inc., dated as of
January 17, 1991.*
2.3 Amended and Restated Agreement and Plan of Merger among Ogden
Corporation, OPI Acquisition Corp. and Ogden Projects, Inc.,
dated as of September 27, 1994.*
3.0 Articles of Incorporation and By-laws.
3.1 Ogden's Restated Certificate of Incorporation as amended.*
3.2 Ogden's By-Laws, as amended.*
4.0 Instruments Defining Rights of Security Holders.
4.1 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of June 1, 1987, and Offering Memorandum
dated June 12, 1987, relating to U.S. $85 million Ogden 6%
Convertible Subordinated Debentures, Due 2002.*
4.2 Fiscal Agency Agreement between Ogden and Bankers Trust
Company, dated as of October 15, 1987, and Offering
Memorandum, dated October 15, 1987, relating to U.S. $75
million Ogden 5-3/4% Convertible Subordinated Debentures, Due
2002.*
4.3 Indenture dated as of March 1, 1992 from Ogden Corporation to
The Bank of New York, Trustee, relating to Ogden's $100
million debt offering.*
42
10.0 Material Contracts
10.1 Credit Agreement by and among Ogden, The Bank of New York, as
Agent and the signatory bank Lenders thereto dated as of
September 20, 1993.*
(i) Amendment to Credit Agreement, dated as of November 16,
1995.*
10.2 Stock Purchase Agreement, dated May 31, 1988, between Ogden
and Ogden Projects, Inc.*
10.3 Tax Sharing Agreement, dated January 1, 1989, between Ogden,
Ogden Projects, Inc. and subsidiaries, Ogden Allied Services,
Inc. an subsidiaries, and Ogden Financial Services, Inc. and
subsidiaries.*
10.4 Stock Purchase Option Agreement, dated June 14, 1989, between
Ogden and Ogden Projects, Inc. as amended on November 16,
1989.*
10.5 Preferred Stock Purchase Agreement, dated July 7, 1989,
between Ogden Financial Services, Inc. and Image Data
Corporation.*
10.6 Rights Agreement between Ogden Corporation and Manufacturers
Hanover Trust Company, dated as of September 20, 1990 and
amended August 15, 1995 to provide The Bank of New York as
successor agent.*
10.7 Executive Compensation Plans
(a) Ogden Corporation 1986 Stock Option Plan.*
(b) Ogden Corporation 1990 Stock Option Plan.*
(i) Ogden Corporation 1990 Stock Option Plan as
Amended and Restated as of January 19, 1994.*
(c) Ogden Services Corporation Executive Pension Plan.*
(d) Ogden Services Corporation Select Savings Plan.*
(i) Ogden Services Corporation Select Savings Plan
Amendment and Restatement as of January 1, 1995.*
(e) Ogden Services Corporation Select Savings Plan Trust.*
43
(i) Ogden Services Corporation Select Savings Plan
Trust Amendment and Restatement dated as of
January 1, 1995.*
(f) Ogden Services Corporation Executive Pension Plan
Trust.*
(g) Changes effected to the Ogden Profit Sharing Plan
effective January 1, 1990.*
(h) Ogden Corporation Profit Sharing Plan.*
(i) Ogden Profit Sharing Plan as amended and restated
January 1, 1991 and as in effect through January
1, 1993.*
(ii) Ogden Profit Sharing Plan as amended and restated
effective as of January 1, 1995.*
(i) Ogden Corporation Core Executive Benefit Program.*
(j) Ogden Projects Pension Plan.*
(k) Ogden Projects Profit Sharing Plan.*
(l) Ogden Projects Supplemental Pension and Profit Sharing
Plans.*
(m) Ogden Projects Employee's Stock Option Plan.*
(i) Amendment, dated as of December 29, 1994 to the
Ogden Projects Employees' Stock Option Plan.
Transmitted herewith as Exhibit 10.7 (u)(i).*
(n) Ogden Projects Core Executive Benefit Program.*
(o) Form of amendments to the Ogden Projects, Inc. Pension
Plan and Profit Sharing Plans effective as of January 1,
1994.*
(i) Form of Amended Ogden Projects, Inc. Profit
Sharing Plan, effective as of January 1, 1994.
Transmitted herewith as Exhibit 10.7 (w)(i).*
(ii) Form of Amended Ogden Projects, Inc. Pension Plan,
effective as of January 1, 1994. Transmitted
herewith as Exhibit 10.7 (w)(ii).*
(p) Ogden Corporation CEO Formula Bonus Plan.*
44
10.8 Employment Agreements
(a) Employment Letter Agreement between Ogden and Lynde H.
Coit dated January 30, 1990.*
(b) Employment Agreement between Ogden and R. Richard Ablon
dated as of May 24, 1990.*
(i) Letter Amendment Employment Agreement between
Ogden and R. Richard Ablon dated as of October 11,
1990.*
(c) Employment Agreement between Ogden and C. G. Caras dated
as of July 2, 1990.*
(i) Letter Amendment to Employment Agreement between
Ogden Corporation and C.G. Caras, dated as of
October 11, 1990.*
(ii) Termination Agreement between C.G. Caras and Ogden
dated April 30, 1996. Transmitted herewith as
Exhibit 10.8(c)(ii).
(d) Employment Agreement between Ogden and Philip G. Husby
as of July 2, 1990.*
(e) Termination Letter Agreement between Maria P. Monet and
Ogden dated as of October 22, 1990.*
(f) Letter Agreement between Ogden Corporation and Ogden's
Chairman of the Board, dated as of January 16, 1992.*
(g) Employment Agreement between Ogden and Ogden's Chief
Accounting Officer dated as of December 18, 1991.*
(h) Employment Agreement between Scott G. Mackin and Ogden
Projects, Inc. dated as of January 1, 1994.*
(i) Letter Amendment to Employment Agreement between
Ogden Projects, Inc. and Scott G. Mackin, dated
December 20, 1996. Transmitted herewith as Exhibit
10.8(h)(i).
(i) Employment Agreement between David L. Hahn and Ogden
Corporation, dated December 1, 1995.*
45
(j) Employment Agreement between Ogden Services Corporation
and Rodrigo Arboleda dated January 1, 1997. Transmitted
herewith as Exhibit 10.8(j).
(k) Employment Agreement between Ogden Projects, Inc. and
Bruce W. Stone dated June 1, 1990. Transmitted herewith
as Exhibit 10.8(k).
(l) Employment Agreement between Ogden Corporation and
Quintin G. Marshall, dated October 30, 1996. Transmitted
herewith as Exhibit 10.8(l).
10.9 First Amended and Restated Ogden Corporation Guaranty
Agreement made as of January 30, 1992 by Ogden Corporation for
the benefit of Mission Funding Zeta and Pitney Bowes Credit
Corporation.*
10.10 Ogden Corporation Guaranty Agreement as of January 30, 1992 by
Ogden Corporation for the benefit of Allstate Insurance
Company and Ogden Martin Systems of Huntington Resource
Recovery Nine Corporation.*
11 Ogden Corporation and Subsidiaries Detail of Computation of
Earnings Applicable to Common Stock for the years ended
December 31, 1996, 1995 and 1994. Transmitted herewith as
Exhibit 11.
13 Those portions of the Annual Report to Stockholders for the
year ended December 31, 1996, which are incorporated herein by
reference. Transmitted herewith as Exhibit 13.
21 Subsidiaries of Ogden. Transmitted herewith as Exhibit 21.
23 Consent of Deloitte & Touche LLP. Transmitted herewith as
Exhibit 23.
27 Financial Data Schedule (EDGAR Filing Only).
* Incorporated by reference as set forth in the Exhibit Index of
this Annual Report on Form 10-K.
(b) No Reports on Form 8-K were filed by Ogden during the fourth
quarter of 1996.
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: March 13, 1997
By /S/ R. Richard Ablon
----------------------------------
R. Richard Ablon
Chairman of the Board,
President and Chief
Executive Officer
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
--------- -----
/S/ R. Richard Ablon Chairman of the Board, President and Chief
- -------------------------- Executive Officer and Director
R. RICHARD ABLON
/S/ Ralph E. Ablon Director
- --------------------------
RALPH E. ABLON
/S/ Philip G. Husby Senior Vice President, Treasurer and Chief
- -------------------------- Financial Officer
PHILIP G. HUSBY
/S/ Robert M. DiGia Vice President, Controller and Chief Accounting
- -------------------------- Officer
ROBERT M. DIGIA
/S/ David M. Abshire Director
- --------------------------
DAVID M. ABSHIRE
/S/ Norman G. Einspruch Director
- --------------------------
NORMAN G. EINSPRUCH
(i)
/S/ Attallah Kappas Director
- --------------------------
ATTALLAH KAPPAS
________________________ Director
TERRY ALLEN KRAMER
/S/ Judith D. Moyers Director
- --------------------------
JUDITH D. MOYERS
_______________________ Director
HOMER A. NEAL
/S/ Stanford S. Penner Director
- --------------------------
STANFORD S. PENNER
/S/ Jesus Sainz Director
- --------------------------
JESUS SAINZ
/S/ Frederick Seitz Director
- --------------------------
FREDERICK SEITZ
/S/ Robert E. Smith Director
- --------------------------
ROBERT E. SMITH
/S/ Helmut F.O. Volcker Director
- --------------------------
HELMUT F.O. VOLCKER
/S/ Abraham Zaleznik Director
- --------------------------
ABRAHAM ZALEZNIK
(ii)
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders of
Ogden Corporation:
We have audited the consolidated financial statements of Ogden Corporation and
subsidiaries as of December 31, 1996 and 1995 and for each of the three years in
the period ended December 31, 1996, and have issued our report thereon dated
February 10, 1997, which report includes an explanatory paragraph relating to
the adoption of Statements of Financial Accounting Standards Nos. 112 and 121;
such consolidated financial statements and report are included in your 1996
Annual Report to Shareholders and are incorporated herein by reference. 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 Corporation'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.
Deloitte & Touche LLP
New York, New York
February 10, 1997