-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WK5LhRaVAVlmNFfo3cFZUKc69URIkMENcD/dyHnQ6rTkiWEX5ldnpMKLUSzvM85H oNGSoAqAt7spSOVVqcWgHQ== 0000851945-94-000002.txt : 19940331 0000851945-94-000002.hdr.sgml : 19940331 ACCESSION NUMBER: 0000851945-94-000002 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OGDEN PROJECTS INC CENTRAL INDEX KEY: 0000851945 STANDARD INDUSTRIAL CLASSIFICATION: 4991 IRS NUMBER: 133213657 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-10282 FILM NUMBER: 94519230 BUSINESS ADDRESS: STREET 1: 40 LANE ROAD CITY: FAIRFIELD STATE: NJ ZIP: 07007 BUSINESS PHONE: 2018829000 MAIL ADDRESS: STREET 1: PO BOX 2615 CITY: FAIRFIELD STATE: NJ ZIP: 07007-2615 10-K 1 FORM 10-K 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 [FEE REQUIRED] For the Fiscal Year Ended December 31, 1993 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the transition period from _______________ to ______________ Commission file number 1-10282 OGDEN PROJECTS, INC. (Exact name of registrant as specified in its charter) Delaware 13-3213657 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 40 Lane Road, Fairfield, NJ 07007-2615 (Address of principal (Zip Code) executive offices) Registrant's telephone number, including area code 201-882-9000 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange on Title of each class which registered Common Stock, par value New York Stock Exchange $.50 per share 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 as of February 28, 1994 was $92,396,739. The number of shares of the registrant's Common Stock outstanding as of February 28, 1994 was 38,009,544 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, 1993 (Parts II and IV). (2) Portions of the Registrant's 1994 Proxy Statement to be filed with the Securities and Exchange Commission (Part III). PART I Item 1. BUSINESS Ogden Projects, Inc. and its subsidiaries (the "Company") provide waste disposal services throughout the United States. Its principal business, conducted through wholly-owned subsidiaries, including Ogden Martin Systems, Inc. ("OMS"), is providing waste-to-energy services. Waste-to- energy facilities combust municipal solid waste to make saleable energy in the form of electricity or steam. Approximately 84.2% of the Company's common stock is held by Ogden Corporation ("Ogden"). The Company was organized as a wholly-owned subsidiary of Ogden in 1984. Through OMS, it holds the exclusive rights to use the proprietary technology (the "Martin Technology") of Martin GmbH fur Umwelt-und Energietechnik of Germany ("Martin") in the United States, other Western Hemisphere locations, and Israel. In addition, the Company has exclusive rights to use the Martin Technology only on a full service design, construct, and operate basis in Germany, the Netherlands, Denmark, Norway, Sweden, Finland, Poland, and Italy. See "Waste-to-Energy Services -- (h) The Cooperation Agreement". The Martin Technology is used in over 150 waste-to-energy facilities operating worldwide, principally in Europe, the Far East, and the United States. Worldwide and in the United States, the Martin Technology is the leading waste-to-energy technology in terms of daily municipal solid waste processing capacity as determined from information available to the Company from Martin and other sources. The Company completed construction of its first waste-to-energy facility in 1986 and currently operates 25 waste-to-energy projects at 24 locations. Three facilities are under construction. The Company is the owner or lessee of 17 of these projects. Additional projects are in various stages of development. See "Waste-to-Energy Services -- (e) The Company's Waste-to- Energy Projects." In 1993 the Company acquired the United States waste-to-energy business of Asea Brown Boveri Inc. through the acquisition of the stock of one of its indirect, wholly-owned subsidiaries. By virtue of the acquisition, the Company became the operator of three facilities. These three facilities do not employ the Martin Technology. The Company owns and operates four additional facilities that do not utilize the Martin Technology. The Company has been awarded three additional projects that are not yet under construction. See "Waste-To-Energy Services -- The Company's Waste- to-Energy Projects" herein. The Company has taken preliminary steps toward expanding its waste-to-energy business internationally. It also is pursuing opportunities to develop independent power projects that utilize fuels other than waste. In addition, the Company is pursuing opportunities to operate and maintain water and wastewater processing facilities. See "Other Services" herein. Waste-To-Energy Services In most cases, the Company, 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"). The Company has projects currently under development for which there is no sponsoring Client Community and may in the future undertake other such projects. (a) Terms and Conditions of Service Agreements. Projects generally are awarded by Client Communities pursuant to competitive procurement. The Company has also built and is operating projects that were not competitively bid. Following award of the project, the Client Community and the winning vendor must agree upon the final terms of the Service Agreement. Following execution of a Service Agreement between the Operating Subsidiary and the Client Community, several conditions must be met before construction commences. These usually include, among other things, financing the facility, executing an agreement providing for the sale of the energy produced by the facility, purchasing or leasing the facility site, and obtaining of required regulatory approvals, including the issuance of environmental and other permits required for construction. In many respects, satisfaction of these conditions is not wholly within the Company's control and, accordingly, implementation of an awarded project is not assured, or may occur only after substantial delays. The Company incurs substantial costs in preparing bids and, if it is the successful bidder, implementing the project so it meets all conditions precedent to the commencement of construction. In some instances the Company has made contractual arrangements with communities that provide partial recovery of development costs if the project fails to go into construction for reasons beyond the Company's control. 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. Pursuant to the Service Agreement, the Operating Subsidiary designs the facility, generally applies for the principal permits required for its construction and operation, and helps to arrange for financing. The Operating Subsidiary then constructs and equips the facility on a fixed price and schedule basis. The actual construction and installation of equipment is performed by contractors under the supervision of the Operating Subsidiary. The Operating Subsidiary bears the risk of costs exceeding the fixed price of the facility and may be charged liquidated damages for construction delays, unless caused by the Client Community or by unforeseen circumstances beyond the Company's control, such as changes of law ("Unforeseen Circumstances"). After the facility successfully completes acceptance testing, the Operating Subsidiary operates and maintains the facility for an extended term, generally 20 years or more. Under the Service Agreement, the Operating Subsidiary generally guarantees that the facility will meet minimum processing capacity and efficiency 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 Unforeseen Circumstances) may result in liquidated damages 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. The Service Agreement requires the Client Community to deliver minimum quantities of municipal solid waste ("MSW") to the facility and, regardless of whether that quantity of waste is delivered to the facility, to pay a service fee. See "Waste-to-Energy Services -- (d) Revenues and Income." Generally, the Client Community also provides or arranges for debt financing. Additionally, the Client Community bears the costs of disposing ash residue from the facility and, in many cases, of transporting the residue to the disposal site. Generally, expenses resulting from the delivery of unacceptable and hazardous waste to the facility, and from the presence of hazardous materials 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. Ogden typically guarantees each Operating Subsidiary's performance under its respective Service Agreement. (b) Other Arrangements for Providing Waste-to-Energy Services. The Company owns two facilities that are not operated pursuant to Service Agreements with Client Communities, and is currently developing, and may undertake in the future, additional such projects. In such projects, the Company must obtain sufficient waste under contracts with haulers or communities to ensure sufficient project revenues. The Company is subject to risks 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 Company's current contracts with waste suppliers for these two facilities provide that the fee charged for waste disposal service is subject to increase to a limited extent in the event that costs of operation increase as a result of Unforeseen Circumstances. On the other hand, the Company 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 Company believes that such projects carry both greater risks and greater potential rewards than projects in which there is a Client Community. As a result of the declining number of municipal procurements in the United States, which is anticipated to continue in the near future, such projects are likely to become more common. (c) Project Financing. Financing for projects is generally accomplished through the issuance of a combination of tax-exempt and taxable revenue bonds issued by a public authority. If the facility is owned by the Operating Subsidiary, the authority lends the bond proceeds to the Operating Subsidiary and the Operating Subsidiary contributes additional equity to pay the total cost of the project. For such facilities, project- related debt is included as a liability in the Company'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 the Company. The Operating Subsidiaries are able to realize value from facilities owned by them either by selling the facilities and leasing them from the purchaser for extended terms or by selling limited partnership interests in the entity owning the facility. The Company has taken advantage of these financing mechanisms by selling its interests in Tulsa I and Tulsa II to a leveraged lessor and leasing the facility back under a long term lease. In addition, in 1991, limited partnership interests in, and the related tax benefits of, the partnership that owns the Huntington, New York, facility were sold to third party investors. In 1992 the Company sold the subsidiary that held the remaining limited partnership interests in, and certain related tax benefits of, that partnership. Under the limited partnership agreement, an Operating Subsidiary is the general partner and retains responsibility for the operation and maintenance of the facility. The Operating Subsidiary retained 85% of the residual value of the facility after the initial term of the Service Agreement. In 1991, the Company acquired a facility from Blount, Inc. which was sold through a sale- leaseback arrangement. An Operating Subsidiary is the owner of the facility under construction in Onondaga, New York, and a sale of equity interests in such facility is under consideration. (d) Revenues and Income. During the construction period, for facilities owned by Client Communities, construction income is recognized on the percentage-of-completion method based on the percentage of costs incurred to total estimated costs. Construction revenues also include amounts relating to sales of limited partnership interests and related tax benefits in facilities not yet in commercial operation as well as other amounts received with respect to activities conducted by the Company prior to the commencement of commercial operation. After construction is completed and the facility is accepted, the Client Community pays the Operating Subsidiary a fixed operating fee which escalates in accordance with specified indices, reimburses the Operating Subsidiary for certain costs specified in the Service Agreement including taxes, governmental impositions (other than income taxes), ash disposal and utility expenses, and shares with the Operating Subsidiary a portion of the energy revenues (generally 10%) generated by the facility. 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 Company 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. For the projects that are not operated pursuant to a Service Agreement, tipping fees, which are generally subject to escalation in accordance with specified indices, and energy revenues are paid to the Company. Electricity generated by these projects is sold to public utilities and in one instance, steam and a portion of the electricity generated is sold to industrial users. Under certain of the contracts under which waste is provided to these facilities, the Company may be entitled to fee adjustments to reflect certain Unforeseen Circumstances. Information about construction revenues, construction costs, service revenues, and operating costs for all of the Company's operations for each of the three years ended December 31, 1993, 1992, and 1991 are presented in the Company's Statements of Consolidated Income incorporated by reference to Part IV of this report. (e) The Company's Waste-to-Energy Projects. Certain information with respect to the Company's projects as of February 28, 1994 is summarized in the following table: THE COMPANY'S WASTE-TO-ENERGY PROJECTS
Tons Boiler Commencement In Operation Per Day Units of Operations Tulsa,OK(I)(1)............. 750 2 1986 Haverhill/Lawrence, MA-RDF(8)................. 950 1 1984 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 Huntsville, AL(3).......... 690 2(2) 1990 Lake County, FL............ 528 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)(9)...... 3,300 3 1989 Honolulu, HI (1)(8)........ 2,160 2 1990 Union County, NJ(3)(11)... 1,440 3 1994 Total................ 29,575
Estimated Unrecognized Construction Revenues as of 12/31/93 Scheduled (In Tons Boiler Commencement thousands Under Construction Per Day Units of Operations of dollars) Onondaga County, NY....... 990 3(2) 1995 N/A Lee County, FL(3)......... 1,200 3(2) 1994 $ 46,269 Montgomery County, MD (3). 1,800 3(2) 1995 $177,988 Total..................... 3,990
Estimated Construction Expected Revenues (In Awarded--Not Yet Commencement thousands of Under Construction Construction dollars) Mercer County, NJ (3)..... 1,450 2 1994 $154,866 Clark County, OH (10)..... 1,750 2 1995 N/A Halifax, Nova Scotia (3).. 550 2 1994 $ 99,620* Total................. 3,750 *Expressed in Canadian Dollars.
____________________ (1) Facility is owned by an owner/trustee pursuant to a sale/leaseback arrangement. (2) Facility has been designed (or, with respect to awarded facilities and facilities under construction, will be designed) to allow for the addition of another unit. (3) Facility is owned (or, with respect to facilities not under construction, is to be 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 the Company. See "Waste-to-Energy Services -- (c) Project Financing." (7) Under contracts with the Connecticut Resource Recovery Authority and Northeast Utilities, the Company 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. (9) In addition, the Company is presently constructing environmental improvements to the Detroit Facility. The total price for this project is approximately $117,800,000 (subject to escalation), and the Company expects construction to be completed by April 1996. (10) On May 19, 1993, the Company entered into a Development Agreement, a Steam Purchase and Sale Agreement, and an Operation and Maintenance Agreement with Ohio Edison Company. On June 8, 1993, the Company entered into a Host Community Agreement for the Construction and Operation of a Waste-to-Energy Incinerator with the Clark County Solid Waste Management District. This contract is the subject of litigation brought by a local landfill in which an intermediate appellate court recently enjoined performance by the County. The County and the Company are determining whether to appeal to the Ohio Supreme Court or whether to rebid the Project. The Company is in the process of procuring additional waste contracts for the facility. (11) This facility is substantially complete and is processing waste. The Company expects to recognize an additional $7.2 million in construction revenues in 1994. (f) Markets and Competition. The Company markets its services principally to governmental entities, including city, county, and state governments as well as public authorities or special purpose districts established by one or more local government units for the purpose of managing the collection and/or disposal of MSW. For certain projects, the Company may market its services directly to private firms in the business of MSW collection and/or disposal. The quantity of MSW generated in 1993 in the United States was estimated to be 201 million tons. This amount is projected to increase to approximately 222 million tons by the year 2000. During 1993, approximately 16% of the total MSW generated was processed in waste-to-energy facilities and approximately 1% was incinerated without energy recovery; and approximately 17% was recycled. The remainder was landfilled. The Company believes that no single waste disposal technique can properly manage all MSW and that an effective waste management program should include waste minimization, recycling, and in many circumstances waste to energy to utilize as much waste as possible for reuse and energy production. Steps to minimize the quantity of MSW produced are being taken at the manufacturing and consumer levels. Some jurisdictions, for example, have banned the use of certain plastic containers. These efforts have not yet had an appreciable impact on the quantities of MSW being generated. Increased recycling is a goal of many state and local governments, and some have legislated ambitious mandatory targets. The Company believes that increased recycling is an important aspect of waste disposal planning in the United States and that the amount of MSW recycled in the United States will continue to grow. However, the Company believes that the inherent limitations on the types of materials that can successfully be recycled will continue to require municipalities to use other disposal methods such as waste to energy or landfilling for much of the waste produced. Most of the Company's facilities have been sized to accommodate the accomplishment of communities recycling goals. Waste-to-energy facilities compete with other disposal methods, such as landfills. In most of the markets the Company serves, the cost of waste- to-energy services is competitive with landfilling. Compliance with regulations promulgated by the United States Environmental Protection Agency (the "EPA") in 1991 will to some extent increase the cost of landfilling, although landfills may be less expensive in some cases, in the short term, than waste-to-energy facilities. Landfills generally do not commit their capacity for extended periods. Much of the landfilling done in the United States is done on a spot market or through short term contracts (less than 5 years). Accordingly, landfill pricing tends to be more volatile as a result of periodic changes in waste generation and available capacity than the Company's pricing, which is based on long-term contracts. Another factor affecting the competitiveness of waste-to-energy fees are the additional charges imposed by Client Communities and included in such fees to support recycling programs, household hazardous waste collections, citizen education, and similar initiatives. The cost competitiveness of waste-to-energy facilities also depends on the prices at which the facility can sell the energy it generates. See "Regulation" herein. Waste-to-energy facilities also compete with other disposal technologies such as mixed solid-waste composting. Mixed waste composting is not a proven technology, and the Company believes that it has not been applied successfully to date in a large scale facility. Mass-burn waste-to-energy systems compete with various refuse-derived fuel ("RDF") systems in which MSW is preprocessed to remove various non- combustibles and is shredded for sizing prior to burning. The Company believes that the large-scale facilities being contracted for today are primarily mass-burn systems. Although the Company operates four RDF projects, these were all acquired after construction. The Company does not intend to develop any new RDF facilities. Since 1989 there has been a decline in the number of communities requesting proposals for waste-to-energy facilities. The Company believes that this decline has resulted from a number of factors that adversely affected communities' willingness to make long-term capital commitments to waste disposal projects, including: the economic downturn which adversely affected local government finances and slowed waste generation; uncertainties about the impact of recycling on the waste stream; and concerns arising from the Clean Air Act Amendments of 1990 and the regulatory actions currently being proposed pursuant to its terms. In addition, there was aggressive opposition to proposed waste disposal projects of all types by individuals and organizations during this period. The Company believes that legislative developments, increased public acceptance of the safety and cost effectiveness of waste-to-energy, and economic recovery will resolve many of these uncertainties. The Company also believes that waste-to-energy facilities and recycling are complimentary methods of managing a community's waste disposal needs. The fact that many of the Company's Client Communities have recycling rates in excess of national averages demonstrates that a properly sized waste-to- energy facility does not hinder achievement of aggressive recycling goals. In response to the decline in the number of requests for proposals, the Company has sought projects for which there are no sponsoring Client Communities. See "Waste-to-Energy Services -- (b) Other Arrangements for Providing Waste-to-Energy Services." In 1993, the Company negotiated a waste disposal agreement with Clark County, Ohio, for the disposal of MSW at such a project. The Company also completed negotiation of contracts with Ohio Edison Company pursuant to which Ohio Edison leases a site to the Company and purchases steam generated at the proposed waste-to-energy facility. This project is conditional upon obtaining commitments of additional MSW from other sources and satisfactory resolution of litigation described herein under "Waste-to-Energy Services -- (e) the Company's Waste-to-Energy Projects." There is substantial competition within the waste-to-energy field. The Company competes with a number of firms, some of which have greater financial resources than the Company. Some competitors have licenses or similar contractual arrangements for competing technologies in the waste- to-energy field, and a limited number of competitors have their own proprietary technology. The Company believes it is the largest operator of large scale (greater than 400 tons per day) waste-to-energy facilities. There are presently 77 such facilities in the United States. The Company believes Wheelabrator Technologies, Inc., which operates 14 such facilities is the second largest operator. Waste-to-energy facilities are also operated by other private companies and municipalities. Approximately 16% of the nation's waste is disposed of at waste-to-energy facilities. The balance of waste not recycled is disposed of by landfilling. The landfilling industry is dominated by several large companies of which Waste Management, Inc. and Browning Ferris, Inc. are the largest. Other technologies utilized in mass-burn type facilities in the United States include those of Von Roll, W+E, Takuma, Volund, Steinmueller, Deutsche Babcock, O'Connor, and Detroit Stoker. The principal factors influencing selection of vendors for governmentally sponsored waste-to-energy projects are technology, financial strength, performance guarantees, experience, reputation for environmental compliance, service, and price. (g) 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 Company 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 Company believes that unexpired patents on other portions of the Martin Technology would limit the ability of other companies to effectively use the basic stoker grate technology in competition with the Company. There are several unexpired patents related to the Martin Technology including: (i) Apparatus for Discharging Cinders from an Incinerator - expires 9/20/94; (ii) Apparatus for the Processing of Slag - expires 2/14/95; (iii) Grate Bar for Grate Linings, especially in Incinerators - expires 2/9/99; (iv) Method and Arrangement for Reducing NOx Emissions from Furnaces - expires 7/19/00; (v) Method and Apparatus for Regulating the Furnace Output of Incineration Plants - expires 9/4/07; (vi) Method for Regulating the Furnace Output in Incineration Plants - expires 1/1/08; and (vii) Feed Device with Filling Hopper and Adjoining Feed Chute for Feeding Waste to Incineration Plants - expires 4/23/08. More importantly, the Company believes that it is Martin's know-how in manufacturing grate components and in designing and operating mass-burn facilities and Martin's worldwide reputation in the waste-to-energy field and the Company's know-how in operating waste-to- energy facilities, rather than the use of patented technology, that is important to the Company's competitive position in the waste-to-energy industry in the United States. The Company 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 the Company's financial condition or competitive position. (h) The Cooperation Agreement. Under an agreement between the Company and Martin (the "Cooperation Agreement"), the Company has the exclusive right to use the Martin Technology in waste-to-energy facilities in the United States, Canada, Mexico, Bermuda, certain Caribbean countries, most of Central and South America, and Israel. In addition, in Germany, Turkey, Saudi Arabia, Kuwait, the Netherlands, Denmark, Norway, Sweden, Finland, Poland, and Italy the Company has exclusive rights to use the Martin Technology, but only on a full service design, construct, and operate basis. The Company may not use any other technology to market, develop, or build refuse incineration facilities without Martin's permission. The Company may, however, acquire, own, commission, and/or operate facilities that use technology other than the Martin technology that have been constructed by entities other than the Company or its affiliates. Martin is obligated to assist the Company 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 of notice. The Cooperation Agreement is also terminable by Martin if there is a change of control (as defined in the Cooperation Agreement) of OMS or any direct or indirect parent of OMS not approved by its respective board of directors. Although termination would not affect the rights of the Company 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 the Company's right to use the Martin Technology could have a material adverse effect on the Company's future business and prospects. (i) International Business Development. In 1993, the Company continued the development of its waste-to-energy business in selected international markets. The Company opened an office in Munich, Germany, in 1993 and, as indicated above, extended its right to use the Martin system to develop full service projects in much of Europe. The Company has not had operations outside the United States previously, although Ogden Corporation does conduct its aviation services at several European airports and entertainment services at several venues. Furthermore, in Europe, waste-to-energy facilities have been built as turn-key construction projects and then operated by local governmental units or by utilities under cost-plus contracts. The Company emphasizes developing projects which it will build and then operate for a fixed fee. Thus, developing this market will require the Company to both become better known in Europe and to successfully market its service concept. The Company believes that its concept of service coupled with the Company's extensive operational experience offers local government units more economical service. Some European countries are seeking to substantially reduce their dependency on landfilling. For example, Germany has enacted legislation which would prevent the landfilling of untreated raw municipal waste by the end of the decade. The Company therefore believes this is an appropriate time to seek to expand its business in these markets. (j) Backlog. The Company's backlog as of December 31, 1993 is set forth under (e) above. As of the same date of the prior year, the estimated unrecognized construction revenues for projects under construction was $192,935,000, and the estimated construction revenues for projects awarded but not yet under construction was $513,488,000 (includes $99,620,000 expressed in Canadian Dollars). The changes reflect construction progress on four projects. Generally, the construction period for a waste-to-energy Facility is approximately 28 to 34 months. The backlog does not reflect the cancellation of projects owned by the Company or the cancellation of the Quonset Point and Johnston Rhode Island projects. See (f) "Markets and Competition" herein. Other Services. The Company operates transfer stations in connection with some of its waste-to-energy facilities and, in connection with the Montgomery County, Maryland, project, the Company will use a railway system to transport MSW and ash residue to and from the facility. The Company leases and operates a landfill located at its Haverhill, Massachusetts, facility, and leases, but does not operate, a landfill in connection with its Bristol, Connecticut, facility. In 1991, the Company announced that it would discontinue the on-site remediation business utilizing a mobile technology then conducted by OWTS. OWTS, which was formed by Ogden in 1986 to conduct on-site remediations of hazardous wastes using a proprietary incineration process, operated at sites located in Alaska and California. Certain of these operations continued into 1993, and certain contractual obligations resulting from the disposal of assets are expected to conclude in 1994. In 1993, the Company announced that it would discontinue the fixed-site hazardous waste business conducted through American Envirotech, Inc., an indirect subsidiary. In light of substantial and adverse changes in the market for hazardous waste incineration services and regulatory uncertainty stemming from EPA pronouncements. The Company has ceased all development activities and in 1994 intends to dispose of the assets related to this business, primarily a permit to build and operate a hazardous waste incineration facility which is the subject of a pending approval. The Company, through its wholly-owned subsidiary, Ogden Power Systems, Inc., intends to develop, operate and, in some cases, own power projects ("alternative energy projects") which cogenerate electricity and steam or generate electricity alone for sale to utilities both in the United States and abroad. These power systems may use, among other fuels, wood, tires, coal, other wastes, or natural gas. The Company believes that its experience in operating waste-to-energy facilities is applicable to other forms of power generation. Although, presently the Company does not operate any alternative energy projects, it is seeking opportunities in this business, through discussions with potential partners and by making proposals on projects that the Company believes have a substantial likelihood of profitable development. The Company currently operates 10 fossil fuel boilers and co-fires coal with MSW at another of its facilities. The Company does not believe that the development activities for this business are likely to require a material amount of the assets of the Company. Competition for alternative energy projects is intense. Many domestic utilities and other purchasers of power are required to or elect to select vendors of power by competitive bidding in which price is the dominant determination in making an award, thereby reducing returns on such projects. Consequently, the Company seeks opportunities in which contract terms are set by negotiation and where the Company is able to stress its ability to run facilities in a highly reliable manner or where other considerations such as the Company's willingness to guarantee project availability are attractive to the power purchaser. There are numerous companies currently operating alternative power projects in the United States and internationally today. Many of these companies are able to commit substantially greater funds to this business and have greater experience in running alternative power projects using fuels other than MSW. The Company seeks to compete by entering into joint ventures with other companies which will as a group have necessary assets available and experience. Proprietary technologies are not significant in this business. The Company, through Ogden Water Systems, Inc., intends to develop, operate and, in some cases, own projects that purify water, treat wastewater, and treat and manage biosolids and compost organic wastes. As with the Company's waste-to-energy business, water and wastewater projects involve various contractual arrangements with a variety of private and public entities including municipalities, lenders, joint venture partners (which provide financing or technical support), and contractors and subcontractors which build the facilities. The Company also intends to develop, operate and, in some cases, own projects that process recyclable paper products into linerboard for reuse in the commercial sector. As with the Company's waste-to-energy business, such projects involve various contractual arrangements with a variety of private and public entities, including municipalities, lenders, joint venture partners (which provide financing or technical support) and contractors and subcontractors which build the facilities. In addition, such projects require significant amounts of energy in the form of steam, which may be provided by present or future waste-to-energy projects operated by the Company. Regulation Environmental regulations. The Company's business activities 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, such as RCRA, 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"), make the Company potentially liable for any environmental contamination which may be associated with its activities or properties (collectively, "Environmental Remediation Laws"). Many states have mandated local and regional solid waste planning, and require that new solid waste facilities may be constructed only in conformity with these plans. State laws may authorize the planning agency to require that waste generated within its jurisdiction be brought to a designated facility, which may help that facility become economically viable but preclude the development of other facilities in that jurisdiction. Such ordinances are sometimes referred to as legal flow control. Legal flow control has been challenged in a number of law suites on the basis that it is a state regulation of interstate commerce prohibited by the United States Constitution. The decisions on these cases have not been consistent. However several recent decisions have invalidated ordinances creating legal flow control. In 1993, the United States Supreme Court granted an appeal from a decision of a New York State Court upholding a New York municipality's ordinance requiring that all waste generated within its jurisdiction be disposed of at a transfer station operating under contract with the municipality. The case was argued in December 1993 and a decision is expected during the Court's Spring 1994 term. The Company believes that legal flow control is an important tool used by municipalities in fulfilling their obligations to provide safe and environmentally sound waste disposal services to their constituencies. Although a decision invalidating legal flow control would reduce the number of options local government would have in meeting this obligation, the Company does not believe it would materially impact the Company's existing facilities or its ability to develop new ones. This view is based on a number of considerations. Most of the contracts pursuant to which the Company provides disposal services require the Client Community to deliver stated minimum quantities of waste on a put-or-pay basis. The Company does not believe these obligations would be negated by an adverse Supreme Court decision. Furthermore, only a few of the Client Communities served by the Company rely solely on legal flow control to provide waste to the Company's facilities, a factor influenced in part by past difficulties in enforcing legal flow control ordinances. Although some municipalities may experience temporary difficulties in meeting delivery commitments as they address required changes in their waste disposal plans, such difficulties should not be long-lived as indicated by the experience of municipalities served by the Company which adopted alternative measures. The Company believes that there are other methods for providing incentives to use integrated waste systems incorporating waste to energy that do not entail legal flow control, which incentives should not be affected by the Court's decision. These include mandating that charges for utilization of the system be maintained at competitive levels and that revenue shortfalls be funded from tax revenues or special assessments on residents. This type of incentive will be utilized at the facility being constructed and which will be operated by the Company in Montgomery County, Maryland. Furthermore, in most of the municipalities where the Company provides services, information available to the Company indicates that the cost to the Client Community of waste to energy is competitive with alternative disposal facilities, and therefore the Company's facilities should be able to compete for waste economically. As indicated, however, certain additional waste disposal services are financed by the Client Community's increasing the cost for disposal at waste-to-energy facilities, and these services may have to be paid for by other mechanisms. A number of bills are presently pending in Congress to authorize legal flow control. Whether Congress will enact legislation on this subject is uncertain. In addition, state laws have been enacted in some jurisdictions that may also restrict the intrastate and interstate movement of solid waste. Restrictions on importation of waste from other states have generally been voided by Federal courts as invalid restrictions on interstate commerce. Bills proposed in past sessions of Congress would authorize such designations and restrictions. Bills of this nature have been introduced in the current session of Congress, but it remains uncertain whether Congress will act to authorize such laws. The Environmental Regulatory Laws require that many permits be obtained before the commencement of construction and operation of any waste-to- energy facility, including: air quality construction and operating permits, stormwater discharge permits, solid waste facility permits in most cases, and,in many cases, wastewater discharge permits. 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. The Environmental Regulatory Laws and regulations and permits issued pursuant to them also establish operational standards, including specific limitations upon emissions of certain air and water pollutants. Failure to meet these standards subject an Operating Subsidiary to regulatory enforcement actions by the appropriate governmental unit, which could include fines, and orders limiting or prohibiting operation. To date, the Company has not incurred material fines, been required to incur material capital costs or additional expenses, or 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 also authorize suits by private parties for damages and injunctive relief. Repeated unexcused failure to comply with environmental standards may also constitute a default by the Operating Subsidiary under its Service Agreement. The Environmental Regulatory Laws and governmental 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. Most federal Environmental Regulatory Laws encourage development of new technology to achieve increasingly stringent standards; they also often require use of the best available technology at the time a permit is issued. The federal Prevention of Significant Deterioration of air quality program requires that new or substantially modified waste-to-energy facilities of the size constructed by the Company that are located in areas of the country that are in compliance with national ambient air quality standards ("NAAQS") employ the Best Available Control Technology ("BACT"). The selection of control technology and the emission limits that must be achieved are made on a case-by-case basis considering economic impacts, energy and other environmental impacts and costs, and may include requirements that certain components of the mixed waste stream be separated for treatment by other means than combustion in the Operating Subsidiary's facility. For facilities developed in areas where NAAQS are not met, federal law requires that control technology capable of achieving the Lowest Achievable Emission Rate ("LAER") must be employed. LAER means the most stringent emission limit achievable in practice by emission sources similar to the facility in question, which does not involve any consideration of the economic impacts or costs to achieve such a limitation. Existing facilities in areas where LAER is now required for new facilities may be required to retro-fit Reasonably Available Control Technology ("RACT") established by EPA applicable to selected pollutants to enhance progress toward these areas achieving the NAAQS. RACT is that technology which EPA or state agencies determine to be available, proven, reliable, and affordable to reduce targeted emissions from specific types of existing sources of air emissions within geographic areas in which NAAQS for the target emissions is not being met. Thus, as new technology is developed and proven, it must be incorporated into new facilities or major modifications to existing facilities. This new technology may often be more expensive than that used previously. EPA has promulgated regulations establishing New Source Performance Standards ("NSPS") and Emission Guidelines ("EG") applicable to new and existing municipal waste combustion units with a capacity of greater than 250 tons per day. The EG and NSPS establish limitations upon the flue gas pollutant concentrations entering the ambient air for particulate matter (opacity), organics (dioxins and furans), carbon monoxide and acid gases (sulfur dioxide and hydrogen chloride). The NSPS also establish emissions limitations for nitrogen oxides. The NSPS apply to facilities beginning construction after December 20, 1989 and the EG will become effective three years after each individual state adopts them, but no later than five years after promulgation. Additional air pollution control equipment is likely to be required at four of the Company's existing waste-to-energy facilities to achieve the EG limitations. The Clean Air Act required EPA to re-evaluate the NSPS and EG for particulate matter (total and fine), opacity (as appropriate), sulfur dioxide, hydrogen chloride, oxides of nitrogen, carbon monoxide, dioxins and dibenzofurans, and to establish new NSPS and EG for lead, cadmium, and mercury no later than November 15, 1991 for all waste combustion facilities. Such re-evaluation and regulations were not completed by that date. These standards must reflect maximum achievable control technology ("MACT") for both new and existing waste-to-energy units. "MACT" means the maximum degree of reduction in emissions, considering the cost, energy requirements, and non air quality related health and environmental impacts. For new facilities, these limits may not be less stringent than the best performing similar facility. For existing facilities, these limits may not be less stringent than the performance of the top 12% non-LAER facilities. The Company cannot predict what standards will be proposed or finally promulgated, although EPA is reviewing data from existing facilities. The revised standards for new facilities will become effective six months after the date of promulgation of the revised standards. Standards for lead, cadmium, and mercury are expected to be proposed in 1994 under a consent order entered in 1993 in connection with litigation commenced by several parties against the EPA. The Clean Air Act also requires each state to implement a state implementation plan in conformity with federal law that outlines how areas out of compliance with NAAQS will be returned to compliance. One aspect of the state implementation plan must be an operating permit program. Most states are now in the process of developing or augmenting their implementation plans to meet these requirements. The state implementation plans and the operating permits issued under them may place new requirements on waste-to-energy facilities. Under federal law, the new operating permits may have a term of up to 12 years after issuance or renewal, subject to review every 5 years. Changes in Clean Air Act standards can affect the manner in which the Company operates existing projects and could require significant additional expenditures to achieve compliance. The Clean Air Act Requirements, which the Company believes will be issued in final form between 1994 and 1996, will require capital improvements to the facilities operated by the Company. The exact timing and cost of such improvements cannot be stated definitively because State regulations embodying the Clean Air Act Requirements have generally not been finally adopted. The cost of capital improvements to meet the Clean Air Act Requirements for facilities owned by Client Communities will be borne by the Client Communities. For projects owned or leased by the Company and operated under a Service Agreement, the Client Community has the obligation to fund such capital improvements, to which the Company must make an equity contribution, generally 20%. Such equity contributions are likely to range, in total for all such facilities, from $9 million to $15 million. With respect to a project owned by the Company and not operated pursuant to a Service Agreement, such capital improvements will cost between $8 million and $15 million. The Company believes that costs incurred to meet Clean Air Act Requirements at facilities it operates may be recovered from Client Communities and other users of its facilities through increased tipping fees permitted under applicable contracts. The Environmental Remediation Laws, including CERCLA, may subject the Company, like other entities that manage waste, to joint and several liability for the costs of remediating contamination at sites, including landfills, which the Company has owned, operated, or leased or at which there has been disposal of residue or other waste handled or processed by the Company. The Company 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. Environmental Regulatory Laws, such as RCRA and state and local solid waste laws, impose significantly more stringent requirements upon disposal of hazardous waste than upon disposal of MSW and other non-hazardous wastes. These laws prohibit disposal of hazardous waste other than in small, household-generated quantities at the Company's municipal solid waste facilities and generally make disposal of hazardous waste more expensive than management of non-hazardous waste. 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. No ash residue from a fully operational facility operated by the Company has been characterized as hazardous under the present or past prescribed EPA test procedures and such ash residue is currently disposed of in permitted landfills as non-hazardous waste. Some state laws or regulations provide that if prescribed test procedures demonstrate that ash residue has hazardous characteristics, it must be treated as hazardous waste. In certain states, ash residue from certain waste-to-energy facilities of other vendors or communities has, on occasion, been found to have hazardous characteristics under these test procedures. There is a conflict between the two federal courts of appeal which have decided whether municipal solid waste ash residue having hazardous characteristics is subject to RCRA's provisions for management as a hazardous waste. The Second Circuit Court of Appeals has held that it is not. The Seventh Circuit Court of Appeals reached the opposite result. In September 1992, the Administrator of the EPA officially stated that EPA policy was that waste-to-energy ash residue was exempt from treatment as a hazardous waste as a matter of law and could be safely disposed of in MSW landfills that met the EPA's criteria. In reaching its decision, the Seventh Circuit refused to give deference to the EPA's policy. An appeal from the Seventh Circuit's determination was filed in early 1993 in the United States Supreme Court and a decision is expected during the Court's Spring 1994 term. The Company does not expect that a decision that requires ash residue having hazardous characteristics to be managed as a hazardous waste would have significant impacts on the Company's business. Eight of the Company's facilities are located in states or dispose of their ash residue in states which require testing to determine whether such residue must be managed as a hazardous waste under state law. Furthermore, ash processing technology is available which could be used to further ensure that ash does not exhibit characteristics of hazardous waste. From time to time, state and federal moratoria on waste to energy have been proposed in legislation, regulation, and by executive action. Generally, such proposals have not been adopted, and where they have, as in the State of New Jersey, following the moratorium, waste to energy has continued to be included in the options available to local municipalities. In 1992, as previously reported, the State of Rhode Island eliminated waste to energy from its unique legislation in which the state's solid waste management plan was enacted as law. As a consequence of this legislation, the Company brought an action against the state challenging the validity of the change in the plan which has been settled by the State's agreement to pay the Company approximately $5.5 million in 1994, a portion of which must be shared with Blount, Inc., the former developer of the Quonset, Rhode Island project. OWTS' business activities were regulated under federal, state, and local environmental laws governing air and water emissions and the generation, transportation, storage, treatment, and disposal of solid wastes, and hazardous and toxic materials. In particular, RCRA, its implementing regulations, and parallel state laws create a cradle-to-grave system for regulating hazardous waste; and CERCLA and similar state laws create programs for remediation of contaminated sites and for the imposition of liability upon those who owned or operated such sites or who generated or transported hazardous substances disposed of at such sites. The Company believes that OWTS's units and projects were operated in compliance in all material respects with regulatory requirements that apply to its business. The Company's waste-to-energy business is subject to the provisions of the federal Public Utility Regulatory Policies Act ("PURPA"). Pursuant to 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, the Public Utility Holding Company Act of 1935, and, except under certain limited circumstances, state laws regulating the rates charged by electric utilities. PURPA was promulgated 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 Federal Power Act and the Public Utility Holding Company Act of 1935 are of great importance to the Company and its competitors in the waste-to-energy industry. State public utility commissions must approve the rates, and in some instances other contract terms, by which public utilities purchase electric power from the Company'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. While public utilities are not required by PURPA to enter into long-term contracts, PURPA creates a regulatory environment in which such contracts can typically be negotiated. In October, 1992, Congress enacted, and the President signed into law, comprehensive energy legislation, several provisions of which are intended to foster the development of competitive, efficient bulk power generation markets throughout the country. Although the impact of the legislation will not be fully known until any judicial challenges are resolved and Federal and State regulatory agencies develop policies and promulgate implementing regulations, the Company believes that, over the long term, the legislation will create business opportunities both in the waste-to- energy field as well as in other power generation fields. Other Information (a) Raw Materials. The construction of each of the Company's waste-to- energy facilities is generally carried out by a general contractor selected by the Company. The general contractor is usually responsible for the procurement of bulk commodities used in the construction of the facility, such as steel and concrete. These commodities are generally readily available from many suppliers. The Company generally directs the procurement of all major equipment utilized in the facility, which equipment is also generally readily available from many suppliers. The stoker grates utilized in facilities constructed by the Company are required to be obtained from Martin pursuant to the Cooperation Agreement. In connection with the currently operating waste-to-energy facilities, the Company has entered into long-term waste disposal agreements which obligate the relevant Client Communities (or in the case of the Haverhill projects, the private haulers) to deliver specified amounts of waste on an annual basis. The Company believes that sufficient amounts of waste are being produced in the United States to support current and future waste-to-energy projects. Other commodities used in the operation of the Company's facilities are readily available from many suppliers. See "Regulation" herein. (b) Employees. As of February 1, 1994, the Company had 355 full-time employees. Substantially all of the personnel operating the Company's waste-to-energy facilities are employees of subsidiaries of an affiliate of the Company, Ogden Services Corporation ("Ogden Services"). Some of the employees at certain facilities are employed by subsidiaries of Ogden Services pursuant to collective bargaining agreements. Each facility's staff is typically supervised by a Facility Manager who is an employee of a subsidiary of Ogden Services, and a Manager of Facility Administration, who is an employee of the Company. There were approximately 1310 employees of a subsidiary of Ogden Services working at the Company's waste-to-energy facilities as of February 1, 1994. The Company considers relations with its employees to be good. (c) Dependence on Ogden. Ogden has provided, at no cost to the Company, guarantees of performance of the obligations of the Operating Subsidiaries for their waste-to-energy projects and has provided other forms of credit support. Such credit support is typically required in connection with the Company's proposals to Client Communities, and without such credit support for future projects, there is no assurance that the Company could continue to compete effectively in the waste-to-energy industry. Credit support has also been provided in connection with acquisitions made by the Company. Ogden also provided certain guarantees with respect to OWTS operations. Ogden has also supported the Company by providing other guarantees related to project financing and project energy agreements, by providing support services in areas such as investor relations, tax, legal, internal audit, cash management, employee benefits administration, and insurance, and by funding working and other capital requirements, including the equity requirements of Company-owned projects, to the extent not provided by the Company. The Company pays a fee for these services. Under the cash management arrangements the Company is charged interest by Ogden if it is a net borrower from, or is paid interest by Ogden if it is a net depositor with, Ogden. Ogden has further supported the Company by providing certain personnel, either directly or through a subsidiary. Substantially all of the personnel utilized by the Company in operating its waste-to-energy facilities are provided on a cost-plus basis by Ogden Services under the technical and budgetary supervision of the Company. The Board of Directors of Ogden has adopted a Statement of Intent providing that it intends to continue to provide support services to the Company. However, the Statement of Intent does not represent a contractual obligation of Ogden and there can be no assurance that Ogden will continue to provide such support. Item 2. PROPERTIES The Company's principal executive offices are located in Fairfield, New Jersey, in an office building located on a 5.4-acre site owned by the Company. The following table summarizes certain information relating to the locations of the properties owned or leased by the Company or its subsidiaries as of January 31, 1994(1).
Approximate Site Size Nature of Location in Acres Site Use Interest Fairfield, New Jersey 5.4 Office space Own Marion County, Oregon 15.2 Waste-to-energy facility Own (2) Alexandria/Arlington, 3.3 Waste-to-energy Acquiring the Virginia facility Alexandria 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 July 1, 2014) Indianapolis, Indiana 23.5 Waste-to-energy Site lease facility (expires Dec., 2008 subject to four 5-year renewal options) (2) Stanislaus County, 16.5 Waste-to-energy Site lease California facility (expires Aug. 20, 2021 subject to 15- year renewal option) (2) Babylon, New York 9.5 Waste-to-energy Site lease facility (expires Dec. 19, 2010, with renewal options) Haverhill, 12.7 Waste-to-energy Site lease Massachusetts facility (expires Mar. 16, 1997, subject to sixteen 5-year renewal options) (2) Haverhill, 16.8 RDF processing Site lease Massachusetts facility (expires Mar. 16, 1997, subject to sixteen 5-year renewal options) (2) Haverhill, 20.2 Landfill Site lease Massachusetts (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 facility (expires Dec. 1, 2026) (2) Fairfax County, Virginia 22.9 Waste-to-energy Acquiring facility Fairfax Authority's interest under Site Lease (expires Mar. 10, 2016) pursuant to Conditional Sale Agreement Imperial County, 83.0 Undeveloped land Own California Huntington, New York 13.0 Waste-to-energy Site lease facility (expires Oct. 28, 2012, subject to successive renewal terms through Jan. 28, 2029)(2) Warren County, 19.8 Waste-to-energy Site lease New Jersey facility (expires Nov. 16, 2005 subject to two ten-year renewals)(2) Hennepin County, 14.6 Waste-to-energy Leases of site Minnesota facility and 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 facility February 1, 1994) (discontinued) Tulsa, Oklahoma 22.0 Waste-to-energy Leases of site facility and facility (expires April 30, 2012 subject to renewal options to August 2, 2026)(2)(3) Harris County, Texas 14.0 Undeveloped land Own Onondaga, New York Facility site Site lease expires contempora- neously with service agreement, subject to renewal options to May 9, 2020(2) _______________________ (1) Two Facilities, located in Detroit, Michigan and Honolulu, Hawaii and not listed in the table, were initially owned by political subdivisions and were sold to leveraged lessors. The lessors entered into lease agreements with the respective Operating subsidiaries, all of which 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. The Company believes that its properties and equipment are generally well maintained, in good operating condition, and adequate for its present needs. The Company regularly upgrades and modernizes facilities and equipment and expands its facilities as necessary.
Item 3. LEGAL PROCEEDINGS In the ordinary course of its business, the Company becomes 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 the Company operates. Such proceedings also include actions brought by individuals or local governmental authorities seeking to overrule governmental decisions on matters relating to the Company's operations in which the Company may be, but is not necessarily, a party. Most proceedings brought against the Company by governmental authorities under these laws relate to alleged technical violations of regulations, licenses, or permits pursuant to which the Company operates. To date the Company, has resolved the proceedings to which it is a party through settlements that generally involve the payment of civil fines or penalties and, in some instances, changing operational procedures. None of these resolutions require the Company to make any material capital expenditures. At September 30, 1993, the Company was involved in one such proceeding in which the Company believes sanctions involved may exceed $100,000. The Company believes that such proceeding will not have a material adverse effect on it or its business. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable EXECUTIVE OFFICERS OF THE COMPANY The executive officers (as defined by Rule 3b-7 of the Securities Exchange Act of 1934) of the Company are named in the table below. Officers are appointed by the Board of Directors and serve at the discretion of the Board.
Name Position Age R. Richard Ablon Chairman of the Board and Chief 44 Executive Officer Scott G. Mackin President and Chief Operating Officer 37 Bruce W. Stone Executive Vice President and Managing Director 46 William C. Mack Executive Vice President 47 John M. Klett Executive Vice President--Operations 47 Gloria A. Mills Executive Vice President--Business Development 54 William E. Whitman Executive Vice President, Chief Financial Officer and Treasurer 38 Brian A. Delle Donne Senior Vice President 37 Jeffrey R. Horowitz Senior Vice President, General Counsel and Secretary 44 Kenneth G. Torosian Vice President and Controller 32
Information about the executive officers of the Company is set forth below: Mr. Ablon has been Chairman of the Board and Chief Executive Officer of the Company since November 1990. Since May 1990, he has been President and Chief Executive Officer of Ogden. From January 1987 to May 1990, he was President- and Chief Operating Officer, Operating Services, Ogden. Mr. Mackin has been President and Chief Operating Officer of the Company since January 1991. From November 1990 to January 1991, he was Co- President, Co-Chief Operating Officer, General Counsel and Secretary of the Company. From 1988 to November 1990, he was First Executive Vice President and Managing Director, General Counsel of the Company and since December 1989 Secretary of the Company. From 1987 to 1988, he was Vice President and General Counsel of the Company, and from 1987 to May 1989, he was Secretary of the Company. Mr. Stone has been Executive Vice President and Managing Director of the Company since January 1991. From November 1990 to January 1991, he was Co- President and Co-Chief Operating Officer of the Company. From 1988 through November 1990, he was First Executive Vice President and Managing Director- - -Project Implementation of the Company. Mr. Mack has been Executive Vice President of the Company since January 1991. He was Secretary of the Company from January 1991 until November 1991. From 1988 to January 1991, he was First Executive Vice President and Managing Director--Operations of the Company. Mr. Klett has been Executive Vice President--Operations of the Company since January 1991. From January 1990 to January 1991, he was Executive Vice President--Plant Operations of OMS. From March 1989 to January 1990, he was Senior Vice President--Plant Operations of OMS. Ms. Mills has been Executive Vice President--Business Development of the Company since January 1991. From 1988 to January 1991, she was First Executive Vice President and Managing Director--Marketing of the Company. Mr. Whitman has been Executive Vice President of the Company since February, 1994 and Chief Financial Officer and Treasurer of the Company since September 1990. He was also Senior Vice President of the Company from December 1990 through February 1994 and Vice President of the Company from September 1990 through December 1990. From January 1990 to September 1990, he was Assistant Vice President, Facility Administration of OMS. From November 1987 to January 1990, he was first a Senior Cost Analyst, then Director, Facility Administration, of the Company. Mr. Delle Donne has been Senior Vice President of the Company since May 1990, and has been President and Chief Operating Officer of OWTS since November 1989. From October 1987 through October 1989, he was Director, Marketing at Westinghouse Environmental Services. Mr. Horowitz has been a Senior Vice President and General Counsel of the Company since July, 1991 and Secretary since November 1991. From 1982 until 1991 he was a partner in the law firm of Schnader, Harrison, Segal and Lewis. Mr. Torosian has been Vice President of the Company since February 1992 and Controller of the Company since November 1987. PART II Item 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS. The information required by this item is incorporated herein by reference to the material captioned "Price Range of Common Stock and Dividend Data" on page 44 of the Company's 1993 Annual Report to Stockholders. As of February 28, 1994, there were 5,103 holders of record of the Company's Common Stock. Item 6. SELECTED FINANCIAL DATA. The information required by this item is incorporated herein by reference to the material captioned "Selected Financial Data" on page 24 of the Company's 1993 Annual Report to Stockholders. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION. The information required by this item is incorporated herein by reference to the material captioned "Management's Discussion and Analysis of Consolidated Operations" on pages 22 and 23 of the Company's 1993 Annual Report to Stockholders. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The information required by this item is incorporated herein by reference to pages 25 through 42 and 44 of the Company's 1993 Annual Report to Stockholders. For other financial statements and schedules required under this item, reference is made to Item 14 of this Report. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable. PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY. (a) Directors. The information with respect to directors required by this item is incorporated herein by reference to the Company's 1994 Proxy Statement to be filed with the Securities and Exchange Commission. (b) Executive Officers. The information with respect to officers required by this item is included at the end of PART I of this document under the heading Executive Officers of the Company. Item 11. EXECUTIVE COMPENSATION. The information required by this item is incorporated herein by reference to the Company's 1994 Proxy Statement to be filed with the Securities and Exchange Commission. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The information required by this item is incorporated herein by reference to the Company's 1994 Proxy Statement to be filed with the Securities and Exchange Commission. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The information required by this item is incorporated herein by reference from the Company's 1994 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. Consolidated Financial Statements and the Independent Auditors' Report incorporated herein by reference to pages 25 through 42 of the Company's 1993 Annual Report to Stockholders: Independent Auditors' Report. Consolidated Balance Sheets, December 31, 1993 and 1992. Statements of Consolidated Income for the Years Ended December 31, 1993, 1992, and 1991. Statements of Consolidated Cash Flows for the Years Ended December 31, 1993, 1992, and 1991. Statements of Common Stockholders' Equity for the Years Ended December 31, 1993, 1992, and 1991. Notes to Consolidated Financial Statements. 2. Financial Statement Schedules: Independent Auditors' Report Schedule II - Amounts Receivable from Related Parties and Underwriters, Promoters, and Employees other than Related Parties. Schedule V - Property, Plant, and Equipment. Schedule VI - Accumulated Depreciation, Depletion, and Amortization of Property, Plant, and Equipment. Schedule VIII - Valuation and Qualifying Accounts. Schedule X - Supplementary Income Statement Information. Schedules, other than those listed above, have been omitted because of the absence of conditions under which they are required or because the required information is included in the financial statements or the notes thereto. 3. Exhibits: 3.1 Third Restated Certificate of Incorporation.* (i) Certificate of Retirement of Stock and Reduction of Capital, dated March 1, 1990.*. (ii) Certificate of Retirement of Stock and Reduction of Capital, dated April 26, 1990.* (iii) Certificate of Ownership and Merger, dated December 1, 1989.* 3.2 Third Restated By-Laws of Ogden Projects, Inc. as amended.* 4.1 (a) Trust Indenture, dated as of December 1, 1986, and amended and restated as of July 1, 1987, between Shawmut Bank, N.A., as trustee, and Massachusetts Industrial Finance Agency.* (i) Amendment No. 2, dated as of April 1, 1992, to Amended and Restated Trust Indenture, as amended, between Shawmut Bank, N.A., as trustee, and Massachusetts Industrial Finance Agency.* (ii) Supplemental and Amending Trust Indenture, dated as of May 1, 1992, between Shawmut Bank, N.A., as trustee, and Massachusetts Industrial Finance Agency.* (b) OHA Loan Agreement, dated as of December 1, 1986, and as amended as of August 1, 1988, between Ogden Haverhill Associates and Massachusetts Industrial Finance Agency.* (i) Amendment No. 2, dated as of May 1, 1992, to the OHA Loan Agreement, as amended, between Ogden Haverhill Associates and Massachusetts Industrial Finance Agency.* (c) OHA (Ogden Haverhill Project) Massachusetts Industrial Finance Agency Series A Note, dated December 23, 1986, and as amended as of August 1, 1988 (Amendment incorporated by reference to Exhibit No. 4.1(e)), by Ogden Haverhill Associates to Shawmut Bank, N.A., as trustee.* (d) OHA (Ogden Haverhill Project) Massachusetts Industrial Finance Agency Series B Note, dated December 23, 1986, and as amended as of August 1, 1988 (Amendment incorporated by reference to Exhibit No. 4.1(e)), by Ogden Haverhill Associates to Shawmut Bank, N.A., as trustee.* (e) OHA (Ogden Haverhill Project) Massachusetts Industrial Finance Agency Series C Note, dated December 23, 1986, and as amended as of August 1, 1988, by Ogden Haverhill Associates to Shawmut Bank, N.A., as trustee.* (i) Amendment No. 2, dated as of May 29, 1992, to OHA (Ogden Haverhill Project) Massachusetts Industrial Finance Agency Series C Note, as amended , by Ogden Haverhill Associates to Shawmut Bank, N.A., as trustee.* (f) SBR Loan Agreement, dated as of December 1, 1986, and as amended through August 1, 1988, between SBR Associates and Massachusetts Industrial Finance Agency.* (i) Amendment No. 2, dated as of May 1, 1992, to SBR Loan Agreement, as amended, between SBR Associates and Massachusetts Industrial Finance Agency.* (g) SBR (Ogden Haverhill Project) Massachusetts Industrial Finance Agency Series D Note, dated December 23, 1986, and as amended as of August 1, 1988, by SBR Associates to Shawmut Bank, N.A., as trustee.* (i) Amendment No. 2, dated as of May 28, 1992, to SBR (Ogden Haverhill Project) Massachusetts Industrial Finance Agency, Series D Note, as amended, by SBR Associates to Shawmut Bank, N.A., as trustee.* (h) Letter of Credit and Reimbursement Agreement, dated as of December 1, 1986, between Ogden Martin Systems of Haverhill, Inc. and Union Bank of Switzerland, New York Branch.* (i) Reimbursement Agreement Amendment, dated August 1, 1988, between Ogden Martin Systems of Haverhill, Inc. and Union Bank of Switzerland, New York Branch.* (ii) Second Reimbursement Agreement Amendment, dated August 1, 1989, between Ogden Martin Systems of Haverhill, Inc. and Union Bank of Switzerland, New York Branch.* (iii) Third Reimbursement Agreement, dated October 13, 1989, between Ogden Martin Systems of Haverhill, Inc. and Union Bank of Switzerland, New York Branch.* (iv) Fourth Reimbursement Agreement Amendment, dated as of September 23, 1991, between Ogden Martin Systems of Haverhill, Inc. and Union Bank of Switzerland, New York Branch.* (v) Fifth Reimbursement Agreement Amendment, dated as of May 1, 1992, between Ogden Martin Systems of Haverhill, Inc. and Union Bank of Switzerland, New York Branch.* (i) Reimbursement Agreement, dated as of May 31, 1989, between Ogden Haverhill Properties, Inc. and Swiss Bank Corporation, New York Branch.* (i) First Amendment to the Reimbursement Agreement dated as of May 28, 1992 between Ogden Haverhill Properties, Inc. and Swiss Bank Corporation, New York Branch.* 4.2 (a) Second Amended and Restated Trust Indenture, dated as of February 1, 1989, between the Fairfax County Economic Development Authority and Crestar Bank, as trustee.* (b) Conditional Sale and Security Agreement, dated as of February 1, 1988, between the Fairfax County Solid Waste Authority and Ogden Martin Systems of Fairfax, Inc.* 4.3 Specimen Stock Certificate for Company's Common Stock.* 4.4 Demand Note, dated May 31, 1989, by Company to Ogden Corporation.* 4.5 Demand Note, dated December 19, 1984, by Company to Bouldin Development Corporation.* 10.1 Tax Sharing Agreement, dated as of January 1, 1989, among Ogden Corporation, Company and Subsidiaries, Ogden Allied Services, Inc. and Subsidiaries, and Ogden Financial Services, Inc. and Subsidiaries.* 10.2 (a) Amended and Restated Cooperation Agreement, dated April 30, 1983 and amended and restated as of April 1, 1985, and as further amended through May 25, 1989 between Ogden Martin Systems, Inc. and Martin GmbH fur Umwelt- und Energietechnik of West Germany (confidential status has been granted for certain provisions thereof pursuant to Commission Order No. 810132).* (i) Amendment to Section 5.3.1 of the Amended and Restated Cooperation Agreement, effective as of January 1, 1989, between Ogden Martin Systems, Inc. and Martin GmbH fur Umwelt- und Energietechnik of West Germany (confidential status has been granted for certain provisions thereof pursuant to Rule 24b-2.)* (ii) Amendment No. 6 to Amended and Restated Cooperation Agreement, effective as of January 1, 1991, between Ogden Martin Systems, Inc. and Martin GmbH fur Umwelt-und Energietechnik of West Germany.* (b) Rights of First Refusal, dated June 2, 1989, among Walter Josef Martin, Anneliese Martin, Johannes Josef Edmund Martin and Ogden Martin Systems, Inc.* 10.3 Ogden Projects, Inc. Directors' Stock Option Plan.* 10.4 Letter Agreement, dated October 5, 1990, between David L. Sokol and Ogden Corporation.* 10.5 Ogden Projects, Inc. Employees' Stock Option Plan.* 10.6 Ogden Corporation Pension Plan, as amended and restated, effective as of January 1, 1988.* 10.7 Ogden Corporation Supplementary Deferred Benefit Plan, adopted December 13, 1976, and amended as of January 5, 1988.* 10.8 Ogden Corporation Stock Option Plan, effective as of March 11, 1986.* 10.9 Ogden Corporation 1990 Stock Option Plan, effective as of October 11, 1990.* 10.10 Ogden Projects, Inc. Pension Plan effective as of January 1, 1989.* (i) Amendment to Ogden Projects, Inc. Pension Plan effective as of January 1, 1994. 10.11 Form of Supplementary Deferred Benefit Plan of Ogden Projects, Inc. effective as of January 1, 1989.* 10.12 Ogden Projects, Inc. Profit Sharing Plan effective as of January 1, 1989.* (i) Ogden Projects Profit Sharing Plan amendment by Unanimous Written Consent of the Administrative Committee, dated March 7, 1990.* (ii) Amendment to Ogden Projects, Inc. Profit Sharing Plan effective as of January 1, 1994. 10.13 Ogden Allied Services Saving and Security Plan, as amended and restated, effective as of August 1, 1986.* 10.14 Ogden Services Corporation Profit Sharing Plan, as amended and restated, effective as of January 1, 1989, as further amended July 18, 1990.* 10.15 (a) Ogden Services Corporation Executive Pension Plan, effective as of January 1, 1989.* (b) Ogden Services Corporation Executive Pension Plan Trust Agreement, dated as of October 1, 1990, between Ogden Services Corporation and The Bank of New York.* 10.16 (a) Ogden Services Corporation Select Savings Plan, dated as of October 1, 1990.* (b) Ogden Services Corporation Select Savings Plan Trust Agreement, dated as of October 1, 1990, between Ogden Services Corporation and The Bank of New York.* 10.17 Form of Supplemental Defined Benefit Plan of Ogden Allied Services effective as of January 1, 1989.* 10.18 Ogden Environmental Services Pension Plan effective as of January 1, 1989.* 10.19 Ogden Environmental Services Profit Sharing Plan effective as of January 1, 1989.* (i) Ogden Environmental Services Profit Sharing Plan amendment by Unanimous Written Consent of the Administrative Committee, dated March 7, 1990.* 10.20 Form of Supplementary Deferred Benefit Plan of Ogden Environmental Services, Inc., effective as of January 1, 1989.* 10.21 Stock Purchase Agreement, dated as of May 31, 1989, between Company and Ogden Corporation.* 10.22 Stock Purchase Option Agreement, dated June 14, 1989, between Ogden Corporation and Company.* (i) Amendment to Stock Purchase Option Agreement, dated November 16, 1989, between Ogden Corporation and Company.* 10.23 Employment Agreement, dated as of June 1, 1990, between Company and William C. Mack.* 10.24 Employment Agreement, dated as of June 1, 1990, between Company and Scott G. Mackin.* (i) Employment Agreement dated January 1, 1994 between Company and Scott G. Mackin. 10.25 Employment Agreement, dated as of June 1, 1990, between Company and Gloria A. Mills.* 10.26 Employment Agreement, dated as of June 1, 1990, between Company and Bruce W. Stone.* 10.27 Employment Agreement, dated as of June 1, 1990, between Company and John M. Klett.* 10.28 Employment Agreement, dated as of May 24, 1990, between Ogden Corporation and R. Richard Ablon, as amended October 11, 1990.* 10.29 Agreement and Plan of Merger dated September 20, 1990 by and among Ogden Environmental Services of Houston, Inc., Ogden Acquisition Company and American Envirotech, Inc.* (i) Amendment dated June 12, 1991 by and among Ogden Environmental Services of Houston, Inc., Ogden Acquisition Company, and American Envirotech, Inc.* 10.30 Ogden Projects, Inc. Core Executive Benefit Program.* 13.0 Annual Report to Stockholders for the year ended December 31, 1993. 21.0 Subsidiaries of the Company. 24.0 Consent of Deloitte & Touche. _______________ * Incorporated by reference as set forth in the Exhibit Index of this Annual Report on Form 10-K. Note: Long term debt instruments of the Company and its consolidated subsidiaries under which the total amount of securities authorized do not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis will be furnished to the Commission upon request. (b) The Company filed the following reports on Form 8-K during the quarter ended December 31, 1993: None. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. OGDEN PROJECTS, INC. By:/s/ R. Richard Ablon Chairman and Chief Executive Officer Date: March 29, 1994 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 Company in the capacities indicated on March 29, 1994. Signature Title /s/ R. Richard Ablon Chairman of the Board and R. Richard Ablon Chief Executive Officer /s/ Scott G. Mackin President, Chief Operating Scott G. Mackin Officer and Director /s/ Bruce W. Stone Executive Vice President, Bruce W. Stone Managing Director and Director /s/ William E. Whitman Executive Vice President, William E. Whitman Chief Financial Officer and Treasurer (Chief Financial Officer) /s/ Kenneth G. Torosian Vice President and Controller Kenneth G. Torosian (Chief Accounting Officer) /s/ William M. Batten Director William M. Batten /s/ Constantine G. Caras Director Constantine G. Caras /s/ Lynde H. Coit Director Lynde H. Coit /s/ Philip G. Husby Director Philip G. Husby /s/ Robert E. Smith Director Robert E. Smith /s/ Jeffrey F. Friedman Director Jeffrey F. Friedman DELOITTE & TOUCHE One World Trade Center Facsimile:(212)524-0890 New York, New York 10048-0601 International & Domestic Telephone:(212)669-5000 Telex: 4995706 1633 Broadway Facsimile:(212)489-6944 New York, New York 10019-6754 International & Domestic Telephone:(212)489-1600 Telex: 4995706 INDEPENDENT AUDITORS' REPORT Ogden Projects, Inc. We have audited the consolidated financial statements of Ogden Projects, Inc. and subsidiaries as of December 31, 1993 and 1992 and for each of the three years in the period ended December 31, 1993, and have issued our report thereon dated February 2, 1994, which report includes an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 109; such consolidated financial statements and report are included in your 1993 Annual Report to Shareholders and are incorporated herein by reference. Our audits also included the consolidated financial statement schedules of Ogden Projects, Inc. and subsidiaries, listed in Item 14. These consolidated financial statement schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, such consolidated financial statement schedules, when considered in relation to the basic consolidated financial statements taken as a whole, present fairly in all material respects the information set forth therein. /S/ Deloitte & Touche February 2, 1994 SCHEDULE II OGDEN PROJECTS, INC. AND SUBSIDIARIES AMOUNTS RECEIVABLE FROM RELATED PARTIES AND UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES FOR THE YEAR ENDED DECEMBER 31, 1991
Column A Column B Column C Column D Column E BALANCE AT DEDUCTIONS BALANCE AT END OF PERIOD BEGINNING AMOUNTS AMOUNTS NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NON-CURRENT Brian Delle Donne (A) $175,000 $175,000 Notes: (A) Mortgage Loan, Collateralized Promissory Note, bearing interest at 8.5% per annum.
SCHEDULE V OGDEN PROJECTS, INC. AND SUBSIDIARIES PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (In thousands of dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F BALANCE AT OTHER BALANCE AT BEGINNING ADDITIONS CHANGES END OF CLASSIFICATION OF PERIOD AT COST RETIREMENTS ADD/(DEDUCT) PERIOD YEAR ENDED DECEMBER 31, 1993 Land $ 5,049 $ 5,049 Waste-to-energy facilities 1,538,762 $ 611 1,539,373 Buildings and improvements 39,498 4,420 $ 4,228 (A) 48,146 Machinery and equipment 19,228 4,066 $278 23,016 Landfills 8,306 158 8,464 Construction in progress 24,993 73,292 (2,496)(B) 95,789 TOTAL $1,635,836 $82,547 $278 $ 1,732 $1,719,837 YEAR ENDED DECEMBER 31, 1992 Land $ 5,049 $ 5,049 Waste-to-energy facilities 1,491,791 $ 9,804 $101 $ 37,268 (C) 1,538,762 Buildings and improvements 27,075 8,556 3,867 (B) 39,498 Machinery and equipment 16,168 3,430 370 19,228 Landfills 8,166 140 8,306 Construction in progress 10,054 16,441 (1,502)(D) 24,993 TOTAL $1,558,303 $38,371 $471 $ 39,633 $1,635,836 YEAR ENDED DECEMBER 31, 1991 Land $ 5,158 $ (109)(E) $ 5,049 Waste-to-energy facilities 1,042,702 $ 659 448,430 (F) 1,491,791 Buildings and improvements 26,516 559 27,075 Machinery and equipment 12,626 3,612 $ 70 16,168 Landfills 8,371 107 (312)(E) 8,166 Construction in progress 178,621 68,944 (237,511)(G) 10,054 TOTAL $1,273,994 $73,881 $ 70 $210,498 $1,558,303 NOTES: (A) Represents $2,496 from the reclassification of construction in progress upon completion and $1,732 from the acquisition of the capital stock of RRS Holdings, Inc. (B) Reclassification of construction in progress upon completion. (C) Represents $39,633 from adjustment to acquired property, plant, and equipment to pretax amounts upon adoption of Statement of Financial Accounting Standards No. 109 and $(2,365) from adjustment of accruals. (D) Represents $(3,867) from the reclassification of construction in progress upon completion and $2,365 from adjustment of accruals. (E) Adjustment of accruals. (F) Represents $238,723 from the reclassification of construction in progress upon completion, $202,974 from the acquisition of the capital stock of Blount Energy Resource Corp., $8,300 from contract cost adjustment, and $(1,567) from adjustment of accruals. (G) Represents $(238,723) from the reclassification of construction in progress upon completion and $1,212 from adjustment of accruals. Prior-year amounts have been reclassified to conform with the 1993 presentation.
SCHEDULE VI OGDEN PROJECTS, INC. AND SUBSIDIARIES ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY, PLANT, AND EQUIPMENT FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (In thousands of dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F ADDITIONS BALANCE AT CHARGED TO OTHER BALANCE AT BEGINNING COST AND CHANGES END OF DESCRIPTION OF PERIOD EXPENSES RETIREMENTS ADD/(DEDUCT) PERIOD YEAR ENDED DECEMBER 31, 1993 Waste-to-energy facilities $ 98,475 $35,134 $133,609 Buildings and improvements 2,073 384 $359 (A) 2,816 Machinery and equipment 11,761 2,277 $264 604 (A) 14,378 Landfills 5,309 363 5,672 TOTAL $117,618 $38,158 $264 $963 $156,475 YEAR ENDED DECEMBER 31, 1992 Waste-to-energy facilities $ 62,352 $34,551 $ 10 $1,582 (B) $ 98,475 Buildings and improvements 1,647 68 358 (A) 2,073 Machinery and equipment 9,357 2,094 322 632 (A) 11,761 Landfills 5,277 32 5,309 TOTAL $ 78,633 $36,745 $332 $2,572 $117,618 YEAR ENDED DECEMBER 31, 1991 Waste-to-energy facilities $ 35,441 $26,911 $ 62,352 Buildings and improvements 1,243 46 $ 358 (A) 1,647 Machinery and equipment 6,425 1,656 $ 58 1,334 (A) 9,357 Landfills 5,138 609 (470) (C) 5,277 TOTAL $ 48,247 $29,222 $ 58 $1,222 $ 78,633 NOTES: (A) Amount capitalized. (B) Adjustment to acquired property, plant, and equipment to pretax amounts upon adoption of Statement of Financial Accounting Standards No. 109. (C) Adjustment of accruals.
SCHEDULE VIII OGDEN PROJECTS, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991 (In thousands of dollars)
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E ADDITIONS BALANCE AT CHARGED TO CHARGED TO BALANCE AT BEGINNING COST AND OTHER END OF DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD YEAR ENDED DECEMBER 31, 1993 Allowances deducted from assets to which they apply: Deferred charges on projects $ 750 $ 750 Doubtful receivables 4,776 $ 180 $4,073 (A) $ 1,708 (C) 7,321 Allowances not deducted: Estimated cost of disposal of discontinued operations 7,620 1,706 4,061 (B) 12,379 (D) 1,008 Other 1,350 1,350 TOTAL RESERVES $13,146 $ 3,236 $8,134 $14,087 $10,429 YEAR ENDED DECEMBER 31, 1992 Allowances deducted from assets to which they apply: Deferred charges on projects $ 6,500 $ 5,750 (E) $ 750 Doubtful receivables 531 $ 265 $4,121 (A) 141 (C) 4,776 Allowances not deducted: Estimated cost of disposal of discontinued operations 7,090 530 (F) 7,620 TOTAL RESERVES $14,121 $ 265 $4,651 $ 5,891 $13,146 YEAR ENDED DECEMBER 31, 1991 Allowances deducted from assets to which they apply: Deferred charges on projects $ 6,500 $ 6,500 Doubtful receivables $ 163 406 $ 38 (C) 531 Allowances not deducted: Estimated cost of disposal of discontinued operations 7,090 7,090 TOTAL RESERVES $ 163 $13,996 $ 38 $14,121 NOTES: (A) Reserve for contract billing adjustments. (B) Net proceeds from on-site remediation utilizing mobile technology $3,853 and reclassification of liabilities pertaining to fixed-site hazardous waste business $208. (C) Write-offs of receivables considered uncollectible. (D) Gain from on-site remediation business utilizing mobile technology. (E) Write-offs of unsuccessful development efforts. (F) Net proceeds from on-site remediation utilizing mobile technology. SCHEDULE X
OGDEN PROJECTS, INC. AND SUBSIDIARIES SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
COLUMN A COLUMN B CHARGED TO COSTS AND EXPENSES ITEM 1993 1992 1991 Maintenance and repairs $55,161,000 $40,873,000 $36,019,000 Royalties 7,452,000 5,901,000 4,750,000
EX-99 2 EXHIBIT INDEX EXHIBIT INDEX EXHIBIT NO. DESCRIPTION OF DOCUMENT FILING INFORMATION 3.1 Third Restated Certificate of Incorporated by reference to Incorporation. Exhibit No. 3.1 forming part of Amendment No. 1 to the Company's Registration State- ment on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. (i) Certificate of Retirement Incorporated by reference to of Stock and Reduction of Exhibit No. 3.1(a) forming part Capital, dated March 1, of the Company's Registration 1990. Statement on Form S-1 (File No. 33-33679) filed with Securities and Exchange Commission under the Securities Act of 1933, as amended. (ii) Certificate of Retirement Incorporated by reference to of Stock and Reduction of Exhibit No. 4.0(a)(ii) forming Capital, dated April 26, part of the Company's Report on 1990. Form 10-Q (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the quarterly period ended March 31, 1990. (iii) Certificate of Ownership Incorporated by reference to and Merger, dated Exhibit 3.1(iii) forming part of December 1, 1989. the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 3.2 Third Restated By-Laws of Ogden Incorporated by reference to Projects, Inc. as amended through Exhibit 3.2 forming part of the March 12, 1991. Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 4 Instruments Defining Rights of Security Holders. 4.1 (a) Trust Indenture, dated as Incorporated by reference to of December 1, 1986, and Exhibit No. 4.1(a) forming part amended and restated as of of the Company's Registration July 1, 1987, between Statement on Form S-1 (File No. Shawmut Bank, N.A., as 33-29312) filed with the trustee, and Massachusetts Securities and Exchange Commis- Industrial Finance Agency. sion under the Securities Act of 1933, as amended. (i) Amendment No. 2, dated Incorporated by reference to as of April 1, 1992, to Exhibit No. 4.1(a)(i) forming Amended and Restated part of the Company's Report on Trust Indenture, as Form 10-Q (File No. 1-10282) amended, between Shawmut filed with the Securities and Bank, N.A., as trustee, Exchange Commission under the and Massachusetts Securities Exchange Act of 1934, Industrial Finance as amended, for the quarterly Agency. period ended June 30, 1992. (ii) Supplemental and Incorporated by reference to Amending Trust Inden- Exhibit No. 4.1(a)(ii) forming ture, dated as of May part of the Company's Report on 1, 1992, between Form 10-Q (File No. 1-10282) Shawmut Bank, N.A., as filed with the Securities and trustee, and Massachu- Exchange Commission under the setts Industrial Securities Exchange Act of 1934, Finance Agency. as amended, for the quarterly period ended June 30, 1992. (b) OHA Loan Agreement, dated Incorporated by reference to as of December 1, 1986, and Exhibit No. 4.1(b) forming part as amended as of August 1, of the Company's Registration 1988, between Ogden Haverhill Statement on Form S-1 (File No. Associates and Massachusetts 33-29312) filed with the Industrial Finance Agency. Securities and Exchange Commission under the Securities Act of 1933, as amended. (i) Amendment No. 2, dated Incorporated by reference to as of May 1, 1992, to Exhibit No. 4.1(b)(i) forming the OHA Loan Agreement, part of the Company's Report on as amended, between Form 10-Q (File No. 1-10282) Ogden Haverhill filed with the Securities and Associates and Exchange Commission under the Massachusetts Industrial Securities Exchange Act of 1934, Finance Agency. as amended, for the quarterly period ended June 30, 1992. (c) OHA (Ogden Haverhill Incorporated by reference to Project) Massachusetts Exhibit No. 4.1(c) forming part Industrial Finance Agency of the Company's Registration Series A Note, dated Statement on Form S-1 (File No. December 23, 1986, and as 33-29312) filed with the amended as of August 1, Securities and Exchange Commis- 1988 (Amendment incorpor- sion under the Securities Act of ated by reference to 1933, as amended. Exhibit No. 4.1(e)), by Ogden Haverhill Associates to Shawmut Bank, N.A., as trustee. (d) OHA (Ogden Haverhill Incorporated by reference to Project) Massachusetts Exhibit No. 4.1(d) forming part Industrial Finance Agency of the Company's Registration Series B Note, dated December Statement on Form S-1 (File No. 23, 1986, and as amended as 33-29312) filed with the of August 1, 1988 (Amendment Securities and Exchange Commis- incorporated by reference to sion under the Securities Act of Exhibit No. 4.1(e)), by 1933, as amended. Ogden Haverhill Associates to Shawmut Bank, N.A., as trustee. (e) OHA (Ogden Haverhill Incorporated by reference to Project) Massachusetts Exhibit No. 4.1(e) forming part Industrial Finance Agency of the Company's Registration Series C Note, dated Statement on Form S-1 (File No. December 23, 1986, and as 33-29312) filed with the amended as of August 1, 1988, Securities and Exchange Commis- by Ogden Haverhill Associates sion under the Securities Act of to Shawmut Bank, N.A., as 1933, as amended. trustee. (i) Amendment No. 2, dated Incorporated by reference to as of May 28, 1992, to Exhibit No. 4.1(e)(i) forming OHA (Ogden Haverhill part of the Company's Report on Project) Massachusetts Form 10-Q (File No. 1-10282) Industrial Finance filed with the Securities and Agency Series C Note, Exchange Commission under the as amended, by Ogden Securities Exchange Act of 1934, Haverhill Associates as amended, for the quarterly to Shawmut Bank, N.A., period ended June 30, 1992. as trustee. (f) SBR Loan Agreement, dated as Incorporated by reference to of December 1, 1986, and as Exhibit No. 4.1(f) forming part amended through August 1, of the Company's Registration 1988, between SBR Associates Statement on Form S-1 (File No. and Massachusetts Industrial 33-29312) filed with the Finance Agency. Securities and Exchange Commission under the Securities Act of 1933, as amended. (i) Amendment No. 2, dated Incorporated by reference to as of May 1, 1992, to Exhibit No. 4.1(f)(i) forming SBR Loan Agreement, as part of the Company's Report on amended, between SBR 10-Q (File No. 1-10282) filed Associates and with the Securities and Exchange Massachusetts Commission under the Securities Industrial Finance Exchange Act of 1934, as Agency. amended, for the quarterly period ended June 30, 1992. (g) SBR (Ogden Haverhill Project) Incorporated by reference to Massachusetts Industrial Exhibit No. 4.1(g) forming part Finance Agency Series D of the Company's Registration Note, dated December 23, Statement on Form S-1 (File No. 1986, and as amended as of 33-29312) filed with the August 1, 1988, by SBR Securities and Exchange Associates to Shawmut Commission under the Securities Bank, N.A., as trustee. Act of 1933, as amended. (i) Amendment No. 2, dated Incorporated by reference to as of May 28, 1992, to Exhibit No. 4.1(g)(i) forming SBR (Ogden Haverhill part of the Company's Report on Project) Massachusetts Form 10-Q (File No. 1-10282) Industrial Finance filed with the Securities and Agency, Series D Note, Exchange Commission under the as amended by SBR Securities Exchange Act of 1934, Associates to Shawmut as amended, for the quarterly Bank, N.A., as trustee. period ended June 30, 1992. (h) Letter of Credit and Reim- Incorporated by reference to bursement Agreement dated as Exhibit No. 4.1(h) forming part of December 1, 1986, between of the Company's Registration Ogden Martin Systems of Statement on Form S-1 (File No. Haverhill, Inc. and Union 33-29312) filed with the Bank of Switzerland, New Securities and Exchange York Branch. Commission under the Securities Act of 1933, as amended. (i) Reimbursement Agreement Incorporated by reference to Amendment, dated August Exhibit No. 4.1(h)(i) forming 1, 1988, between Ogden part of Amendment No. 1 to the Martin Systems of Company's Registration Statement Haverhill, Inc. and on Form S-1 (File No. 33-29312) Union Bank of filed with the Securities and Switzerland, New York Exchange Commission under the Branch. Securities Act of 1933, as amended. (ii) Second Reimbursement Incorporated by reference to Agreement Amendment, Exhibit No. 4.1(h)(ii) forming dated August 1, 1989, part of Amendment No. 3 to the between Ogden Martin Company's Registration Statement Systems of Haverhill, on Form S-1 (File No. 33-29312) Inc. and Union Bank of filed with the Securities and Switzerland, New York Exchange Commission under the Branch. Securities Act of 1933, as amended. (iii) Third Reimbursement Incorporated by reference to Agreement Amendment, Exhibit No. 4.1(h)(iii) forming dated October 13, 1989, part of Amendment No. 1 to the between Ogden Martin Company's Registration Statement Systems of Haverhill, on Form S-1 (File No. 33-31575) Inc. and Union Bank of filed with the Securities and Switzerland, New York Exchange Commission under the Branch. Securities Act of 1933, as amended. (iv) Fourth Reimbursement Incorporated by reference to Agreement Amendment, Exhibit No. 4.1(h)(iv) forming dated September 23, part of the Company's Report on 1991, between Ogden Form 10-Q (File No. 1-10282) Martin Systems of filed with the Securities and Haverhill, Inc. and Exchange Commission under the Union Bank of Securities Exchange Act of 1934, Switzerland, New York as amended, for the quarterly Branch. period ended June 30, 1992. (v) Fifth Reimbursement Incorporated by reference to Agreement Amendment, Exhibit No. 4.1(h)(v) forming dated May 1, 1992, part of the Company's Report on between Ogden Martin Form 10-Q (File No. 1-10282) Systems of Haverhill, filed with the Securities and Inc. and Union Bank of Exchange Commission under the Switzerland, New York Securities Exchange Act of 1934, Branch. as amended, for the quarterly period ended June 30, 1992. (i) Reimbursement Agreement, Incorporated by reference to dated as of May 31, 1989, Exhibit No. 4.1(i) forming part between Ogden Haverhill of the Company's Report on Form Properties, Inc. and Swiss 10-Q (File No. 1-10282) filed Bank Corporation, New York with the Securities and Exchange Branch. Commission under the Securities Exchange Act of 1934, as amended, for the quarterly period ended June 30, 1990. (i) First Amendment to the Incorporated by reference to Reimbursement Agreement Exhibit No. 4.1(i)(i) forming dated as of May 28, 1992 part of the Company's Report on between Ogden Haverhill Form 10-Q (File No. 1-10282) Properties, Inc. and filed with the Securities and Swiss Bank Corporation, Exchange Commission under the New York Branch. Securities Exchange Act of 1934, as amended, for the quarterly period ended June 30, 1992. 4.2 (a) Second Amended and Restated Incorporated by reference to Trust Indenture, dated as of Exhibit No. 4.8(a) forming part February 1, 1989, between of the Company's Registration the Fairfax County Economic Statement on Form S-1 (File No. Development Authority and 33-29312) filed with the Crestar Bank, as Trustee. Securities and Exchange Commission under the Securities Act of 1933, as amended. (b) Conditional Sale and Incorporated by reference to Security Agreement, dated as Exhibit No. 4.8(b) forming part of February 1, 1988, between of the Company's Registration the Fairfax County Solid Statement on Form S-1 (File No. Waste Authority and Ogden 33-29312) filed with the Martin Systems of Fairfax, Securities and Exchange Inc. Commission under the Securities Act of 1933, as amended. 4.3 Specimen Stock Certificate for Incorporated by reference to Company's Common Stock. Exhibit No. 4.12 forming part of Amendment No. 1 to the Company's Registration Statement on Form S-1 (File no. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 4.4 Demand Note, dated May 31, 1989 Incorporated by reference to by Company to Ogden Corporation. Exhibit No. 4.13 forming part of Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 4.5 Demand Note, dated December 19, Incorporated by reference to 1984, by Company to Bouldin Exhibit No. 4.14 forming part of Development Corporation. Amendment No. 1 to the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.1 Tax Sharing Agreement, dated as Incorporated by reference to of January 1, 1989, among Ogden Exhibit No. 10.21 forming part Corporation, Ogden Projects, Inc., of the Company's Registration and Subsidiaries, Ogden Allied Statement on Form S-1 (File No. Services, Inc. and Subsidiaries, 33-29312) filed with the and Ogden Financial Services, Inc. Securities and Exchange and Subsidiaries. Commission under the Securities Act of 1933, as amended. 10.2 (a) Amended and Restated Incorporated by reference to Cooperation Agreement, dated Exhibit No. 10.22(a) forming April 30, 1983 and amended part of Amendment No. 2 to the and restated as of April 1, Company's Registration Statement 1985, and as further on Form S-1 (File No. 33-29312) amended through May 25, 1989 filed with the Securities and between Ogden Martin Systems, Exchange Commission under the Inc. and Martin GmbH fur Securities Act of 1933, as Umwelt-und Energietechnik of amended. West Germany (confidential status has been granted for certain provisions thereof pursuant to Commission Order No. 810132). (i) Amendment to Section Incorporated by reference to 5.3.1 of the Amended Exhibit No. 19.1 forming part of and Restated Coopera- The Company's Report Form 10-Q tion Agreement, effec- (File no. 1-10282) filed with tive as of January 1, the Securities and Exchange 1989, between Ogden Commission under the Securities Martin Systems, Inc. Exchange Act of 1934, as and Martin GmbH fur amended, for the quarterly Umwelt- und Energie- period ended June 30, 1990. technik of West Germany (confidential status has been granted for certain provisions thereof pursuant to Rule 24b-2). (ii) Amendment No. 6 to Incorporated by reference to Amended and Restated Exhibit No. 19.1 forming part of Cooperation Agreement, The Company's Report Form 10-Q effective as of (File no. 1-10282) filed with January 1, 1991, the Securities and Exchange between Ogden Martin Commission under the Securities Systems, Inc. and Exchange Act of 1934, as Martin GmbH fur amended, for the quarterly Umwelt- und Energie- period ended June 30, 1991. technik of West Germany. (b) Rights of First Refusal, Incorporated by reference to dated June 2, 1989, among Exhibit No. 10.22(b) forming Walter Josef Martin, part of Amendment No. 2 to the Anneliese Martin, Johannes Company's Registration Statement Josef Edmund Martin, and on Form S-1 (File No. 33-29312) Ogden Martin Systems, Inc. filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.3 Ogden Projects, Inc. Directors' Incorporated by reference to Stock Option Plan. Exhibit No. 10.24 forming part of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.4 Letter Agreement, dated October Incorporated by reference to 5, 1990, between David L. Sokol Exhibit No. 19.5 forming part of and Ogden Corporation. the Company's Report on Form 10-Q (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the quarterly period ended September 30, 1990. 10.5 Ogden Projects, Inc. Employees' Incorporated by reference to Stock Option Plan. Exhibit No. 10.26 forming part of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.6 Ogden Corporation Pension Plan, Incorporated by reference to as amended and restated, Exhibit No. 10.27 forming part effective as of January 1, 1988. of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.7 Ogden Corporation Supplementary Incorporated by reference to Deferred Benefit Plan, adopted Exhibit No. 10.28 forming part December 13, 1976, and amended of the Company's Registration as of January 5, 1988. Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.8 Ogden Corporation Stock Option Incorporated by reference to Plan, effective as of March 11, Exhibit No. 10.29 forming part 1986. of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.9 Ogden Corporation 1990 Stock Incorporated by reference to Option Plan, effective as of Exhibit No. 10.29 forming part October 11, 1990. of the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.10 Ogden Projects, Inc. Pension Incorporated by reference to Plan effective as of January 1, Exhibit No. 10.30 forming part 1989. of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. (i) Amendment to Ogden Projects, Transmitted herewith as Inc. Pension Plan, effective Exhibit 10.10(i) as of January 1, 1994. 10.11 Form of Supplementary Deferred Incorporated by reference to Benefit Plan of Ogden Projects, Exhibit No. 10.31 forming part Inc. effective as of January 1, of Amendment No. 1 to the 1989. Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.12 Ogden Projects, Inc. Profit Incorporated by reference to Sharing Plan effective as of Exhibit No. 10.32 forming part January 1, 1989. of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. (i) Amendment to Ogden Projects, Incorporated by reference to Profit Sharing Plan amendment Exhibit No. 19.2 forming part of by Unanimous Written the Company's Report on Form Consent of the Administra- 10-Q (File No. 1-10282) filed tive Committee, dated with the Securities and Exchange March 7, 1990. Commission under the Securities Exchange Act of 1934, as amended, for the quarterly period ended March 31, 1990. (ii) Amendment to Ogden Transmitted herewith as Projects, Inc. Profit Exhibit No. 10.10(i) Sharing Plan, effective as of January 1, 1994. 10.13 Ogden Allied Services Savings Incorporated by reference to and Security Plan, as amended Exhibit No. 10.33 forming part and restated, effective as of of the Company's Registration August 1, 1986. Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended, for the fiscal year ended December 31, 1990. 10.14 Ogden Services Corporation Profit Incorporated by reference to Sharing Plan, as amended and Exhibit No. 10.34 forming part restated, effective as of January of the Company's Report on Form 1, 1989, as further amended July 10-K (File No. 1-10282) filed 18, 1990. with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.15 (a) Ogden Services Corporation Incorporated by reference to Executive Pension Plan, Exhibit No. 10.35(a) forming effective as of January 1, part of the Company's Report on 1989. Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. (b) Ogden Services Corporation Incorporated by reference to Executive Pension Plan Trust Exhibit No. 10.35(b) forming Agreement, dated as of part of the Company's Report October 1, 1990, between on Form 10-K (File No. 1-10282) Ogden Services Corporation filed with the Securities and and The Bank of New York. Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.16 (a) Ogden Services Corporation Incorporated by reference to Select Savings Plan, Exhibit No. 10.36(a) forming effective as of October 1, part of the Company's Report on 1990. Form 10-K (File No. 1-10282) filed with the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. (b) Ogden Services Corporation Incorporated by reference to Select Savings Plan Trust Exhibit No. 10.36(b) forming Agreement, dated as of part of the Company's Report on October 1, 1990, between Form 10-K (File No. 1-10282) Ogden Services Corporation filed with the Securities and and The Bank of New York. Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.17 Form of Supplemental Defined Incorporated by reference to Benefit Plan of Ogden Allied Exhibit No. 10.34 forming part Services effective as of of Amendment No. 1 to the January 1, 1989. Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.18 Ogden Environmental Services Incorporated by reference to Pension Plan effective as of Exhibit No. 10.35 forming part January 1, 1989. of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.19 Ogden Environmental Services Incorporated by reference to Profit Sharing Plan effective as Exhibit No. 10.36 forming part of January 1, 1989. of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. (i) Ogden Environmental Services Incorporated by reference to Profit Sharing Plan amend- Exhibit No. 19.3 forming part of ment by Unanimous Written the Company's Report on Form Consent of the Administra- 10-Q (File No. 1-10282) filed tive Committee, dated March with the Securities and Exchange 7, 1990. Commission under the Securities Exchange Act of 1934, as amended, for the quarterly period ended March 31, 1990. 10.20 Form of Supplementary Deferred Incorporated by reference to Benefit Plan of Ogden Exhibit No. 10.37 forming part Environmental Services, Inc., of Amendment No. 1 to the effective as of January 1, 1989. Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.21 Stock Purchase Agreement, dated Incorporated by reference to as of May 31, 1989, between Exhibit No. 10.38 forming part Company and Ogden Corporation. of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.22 Stock Purchase Option Agreement, Incorporated by reference to dated June 14, 1989, between Exhibit No. 10.39 forming part Ogden Corporation and Company of the Company's Registration Statement on Form S-1 (File No. 33-29312) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. (i) Amendment to Stock Incorporated by reference to Purchase Option Agreement, Exhibit No. 10.39(i) forming dated November 16, 1989, part of Amendment No. 1 to the between Ogden Corporation Company's Registration Statement and Company. on Form S-1 (File No. 33-31575) filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended. 10.23 Employment Agreement, dated as Incorporated by reference to of June 1, 1990, between Company Exhibit No. 10.47 forming part and William C. Mack. of the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.24 Employment Agreement, dated as Incorporated by reference to of June 1, 1990, between Company Exhibit No. 10.48 forming part and Scott G. Mackin. of the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. (i) Employment Agreement dated Transmitted herewith as as of January 1, 1994 Exhibit No. 10.24(i). between Company and Scott G. Mackin. 10.25 Employment Agreement, dated as Incorporated by reference to of June 1, 1990, between Company Exhibit No. 10.49 forming part and Gloria A. Mills. of the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.26 Employment Agreement, dated as Incorporated by reference to of June 1, 1990, between Company Exhibit No. 10.50 forming part and Bruce W. Stone. of the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.27 Employment Agreement, dated as Incorporated by reference to of June 1, 1990, between Company Exhibit No. 10.51 forming part and John M. Klett. of the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.28 Employment Agreement, dated as Incorporated by reference to of May 24, 1990, as amended Exhibit No. 10.52 forming part October 11, 1990, between Ogden of the Company's Report on Form Corporation and R. Richard Ablon. 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. 10.29 Agreement and Plan of Merger Incorporated by reference to dated September 20, 1990 by and Exhibit No. 10.53 forming part among Ogden Environmental of the Company's Report on Form Services of Houston, Inc., Ogden 10-K (File No. 1-10282) filed Acquisition Company and American with the Securities and Exchange Envirotech, Inc. Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1990. (i) Amendment dated June 12, Incorporated by reference to 1991 by and among Ogden Exhibit No. 10.29 forming part Environmental Services of of the Company's Report on Form Houston, Inc., Ogden 10-K (File No. 1-10282) filed Acquisition Company and with the Securities and Exchange American Envirotech, Inc. Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1991. 10.30 Ogden Projects, Inc. Core Incorporated by reference to Executive Benefit Program. Exhibit No. 10.30 forming part of the Company's Report on Form 10-K (File No. 1-10282) filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934, as amended, for the fiscal year ended December 31, 1992. 13.0 Those portions of the Annual Transmitted herewith as Exhibit Report to Stockholders for the No. 13. year ended December 31, 1993 which are incorporated herein by reference. 21.0 Subsidiaries of the Company. Transmitted herewith as Exhibit No. 21. 24.0 Consent of Deloitte & Touche. Transmitted herewith as Exhibit No. 24. EX-10.10(I) 3 AMENDMENTS TO PENSION AND PROFIT SHARING PLANS EXHIBIT NO. 10.10(i) and EXHIBIT NO. 10.12(ii) FORM OF AMENDMENTS TO THE OGDEN PROJECTS, INC. PENSION PLAN AND PROFIT SHARING PLANS EFFECTIVE JANUARY 1, 1994 WHEREAS, the Corporation is the sponsor of the Ogden Projects Pension Plan (the "Pension Plan") and the Ogden Projects Profit Sharing Plan (the "Profit Sharing Plan") and their related trusts, said Pension Plan and Profit Sharing Plan and underlying trusts being qualified and tax-exempt under Section 401(a) and 501(a) (of the Internal Revenue Code (the "IRC"); and WHEREAS, the Corporation has determined that the Pension Plan and Profit Sharing Plan should be amended and modified in certain respects, so that the Corporation will be able to meet the IRC rules and regulations concerning the employer-wide non- discriminatory classification test (the "Test") necessary to maintain the qualified and tax-exempt status of the Corporation's Pension Plan and Profit Sharing Plan, effective as of January 1, 1994; and WHEREAS, the Corporation has determined that it is in the best interest of the Corporation and its employees that effective as of January 1, 1994, and in order to satisfy the Test, all benefits under the Pension Plan be frozen and that the Profit Sharing Plan be amended to enable the Corporation to remove from coverage as many highly paid employees as is necessary to satisfy the Test; NOW THEREFORE BE IT RESOLVED, that the Board of Directors hereby authorizes, upon advice of counsel, that the Pension Plan be amended, effective as of January 1, 1994, as follows: (i) all additional benefit accruals under the Pension Plan shall cease effective as of the close of business on December 31, 1993; (ii) all accrued benefits under the Pension Plan shall be frozen as of the close of business on December 31, 1993, and (iii) subject to the foregoing amendments, the Pension Plan shall continue in existence as a qualified and tax-exempt plan under Section 401(a) and 501(a) of the IRC in accordance with its terms and applicable law, regulation and governmental guidelines; and it is further RESOLVED, that the Board of Directors hereby authorizes, upon advice of counsel, that the Profit Sharing Plan shall be amended, effective as of January 1, 1994, to provide that a certain number of highly paid employees of the Corporation shall no longer be eligible to participate in the Profit Sharing Plan as shall be determined by the Administrative Committee from time to time as may be necessary for the Profit Sharing Plan to meet the Test and maintain its qualified and tax-exempt status, and to provide that the account balances of any highly paid employees who are determined to be ineligible to participate in the Profit Sharing Plan shall be ineligible to receive future contributions; and it is further RESOLVED, that effective as of January 1, 1993, the Profit Sharing Plan is further amended to comply with the Unemployment Compensation Act of 1993 by applying a 20% Federal income tax withholding to the taxable portion of any distribution unless the participant requests a direct rollover of the distribution to an eligible retirement plan; and it is further RESOLVED, that the fiduciaries of the Pension Plan and Profit Sharing Plan and the officers of this Corporation and each of them be and hereby is authorized, upon advice of counsel, to execute, deliver and file any and all documents and instruments which, upon advice of counsel, are desirable, necessary or appropriate to effect the purpose and intent of the foregoing Resolutions. EX-10.24(I) 4 SCOTT MACKIN EMPLOYMENT AGREEMENT EXHIBIT 10.24(i) CONFIDENTIAL AND LEGALLY PRIVILEGED SCOTT G. MACKIN EMPLOYMENT AGREEMENT THIS AGREEMENT, made and entered into as of the 1st day of January, 1994, by and between OGDEN PROJECTS, INC., a Delaware corporation maintaining its principal office at 40 Lane Road, Fairfield, New Jersey (the "Company") and Scott G. Mackin, now residing at 19 Hall Road, Chatham, New Jersey 07928 (the "Employee"). WITNESSETH: WHEREAS, the Employee is currently serving as President and Chief Operating Officer of the Company, a position he has held since January 1991; and WHEREAS, the employment agreement under which the Employee is currently employed is a three (3) year agreement entered into on June 1, 1990 and which on December 31, 1993 began to run on a year to year basis (the "Old Agreement") and which incorrectly reflects the Employee's title as Executive Vice President, General Counsel, Secretary and Managing Director; and WHEREAS, the Company and Employee desires to terminate the Old Agreement and enter into a new employment agreement with terms and conditions similar to the Old Agreement; and WHEREAS, the Company desires to ensure that the Employee will continue to be available to provide services in the capacity of President and Chief Operating Officer in the future, which services are significant to the Company's long-range prospects and the long-range prospects of the Company's subsidiaries (the Company and its subsidiaries are hereinafter referred to as the "OPI Group"); and WHEREAS, to induce the Employee to continue to provide such services, the Company is offering to provide the Employee with the compensation, benefits and security provided for in this Agreement. NOW, THEREFORE, in consideration of the covenants and agreements herein contained, the parties hereto agree as follows: 1. EMPLOYMENT/CAPACITY/TERM. The Company agrees to and does hereby continue to employ the Employee, and the Employee agrees to and does hereby continue in the employ of the Company upon the terms and conditions set forth in this Agreement. Such employment shall be in an executive capacity as President and Chief Operating Officer. Such employment shall commence on January 1, 1994 and shall continue through December 31, 1996, and from year to year thereafter subject to the right of the Employee or the Company to terminate such employment as of December 31, 1994, or any subsequent December 31, by written notice given to the other party at least sixty (60) days prior to such termination date stating an intention to so terminate such employment. Termination by the Company, in accordance with the provisions of the preceding sentence, shall obligate the Company to make a severance payment as provided in Paragraph 9. hereof. Otherwise, termination by either party, in accordance with the provisions of the above referenced sentence, shall not require a statement of the reason or cause for such termination and shall not be deemed a breach or violation of this Agreement by the party giving such notice. As used in this Agreement, the phrase "term of this Agreement" shall be deemed to include the period subsequent to the date hereof and prior to termination of this Agreement; however, such phrase shall not be construed as limiting the enforceability by either party of any rights which survive termination of this Agreement. 2. TIME AND EFFORT/ABSENCES. During the term of this Agreement, the Employee shall devote his entire time and attention during normal business hours to the business of the Company and the OPI Group, subject to the supervision of the Board of Directors of the Company, and he shall not engage in any other business activity whether or not such business activity is pursued for gain, profit, or other pecuniary advantage, but this restriction shall not be construed to restrict the Employee (i) from performing services as a member of the Board of Directors, Board of Trustee or the like of any non-profit entity for which the Employee receives no compensation, provided that, such services do not unreasonably interfere with the ability of the Employee to perform the services and discharge the responsibilities required of him under this Agreement, and (ii) from investing his assets in such form or manner as will not require any services on the part of the Employee in the operation of the business of the entity in which such investments are made. The Employee shall be excused from rendering his services during reasonable vacation periods and during other reasonable temporary absences as authorized from time to time by the Board of Directors of the Company. At the date hereof, the principal office of the Company is located in Fairfield, New Jersey, considered to be a New York suburb and part of the metropolitan New York area. It is understood that the Employee will not be required to relocate from the metropolitan New York area to discharge his responsibilities under this Agreement. 3. CORPORATE OFFICES. If elected, the Employee will serve, without additional compensation, as an officer and director (or in either capacity) of the Company and the OPI Group. 4. SALARY/BONUS/OTHER BENEFITS. In consideration of the services and duties to be rendered and performed by the Employee during the term of this Agreement, the Company agrees to pay and provide for the Employee the compensation and benefits described below: (a) Consistent with the Company's policy concerning its executives, the Executive's annual salary shall be reviewed by the Board of Directors or an appropriate committee of the Board of Directors of the Company on a calendar year basis, with any increases therein being within the sole discretion of the Board of Directors or an appropriate committee of the Board of Directors and shall become effective on March 1st of the following year. During January and February of 1994, the Employee will be paid on the basis of his 1993 salary. Commencing March 1, 1994, the minimum annual salary payable to the Executive under this Agreement shall be in the amount of Four Hundred Thousand and 00/100 Dollars ($400,000), payable in equal monthly or bi-weekly installments. (b) An annual incentive bonus in such amount as may from time to time be fixed by the Board of Directors or an appropriate committee of the Board of Directors of the Company, provided that in determining the annual incentive bonus the Board of Directors or appropriate Committee shall utilize standards which are reasonably applied to the Employee and other executives of the Company who furnish services of comparable significance, on a non-discriminatory basis. (c) Other Benefits. It is intended that the Company shall continue to provide the Employee with benefits at least as favorable as benefits provided on behalf of other executives of the Company and the OPI Group who furnish services of comparable significance, as they may exist from time to time. Such benefits presently include Group Life Insurance, Group Health Insurance, Automobile Allowance, and Pension and Profit Sharing Plans. Except as otherwise provided herein, any such participation shall be in accordance with the provisions of such plans and nothing contained in this Agreement is intended to or shall be deemed to affect adversely any of the Employee's rights as a participant under any such plan. Nothing herein shall prevent the Company from modifying or discontinuing any benefit plan on a consistent and non-discriminatory basis applicable to all such executives. 5. EXPENSE. The Employee shall be reimbursed for out-of-pocket expenses incurred from time to time on behalf of the Company and the OPI Group or in the performance of his duties under this Agreement, upon the presentation of such supporting documents and forms as the Company shall reasonably request. 6. DISABILITY/DISABILITY BENEFIT. In the event that the Employee is incapable because of physical or mental illness of rendering services of the character contemplated hereby, for a period of six (6) consecutive months, the Board of Directors of the Company may determine that the Employee has become disabled. In the event of such a determination of disability, the Company shall have the continuing right and option while such disability continues to terminate this Agreement by notice in writing to the Employee, effective thirty (30) days after such notice of termination is so given, unless, within such thirty (30) day notice period, the Employee resumes rendering full-time services of the character contemplated hereby. The incapacity due to physical or mental illness to render the services of the character contemplated hereby, shall not constitute a breach of this Agreement by the Employee. If this Agreement is terminated by the Company as a result of a determination of disability, as aforesaid, the Company shall be obligated to continue the salary and benefits of the Employee as provided in Paragraph 4 for a period equal to the greater of (a) twelve (12) months, or (b) such longer period as may be determined by the Board of Directors of the Company, in each case reduced by any disability insurance benefits provided for the benefit of the Employee at the expense of the Company. 7. DEATH/DEATH BENEFIT. In the event of the death of the Employee during the term of this Agreement, this Agreement shall terminate and the Employee's salary shall continue to be paid to his designated beneficiary or, if none, to his personal representative, through the last day of the month in which such death occurs. In addition, the Employee, his personal representative(s) and/or his beneficiaries will be entitled to such death benefits as are provided to Employee under Paragraph 4 hereof. 8. COMPANY STOCK OPTION PLAN. The Board of Directors of the Company has awarded the Employee non-qualified stock options to purchase Thirty-five Thousand (35,000) shares of the Company Common Stock under the Company's Employees' Stock Option Plan (the "Employees' Plan"). If the employment of the Employee terminates under circumstances entitling him to a Severance Payment (as defined in Paragraph 9.), he shall thereupon be entitled to exercise any and all options granted to him under the Employees' Plan to the extent permitted pursuant to the terms and conditions of the Employees' Plan. 9. SEVERANCE PAYMENT. If the Company gives notice to terminate in accordance with Paragraph 1 or if the employment of the Employee is terminated at any time (i) by the Employee for Good Reason (as defined in Paragraph 10), or (ii) by the Company for any reason other than for Cause (as hereinafter defined), the Company will be obligated to pay to the Employee in cash a severance payment equal to the product of (i) and (ii); where (i) shall equal the sum of (A) the Employee's annual salary at the time of such termination, and (B) the Employee's annual incentive bonus during the twelve (12) month period ending with the close of the month in which such termination of employment occurs (the "Date of Termination"), but not less than the incentive bonus paid to the Employee in January 1994 for services rendered during 1993, which was Three Hundred Thousand and 00/100 Dollars ($300,000), divided by twelve (12); and where (ii) shall be thirty-six (36). Termination of the Employee's employment on account of his disability, death or retirement (as defined in this Agreement) will not be considered a termination of the Employee's employment by the Company and will not require the Company to pay and provide any Severance Payment. No Severance Payment will be required if the employment of the Employee is terminated by the Company for Cause (as hereinafter defined) or by the Employee (other than for Good Reason as defined in Paragraph 10) or if the Employee gives notice to terminate in accordance with Paragraph 1. The Severance Payment provided herein is provided in order to reinforce and encourage the continued loyalty, attention, and dedication of the Employee to the Company's business and affairs without the concerns which normally arise from the possibility of a loss of employment security. As used herein, the terms "Retirement" and "Cause" shall have the following meanings, respectively: (a) Retirement. Termination of the Employee's employment on account of "Retirement" shall mean termination on or after the Employee's normal retirement date in accordance with the terms of the Company's pension plan (or any successor or substitute plan or plans of the Company or of any subsidiary of the Company under which the Employee may be a participant); and (b) Cause. Termination by the Company of the Employee's employment for "Cause" shall mean termination as a result of (i) the willful and continued failure by the Employee to devote the time, attention and effort necessary to perform substantially the services contemplated by this Agreement in a manner consistent with the Employee's past performance (other than any such failure resulting from the Employee's incapacity due to physical or mental illness) after a written demand for substantial performance is delivered to the Employee by a member or representative of the Board of Directors of the Company which specifically identifies the manner in which it is alleged that the Employee has not substantially performed such services, or (ii) the willful engaging by the Employee in gross misconduct which is materially and demonstrably injurious to the Company; provided that, no act, or failure to act, on the Employee's part shall be considered "willful" unless done, or omitted to be done, in bad faith and without reasonable belief that such action or omission was in, or not apposed to, the best interests of the Company. It is also expressly understood that the Employee's attention to or engagement in matters not directly related to the business of the Company shall not provide a basis for termination for Cause if such attention or engagement is authorized by the terms of this Agreement or has otherwise been approved by the Board of Directors of the Company. Anything in this Agreement to the contrary notwithstanding, the Employee's employment may not be terminated for Cause unless and until there shall have been delivered to the Employee a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (after reasonable notice to the Employee and an opportunity for the Employee, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board the Employee was guilty of the conduct set forth in clause (i) or (ii) of this subparagraph (b) and specifying the particulars thereof in detail. Except as otherwise provided in Paragraphs 1 and 6, no purported termination by the Company of the Employee's employment which is not justified as a termination of the Employee's employment for Cause shall be effective. 10. TERMINATION BY THE EMPLOYEE FOR GOOD REASON. The termination by the Employee of his employment for "Good Reason" shall be deemed a justifiable termination of his employment and shall excuse the Employee from the obligation to render services as provided in Paragraph 2 hereof. Upon such termination, the Employee shall be entitled to the Severance Payment in accordance with the provisions of Paragraph 9 hereof. As used herein, the phrase "Good Reason" shall mean: (a) a change in the Employee's status, title or position(s) as an officer of the Company in the executive capacity set forth in Paragraph 1 hereof, which in his reasonable judgment, does not represent a promotion from or enhancement of his status, title and position, or the assignment by the Board of Directors of the Company to the Employee of any duties or responsibilities which, in his reasonable judgment, are inconsistent with such status, title or position, or any removal of the Employee from or any failure to reappoint or reelect him to such position, except in connection with a justifiable termination by the Company of the Employee's employment for Cause or on account of disability, the Retirement or death of the Employee or the termination by the employee of his employment other than for Good Reason; (b) a reduction in the Employee's annual salary or a failure by the Company to pay to the Employee any installment of the annual salary required by Paragraph 4 hereof, which failure continues for a period of twenty (20) days after written notice thereof is given by the Employee to the Company; (c) the Company's requiring the Employee to be based anywhere other than the Fairfield, New Jersey area, except for required travel on the business of the Company or the OPI Group to an extent substantially consistent with the business travel obligations which the Employee has previously undertaken on behalf of the Company or the OPI Group; (d) the failure by the Company to obtain the assumption of this Agreement in form and substance to the reasonable satisfaction of the Employee by any Successor (other than by merger or consolidation for which no separate assumption is necessary) as referred to in Paragraph 17; or (e) any refusal by the Company to allow the Employee to attend to matters or engage in activities not directly related to the business of the Company which is permitted by this Agreement or which, prior thereto, was permitted by the Board of Directors of the Company. 11. NOTICE OF TERMINATION. Any purported notice of termination of the Employee's employment (other than a Notice given by either party pursuant to Paragraph 1 hereof) shall be communicated in writing and delivered to the other party as provided in Paragraph 18 (hereinafter a "Notice of Termination"). For purposes of this Agreement a "Notice of Termination" shall mean a notice which specifies the termination provision relied upon by the party giving such notice and shall set forth in detail such facts and circumstances claimed by said party to provide a justified basis for termination of the Employee's employment under the provision(s) so indicated. 12. TRADE SECRETS, ETC. The Employee acknowledges that prior to his initial employment by the Company he had no knowledge of the formulae, processes or methods of manufacture or other trade secrets of the Company. Upon the termination of his employment, the Employee agrees forthwith to deliver up to the Company notebooks and other data relating to research or experiments as conducted by him or relating to the products, formulae, processes or methods of manufacture of the Company. 13. CUSTOMER LIST. The Employee recognizes and acknowledges that the written list of the customers of the Company, its subsidiaries and affiliates, as it may exist from time to time, is a valuable, special and unique asset. The Employee agrees that he will not during the term of his employment or within five (5) years thereafter, use for his own personal benefit or disclose the written list of the customers of the Company, its subsidiaries and affiliates or any part thereof, to any person, firm, corporation, association or other entity for any reason or purpose whatsoever. 14. LIMITED COVENANT NOT TO COMPETE. If the employment of the Employee hereof is terminated (i) by the Employee pursuant to Paragraph 1 hereof or (ii) by the Company for Cause (as defined in Paragraph 9.(b) above), then in either case (y) the Employee will not, for a period of two (2) years from such termination of employment, within the territorial confines of the United States of America, directly or indirectly, own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business in competition with the business conducted by the Company at the time of such termination, and (z) the Employee will, for a period of two (2) years from such termination refrain from carrying on a business similar to that presently carried on by the Company within the states in which the business of the Company has been carried on, so long as the Company carries on like business therein. 15. INJUNCTIVE RELIEF. In the event of a breach by the Employee of the provisions of Paragraphs 12, 13 or 14 during or after the term of this Agreement, the Company shall be entitled to an injunction restraining the Employee from violation of such paragraph. Nothing herein shall be construed as prohibiting the Company from pursuing any other remedy it may have in the event of breach of this Agreement by the Employee. 16. CERTAIN PROPRIETARY RIGHTS. Employee agrees to and hereby does assign to the Company all his right, title and interest in and to all inventions, whether or not patentable, which are made or conceived solely or jointly by him: (a) At any time during the term of his employment by the Company in an executive, managerial, planning, technical research or engineering capacity (including development, manufacturing, systems, applied science and sales), or (b) During the course of or in connection with his duties during the term of this Agreement, or (c) With the use of time or materials of the Company. The Employee agrees to communicate to the Company or its representatives all facts known to him concerning such inventions, to sign all rightful papers, make a rightful oaths and generally to do every thing possible to aid the Company in obtaining and enforcing proper patent protection for all such inventions in all countries and in vesting title to such inventions and patents in the Company. For the purpose of this Agreement, the subject matter of any application for patent naming Employee as a sole or joint inventor filed during the course of employment or within one year subsequent to the termination thereof shall be deemed to be an invention made or conceived by him during the course of his employment by the Company and assignable to the Company hereunder, unless the Employee establishes by a preponderance of the evidence that such invention was made or conceived by him subsequent to termination of his employment hereunder. At the Company's request (during or after the term of this Agreement) and expense, the Employee will promptly execute a specific assignment of title to the Company, and perform any other acts reasonably necessary to implement the foregoing assignment. 17. BINDING EFFECT. This Agreement shall be binding upon and inure to the benefit of: (a) The Company, and any successors or assigns of the Company, whether by way of a merger or consolidation, or liquidation of the Company, or by way of the Company selling all or substantially all of the assets of the Company, or a division thereof, to a successor entity; however, in the event of the assignment by the Company of this Agreement, the Company shall nevertheless remain liable and obligated to the Employee in accordance with the terms hereof; and (b) The Employee, his estate, his executors, administrators, heirs and beneficiaries. 18. NOTICE. Any notice or other EX-13 5 PARTS OF ANNUAL REPORT INCORPORATED BY REFERENCE Ogden Projects, Inc. and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED OPERATIONS The following discussion and analysis should be read in conjunction with the Company's Consolidated Financial Statements and notes thereto. RESULTS OF OPERATIONS Year Ended December 31, 1993, Compared with 1992 Income from services (service revenues less operating costs and debt service charges) in 1993 of $76,403,000 was $8,527,000 higher than in 1992 due primarily to enhanced performance at certain existing facilities and the income generated at the three waste-to-energy facilities operated as part of the acquisition of RRS Holdings, Inc. ("RRS") in 1993. Construction profit (construction revenues less construction costs) of $16,495,000 in 1993 was $6,339,000 higher than in 1992 due primarily to increased construction activity during 1993. Service revenues for the year ended December 31, 1993 were $60,940,000 higher than in 1992. This increase was due primarily to the addition of the three RRS facilities in 1993. Construction revenues in 1993 were $154,083,000 higher than in 1992. This increase was primarily due to a full year of construction activity in 1993 at the Lee County, Florida, facility which broke ground in October 1992, new construction activity at the Montgomery County, Maryland, facility which broke ground in April 1993, and construction activity relating to the retrofit project at the Detroit, Michigan, facility which was part of the acquisition of RRS. These increases were partially offset by reduced construction activity for the year at the Union County, New Jersey, facility as the project nears completion. Additionally, $7,681,000 of construction revenues was recognized in 1992 on the sale of limited partnership interests in and related tax benefits of the Huntington, New York, waste-to-energy facility. Construction of the Union County facility is expected to be completed in the early part of 1994, while construction of the other three facilities is expected to continue throughout the entire year. The company recognizes profit on the percentage-of-completion method commencing at the level of completion at which the total profit is reasonably determinable. Operating costs increased $53,483,000 in 1993 compared to 1992. This increase was due primarily to the three RRS facilities being included in the results of operations during 1993,including the costs to overhaul the acquired facilities. Operating costs included $35,134,000 and $34,551,000 in 1993 and 1992, respectively, for depreciation of waste-to-energy facilities. General and administrative expenses in 1993 increased $7,492,000 compared to 1992 due primarily to increased marketing efforts associated with the development of new business. In December 1993, the Company adopted a plan to discontinue its fixed-site hazardous waste business. The net charge for all discontinued operations activity in 1993, which was not material, has been included in other deductions. See Note 3 for a further discussion on discontinued operations. The effective rate of the charge equivalent to income taxes for 1993 was 45.5% as compared to 40.0% in 1992. This increase was due primarily to the Omnibus Budget Reconciliation Act of 1993, enacted in August 1993, which increased the corporate Federal income tax rate from 34% to 35% retroactively to January 1, 1993. In accordance with the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", the net deferred income tax liabilities were adjusted for the effect of the change in rate, resulting in a one-time charge of $4,402,000 in 1993. Year Ended December 31, 1992, Compared with 1991 Income from services in 1992 of $67,876,000 was $14,343,000 higher than in 1991 due primarily to six additional waste-to-energy facilities in operation throughout the entire year, partially offset by increased maintenance and repair costs incurred in 1992 at certain facilities. Construction profit of $10,156,000 in 1992 was $11,492,000 lower than in 1991 due primarily to a decrease of $10,098,000 in the construction revenues recognized in 1992 from the sale of limited partnership interests and related tax benefits of the Huntington facility. Service revenues for the year ended December 31, 1992 were $50,308,000 higher than in 1991. This increase was due primarily to six facilities that were in operation for only a portion of 1991 generating revenue for the entire year in 1992. Construction revenues in 1992 were $51,488,000 higher than in 1991. This increase was primarily attributable to increased construction activity at the Union County waste-to-energy facility and the commencement of construction at the Lee County waste-to-energy facility, partially offset by lower construction revenues recognized on the aforementioned sale of limited partnership interests and related tax benefits. Operating costs increased $25,189,000 in 1992 as compared to 1991. This increase was due primarily to the six facilities that were in operation for only a portion of 1991 incurring costs for the full year in 1992 as well as from additional maintenance and repair costs incurred in 1992 at certain other operating facilities. Operating costs included $34,551,000 and $26,911,000 in 1992 and 1991, respectively, for depreciation of waste-to-energy facilities. Debt service charges in 1992 were $10,776,000 higher than in 1991. This increase was due primarily to four additional privately-owned waste-to-energy facilities, which were in commercial operation for only a portion of 1991, incurring debt service charges for the full year in 1992. Such increase was partially offset by a reduction in interest rates in 1992 on various adjustable rate revenue bonds. Effective January 1, 1992, the Company adopted the provisions of SFAS No. 109. The adoption of this standard required the Company to recognize the benefit of certain deferred tax assets that were not recognizable under previous standards. This benefit of $43,852,000 was recognized as a cumulative effect of a change in accounting principle in 1992. The effective rate of the charge equivalent to income taxes increased to 40.0% in 1992 from 26.3% in 1991 principally as a result of the adoption of SFAS No. 109. The Company adopted Statement of Financial Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions", effective January 1, 1993. This Statement requires the accrual of the obligation for future costs of health benefits after retirement during the period employees render the service necessary to earn the benefits. In 1992, the Company discontinued its policy of providing postretirement health care and life insurance benefits for its employees, except those employees that were retired or eligible for retirement at December 31, 1992. The estimated accumulated postretirement benefit obligation as of January 1, 1993 and the effect on current results of operations from the implementation of SFAS No. 106 were not material. Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits", was issued in November 1992 and is effective for fiscal years beginning after December 15, 1993. This Statement establishes accounting standards for the estimated cost of benefits provided by an employer to former or inactive employees after employment but before retirement and requires the accrual of the future cost of postemployment benefits. The implementation of SFAS No. 112 will not have a material effect on the Company's consolidated financial position or results of operations. FINANCIAL CONDITION December 31, 1993, Compared with December 31, 1992 Receivables at December 31, 1993 increased by $49,990,000 due primarily to $15,000,000 related to the RRS facilities, $14,460,000 related to construction activity, and $22,962,000 which reflects amounts recorded for services performed currently which will be billed by contract at later dates. Restricted funds held in trust decreased by $60,347,000 during 1993 principally as a result of funds disbursed to cover expenditures for the privately-owned Onondaga County, New York, waste-to-energy facility. Property, plant, and equipment at December 31, 1993 increased by $45,144,000. This increase was due primarily to construction costs incurred on the Onondaga County facility, partially offset by normal depreciation for the year. Contract acquisition costs at December 31, 1993 increased by $39,318,000 due primarily to the amounts associated with the acquisition of RRS. Other liabilities increased by $20,794,000 in 1993 due primarily to billings in excess of costs on uncompleted construction contracts and additional retainage on construction in progress. LIQUIDITY AND CAPITAL RESOURCES The Company's most significant cash requirements are for construction expenditures for its privately-owned waste-to-energy facilities. The project debt associated with the financing of such facilities is generally arranged by municipalities through the issuance of tax-exempt or taxable revenue bonds. In addition to the proceeds of these revenue bonds, generally between 10% and 25% of the cost of construction is invested by operating subsidiaries in each of the facilities they own. Additional significant cash requirements include expenditures for project proposal and development efforts, acquisitions, the equity portion of rent for the lease under the Tulsa sale and leaseback arrangements, and normal replacement, modernization, and growth. The Company's cash needs in excess of funds provided by project debt have been met by cash generated from operations, the sale of limited partnership interests and related tax benefits, and amounts held by Ogden on behalf of the Company. Funds from Ogden may also include payments to the Company under a tax sharing agreement. The Company expects that its cash requirements will continue to be met from the proceeds of project debt, from operations and, if necessary, from amounts held by Ogden. Ogden has stated that it intends to continue to fund the Company's cash requirements as necessary. Such funding is expected to be provided in the form of advances repayable on demand which bear interest at a mutually agreed rate. The Company advances its excess cash to Ogden to be invested by Ogden at a mutually agreed rate. Advances to Ogden totaled $136,664,000 at December 31, 1993. At December 31, 1993, commitments for direct-equity investments in waste-to-energy facilities, exclusive of funds provided by project debt issued by municipalities and municipal agencies, and for normal replacement, modernization, and growth amounted to $24,909,000, which is expected to be expended over the next 18 months. Ogden Projects, Inc. and Subsidiaries SELECTED FINANCIAL DATA
December 31, 1993 1992(a) 1991 1990 1989 (In thousands of dollars, except per-share amounts) TOTAL REVENUES............................. $ 681,060 $ 466,037 $ 364,241 $ 362,600 $ 321,713 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE........... 80,214 71,719 69,652 48,319 31,912 INCOME (LOSS) FROM: Continuing operations...................... 43,726 43,007 52,560 39,159 26,303 Discontinued operations.................... (20,101) (3,100) (877) Cumulative effect of change in accounting principle..................... 43,852 Net income................................. 43,726 86,859 32,459 36,059 25,426 EARNINGS (LOSS) PER COMMON SHARE: Continuing operations...................... 1.15 1.14 1.40 1.07 .77 Discontinued operations.................... (.54) (.08) (.03) Cumulative effect of change in accounting principle.................... 1.16 Total...................................... 1.15 2.30 .86 .99 .74 TOTAL ASSETS............................... 2,432,327 2,287,284 2,006,080 1,884,891 1,874,267 LONG-TERM OBLIGATIONS: Project Debt............................... 1,551,366 1,582,813 1,444,680 1,363,205 1,377,730 Other borrowings........................... 28,423 28,423 28,423 Total............................ 1,579,789 1,611,236 1,473,103 1,363,205 1,377,730 REDEEMABLE PREFERRED STOCK PLUS ACCRUED DIVIDENDS................................ 14,913 COMMON STOCKHOLDERS' EQUITY................ 389,863 344,052 253,763 218,939 145,252 COMMON STOCKHOLDERS' EQUITY PER SHARE...... 10.26 9.08 6.74 5.84 4.05 - ------------ (a) See Note 10 to the Consolidated Financial Statements for the effect of a change in accounting principle effective January 1, 1992.
Ogden Projects, Inc. and Subsidiaries STATEMENTS OF CONSOLIDATED INCOME
For the years ended December 31, 1993 1992 1991 REVENUES: Service revenues............. $432,609,000 $371,669,000 $321,361,000 Construction revenues........ 248,451,000 94,368,000 42,880,000 Total revenues........... 681,060,000 466,037,000 364,241,000 COSTS AND EXPENSES: Operating costs.............. 257,542,000 204,059,000 178,870,000 Construction costs........... 231,956,000 84,212,000 21,232,000 Debt service charges......... 98,664,000 99,734,000 88,958,000 General and administrative expenses................... 16,066,000 8,574,000 6,813,000 Other deductions (income) - net........................ (3,382,000) (2,261,000) (1,284,000) Total costs and expenses. 600,846,000 394,318,000 294,589,000 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.................. 80,214,000 71,719,000 69,652,000 Charge equivalent to income taxes...................... (36,488,000) (28,712,000) (17,092,000) INCOME FROM CONTINUING OPERATIONS................. 43,726,000 43,007,000 52,560,000 LOSS FROM DISCONTINUED OPERATIONS................. (20,101,000) CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE.... 43,852,000 NET INCOME................... $ 43,726,000 $ 86,859,000 $ 32,459,000 EARNINGS PER SHARE OF COMMON STOCK: Income from continuing operations................. $ 1.15 $ 1.14 $ 1.40 Loss from discontinued operations................. (.54) Cumulative effect of change in accounting principle.... 1.16 Total........................ $ 1.15 $ 2.30 $ .86 See Notes to Consolidated Financial Statements
Ogden Projects, Inc. and Subsidiaries CONSOLIDATED BALANCE SHEETS
ASSETS December 31, 1993 1992 Cash..................................... $ 3,558,000 $ 7,938,000 Receivables (net of allowances of $7,321,000 in 1993 and $4,776,000 in 1992).................................. 224,561,000 174,571,000 Restricted funds......................... 359,416,000 419,763,000 Property, plant, and equipment........... 1,563,362,000 1,518,218,000 Contract acquisition costs............... 55,519,000 16,201,000 Unamortized bond issuance costs.......... 36,984,000 39,945,000 Due from affiliated companies............ 136,664,000 64,696,000 Other assets............................. 52,263,000 45,952,000 TOTAL ASSETS............................. $ 2,432,327,000 $ 2,287,284,000 LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable......................... $ 24,647,000 $ 11,681,000 Accrued expenses......................... 156,806,000 110,490,000 Project Debt: Revenue bonds issued by and prime responsibility of municipalities.. 1,210,935,000 1,234,910,000 Revenue bonds issued by municipal agencies with sufficient service revenues guaranteed by third parties........................... 340,431,000 347,903,000 Other borrowings......................... 28,423,000 28,423,000 Deferred income.......................... 52,028,000 52,613,000 Deferred income taxes.................... 155,130,000 102,353,000 Minority interest........................ 12,130,000 13,719,000 Other liabilities........................ 61,934,000 41,140,000 Total liabilities.................... 2,042,464,000 1,943,232,000 Common Stockholders' Equity: Common stock: authorized, 40,000,000 shares of $.50 par value; shares outstanding: 38,010,000 in 1993 and 37,872,000 in 1992..................... 19,005,000 18,936,000 Additional Capital: Paid-in surplus.......................... 150,445,000 148,429,000 Retained earnings........................ 220,413,000 176,687,000 Total additional capital............. 370,858,000 325,116,000 Common stockholders' equity.......... 389,863,000 344,052,000 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY................................. $ 2,432,327,000 $ 2,287,284,000 See Notes to Consolidated Financial Statements
Ogden Projects, Inc. and Subsidiaries STATEMENTS OF COMMON STOCKHOLDERS' EQUITY
For the years ended December 31, 1993 1992 1991 COMMON STOCK (AUTHORIZED, 40,000,000 SHARES OF $.50 PAR VALUE): Issuance of shares upon exercise of stock options.. $ 69,000 $ 110,000 $ 76,000 Balance at beginning of year. 18,936,000 18,826,000 18,750,000 Balance at end of year... 19,005,000 18,936,000 18,826,000 ADDITIONAL CAPITAL: Paid-in Surplus: Issuance of shares upon exercise of stock options.. 2,016,000 3,320,000 2,289,000 Balance at beginning of year. 148,429,000 145,109,000 142,820,000 Balance at end of year... 150,445,000 148,429,000 145,109,000 Retained Earnings: Net income for year.......... 43,726,000 86,859,000 32,459,000 Balance at beginning of year. 176,687,000 89,828,000 57,369,000 Balance at end of year... 220,413,000 176,687,000 89,828,000 Total additional capital..... 370,858,000 325,116,000 234,937,000 COMMON STOCKHOLDERS' EQUITY.. $ 389,863,000 $ 344,052,000 $ 253,763,000 See Notes to Consolidated Financial Statements
Ogden Projects, Inc. and Subsidiaries STATEMENTS OF CONSOLIDATED CASH FLOWS
For the years ended December 31, 1993 1992 1991 CASH FLOWS FROM OPERATING ACTIVITIES: Net income...................... $ 43,726,000 $ 86,859,000 $ 32,459,000 Adjustments to reconcile net income to net cash provided by operating activities: Cumulative effect of change in accounting principle.......... (43,852,000) Depreciation and amortization... 47,168,000 42,156,000 34,031,000 Deferred income taxes........... 53,231,000 37,224,000 23,844,000 Estimated loss on disposal of discontinued operations....... 17,373,000 Other........................... (5,526,000) (5,529,000) 6,877,000 Management of Operating Assets and Liabilities: Receivables..................... (40,674,000) (48,614,000) (7,850,000) Other assets.................... (26,050,000) (22,486,000) (25,959,000) Accounts payable and accrued expenses...................... 51,337,000 17,081,000 (15,265,000) Deferred income................. (1,152,000) (926,000) 364,000 Billings in excess of costs and estimated profit on uncompleted contracts..................... 21,128,000 7,649,000 2,533,000 Other liabilities............... 7,477,000 (3,692,000) (4,735,000) Net operating activities of discontinued operations....... (636,000) (2,959,000) 3,004,000 Net cash provided by operating activities...... 150,029,000 62,911,000 66,676,000 CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of revenue bonds....... 225,686,000 1,800,000 Repayments and advances to affiliated companies.......... (52,005,000) (27,186,000) (31,631,000) Decreases in (additions to) restricted funds held in trust 60,347,000 (139,705,000) 161,271,000 Repayment of revenue bonds...... (31,447,000) (95,462,000) (122,855,000) Proceeds from exercise of stock options....................... 1,631,000 2,623,000 2,365,000 Distributions to minority partners...................... (2,040,000) (1,932,000) (588,000) Other financing activities...... (1,446,000) (48,000) Net cash provided by (used in) financing activities................ (24,960,000) (35,976,000) 10,314,000 CASH FLOWS FROM INVESTING ACTIVITIES: Investments in waste-to-energy facilities.................... (77,777,000) (29,856,000) (68,144,000) Entities purchased, net of cash acquired...................... (47,696,000) (13,240,000) Other property, plant, and equipment expenditures........ (4,035,000) (3,433,000) (4,069,000) Proceeds from sale of property and equipment................. 59,000 91,000 Proceeds from sale of limited partnership interests......... 8,238,000 10,521,000 Net investing activities of discontinued operations....... 827,000 Net cash used in investing activities................ (129,449,000) (24,960,000) (74,105,000) NET INCREASE (DECREASE) IN CASH. (4,380,000) 1,975,000 2,885,000 CASH AT BEGINNING OF YEAR....... 7,938,000 5,963,000 3,078,000 CASH AT END OF YEAR............. $ 3,558,000 $ 7,938,000 $ 5,963,000 See Notes to Consolidated Financial Statements
Ogden Projects, Inc. and Subsidianes NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ORGANIZATION AND OPERATIONS ORGANIZATION: Ogden Projects, Inc. ("OPI") and its subsidiaries (the "Company") design, build, and operate, with affiliated companies, waste-to-energy facilities utilizing the mass-burn combustion technology of Martin GmbH fur Umwelt-und Energietechnik of Germany ("Martin"). Ogden Martin Systems, Inc. ("OMS"), a subsidiary of the Company, holds the exclusive rights to develop and market facilities utilizing the Martin technology in North America, most of Central and South America, and certain other countries, for which royalty and other fees are paid. The Company also operates, and in certain instances owns, waste-to-energy facilities utilizing technologies other than the Martin technology. The Company's parent is Ogden Corporation ("Ogden"), which owns 84.2% of the capital stock of OPI. OPERATIONS: Through certain of its subsidiaries, the Company is responsible, through long-term contracts, for the operation and maintenance of both privately-owned waste-to-energy facilities (in which equity of approximately 10% to 25% of the facility price is invested by the Company) and such facilities owned solely by municipalities or unrelated third parties. The Company, through these subsidiaries, is also responsible for the construction of all facilities except those acquired after completion. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The Consolidated Financial Statements include the accounts of OPI and all of its subsidiaries. All intercompany accounts and transactions have been eliminated in the Consolidated Financial Statements. SERVICE REVENUES: Service revenues represent the fees earned under long-term contracts to operate and maintain the waste-to-energy facilities and, with respect to privately-owned facilities, to service the facilities' debt. Additional fees are earned from the processing of excess waste and from energy generation. The Company typically receives all of the revenue for electricity and steam sales or, in certain cases, alternative fees during the facility's start-up period prior to the date the facility is accepted for full commercial operation by the municipality. Upon acceptance for commercial operation, revenues from energy sales are generally allocated 90% to the municipality and 10% to the Company. Long-term unbilled receivables for services performed currently, which are due by contract at a later date, are discounted in recognizing the present value of such services. CONSTRUCTION REVENUES: Construction revenues from waste-to-energy facilities which are not owned by the Company are recognized as work progresses on the percentage-of-completion method based on the percentage of costs incurred to date to total estimated costs. Profit recognition on individual contracts commences when construction has progressed to the point at which the total profit is reasonably determinable. Estimated losses are provided in full as soon as identified. In addition, construction revenues include amounts relating to sales of limited partnership interests and related tax benefits as well as other activities prior to the commencement of commercial operations. RESTRICTED FUNDS: Restricted funds represent proceeds from the financing of privately-owned facilities. Funds are held in trust and released as expenditures are made or upon satisfaction of conditions provided under the respective trust agreements. PROPERTY, PLANT, AND EQUIPMENT: For those facilities that the Company owns, the construction costs are capitalized in property, plant, and equipment. Property, plant, and equipment is stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets, which range generally from 50 years for waste-to-energy facilities to five years for certain machinery and equipment, for financial reporting purposes. Accelerated depreciation is generally used for Federal income tax purposes. Landfill costs are amortized based on the rate at which the total estimated capacity of such landfill cell is used. CONTRACT ACQUISITION COSTS: Costs associated with the acquisition of certain contracts are amortized over the term of the respective contract. BOND ISSUANCE COSTS: Costs incurred in connection with issuance of revenue bonds are amortized over the terms of the respective debt issues. DEFERRED CHARGES ON PROJECTS: Costs incurred in connection with certain project development efforts are deferred until the award of the related project is determined. Costs on awarded projects are deferred until the commencement of construction, at which time they are either capitalized in property, plant, and equipment for privately-owned facilities or charged to construction costs for municipally-owned facilities. Costs associated with general marketing efforts and with projects which are no longer under consideration are charged to operating costs. INCOME TAXES: The Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", effective January 1, 1992. The Company and its subsidiaries are included in the consolidated Federal income tax return of Ogden. A tax sharing agreement among Ogden and its principal subsidiaries provides for payments to those affiliated groups that generate tax deductions and credits that are used to reduce taxable income otherwise payable by the Ogden consolidated group. EARNINGS PER SHARE OF COMMON STOCK: Earnings per common share are computed by dividing net income by the weighted average of the number of shares of common stock outstanding. The weighted average number of shares outstanding during each period were as follows:
1993 1992 1991 Weighted average shares outstanding... 37,948,000 37,828,000 37,570,000
RECLASSIFICATIONS: Prior-year amounts in the accompanying financial statements have been reclassified to conform with the 1993 presentation. 3. DISCONTINUED OPERATIONS In December 1993, the Company adopted a plan to discontinue its fixed-site hazardous waste business (the "hazardous waste business"). As part of the disposal of this business, the Company ceased all development activities and in 1994 intends to dispose of the assets related to this business, primarily a permit to build and operate a hazardous waste incineration facility. Provision has been made in 1993 for the write down of assets resulting in a pretax loss of $12,629,000. In December 1991, the Company adopted a plan to discontinue its on-site remediation business utilizing mobile technology (the "remediation business"). During 1993, the Company recognized a pretax gain from the remediation business totaling $12,379,000. This gain resulted primarily from the receipt of amounts previously withheld pending satisfactory completion of obligations under existing contracts and from proceeds received from the sale of assets in excess of previously estimated net realizable values. For the year ended December 31, 1993, the net loss of $250,000 from discontinued operations is included in "Other deductions (income)-net" in the Statement of Consolidated Income. At December 31, 1993, the remaining net liabilities of approximately $1,000,000 related to discontinued operations are included in "Other liabilities" in the accompanying Consolidated Balance Sheet. For the year ended December 31, 1991, the results of operations of the discontinued remediation business, and the estimated loss on disposal, presented as Discontinued Operations in the accompanying Statement of Consolidated Income (expressed in thousands of dollars), were as follows: Service revenues and other income................................. $ 4,540 Operating costs................................................... 8,014 Loss from operations before taxes................................. (3,474) Benefit equivalent to income taxes................................ 746 Loss from operations.............................................. (2,728) Loss on disposal (net of income tax benefit of $4,747)............ (17,373) Loss from discontinued operations................................. $(20,101) --------
4. ACQUISITION On January 8, 1993, the Company completed the purchase of all of the outstanding capital stock of RRS Holdings, Inc. ("RRS"), the United States waste-to-energy subsidiary of Asea Brown Boveri Inc. The purchase price of $47,696,000 was paid from amounts held by Ogden on behalf of the Company. The assets acquired consisted primarily of long-term contracts to operate three municipally-owned waste-to-energy facilities in Detroit, Michigan; Honolulu, Hawaii; and Hartford, Connecticut. The acquisition was accounted for using the purchase method of accounting. Accordingly, the assets and liabilities of RRS have been recorded at their estimated fair values at the date of acquisition and are included in the Consolidated Balance Sheet of the Company at December 31, 1993. The results of operations of RRS have been included in the Statements of Consolidated Income of the Company since the date of acquisition. The unaudited pro forma total revenues of the Company and RRS for the year ended December 31, 1992 were $551,708,000, calculated as if the acquisition had occurred on January 1, 1992. The effect on income from continuing operations, net income, and earnings per share is not material. The pro forma information is for comparative purposes only and does not purport to be indicative of the results of operations that would have occurred had the acquisition been consummated at the beginning of 1992 or of results which may occur in the future. 5. RECEIVABLES Receivables (expressed in thousands of dollars) were comprised of the following:
1993 1992 Billed services....................................... $ 68,082 $ 51,333 Unbilled services..................................... 108,108 85,146 Construction contract billings........................ 22,025 13,361 Costs in excess of billings on uncompleted construction contracts.............................. 435 7,678 Retainage on uncompleted construction contracts....... 17,447 4,408 Other................................................. 15,785 17,421 Allowance for doubtful accounts....................... (7,321) (4,776) Total................................................. $224,561 $174,571
Unbilled service revenues due from municipalities at December 31, 1993 are scheduled, by contract, to be billed as follows: $27,026,000 in 1994, $32,075,000 in 1995, and $49,007,000 thereafter. 6. RESTRICTED FUNDS HELD IN TRUST Funds held by trustees from proceeds received from financing of facilities are segregated principally for the construction of the waste-to-energy facilities, debt service reserves for payment of principal and interest on revenue bonds, and capitalized interest for payment of interest generally during the construction period. Such funds are invested principally in United States Treasury bills and notes and United States government agencies securities. Fund balances (expressed in thousands of dollars) were as follows:
1993 1992 Construction funds.................................... $ 71,725 $129,913 Debt service funds.................................... 197,649 195,841 Capitalized interest funds............................ 19,289 28,788 Other funds........................................... 70,753 65,221 Total................................................. $359,416 $419,763
Based on anticipated construction schedules, the remaining construction funds at December 31, 1993 are expected to be disbursed as follows: $41,701,000 in 1994 and $30,024,000 in 1995. 7. PROPERTY, PLANT, AND EQUIPMENT Property, plant, and equipment (expressed in thousands of dollars) consisted of the following:
1993 1992 Land............................................. $ 5,049 $ 5,049 Waste-to-energy facilities....................... 1,539,373 1,538,762 Buildings and improvements....................... 48,146 39,498 Machinery and equipment.......................... 23,016 19,228 Landfills........................................ 8,464 8,306 Construction in progress......................... 95,789 24,993 Total............................................ 1,719,837 1,635,836 Less accumulated depreciation and amortization... 156,475 117,618 Net.............................................. $1,563,362 $1,518,218
Depreciation and amortization (expressed in thousands of dollars) charged to expense were as follows:
1993 1992 1991 Waste-to-energy facilities, including improvements..................... $35,134 $34,551 $26,911 Machinery and equipment...................... 2,661 2,162 1,702 Landfills.................................... 363 32 609 Total........................................ $38,158 $36,745 $29,222
8. OTHER ASSETS Other assets (expressed in thousands of dollars) were comprised of the following:
1993 1992 Deferred charges on projects - net...................... $12,704 $16,014 Spare parts............................................. 25,825 16,458 Prepaid insurance....................................... 8,391 4,363 Other................................................... 5,343 9,117 Total................................................... $52,263 $45,952
9. ACCRUED EXPENSES Accrued expenses (expressed in thousands of dollars) consisted of the following:
1993 1992 Interest.............................................. $ 36,430 $ 34,252 Construction costs.................................... 27,314 11,828 Lease payments........................................ 12,234 10,906 Insurance............................................. 16,201 8,869 Municipalities' share of service revenues............. 18,747 12,764 Other................................................. 45,880 31,871 Total................................................. $156,806 $110,490
10. INCOME TAXES Effective January 1, 1992, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes". SFAS No. 109 requires the asset and liability method of accounting for income taxes. Under the asset and liability method, deferred taxes are recognized based on the expected future tax consequences of events that have been included in the financial statements or tax returns by applying currently enacted statutory tax rates applicable to future years to differences between the financial statement and tax bases of assets and liabilities. This standard required the Company to recognize the benefit of certain deferred tax assets that were not recognizable under the previous standard, Accounting Principles Board Opinion (APB) No. 11. This benefit of $43,852,000, or $1.16 per share, as of January 1, 1992 was recognized in the first quarter of 1992 as a cumulative effect of a change in accounting principle. In August 1993, the Omnibus Budget Reconciliation Act of 1993 was enacted which, among other things, increased the corporate Federal income tax rate from 34% to 35%, effective retroactively to January 1, 1993. In accordance with the provisions of SFAS No. 109, the effect of the change in rate, primarily a $4,402,000 adjustment of deferred tax liabilities and assets, is included in the charge equivalent to income taxes for the current year. The components of the charge equivalent to income taxes (expressed in thousands of dollars) were as follows:
1993 1992 1991 CURRENT: State........................................ $ 2,724 $ 1,381 $ 1,677 DEFERRED: Federal...................................... 29,461 22,176 8,804 State........................................ 4,303 5,155 4,739 Total deferred............................... 33,764 27,331 13,543 Total charge equivalent to income taxes...... 36,488 28,712 15,220 Reduction in charge equivalent to income taxes for benefits utilized by Ogden affiliates................................. (3,621) Charge equivalent to income taxes............ $36,488 $28,712 $11,599
The charge equivalent to income taxes (expressed in thousands of dollars) on a separate group return basis varied from the Federal statutory income tax rate due to the following:
1993 1992 1991 Taxes at statutory rate...................... $28,075 $24,385 $14,980 State income taxes, net of Federal tax beneft..................................... 4,568 4,313 4,235 Investment tax credits....................... (1,807) (4,717) Adjustment of deferred tax balances.......... 4,402 Benefits utilized by Ogden affiliates........ (3,621) Other - net.................................. 1,250 14 722 Charge equivalent to income taxes............ $36,488 $28,712 $11,599 Statutory rate............................... 35.0% 34.0% 34.0% Effective rate............................... 45.5% 40.0% 26.3%
The charge (benefit) equivalent to income taxes (expressed in thousands of dollars) was included in the financial statements as follows:
1993 1992 1991 Continuing operations........................ $36,488 $28,712 $17,092 Discontinued operations...................... (5,493) Charge equivalent to income taxes............ $36,488 $28,712 $11,599
Deferred income taxes were determined under the provisions of SFAS No. 109 for 1993 and 1992 and under the provisions of APB No. 11 for 1991. Deferred income tax (credits) charges for 1991 (expressed in thousands of dollars), arising from differences between tax and financial reporting, were as follows: Interest income.................................................... $(1,672) Deferred income.................................................... 7,770 Investment tax credits............................................. 2,430 Depreciation....................................................... 62,786 Investment tax credit carryforwards................................ (7,148) Net operating loss carryforwards................................... (49,778) Accrued expenses................................................... (1,150) Waste-to-energy facility grant..................................... (1,438) Disposal of discontinued operations................................ (7,521) Sale of limited partnership interests.............................. 8,532 Other - net........................................................ 732 Total.............................................................. $13,543 -------
The components of the net deferred income tax liability (expressed in thousands of dollars) at December 31, 1993 and 1992 were as follows:
1993 1992 Deferred tax assets: Deferred income................................... $ 21,690 $ 17,660 Accrued expenses.................................. 28,780 25,741 Investment tax credits............................ 80,097 77,317 Net operating loss carryforwards.................. 157,347 145,170 Total deferred tax assets......................... 287,914 265,888 Deferred tax liabilities: Unbilled accounts receivable...................... 29,490 22,040 Property, plant, and equipment.................... 406,828 340,363 Other............................................. 6,726 5,838 Total deferred tax liabilities.................... 443,044 368,241 Net deferred tax liability............................ $155,130 $102,353
Under the tax sharing agreement with Ogden, investment and other tax credits recognizable in connection with such tax sharing arrangement are reflected as a reduction of the charge equivalent to income taxes in the accompanying Statement of Consolidated Income for the year ended December 31, 1991. For the years ended December 31, 1993 and 1992, these payments from Ogden are reflected as a reduction of the deferred tax assets. At December 31, 1993, the Company had investment and other tax credit carryforwards with Ogden for Federal income tax purposes of approximately $80,100,000 and net operating loss carryforwards of approximately $364,600,000. The carryforwards will expire in 2004 through 2008. Deferred Federal income taxes have been reduced by the tax effect of these amounts. Under the tax sharing agreement, the Company received $19,963,000, $13,008,000, and $9,718,000 for 1993,1992, and 1991, respectively, primarily for utilization of its tax deductions (principally accelerated depreciation) against taxable income otherwise payable by the Ogden consolidated tax group. The utilization of these deductions by other Ogden affiliates resulted in a reduction in the charge equivalent to income taxes (expressed in thousands of dollars) in 1991 as follows: Tax deductions of the Company utilized by the Ogden consolidated group................................................ $9,718 Deferred taxes provided............................................. 6,097 Reduction in charge equivalent to income taxes...................... $3,621 ------ ------
11. PROJECT DEBT Project debt (expressed in thousands of dollars) is summarized as follows:
1993 1992 Revenue Bonds Issued by and Prime Responsibility of Municipalities: 3.5-10% serial revenue bonds maturing 1994 through 2005........................ $ 257,180 $ 269,055 5.4-10% term revenue bonds due 1995 through 2019.... 934,685 865,285 Adjustable rate revenue bonds due 1994 through 2013. 19,070 100,570 Total............................................... 1,210,935 1,234,910 Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties: 4.15-8.9% serial revenue bonds maturing 1994 through 2007...................................... 91,290 94,280 7.25-7.4% term revenue bonds due 1999 through 2011.. 105,610 105,610 Adjustable rate revenue bonds due 1994 through 2011. 143,531 148,013 Total............................................... 340,431 347,903 Total project debt.................................. $1,551,366 $1,582,813
The project debt associated with the financing of waste-to-energy facilities is generally arranged by municipalities through the issuance of tax-exempt and taxable revenue bonds. The category "Revenue Bonds Issued by and Prime Responsibility of Municipalities" includes bonds issued with respect to which debt service is an explicit component of the client community's obligation under the related service agreement. In the event that a municipality is unable to satisfy its payment obligations, the bondholders' recourse with respect to the Company is limited to the waste-to-energy facility and restricted funds pledged to secure such obligation. The category "Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties" includes bonds issued to finance three facilities for which contractual obligations of third parties to deliver waste ensure sufficient revenues to pay debt service, although such debt service is not an explicit component of a third party's service fee obligation. Payment obligations for the project debt, which are limited recourse to the Operating Subsidiary and nonrecourse to the Company and Ogden, subject to construction and operating performance guarantees and commitments, are secured by the revenues pledged under the respective indentures and are collateralized principally by assets of the respective Operating Subsidiary. At December 31, 1993, such project debt is collateralized by property, plant, and equipment with a net carrying value of $1,534,958,000, credit enhancements of approximately $200,000,000 for which Ogden has certain reimbursement obligations, and substantially all of the restricted funds held in trust (see Note 6). The interest rates on adjustable rate revenue bonds are adjusted periodically to reflect current market rates, generally with an upside cap of 15%. The average adjustable rates during the years ended December 31, 1993 and 1992 were 2.65% and 3.40%, respectively. In May 1993, the Company entered into two interest rate swap agreements as hedges against interest rate exposure on certain adjustable rate revenue bonds in the category "Revenue Bonds Issued by Municipal Agencies with Sufficient Service Revenues Guaranteed by Third Parties". Both swap agreements expire in May 1999. Under one swap agreement, the Company pays a fixed rate of 3.95% per annum on a semi-annual basis and receives a floating rate based on an index of tax-exempt variable rate obligations. Under the second swap agreement, the Company pays a fixed rate of 5.25% per annum on a semi-annual basis and receives a floating rate based on a defined commercial paper rate. At December 31, 1993, the floating rates on the two swaps were 2.34% and 3.36%, respectively. The notional amounts of the swaps at December 31, 1993 were $91,070,000 and $48,305,000, respectively, and are reduced in accordance with the scheduled repayments of the applicable revenue bonds. The counterparties to both swaps are major financial institutions. The Company believes the credit risk associated with nonperformance is not significant. The maturities and sinking fund installments (expressed in thousands of dollars) on the project debt are as follows: 1994............................................................ $ 32,632 1995............................................................ 37,867 1996............................................................ 48,597 1997............................................................ 52,617 1998............................................................ 58,132 Later years..................................................... 1,321,521 Total........................................................... $1,551,366
Interest incurred, related capitalization of such interest costs, and amortization of bond issuance costs (expressed in thousands of dollars) were as follows:
1993 1992 1991 Interest incurred on taxable and tax-exempt borrowings............... $107,846 $99,828 $101,906 Interest earned on temporary investment of borrowings during construction, etc..... 9,985 6,095 8,919 Net interest incurred..................... 97,861 93,733 92,987 Interest capitalized during construction in property, plant, and equipment....... 5,538 753 9,166 Interest expense - net.................... 92,323 92,980 83,821 Amortization of bond issuance costs....... 6,341 6,754 5,137 Debt service charges...................... $ 98,664 $99,734 $ 88,958
12. DEFERRED INCOME Deferred income (expressed in thousands of dollars) was comprised of the following:
1993 1992 Sale and leaseback arrangement.......................... $27,930 $29,954 Advance billings to municipalities...................... 14,297 9,862 Other................................................... 9,801 12,797 Total................................................... $52,028 $52,613
The gain from a sale and leaseback arrangement (see Note 15) has been deferred and is being recognized in income as a credit against future rental expenses. 13. OTHER BORROWINGS AND OTHER LIABILITIES In 1991, the Company assumed an obligation for $28,423,000 representing the equity component of a sale and leaseback arrangement relating to the Hennepin County, Minnesota, waste-to-energy facility. This arrangement is accounted for as a financing. The obligation, which has an effective interest rate of 5% and does not require a principal payment in the next five years, extends through 2017. Other liabilities (expressed in thousands of dollars) were comprised of the following:
1993 1992 Retainage on construction in progress................... $11,136 $ 3,109 Lease reserve payments.................................. 10,605 10,605 Billings in excess of costs and estimated profit on uncompleted contracts................................. 17,939 4,235 Other................................................... 22,254 23,191 Total................................................... $61,934 $41,140
14. COMMON STOCK AND STOCK OPTIONS In 1989, the Board of Directors approved a non-qualified Employees' Stock Option Plan. Under such plan, options are granted to officers and key management employees to purchase common stock of the Company. Options granted prior to August 2, 1989 to certain employees of the Company became exercisable over a three-year period ending on December 31, 1991. Options granted prior to August 2, 1989 to all other persons, including persons employed by affiliates of the Company, became exercisable on August 9, 1989. The exercise price of such options for 797,000 shares is $11.90 per share. The exercise price for any options granted under the Employees' Stock Option Plan after August 2, 1989 is to be the fair market value as of the date of the grant. During 1990, options for 10,000 shares were granted at an exercise price of $24.75 per share. Such options became exercisable over a three-year period ending on December 31, 1992. As adopted, the plan calls for a maximum of 825,000 shares of the Company's common stock to be available for issuance upon exercise of options. Also in 1989, the Board of Directors approved a non-qualified Directors' Stock Option Plan. Under such plan, options to purchase 25,000 shares of common stock of the Company were granted to each person who as of August 9, 1989, was a director or member of the Advisory Board of the Board of Directors and who was not otherwise an employee of the Company, Ogden, or any of their respective affiliates. The exercise price of such options for 275,000 shares is $11.90 per share. The options became exercisable on August 9, 1989. As adopted, the plan calls for a maximum of 275,000 shares of the Company's common stock to be available for issuance upon exercise of options. Information regarding the activity of the Company's stock option plans is summarized as follows:
AVAILABLE OUTSTANDING EXERCISABLE FOR GRANT Balance at December 31,1990......... 943,334 872,334 30,666 Became exercisable.................. 66,333 Cancelled........................... (1,334) 1,334 Exercised........................... (152,998) (152,998) Balance at December 31,1991......... 789,002 785,669 32,000 Became exercisable.................. 3,333 Exercised........................... (220,500) (220,500) Balance at December 31,1992......... 568,502 568,502 32,000 Exercised........................... (137,000) (137,000) Balance at December 31, 1993........ 431,502 431,502 32,000
All options exercised or cancelled to date had an exercise price of $11.90 per share. At December 31, 1993, there were 463,502 shares of the Company's common stock reserved for issuance under such plans. 15. LEASES Total rental expenses amounted to $13,632,000, $13,306,000, and $13,420,000 for the years ended December 31, 1993, 1992, and 1991, respectively. In 1986 and 1987, the Company sold, under a sale and leaseback arrangement, its ownership interests in the Tulsa, Oklahoma, waste-to-energy facility for an aggregate sale price of $140,500,000, of which $92,375,000 represented the assumption of revenue bonds. These leases, which extend through 2012, are accounted for as operating leases. Future minimum rental payments (expressed in thousands of dollars) required under operating leases that have initial or remaining noncancelable lease terms in excess of one year, principally for the Tulsa facility leases, leases on waste-to-energy facility sites, and amounts to be paid under a leasehold for a landfill through 1997 at the rate of $2.71 per ton of waste, are as follows: 1994.............................................................. $ 12,845 1995.............................................................. 12,447 1996.............................................................. 14,561 1997.............................................................. 13,915 1998.............................................................. 13,748 Later years....................................................... 181,667 Total............................................................. $249,183
Operating leases at December 31, 1993 include $144,916,000 of future nonrecourse rental payments that are supported by third-party commitments to provide sufficient service revenues to meet such obligations. 16. RELATED PARTY TRANSACTIONS ADMINISTRATIVE SERVICE CHARGE: Ogden affiliates provide the Company with administrative services that include cash management, financing, employee benefits, insurance, and similar services. For such services, the Company incurred charges of $2,500,000, $2,364,000, and $2,364,000 for the years ended December 31, 1993, 1992, and 1991, respectively. In the opinion of management, such service charges have been made on a basis which is considered to be reasonable; however, these charges are not necessarily indicative of the total costs that the Company would have incurred had it operated on a stand-alone basis. CASH MANAGEMENT: The Company participates in Ogden's centralized cash management system whereby all of the Company's cash requirements are satisfied by Ogden affiliates; any excess cash is held by Ogden on behalf of the Company. Commencing April 1, 1991, the Company was charged or credited interest on advances from or to affiliated companies. During 1991, the Company was charged net interest in the amount of $81,000. During 1993 and 1992, the Company was credited for interest in the amount of $2,436,000 and $1,872,000, respectively. WASTE-TO-ENERGY FACILITY PERSONNEL: Except for the manager of facility administration, who is a Company employee, the work force at each facility is generally supplied, by agreement, by Ogden Services Corporation, an Ogden affiliate. The fee for such services, which is equal to payroll costs plus 10% of the respective facilities' total payroll, amounted to $79,982,000, $53,160,000, and $47,915,000 for the years ended December 31, 1993, 1992, and 1991, respectively. 17. RETIREMENT PLANS The pension plan provides benefits to substantially all of the salaried employees, normally upon retirement at age 65, based on years of service and average compensation for the most highly compensated five consecutive years out of the employee's last ten years of service. The Company's funding policy for this plan is to contribute annually an actuarially recommended amount no less than the minimum funding required by ERISA. Contributions are intended to provide not only for benefits attributed to service to date but also for those expected to be earned in the future. Benefits under the plan have been temporarily frozen as of December 31, 1993 due to the Plan not being able to satisfy certain tests under ERISA regulations effective January 1, 1994. Clarification of the new requirements is being sought and a final determination of the status of the plan is expected in 1994. The following table sets forth the pension plan's funded status at December 31, 1993 and 1992 (expressed in thousands of dollars):
1993 1992 Accumulated benefit obligations (including vested benefits of $3,248 and $1,698 in 1993 and 1992, respectively).................................... $ 4,163 $2,515 Projected benefit obligations............................ $ 6,614 $4,420 Plan assets, primarily common stocks and U S. government securities, at fair value.............................. 5,222 4,275 Underfunded projected benefits........................... $(1,392) $ (145) Source of Underfunded Status: Unrecognized net gains (losses) from past experience different from that assumed and effects of changes in assumptions.............................. $(1,265) $ 55 Unrecognized net transition asset being recognized over 16 years............................................... 428 483 Accrued pension costs.................................... (555) (683) Underfunded projected benefits........................... $(1,392) $ (145)
The 1993, 1992, and 1991 cost for the Company's pension plan included the following components (expressed in thousands of dollars):
1993 1992 1991 Service cost on benefits earned during the year....... $699 $674 $656 Interest cost on projected benefit obligations........ 371 294 226 Net amortization and deferral......................... (224) 126 119 Actual return on plan assets.......................... (188) (461) (357) Net pension cost...................................... $658 $633 $644
The expected long-term rate of return on plan assets was 8.0% at December 31, 1993, 1992 and 1991. The weighted average discount rate and the rate of increase in future compensation levels used in determining the actuarial present value of the projected benefit were as follows:
1993 1992 Discount rate................................................ 7.5 % 8.5 % Compensation increase........................................ 4.5 % 5.0 %
Contributions and costs for defined contribution plans are determined by a benefit formula based on a percentage of compensation as well as discretionary contributions. The cost for 1993, 1992, and 1991 was $1,950,000, $1,663,000, and $1,439,000, respectively. 18. SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Payments of debt service charges and income taxes (expressed in thousands of dollars) were as follows:
1993 1992 1991 ------- ------- -------- Interest paid (net of amounts capitalized).. $93,831 $96,416 $ 82,648 Charge equivalent to income taxes - net paid (refunded)................................ (99) 913 1,855
Noncash investing and financing activities (expressed in thousands of dollars) were as follows:
1993 1992 1991 Adjustment to acquired property, plant, and equipment to pretax amounts upon adoption of SFAS No 109................... $38,051 Acquisition of net assets in connection with a merger.................................. 4,375 Adjustment to property, plant, and equipment resulting from purchase price and contract cost adjustments................. $ 8,300 Detail of entities acquired: Fair value of assets acquired............... $62,438 $254,778 Cash paid for capital stock................. 47,696 13,250 Liabilities assumed......................... $14,742 $241,528
19. COMMITMENTS AND CONTINGENT LIABILITIES The Company and certain of its subsidiaries are contingently liable as a result of transactions arising in the ordinary course of business and are involved in legal proceedings in which damages and other remedies are sought. In the opinion of Company management, after review with counsel, the eventual disposition of these matters will not have a material adverse effect on the Company's Consolidated Financial Statements. The Company intends to indemnify Ogden for any payments Ogden or its affiliates may be required to make under credit enhancements and guarantees arising from the performance by the Company and its Operating Subsidiaries of obligations under construction and service agreements in connection with waste-to-energy facilities constructed and/or operated by Operating Subsidiaries. In the opinion of Company management, there will be no requirement for Ogden to make any payments under guarantees arising out of a default with respect to the construction or operation of such facilities. At December 31, 1993, capital commitments, exclusive of funds provided by revenue bonds issued by municipalities and municipal agencies, amounted to $24,909,000, of which $12,302,000 was for direct equity investments in waste-to-energy facilities and $12,607,000 was for normal replacement, modernization, and growth. 20. SALE OF LIMITED PARTNERSHIP INTERESTS During October 1991 and January 1992, the Company sold limited partnership interests in and related tax benefits of its Huntington, New York, waste-to-energy facility. Construction revenues in the accompanying Statements of Consolidated Income include $7,681,000 and $17,779,000 for the years ended December 31, 1992 and 1991, respectively, from these transactions. The accounts of the partnership have been consolidated as part of the Company's Consolidated Financial Statements, with intercompany accounts and transactions having been eliminated. At December 31, 1993 and 1992, the balance of the capital accounts of minority partners totaling $12,130,000 and $13,719,000, respectively, is reflected as "Minority Interest" in the accompanying Consolidated Balance Sheets. 21. FAIR VALUE OF FINANCIAL INSTRUMENTS The estimated fair values of financial instruments have been determined by the Company using available market information and appropriate valuation methodologies. However, considerable judgement is required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Company could realize in a current market exchange. The carrying amount and estimated fair values of financial instruments (expressed in thousands of dollars) at December 31, 1993 and 1992 are summarized as follows:
1993 1992 CARRYING ESTIMATED CARRYING ESTIMATED AMOUNT FAIR VALUE AMOUNT FAIR VALUE ASSETS: Cash................... $ 3,558 $ 3,558 $ 7,938 $ 7,938 Receivables............ 224,561 233,841 174,571 180,790 Restricted funds....... 359,416 366,006 419,763 424,940 LIABILITIES: Project debt........... 1,551,366 1,691,939 1,582,813 1,668,372 Other borrowings....... 28,423 19,810 28,423 14,835 Other liabilities...... 8,300 7,175 8,300 6,395 OFF BALANCE SHEET FINANCIAL INSTRUMENTS: Unrealized loss on interest rate swap agreements........... 430
The following methods and assumptions were used to estimate the fair value of financial instruments presented above: Cash - the carrying amount is a reasonable approximation of fair value. Receivables - the fair value of long-term unbilled receivables is estimated by using a discount rate that approximates the current rate for comparable notes. The carrying amount of all other receivables is a reasonable approximation of fair value. Restricted funds - the fair value of funds held in trust is estimated based on quoted market prices of the investments held by the trustee. Project debt - the fair value of the revenue bonds is estimated based on quoted market prices for the same or similar issues. Other borrowings - the fair value of the obligation assumed as part of a sale and leaseback transaction accounted for as a financing is estimated by discounting the future stream of payments using the incremental borrowing rate of Ogden, the Company's primary source of recourse financing. Other liabilities - the fair value of liabilities that come due beyond one year of the balance sheet date are estimated by discounting the future stream of payments using the incremental borrowing rate of Ogden. Interest rate swap agreements - the fair value of the interest rate swap agreements is the estimated amount the Company would have to pay to the financial institutions to terminate the agreements. INDEPENDENT AUDITORS' REPORT Deloitte & Touche 1633 Broadway New York, NY 10019 The Board of Directors and Stockholders of Ogden Projects, Inc.: We have audited the accompanying consolidated balance sheets of Ogden Projects, Inc. and subsidiaries as of December 31, 1993 and 1992 and the related statements of common stockholders' equity, consolidated income and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such financial statements present fairly, in all material respects, the financial position of the companies at December 31, 1993 and 1992 and the results of their operations and cash flows for each of the three years in the period ended December 31, 1993 in conformity with generally accepted accounting principles. As discussed in Note 2 to the financial statements, in 1992 the Company changed its method of accounting for income taxes to conform with Statement of Financial Accounting Standards No. 109. [Signature] February 2, 1994 42 1993 ANNUAL REPORT Ogden Projects, Inc. and Subsidiaries REPORT OF MANAGEMENT Ogden Projects, Inc.'s management is responsible for the information and representations contained in this annual report. Management believes that the financial statements have been prepared in conformity with generally accepted accounting principles appropriate in the circumstances to reflect in all material respects the substance of events and transactions that should be included and that the other information in the annual report is consistent with those statements. In preparing the financial statements, management makes informed judgments and estimates of the expected effects of events and transactions currently being accounted for. In meeting its responsibility for the reliability of the financial statements, management depends on the Company's internal control structure. This structure is designed to provide reasonable assurance that assets are safeguarded and transactions are executed in accordance with management's authorization and recorded properly to permit the preparation of financial statements in accordance with generally accepted accounting principles. In designing control procedures, management recognizes that errors or irregularities may nevertheless occur. Also, estimates and judgments are required to assess and balance the relative cost and expected benefits of such controls. Management believes that the Company's internal control structure provides reasonable assurance that errors or irregularities that could be material to the financial statements are prevented or would be detected within a timely period by employees in the normal course of performing their assigned functions. The Board of Directors pursues its oversight role for these financial statements through the Audit Committee, which is composed solely of non-affiliated directors. The Audit Committee, in this oversight role, meets periodically with management and internal auditors to monitor their respective responsibilities. The Audit Committee also meets periodically with the independent auditors and the internal auditors, both of whom have free access to the Audit Committee without management present. The independent auditors express an opinion on our financial statements. Their opinion is based on procedures they consider to be sufficient to enable them to reach a conclusion as to the fairness of the presentation of the financial statements. [Signature] [Signature] Scott G. Mackin William E. Whitman President and Executive Vice President and Chief Operating Officer Chief Financial Officer Ogden Projects, Inc. and Subsidiaries QUARTERLY RESULTS OF OPERATIONS
1993 QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31 (In thousands of dollars, except per-share amounts) Total revenues............... $ 141,506 $ 171,836 $ 182,846 $ 184,872 Income before income taxes... $ 14,200 $ 19,118 $ 21,373 $ 25,523 Net income................... $ 8,520 $ 11,471 $ 7,875 $ 15,860 Earnings per common share.... $ .22 $ .30 $ .21 $ .42
1992 QUARTER ENDED MARCH 31 JUNE 30 SEPT. 30 DEC. 31 (In thousands of dollars, except per-share amounts) Total revenues............... $ 111,033 $ 107,577 $ 109,892 $ 137,535 Income from continuing operations before income taxes and cumulative effect of change in accounting principle.................. $ 16,861 $ 16,842 $ 16,039 $ 21,977 INCOME FROM: Continuing operations........ $ 10,111 $ 10,099 $ 9,619 $ 13,178 Cumulative effect of change in accounting principle.... 43,852 Net income................... $ 53,963 $ 10,099 $ 9,619 $ 13,178 EARNINGS PER COMMON SHARE: Continuing operations........ $ .27 $ .27 $ .25 $ .35 Cumulative effect of change in accounting principle.... 1.16 Total........................ $ 1.43 $ .27 $ .25 $ .35
Ogden Projects, Inc. and Subsidiaries PRICE RANGE OF STOCK AND DIVIDEND DATA
1993 1992 HIGH LOW HIGH LOW Common: First Quarter............................... 20 5/8 17 1/4 24 1/4 20 1/4 Second Quarter.............................. 22 3/4 16 3/8 22 17 Third Quarter............................... 23 7/8 15 3/8 20 5/8 14 5/8 Fourth Quarter.............................. 18 15 1/8 20 3/4 15
No dividends have been paid on Ogden Projects, Inc. common stock. The common stock is listed on the New York Stock Exchange. EX-21 6 SUBSIDIARY LIST December 31, 1993 OGDEN PROJECTS, INC. AND SUBSIDIARIES
PERCENT PLACE OF COMPANY OWNERSHIP INCORPORATION Ogden Projects, Inc. 84.5 Delaware Ogden Energy Resource Corp. 100 Delaware Ogden Land Management, Inc. 100 Delaware Ogden Land Management of Warren, Inc. 100 New Jersey Ogden Projects of Campo, Inc. 100 California Ogden Projects of Haverhill, Inc. 100 Massachusetts Ogden Projects of Lawrence, Inc. 100 Massachusetts Ogden Power Systems, Inc. 100 Delaware Ogden Power Systems 7, Inc. 100 Delaware Ogden Projects Holdings, Inc. 100 Delaware Ogden Projects (U.K.) Limited 100 U.K. Ogden Projects (Birmingham) Limited 100 U.K. Ogden Wallingford Associates, Inc. 100 Connecticut OPW Associates, Inc. 100 Connecticut OPWH, Inc. 100 Delaware Ogden Martin Systems, Inc. 100 Delaware Grey Acre Development Corporation 100 Massachusetts Ogden Engineering Services, Inc. 100 New Jersey Ogden Marion Land Corp. 100 Oregon Ogden Martin Systems, Ltd. 100 Ontario Ogden Martin Systems of Nova Scotia, Ltd. 100 Nova Scotia Ogden Martin Systems of Alexandria/ Arlington, Inc. 100 Virginia OMS Equity of Alexandria/Arlington, Inc. 100 Virginia Ogden Martin Systems of Babylon, Inc. 100 New York Ogden Martin Systems of Bristol, Inc. 100 Connecticut Ogden Martin Systems of Clark, Inc. 100 Ohio OMSC One, Inc. 100 Delaware OMSC Two, Inc. 100 Delaware OMSC Three, Inc. 100 Delaware OMSC Four, Inc. 100 Delaware Ogden Martin Systems of Dakota, Inc. 100 Minnesota Ogden Martin Systems of Eastern/Central Connecticut, Inc. 100 Connecticut Ogden Martin Systems of Fairfax, Inc. 100 Virginia Ogden Martin Systems of Ford Heights, Inc. 100 Illinois Ogden Martin Systems of Haverhill, Inc. 100 Massachusetts Haverhill Power, Inc. 100 Massachusetts LMI, Inc. 100 Massachusetts Ogden Omega Lease, Inc. 100 Delaware Ogden Haverhill Properties, Inc. 100 Massachusetts Ogden Martin Systems of Hillsborough, Inc. 100 Florida Ogden Martin Systems of Hudson, Inc. 100 New Jersey Ogden Martin Systems of Huntington, Inc. 100 New York Ogden Martin Systems of Huntington Resource Recovery One Corp. 100 Delaware Ogden Martin Systems of Huntington Resource Recovery Two Corp. 100 Delaware Ogden Martin Systems of Huntington Resource Recovery Three Corp. 100 Delaware Ogden Martin Systems of Huntington Resource Recovery Four Corp. 100 Delaware Ogden Martin Systems of Huntington Resource Recovery Five Corp. 100 Delaware Ogden Martin Systems of Huntington Resource Recovery Six Corp. 100 Delaware Ogden Martin Systems of Huntington Resource Recovery Seven Corp. 100 Delaware Ogden Martin Systems of Huntsville, Inc. 100 Alabama Ogden Martin Systems of Indianapolis, Inc. 100 Indiana Ogden Martin Systems of Kent, Inc. 100 Michigan Ogden Martin Systems of Knox, Inc. 100 Tennessee NRG/Recovery Group, Inc. 100 Florida (formerly Ogden Martin Systems of Lake, Inc.) Ogden Martin Systems of Lancaster, Inc. 100 Pennsylvania Ogden Martin Systems of Lawrence, Inc. 100 Massachusetts Ogden Martin Systems of Lee, Inc. 100 Florida Ogden Martin Systems of Long Island, Inc. 100 Delaware Ogden Martin Systems of L.A., Inc. 100 Delaware Ogden Martin Systems of Marion, Inc. 100 Oregon Ogden Martin Systems of Mercer, Inc. 100 New Jersey Ogden Martin Systems of Montgomery, Inc. 100 Maryland Ogden Martin Systems of Morris, Inc. 100 New Jersey Ogden Martin Systems of North Carolina, Inc. 100 North Carolina Ogden Martin Systems of Oakland, Inc. 100 Michigan Ogden Martin Systems of Onondaga, Inc. 100 New York Ogden Martin Systems of Onondaga Two Corp. 100 Delaware Ogden Martin Systems of Onondaga Three Corp. 100 Delaware Ogden Martin Systems of Onondaga Four Corp. 100 Delaware Ogden Martin Systems of Onondaga Five Corp. 100 Delaware Ogden Martin Systems of Pasco, Inc. 100 Florida Ogden Martin Systems of Rhode Island, Inc. 100 Rhode Island Ogden Martin Systems of San Bernardino, Inc. 100 California Ogden Martin Systems of San Diego, Inc. 100 California Ogden Martin Systems of Stanislaus, Inc. 100 California OMS Equity of Stanislaus, Inc. 100 California Ogden Martin Systems of Tulsa, Inc. 100 Oklahoma Ogden Martin Systems of Union, Inc. 100 New Jersey Ogden Recycling Systems, Inc. 100 Delaware Ogden Recycling Systems of Chicago, Inc. 100 Illinois Ogden Recycling Systems of Fairfax, Inc. 100 Virginia Ogden Recycling Systems of Indianapolis, Inc. 100 Indiana Ogden Residuals Management, Inc. 100 Delaware Ogden Waste Treatment Services, Inc. 100 Delaware Ogden Environmental Services Limited 100 Canada Ogden Environmental Services of Houston, Inc. 100 Texas American Envirotech, Inc. 100 Texas Stockton Soil Treatment Facility, Inc. 100 California Projets Ogden Quebec Inc. 100 Quebec RRS Holdings Inc. 100 Delaware Michigan Waste Energy, Inc. 100 Delaware Oahu Waste Energy Recovery, Inc. 100 California Ogden Projects of Hawaii, Inc. 100 Hawaii Resource Recovery Systems of Connecticut, Inc. 100 Connecticut
EX-24 7 INDEPENDENT AUDITORS' CONSENT EXHIBIT NO. 24 INDEPENDENT AUDITORS' CONSENT Ogden Projects, Inc.: We consent to the incorporation by reference in Registration Statement No. 33-31935 of Ogden Projects, Inc. on Form S-8 of our reports dated February 2, 1994 (which express an unqualified opinion and include an explanatory paragraph relating to the adoption of Statement of Financial Accounting Standards No. 109) appearing or incorporated by reference in this Annual Report on Form 10-K of Ogden Projects, Inc. for the year ended December 31, 1993. /s/Deloitte & Touche March 28, 1994 -----END PRIVACY-ENHANCED MESSAGE-----