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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(Mark One)
[ 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 .
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COMMISSION FILE NUMBER 1-9108
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CHAMBERS DEVELOPMENT COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 25-1214958
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
10700 FRANKSTOWN ROAD
PITTSBURGH, PENNSYLVANIA 15235
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (412) 242-6237
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
COMMON STOCK AMERICAN STOCK EXCHANGE
CLASS A COMMON STOCK AMERICAN STOCK EXCHANGE
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
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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 amendment to this
Form 10-K. [ X ].
The aggregate market value of Chambers Development Company, Inc. Common
Stock and Class A Common Stock held by non-affiliates as of March 18, 1994 was
approximately $10,783,000 and $158,693,000, respectively. As of March 18, 1994,
16,015,950 shares of the registrant's Common Stock were outstanding and were
held by approximately 557 shareholders of record and 50,773,177 shares of the
registrant's Class A Common Stock were outstanding and were held by
approximately 3,646 shareholders of record.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Proxy Statement dated March 28, 1994 are
incorporated by reference into Part III of this report.
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PART I
ITEM 1. BUSINESS.
GENERAL
Chambers Development Company, Inc. (the "Company") is one of the leading
providers of integrated solid waste services in the United States, with
operations at the end of 1993 in selected areas of Pennsylvania, New Jersey,
Virginia, South Carolina, Georgia, North Carolina, Maryland, West Virginia,
Florida, Mississippi and Ohio. Major elements of the business include the
operation, management, construction and engineering of solid waste sanitary
landfills, transfer stations, recycling facilities and related operations. The
Company also provides services for the collection, hauling and recycling of
solid waste for municipal, commercial, industrial and residential customers.
(See Item 8, "Financial Statements and Supplementary Data," for further
information regarding operating results.)
While the Company's operations in collection and hauling of wastes are
typical of those in the waste services industry, the Company believes that it
derives or may derive a competitive advantage from its landfills, which provide
long-term disposal capacity for a majority of the Company's collection and
hauling operations. Because of the proximity of the landfills to the areas
served by its solid waste collection operations, the Company enjoys economies of
operation in those locations. In addition, the development of its intermodal
rail transportation system has expanded the geographical service area for its
landfill operations. The Company presently owns or operates 14 sanitary
landfills, one construction and demolition debris landfill and one medical,
special and municipal waste incinerator. Consistent with its goal of
complementary growth in solid waste collection and disposal activities, from
1987 through 1992, the Company acquired 55 waste services businesses, primarily
collection operations, in most of the states mentioned above.
In late 1992, the Company began a program to divest certain businesses that
no longer met strategic and performance objectives. In that regard, in 1993, the
Company sold one landfill, three transfer stations and six collection and
hauling businesses, including all of its operations in Rhode Island, Texas,
Massachusetts and Indiana. In late 1992, the Company also sold its security
services business.
The Company's waste services operations are subject to various and changing
federal, state and local laws and substantial regulations under these laws by
governmental authorities, including the United States Environmental Protection
Agency and various state agencies and county and local authorities acting in
conjunction with such federal and state agencies.
Since early 1992, the Company has devoted substantial effort to the
resolution of several significant legal and financial matters, and to shifting
the primary emphasis of its marketing and operations from development of new
disposal capacity to utilization of existing and previously developed capacity.
(See "Financing" and Item 3, "Legal Proceedings," for a discussion of these
financial and legal matters.)
The Company was formed in 1971 as a Delaware corporation. The Company's
principal executive offices are located at 10700 Frankstown Road, Pittsburgh,
Pennsylvania 15235. Its telephone number is (412) 242-6237.
Unless the context indicates to the contrary, as used in this report the
term "Company" refers to Chambers Development Company, Inc. and its
subsidiaries.
OPERATIONS
The Company initially provided disposal services to public utilities and
various services to government subdivisions, including recycling, hauling and
sales of coal and steel by-products and the disposal of related wastes. After
developing the ability to engineer and operate disposal sites for the handling
of solid waste in compliance with environmental standards, the Company expanded
its operations to include disposal of municipal solid waste and later to include
collection, recycling and hauling of commercial and residential waste and the
operation of solid waste transfer stations. The Company has in past years
devoted considerable resources to the development and construction of new
landfill sites. However, the Company currently is
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focusing its efforts on improving operating efficiencies, with particular
emphasis on increasing the volume of waste disposed of in its current landfills,
in order to achieve greater utilization of those facilities.
Although the Company's waste services business is described herein as five
separate operations -- landfills, transfer stations, collection and hauling,
recycling and medical waste -- these operations are in many respects integrated.
For example, the Company's landfills generate revenues from third-party disposal
and also support the Company's local collection and hauling operations;
similarly, the Company's transfer stations and recycling facilities operate in
conjunction with both the landfill and the collection and hauling operations.
LANDFILL OPERATIONS. The Company owns or operates 14 sanitary landfills
for disposal of nonhazardous solid waste and one construction and demolition
debris landfill. Of the sanitary landfills, five are located in Pennsylvania,
two each in South Carolina and Virginia and one each in West Virginia, Maryland,
Florida, Mississippi and Georgia; all except the Mississippi site are either
owned by the Company or held under long-term lease. The construction and
demolition debris landfill is located in Georgia. The Company's landfills
currently provide disposal capacity for a majority of its collection and hauling
operations. Most of the landfills are located close to municipal areas served by
the Company's collection operations or are accessible to transfer facilities
where waste is consolidated into trailers or rail containers to afford efficient
transportation from remote areas to the disposal sites.
Prior to 1992, the Company's primary emphasis had been upon developing and
constructing new landfills ("greenfield sites"), either independently or in
cooperation with the municipal entity within which the property was located. The
Company believes that the development and construction of new landfills, while
often time consuming and requiring significant capital expenditures and related
indirect expenses, is usually preferable to the acquisition of existing landfill
sites, so that the environmental risks often associated with acquired landfills
can be avoided. In 1992, the Company reexamined its strategies in light of its
financial condition and, recognizing that it held permits to construct
sufficient disposal capacity to service its anticipated needs for a substantial
period of time, decided to focus its efforts on increasing the utilization of
its existing landfills. In addition, the Company recognized that its ability to
independently develop additional greenfield sites may be limited in the near
term as the Company's access to the capital markets may be restricted (see Item
7, "Management's Discussion and Analysis of Financial Condition and Results of
Operations").
LANDFILL OPERATIONAL ACTIVITY. Fees from third-party solid waste
collectors and generators, consisting of landfill tipping fees and in certain
instances subcontracted hauling fees, accounted for approximately 28% of the
Company's revenues in 1993 and 23% in both 1992 and 1991. Tipping fees are based
on the weight or volume and the type of waste disposed of at the landfills.
While the Company's landfills are made available to numerous waste
generators and third-party solid waste collectors, the Company has sought to
obtain long-term contracts principally with governmental entities in order to
create a predictable waste flow to its landfills. In this regard, for example,
the Company has handled the disposal of the residential municipal solid waste
from the City of Richmond, Virginia, since 1989 (including the operation of two
transfer stations); and from the City of Fort Pierce, Florida, since early 1993.
Under an agreement entered into in early 1991 with Bergen County, New
Jersey, the Company has transported and disposed of the ash generated by the
Essex County, New Jersey, incinerator, as well as that portion of the Bergen
County solid waste which was not disposed of at the Essex County incinerator.
The Bergen County contract, which expired in February 1994, generated $33.9
million, or 12%, of the Company's 1993 revenues. In December 1993, the Company
was awarded a new three-year contract at a reduced rate for the municipal solid
waste from Bergen County, New Jersey, to commence in March 1994. The contract
provides the county options for two one-year renewal periods. The contract for
the transportation and disposal of ash generated by the Essex County incinerator
was awarded to a competitor effective in March 1994. Commencing in 1988, the
Company had also provided disposal and transportation of solid waste from Union
County, New Jersey, under contracts which were renegotiated in early 1991 and
were terminated pursuant to their terms in December 1993. The Company had also
provided disposal of the municipal solid waste from Passaic County, New Jersey,
from December 1987 through November 1993. The Passaic County contract generated
$10.5 million, or 4%, of the Company's 1993 waste services revenues (see Item 3,
"Legal
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Proceedings," and Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations," regarding the impact of the expiration or
renegotiation of these contracts).
In 1993 as in 1992, the Company continued to place a growing emphasis on
the disposal of special wastes, which consist of nonhazardous waste materials
such as sewage sludges, contaminated soils, incinerator ash and certain
industrial residues. Following a proposal process initiated by the New York City
Department of Environmental Protection, the Company commenced service in January
1992 under a 6 1/2-year contract to transport and dispose of sewage sludge in
amounts varying from 70 to 550 tons per day. The sewage sludge is being
transported by truck in intermodal containers designed for leakproof waste
transportation to a Company landfill.
In September 1993, the Company sold its Indiana landfill, as well as
related collection and hauling operations, to USA Waste Services, Inc. of
Dallas, Texas.
LANDFILL DEVELOPMENT AND CONSTRUCTION ACTIVITY. The Company has invested
substantial capital to develop landfills with strict environmental controls.
Development activities include site selection and site feasibility studies,
environmental assessments (including hydrological and geological reviews), land
acquisition, engineering and design work for the site as a whole, and the design
and construction of the landfill infrastructure. The infrastructure consists of
roadway or rail access systems, initial clearing and site preparation, leachate
and methane collection and treatment systems, and stormwater and surface water
management systems. All currently required groundwater monitoring devices and
other environmental controls are in place at the sanitary landfills operated by
the Company. A large portion of the infrastructure expenditures with respect to
each site is nonrecurring, required only at the initial phase in order to
prepare the site for the receipt of waste and to support the operation of the
landfill throughout its useful life. The Company performs design and
construction work in various phases of landfill development, including
excavation and compaction of soils, and stormwater and surface water management.
The Company has found that performing portions of its own landfill construction
is cost effective in certain instances.
As the operation of a landfill commences, site preparation, including
excavation and the installation of a liner system at the base elevation of the
site, requires significant capital expenditures, often exceeding $200,000 per
acre. However, once a particular area of the site has been lined, limited
additional investment is required with respect to overlaying waste on the lined
areas. The daily filling activities normally provide for the sequential deposit
of waste on the base liner system in adjacent areas within the site (typically
referred to as "cells"). In order to maintain sanitary conditions at the
landfills operated by the Company, heavy equipment is used to spread, compact
and cover the waste daily with soil or other approved cover material. The
construction of adjacent cells permits the creation of additional air space over
previously constructed cells, which provides the Company additional airspace to
accept waste with limited additional investment. This technique of overlaying
waste materials on areas already lined reduces the ongoing capital requirements
for facilities which are currently operational.
Landfill operations are subject to increasingly strict and costly
environmental regulation, and to numerous uncertainties resulting from
legislative, regulatory and local land use restrictions, as well as increasing
public attention and market changes. See "Regulation" for information concerning
evolving environmental laws and regulations, and Item 7, "Management's
Discussion and Analysis of Financial Condition and Results of Operations," for a
discussion of related capital expenditures and constraints on expansion of
landfill operations.
TRANSFER STATION OPERATIONS. Transfer stations are facilities located in
areas which are not convenient to, or which do not have ready access to, solid
waste disposal sites. Residential and commercial collection vehicles operating
within such areas, including the Company's vehicles in some cases, discharge
their solid waste loads at these facilities. The waste is then consolidated and
loaded into larger capacity transfer trailers or rail containers for efficient
transportation to disposal sites, including landfills owned and operated by the
Company. Transfer station operations accounted for approximately 19%, 20% and
24% of the Company's waste services revenues for 1993, 1992 and 1991,
respectively.
During 1993, the Company owned or operated nine solid waste transfer
stations, with four in New Jersey, two in Virginia and one each in Pennsylvania,
South Carolina and Ohio. The Company's Rhode Island
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transfer station operations were sold in March 1993. On December 31, 1993, the
Company sold its two transfer stations in Morris County, New Jersey, to the
Morris County Municipal Utilities Authority (the "MCMUA") but will continue to
operate both transfer stations and provide transportation services under a
contract with the MCMUA until the county's long -term solid waste system is in
operation or December 31, 1996, if later.
Operations at the transfer stations in Morris County, New Jersey, began in
January 1988, and these facilities processed an aggregate of approximately
325,000 tons of municipal solid waste in 1993. Under its contracts with Morris
County, during 1988 through 1993 the Company operated the transfer stations and
provided long-distance transportation of waste from the transfer stations to a
third-party disposal site. The contract for disposal of waste commencing in
January 1995 has been awarded to a competitor of the Company, but the Company
will continue to operate the transfer stations in 1995 and 1996, provided the
county's solid waste system is not yet in operation. The Company's rates and
revenues from the Morris County transfer station operations are subject to the
ratemaking authority of the New Jersey Department of Environmental Protection
and Energy. The two Morris County transfer station operations produced
approximately 15% of the Company's 1993 waste services revenues.
COLLECTION AND HAULING OPERATIONS. Waste collection and hauling generally
support the Company's landfill and transfer station operations, although in
certain areas, operations involve disposal at commercial or municipal landfills.
Fees for collection and hauling services are based on such factors as the type
and frequency of service, the volume or weight of the waste, the type of waste,
disposal costs and the distance traveled.
Collection and hauling revenues for commercial and industrial customers
accounted for 39%, 42% and 40% of revenues in 1993, 1992 and 1991, respectively,
which includes transportation revenues derived from certain of the Company's
contracts. In most areas, the Company services commercial and industrial
accounts without the requirement of prior municipal approval and, as such,
competes with other operators and negotiates rates directly with individual
customers. The Company typically contracts with commercial customers for
collection, hauling and disposal of solid waste for a multi-year period. In
limited areas, the Company competes for municipally-awarded franchises which
include commercial and industrial accounts as well as residential accounts. Such
contract awards may be in the form of exclusive or nonexclusive franchises for
several years.
Collection and hauling revenues for residential and municipal customers
accounted for 8%, 10% and 9% of revenues for 1993, 1992 and 1991, respectively.
Such services are performed primarily under exclusive contracts granted by
municipalities on the basis of competitive bids.
The competitive nature of the waste industry, the varying availability of
landfills and disposal capacity, and the financial condition of the Company may
affect the ability of the Company to secure and maintain municipal contracts in
the future. (See "Financing" and "Regulation.")
The Company expanded its collection and hauling operations through
acquisition during 1986 through 1992, but did not in 1993. Management expects
that, to the extent that there is acquisition activity in the next several
years, it likely will be limited to relatively small acquisitions of businesses
in existing markets.
In late 1992, the Company began a program to divest certain businesses that
no longer met strategic and performance objectives, and in March 1993, as an
initial part of that program, sold substantially all of the assets of its
collection, hauling and transfer station operations in Rhode Island,
Massachusetts and Texas. The Company sold its landfill and collection and
hauling operations in Indiana in September 1993, its collection and hauling
operations in Conway, South Carolina, in November 1993, and its Columbus,
Georgia, collection and hauling operations in December 1993. The marketing of
additional non-core operations and assets is expected to continue throughout
1994 and may continue thereafter.
RECYCLING OPERATIONS. The Company recognizes the importance of recycling
materials recovered from solid waste streams where consistent with viable market
conditions. The Company has engaged in recycling efforts in order to complement
its range of waste management services. While extensive recycling is likely to
reduce the size of the waste stream available for disposal in the Company's
landfills, and
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although the market for recyclables is in many instances depressed due to an
excessive supply of recovered materials, recycling has aided the Company's
efforts to market its other waste services. Recycling revenues accounted for 3%
of revenues in each of the last three years. At December 31, 1993, the Company
owned and operated two recycling facilities, one each in Pennsylvania and
Virginia.
MEDICAL WASTE AND INCINERATOR OPERATIONS. Through its subsidiary, Chambers
Medical Technologies, Inc. ("CMTI"), the Company owns and operates a medical,
special and municipal waste incineration facility in Hampton, South Carolina.
The facility is permitted to incinerate 200 tons per day of medical, municipal
solid waste and other approved nonhazardous special wastes. CMTI is implementing
a plan to maximize utilization of the facility in response to changing market
conditions. CMTI is currently focusing its marketing on higher priced, higher
fuel value special wastes such as pharmaceuticals, petrochemicals and scrap
tires. State legislation restricts the facility's permitted incineration
capacity to the greater of 50 tons per day of medical waste or 1/12 of the
amount of medical waste generated within the state of South Carolina within one
year. CMTI has undertaken a constitutional challenge to the state's imposition
of the limitation, as well as to certain provisions of the South Carolina
Infectious Waste Management Act and the regulations promulgated under the Act.
At the trial level CMTI was successful in its challenge to certain fee
requirements under the regulations; however, the statutorily imposed volume
limitation was held to be constitutional. CMTI has filed a motion for a stay
pending appeal of the implementation of the volume limitation, which stay
pending appeal was granted. Prior to the acquisition of the Hampton facility,
CMTI had not generated revenues from the treatment or disposal of medical waste.
Medical waste and incinerator revenues accounted for 3%, 2% and 1% of revenues
for 1993, 1992 and 1991, respectively.
RESEARCH AND DEVELOPMENT. The Company has explored technologies and
related business opportunities attendant to the disposal and recycling
processes, including but not limited to refuse derived fuel, landfill methane
gas recovery and related systems, and tire reclamation and recycling. The
Company has also assisted in the development of, and holds an exclusive license
to use, an intermodal containerized transportation system for the economical and
environmentally safe transportation of solid waste by rail and truck.
COMPETITION
Solid waste management is a highly competitive business which requires
substantial investment in labor and capital resources. The sources of
competition vary by locality and by the type of services provided, and originate
from national, regional and local companies. Several national waste management
companies are larger and have greater capital resources than the Company. Major
competitors in the waste industry include WMX Technologies, Inc. and
Browning-Ferris Industries, Inc. The Company also competes with municipalities
and commercial facilities which provide their own waste hauling and disposal
services. Disposal operations compete primarily on the basis of proximity to
collection and hauling operations and on the basis of disposal cost. To acquire
new collection and hauling contracts and to retain its existing customer base,
the Company competes on the basis of price, service and disposal capacity. The
Company anticipates that competition in the disposal business will increasingly
include an emphasis on safeguards with respect to the environment, and intends
to continue its policy of constructing and operating landfills with high levels
of environmental protection and monitoring. The Company has experienced
competition from incineration and other waste recovery processes. However, it
believes that its landfill operations can complement certain of these processes,
in that landfills serve as receptacles for incinerator ash and nonrecoverable
materials.
The Company experienced in 1993, and expects to continue to face in 1994,
intense competitive pressure on landfill waste disposal prices in many markets,
partly due to increased landfill capacity in certain regions and partly as a
result of the rapid use of existing capacity by many older landfills which
currently operate under less stringent standards of environmental protection
than those utilized by the Company. As a result of revisions to regulations
under Subtitle D of the Resource Conservation and Recovery Act of 1976 ("RCRA")
and to state regulations, the Company expects that more stringent governmental
regulations will be mandated in these markets, with the initial compliance dates
under Subtitle D having become effective in late 1993 (see "Regulation"). In the
long term, the Company anticipates that this strengthening of environmental
standards should have a positive effect on its business, as the Company has
designed and constructed its landfills in anticipation of more vigorous
compliance standards.
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MARKETING
Before entering a new solid waste management market, the Company evaluates
potential business which would be compatible with current operations. The
Company establishes new commercial and industrial accounts through direct
solicitation. New municipal business depends on identifying and winning
competitive bids. Price, service and disposal capacity are key factors in
developing new business and retaining customers. Marketing and operational
efficiencies are achieved through the Company's consolidation of residential and
commercial business on a regional basis. In conjunction with the growing
emphasis on special wastes, the Company has restructured its corporate marketing
group to increase its focus on the pursuit of disposal opportunities in the
special waste market segment.
FINANCING
On July 9, 1993, the Company executed comprehensive amendments (the
"Amendments") to its bank credit facility (the "Credit Facility") and its note
purchase agreements under which the Company in 1988 issued $30,000,000 of 10.95%
(currently 11.95%) Senior Notes and in 1990 issued $192,000,000 of 10.45%
(currently 11.45%) Senior Notes (collectively, the "Senior Notes"). The
amendments to the Credit Facility and Senior Note agreements (collectively as
amended, the "Amended Agreements") included revisions to the terms and
conditions of the original agreements and provided for additional terms and
conditions with respect to future periods. The Company's lenders and bonding
company have been granted security interests in substantially all of the assets
of the Company, and an intercreditor agreement has been executed among the
Credit Facility banks, the Senior Note holders and the bonding company with
respect to priority of interests in collateral and access to assets.
The amendments to the Credit Facility eliminated the provisions permitting
new borrowings and the issuance of new letters of credit. The letters of credit
existing on July 9, 1993, which had scheduled expiration dates, may be
automatically extended, but not beyond the Credit Facility's final maturity date
of December 31, 1996. Three letters of credit, currently totaling $44,526,000
and scheduled to expire in November 1994, December 1994 and March 1995, were not
eligible for automatic maturity extension at the time the Credit Facility
amendments were executed. On February 22, 1994, the Company received consents
from all of the participating Credit Facility banks to extend the maturities of
these three letters of credit. Such consents require the completion of letter of
credit reductions of $6,000,000, which the Company has commenced, and are
subject to the Company being in compliance with all covenants at the time of
renewal.
The Amended Agreements required the Company to sell certain assets in order
to produce minimum net proceeds of $50,000,000 during 1993. Net proceeds from
such asset sales during 1993 totaled $51,324,000, of which $24,999,000 was
applied in 1993 and $6,502,000 was applied in early 1994 against the Senior
Notes and to prepay industrial revenue bonds (the "IRBs") supported by letters
of credit issued under the Credit Facility.
The Company is also required to pay to the holders of the Senior Notes and
the Credit Facility banks the amount by which its daily average unrestricted
cash balance exceeds $50,000,000 for any calendar month, and 50% of the net
proceeds from sales of assets as permitted by the Amended Agreements. The
Amended Agreements require that principal payments made to the holders of the
Senior Notes and IRBs maintain the relative exposure of the holders of the
Senior Notes and the Credit Facility banks on a pro rata basis.
The Amended Agreements also provided that, at the option of the Company,
the scheduled aggregate principal payments of $28,722,000 on the Senior Notes
originally due in 1993 and 1994 could be deferred until July 1, 1995. Through
March 1, 1994, principal payments of $27,098,000 related to such deferrals had
been made. In addition to any remaining unpaid deferred amounts under the Senior
Notes, the Amended Agreements require aggregate principal payments of
$75,000,000 on July 1, 1995, which payments are to be applied pro rata against
the remaining principal payments originally due on the Senior Notes and to
reduce the IRBs. The Company will be required to explore available financing
alternatives including, but not limited to, the renegotiation of the Amended
Agreements prior to July 1, 1995, when the principal payments aggregating
$75,000,000 become due. Management believes that a satisfactory renegotiation or
other alternative will be
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effected. However, in the event that a satisfactory resolution is not achieved,
the liquidity and operations of the Company would be materially adversely
affected.
The Amended Agreements contain financial covenants which require the
Company to maintain minimum levels of tangible net worth, working capital and
quarterly cash flows from operations. The Amended Agreements also prohibit the
incurrence of additional indebtedness and the payment of cash dividends and
limit annual cash capital expenditures.
The Credit Facility at December 31, 1993 provided for letters of credit
supporting IRBs, landfill closure and post-closure requirements, insurance and
other contracts. Letters of credit outstanding at December 31, 1993, aggregated
$131,103,000, the maximum amount then issuable under the Credit Facility. The
Company pays a fee of 2% on the amount of letters of credit outstanding.
The IRBs outstanding at December 31, 1993 were collateralized by letters of
credit totalling $97,087,000. The terms of the IRBs provide that the Company may
convert them to fixed interest rate obligations prior to the expiration of the
applicable letters of credit, at prevailing market interest rates. The holders
of such IRBs, upon giving notice, may tender them for redemption to the
designated agent who will either remarket the obligations or use the letters of
credit to fund their retirement. In the latter situation, the Company would be
indebted to the Credit Facility banks for the amounts advanced, and the banks
could request cash collateral in the amount thereof.
REGULATION
The operation of landfills, waste incinerators and transfer stations, and
the collection and hauling of solid waste and the recycling of solid waste are
subject to various local, state and federal requirements. Operating permits are
required for waste disposal facilities and certain collection vehicles. Some of
these permits could be subject to modification, renewal and/or revocation if
significant operational and environmental violations occur. The Company's
operation of landfills subjects it to operational, closure, post-closure,
monitoring and site maintenance obligations. Governmental authorities have the
power to enforce compliance with these regulations and to obtain injunctions and
impose fines in the case of non-compliance. While the Company is in substantial
compliance with regulatory requirements, from time to time in the ordinary
course of its operations, the Company receives citations or notices from
authorities that such operations may not be in strict specific compliance with
applicable environmental regulations. Upon such receipt, the Company has and
will continue to make every effort to resolve amicably and quickly the issues
raised by such citations or notices.
Governmental authorities, including the United States Environmental
Protection Agency ("EPA"), various state agencies and county and local
authorities acting in conjunction with such federal and state agencies, impose
restrictions to control or prohibit air and water pollution and, in most states,
the Company and other operators are required to post bonds or provide other
financial assurances covering closure, monitoring and potential corrective
measures for its landfills. While the Company is in substantial compliance with
regulatory requirements applicable to its business, if significant regulatory
changes are made it may be required to increase capital and/or operating
expenditures in order to maintain operations or initiate new operations.
Depending on the degree of future regulatory changes, the Company may be
required to curtail certain operations until a particular problem is remedied.
The regulatory framework in the solid waste business, particularly as it
relates to the disposal of solid waste, varies substantially from jurisdiction
to jurisdiction, and is changing frequently and becoming increasingly complex in
nearly all locations. As a result, both current operations and development
projects involve certain risks and uncertainties inherent in the industry, as
discussed below. Amendments to current laws and regulations governing the
Company's operations could have an adverse economic effect on the Company or
require substantial capital expenditures to comply with such laws and
regulations.
In October 1991, the EPA promulgated revisions to regulations under the
Resource Conservation Recovery Act ("RCRA"). In revisions to regulations under
Subtitle D of RCRA, the EPA announced comprehensive solid waste management
standards including location standards, facility design and operating criteria,
closure and post-closure requirements, financial assurance standards, methane
gas and groundwater
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monitoring, and corrective action standards which had not been historically
required or enforced at landfills. State standards can be, and in a majority of
the states where the Company operates already are, more stringent than the
federal requirements. Because some portions of the revisions to regulations
under Subtitle D of RCRA are expected to be phased in over as many as five
years, the full impact of the revisions may not be felt until 1998. Current
landfill design and construction by the Company has been performed in
anticipation of those requirements. More stringent regulation, while requiring
greater expenditures by landfill operators, is expected to increase
opportunities for the Company and others who have landfills which comply with
these regulations, as noncomplying landfills will be required to close. The 1988
Pennsylvania regulations, which were similar in scope to the revisions to
regulations under Subtitle D of RCRA, had a significant adverse impact on the
operations of the Company's Pennsylvania landfills from 1988 through 1991.
However, the Company does not anticipate significant disruption of any of its
businesses as a result of the promulgation of the revisions to Subtitle D.
Pending development of state standards and evaluation of those standards by the
EPA, management of the Company believes that its landfills are currently
designed and operated to be in material compliance with those revisions.
While the Company believes that the states in which it operates landfills
have revised or will revise their landfill regulations to meet or exceed the
requirements of the revisions to Subtitle D of RCRA, there can be no assurances
that the state regulations will be approved by the EPA. Although the Company may
require additional capital expenditures to comply with potentially inconsistent
state and federal regulations applicable to the same facility, the Company does
not believe such inconsistent regulations would have a material adverse effect
on the Company's operations.
Revisions to health, safety and environmental protection laws may continue
to require the Company and others in the industry to make substantial
expenditures to construct or operate waste facilities in compliance with such
laws. Substantial capital and operating expenditures to develop landfills and
maintain compliance with environmental protection regulations are necessary for
the Company and any participant in the waste industry. These costs are incurred
in the ordinary course of business, but could increase as laws and regulations
change. See Item 7, "Management's Discussion and Analysis of Financial Condition
and Results of Operations," for a discussion of anticipated capital
expenditures.
Proposed federal legislation and numerous proposed state laws include
provisions that would allow states to ban or impose differential fees on
interstate shipments of solid waste. In addition, certain matters involving the
interstate shipment of waste and classification of incineration ash as a
hazardous substance are currently being considered by the Supreme Court of the
United States. The Company cannot currently predict the results of such
legislation or decisions, or the extent to which they may affect the Company's
operations.
In addition to potentially costly and restrictive regulations, there are a
number of risks and factors, often having unforeseen ramifications, which could
result in increased costs to the Company's waste management business or, in some
circumstances, delay or prevent certain operations or planned projects. These
factors include varying degrees of governmental and public opposition to the
siting and operation of landfills, which in many locations can contribute to a
shortage of sites and facilities; increased regulation aimed at reducing
dependence on landfilling and promoting other methods of disposal such as
incineration or recycling; and risks related to potential adverse environmental
effects attributable to the Company's operations.
Complex regulatory requirements, together with potential community
opposition (often resulting in litigation), may make it increasingly difficult
to open new landfills or expand existing sites. While the Company attempts to
avail itself of opportunities to open or expand landfills at reasonable cost,
there can be no assurance regarding the extent to which such opportunities will
be present in the future, nor can there be any assurance in the near term that
the Company will be able to avail itself of such opportunities without the
generation of additional capital. Nevertheless, the Company believes that, due
to the receipt during 1990, 1991 and 1992 of permits for landfill sites which
had been under development in prior periods, it now holds permits to construct
sufficient disposal capacity to meet its needs and those of its customers for a
substantial period of time. (See also Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations.")
9
<PAGE> 10
BONDING
BID AND PERFORMANCE BONDS. In order to submit a bid to a governmental
entity for solid waste collection, hauling and disposal services, the Company is
usually required to submit bonds, in the form of a bid bond and, upon contract
award, a bond to secure its performance of the contract. Commercial customers
contracting for collection, hauling and solid waste disposal services with the
Company do not generally require either bid or performance bonds. Over the past
several years, the Company's bonding requirements have increased as the size and
length of the contracts have increased. It is important for the Company to bid
successfully on large multi-year contracts to ensure a consistent flow of waste
into its landfills.
Firms that provide such bonds to the solid waste disposal industry are
limited in number. The Company has in the past relied on a single outside source
for its bid and performance bonding requirements. Management believes that the
Company's current bid and performance bond coverage and future capacity is
adequate; however, there can be no assurance that future bonding will be
available when required by the Company.
CLOSURE AND POST-CLOSURE FINANCIAL ASSURANCES. Most states have enacted
legislation that requires landfill operators and owners to guarantee minimum
financial capabilities to insure that a landfill is properly closed in
accordance with environmental requirements. The form of the guarantee varies
from state to state but generally consists of either trust funds, letters of
credit or surety bonds. The Company has employed all of these options in various
locations. Management believes that its current financial position is adequate
to meet the closure and post-closure requirements of its current landfills.
INSURANCE
The Company carries a broad range of insurance coverages which management
considers sufficient to protect the assets and operations of the Company that
could otherwise be negatively affected in the event of a loss. The coverages are
intended to provide the Company with comprehensive financial protection.
Insurance coverages are currently in effect to protect the Company from
financial losses resulting from bodily injury, personal injury and property
damage, including but not limited to workers' compensation, comprehensive
general liability, fire and casualty, vehicle and other related coverages.
Commercial excess liability coverage is maintained as well. The Company has
determined that it is in its best interests to self-insure certain portions of
liability and workers' compensation risks, while in some instances maintaining
third-party coverage to protect against catastrophic loss. The Company also
maintains directors' and officers' insurance coverage. Because of the litigation
arising out of the change in accounting method announced by the Company in 1992
and the subsequent restatement of its prior years' financial statements (see
Item 3, "Legal Proceedings"), the Company has incurred significantly higher
costs with respect to its directors' and officers' coverage.
As a result of limited availability in the insurance marketplace as well as
costly premium assessments, the Company, along with most companies in the waste
industry, has experienced difficulty in obtaining environmental impairment
liability insurance. The Company will continue to undertake efforts to obtain
this type of insurance coverage if such coverage is commercially available at
premium levels which are reasonable in light of the business and financial risks
involved. The Company does not believe that the limited availability of
comprehensive environmental impairment liability insurance should have a
material adverse effect upon the operation of its business at this time.
EMPLOYEES
At December 31, 1993, the Company employed approximately 1,500 people,
approximately 360 of whom were represented by unions under collective bargaining
agreements. The Company is a party to union contracts at its Monroeville,
Washington and Southern Alleghenies locations in Pennsylvania, and at its Morris
County, New Jersey, locations. The employees at the remaining locations of the
Company are not represented by unions. The Company has not experienced any work
stoppages and believes its labor relations are good.
10
<PAGE> 11
ITEM 2. PROPERTIES.
The principal fixed assets of the Company consist of real property
interests, real property improvements, and vehicles and equipment. The vehicles
and equipment, which are owned and leased, included, at December 31, 1993,
approximately 440 collection and disposal vehicles, 170 light vehicles, 50
over-the-road tractors and 410 trailers, 70 rail trailers, 120 railcars and 580
rail containers, 66,000 waste collection containers and roll-off boxes, 48,000
recycling collection containers and 470 portable and stationary compactors, in
addition to approximately 290 pieces of heavy equipment used in landfill
construction and operations.
At December 31, 1993, the Company owned 10,620 acres of land and leased
1,451 acres of land; 10,071 acres of which are or could be used for landfill
operations, 41 acres are used for recycling and transfer station operations and
1,959 acres are or could be used for garages, offices and other facilities for
business operations. The Company owns and leases facilities where it provides
complete maintenance, repair, fabrication, rebuilding and painting services for
its vehicles and equipment. At December 31, 1993, the Company operated in
selected areas of Pennsylvania, New Jersey, Virginia, South Carolina, Georgia,
North Carolina, Maryland, West Virginia, Florida, Mississippi and Ohio. In
connection with the restructuring of its financing agreements, the Company has
granted security interests in substantially all of its assets as collateral for
the Company's long-term borrowings and performance bonds. (See Item 1,
"Business, Financing.")
The Company's headquarters is located in Penn Hills, Pennsylvania, near
Pittsburgh. In 1985, John G. Rangos, Sr., John G. Rangos, Jr. and Alexander W.
Rangos, each a director and officer of the Company, doing business as Synergy
Associates, obtained an industrial development bond issue to finance the
acquisition and renovation of existing property into the Company's corporate
headquarters facility. The Company occupies the facility under a long-term lease
from Synergy Associates. (See Item 13, "Certain Relationships and Related
Transactions.")
ITEM 3. LEGAL PROCEEDINGS.
Between March 18, 1992 and May 7, 1992, various Company shareholders filed
twenty-three actions in the United States District Court for the Western
District of Pennsylvania asserting federal securities fraud claims and pendent
state law claims against the Company, certain of its officers and directors, its
former auditors, and the underwriters of its securities (the "Federal Class
Action"). The significant part of these actions, as amended and consolidated on
November 4, 1992, under the caption In Re: Chambers Development Company, Inc.
Shareholders Litigation, Civil Action No. 92-0679, and brought on behalf of a
putative class of purchasers of the Company's securities between March 18, 1988
and October 20, 1992, is the allegation that the decrease in the Company's stock
price during the period from the Company's March 17, 1992 announcement of a
change in accounting method relating to capitalization of certain costs and
expenses through its October 20, 1992 announcement of a $362 million reduction
in retained earnings as of December 31, 1991, as compared to the amount
previously reported, and a restatement of its 1990 and 1989 consolidated
financial statements, was caused by the Company's misrepresentation of its
earnings and financial condition. One of the original twenty-three complaints,
Yeager v. Rangos, et al., C.A. No. 92-1081, also asserts derivative claims on
behalf of the Company (which is named as a nominal defendant) for breach of
fiduciary duty against certain of its officers and directors and for negligence
against its former auditors (the "Federal Derivative Action").
In addition, three parallel lawsuits have been filed in state courts. Two
derivative actions, asserting waste and mismanagement claims on behalf of the
Company against certain of its officers and directors, have been filed in the
Delaware Court of Chancery for New Castle County (the "Delaware Derivative
Actions") and are pending under the caption In Re: Chambers Development Company,
Inc. Shareholders Litigation, Consolidated C.A. No. 12508. One purported class
action, alleging state securities law and common law claims, has been filed in
the Court of Common Pleas of Allegheny County, Commonwealth of Pennsylvania,
under the caption Integrated Investments, Inc., et al. v. Chambers Development
Company, Inc., et al., No. G.D. 92-7036 (the "State Class Action").
The complaints in the Federal and State Class Actions allege that the
Company, in publicly disseminated materials, intentionally or negligently
misstated its earnings during the class period, thereby deceiving the
11
<PAGE> 12
Company's shareholders and others with respect to its growth prospects and
profitability. In particular, the plaintiffs allege that the Company's earnings
were improperly increased by capitalizing certain costs and expenses in
violation of generally accepted accounting principles, in part through the use
of a formula which arbitrarily allocated indirect costs and expenses to landfill
and development activities. In addition, the plaintiffs allege that the Company
had an inadequate information system and failed to maintain the records
necessary to support the capitalization of such costs and expenses.
The Federal Class Action claims assert violations of section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, section
11 of the Securities Act of 1933 and negligent misrepresentation against the
Company. Claims under sections 12(2) and 20(a) of the Securities Act of 1933
have been asserted against the Company's officers and directors who are named as
defendants, but not against the Company. The State Class Action asserts similar
violations of the Commonwealth of Pennsylvania securities laws. These actions
seek to recover damages in an unspecified amount which the class members
allegedly sustained by purchasing the Company's securities at artificially
inflated prices, as well as related relief.
The section 11 claims relate to the sale in April 1989 of 2.85 million
shares of the Company's Class A Common Stock at $25 per share (equivalent to 5.7
million shares of its Class A Common Stock at $12.50 per share after a
subsequent two-for-one stock split), the issuance in September 1989 of $110
million principal amount of the Company's 6 3/4% Convertible Subordinated
Debentures Due September 15, 2004 (subsequently converted into Class A Common
Stock on or about September 16, 1991 at $21.125 per share), and the sale in June
1991 of 7 million shares of the Company's Class A Common Stock at $24.875 per
share, and may be asserted by plaintiffs who, subject to certain conditions, are
able to trace their purchases to these offerings. The section 10(b) fraud and
negligent misrepresentation claims relate to these three offerings and open
market transactions, whether or not the plaintiffs are able to trace their
purchases to a specific offering. The Company has been advised by its counsel
that the plaintiffs have alleged that the restatement of the Company's 1990 and
1989 consolidated financial statements is an admission that they were materially
misstated. However, the Company has also been advised by its counsel that the
Company's former auditors and former chief financial officer have contended that
the Company's prior consolidated financial statements were fairly presented in
accordance with generally accepted accounting principles. If a plaintiff were to
establish that the Company's consolidated financial statements were materially
misstated, the Company would be liable for statutorily prescribed damages under
section 11 (subject to a causation defense in which the Company bears the burden
of proving that some or all of the loss resulted from factors other than the
misstatement and subject to the statute of limitations defense) and for damages
established by case law under section 10(b) and the common law claims if that
plaintiff were able to establish the remaining elements of those claims and the
Company had no affirmative defense.
The Federal Derivative Action and the Delaware Derivative Actions assert,
inter alia, that the Company's officers and directors committed acts of waste,
mismanagement and breach of fiduciary duty by allegedly instituting or approving
the Company's accounting policies relating to capitalization of certain costs
and expenses for the purpose of increasing their salaries, fees, stock and other
benefits. These actions, which seek recovery of unspecified damages on behalf of
the Company, allege that the Company has been damaged because it has become
exposed to the risk of an adverse judgment or settlement in the class actions,
that it has and will incur costs to defend the class actions, and that it has
suffered injury to its reputation.
The twenty-three separate actions comprising the Federal Class Action have
been consolidated, and the plaintiffs have filed amended consolidated class
action complaints. On February 23, 1994, the court substantially denied the
motions of the Company and its officers and directors to dismiss the complaint
in the Federal Class Action. The Company's time to answer the complaint in the
Federal Class Action has been extended to April 6, 1994, and the Company's time
to respond to the contribution and indemnity cross-claims asserted in the
answers of its former auditors and its former chief financial officer has been
extended to April 11, 1994. The Company's time to move against or answer the
complaint in the Federal Derivative Action has been extended to April 22, 1994.
12
<PAGE> 13
The Company's time to answer or move against the complaint in the State
Class Action has been extended without date and the court has entered an order
staying the action indefinitely pending further notice.
The Company and its officers and directors have moved to dismiss, or
alternatively stay, the Delaware Derivative Actions. In November 1992, the
Delaware plaintiffs filed an amended consolidated complaint containing
supplemental allegations based on the Company's October 20, 1992 announcement.
The Company and certain of its officers and directors have been served with a
document request in the Delaware Derivative Actions, but an order was entered
staying the Delaware Derivative Actions pending the resolution of the Federal
Class Action and Derivative Actions. The Company served its initial response to
plaintiffs' document request in the Federal Class Action in late 1992, and has
commenced document production.
On March 7, 1994, the plaintiffs filed an amended motion for class
certification. Pursuant to the court's February 23, 1994 order, the parties are
negotiating a scheduling order for the briefing of the class certification
motion. A status/settlement conference before the court is scheduled for April
29, 1994.
On March 5, 1993, another state court action was filed in the Court of
Common Pleas in Allegheny County, Pennsylvania, under the caption Balaban v.
Rangos, et al. This action asserts derivative claims on behalf of the Company
similar in nature to those asserted in the Federal and Delaware Derivative
Actions. The Company's time to answer or move against the complaint has been
extended without date.
The Company intends to defend vigorously each of these actions. In the
event that the Company is unsuccessful in its defense, the result would have a
material adverse effect on the Company.
Shortly after the Company's March 17, 1992 announcement of a change in
accounting method, the Securities and Exchange Commission (the "SEC") initiated
an informal investigation into the possibility that persons or entities had
traded in the Company's securities on the basis of inside information prior to
the announcement and with respect to the Company's accounting policies
concerning capitalization and the accuracy of its financial statements. On
September 30, 1992, a formal order of investigation was issued by the SEC with
respect to potential violations by the Company and others of sections 10(b) and
13(a) and (b) of the Securities Exchange Act of 1934 and various rules
promulgated thereunder. The Company is cooperating with the investigation
through the production of documents and by providing witnesses pursuant to the
SEC's request.
The American Stock Exchange and the Chicago Board of Options Exchange are
conducting investigations into trading activity on their respective exchanges in
the Company's securities and in put options on the Company's securities prior to
the March 17, 1992 announcement.
On December 4, 1992, the Company was served with a grand jury subpoena out
of the United States District Court for the Eastern District of New York seeking
production of public filings and reports disseminated to its shareholders,
documents referring to the preparation of its financial statements and other
materials. The Company has responded to the subpoena by producing documents. The
grand jury investigation is ongoing and it appears to be focusing on issues
similar to those raised by the civil litigation and the SEC investigation
described above.
The Company is cooperating with each of the investigations referred to in
the three preceding paragraphs.
On August 31, 1992, the Company and the Township of Conemaugh, Commonwealth
of Pennsylvania, filed an action in the United States District Court for the
Western District of Pennsylvania seeking to enjoin the Passaic County Utilities
Authority (the "Authority") from entering into a long-term disposal contract
with Empire Sanitary Landfill, Inc. ("Empire") in breach of the Authority's
long-term disposal contract with the Company. On September 9, 1992, the
Authority filed an action on the same issues in the Superior Court of New Jersey
in Passaic County. The District Court awarded the Company summary judgment on
one count of its complaint, thereby directing the Authority specifically to
perform its obligations under its existing contract with the Company. However,
the District Court in granting summary judgment recognized that the New Jersey
Department of Environmental Protection and Energy ("DEPE") has ultimate approval
authority regarding New Jersey public solid waste disposal contracts and,
therefore, the Authority could proceed with seeking approval from the DEPE of
its agreement with Empire. On December 7, 1992, the DEPE directed the
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<PAGE> 14
Authority to continue to deliver Passaic County's waste to the Company through
December 11, 1993, and subsequently granted the Authority's request for approval
of the Empire agreement. The Company has filed a motion for summary judgment for
an award of damages to be calculated as the amount of lost profits of the
Company resulting from the delivery of the waste to Empire rather than to the
Company. The Court has yet to rule on the motion for damages.
In December 1992, an action was filed in the Court of Common Pleas of
Northampton County, Commonwealth of Pennsylvania, captioned Charles Chrin and
Nicholas Chrin, individually and trading as Chrin Bros., et al. v. Chambers
Development Company, Inc., et al., seeking a special and preliminary injunction
to enjoin the defendants from allegedly tortiously interfering with the
plaintiffs' permit modification application and with certain engineers
developing the application for a landfill which the Company was in the process
of purchasing. On March 2, 1993, the plaintiffs filed an amended complaint
seeking rescission and damages relating to certain contracts entered into
between the plaintiffs and a subsidiary of the Company with respect to the sale
of a landfill and the prior sale of a waste collection and hauling company in
eastern Pennsylvania previously owned by one of the plaintiffs. The plaintiffs
allege that they were induced to enter into these contracts for the sale of the
landfill and the waste collection and hauling company based upon false and
misleading statements made by the Company as to its financial condition and
future prospects. The Company defendants have filed an answer generally denying
the allegations of the complaint and have counterclaimed against the Chrin
entities for breach of contract and are seeking damages. Discovery on this
matter has recently commenced.
On July 29, 1993, the Circuit Court of Berkeley County, West Virginia,
issued an order requiring the Company to obtain the approval of the Berkeley
County Commission in order to continue operation of its LCS landfill. In
November 1993, the Supreme Court of West Virginia accepted the Company's appeal
of the lower court order and granted a continuing stay of the order pending
decision by the state Supreme Court upon appeal. A hearing date upon the appeal
has not been set. Concurrently with the litigation, the Company will be
undertaking efforts to renew the existing landfill permit, which expires in late
1994, but there is no assurance that these efforts will be successful.
On February 5, 1993, an action was filed in the Circuit Court of Kanawha
County, West Virginia, under the caption Lenzi, et al. v. Chambers of West
Virginia, Inc., et al. This action was brought by two individuals who claim to
have been owners of a majority interest in the corporation which owned the LCS
landfill until it was sold to the Company in 1989. The plaintiffs allege that
they were induced to sell the stock of the corporation which owned the landfill
to the Company and to accept royalty payments based on the amounts of waste
deposited in the landfill, as part of the consideration for the sale, as a
result of false and misleading statements made by the Company as to its
financial condition and future prospects. This action seeks to enjoin the
Company from disposing of its interest in the landfill, to impose a constructive
trust, and to rescind the sale or, in the alternative, to obtain compensatory
damages of approximately $21.5 million, plus punitive damages. On March 22,
1993, the Company filed an answer generally denying the allegations of the
complaint and a motion to dismiss the complaint. Additionally, the Company filed
a counterclaim against the plaintiffs seeking compensatory and punitive damages
resulting from misrepresentations and omissions of fact made by the plaintiffs
which induced the Company to proceed with this acquisition. The Company intends
to defend vigorously this action and to prosecute its counterclaim.
On March 10, 1993, the Company received a notice from the EPA that the
Company is a potentially responsible party with respect to a third-party
landfill site in Rhode Island, purportedly as a successor to a company that had
transported waste to the site prior to the Company's acquisition of assets of
that company in 1989. The Company has responded, asserting that it is not a
successor, and at this time does not anticipate any material liability for
cleanup costs.
By letter delivered on June 24, 1993, George R. Johannes submitted his
resignation as Executive Vice President-Finance of the Company, asserting that
he was terminating his employment on the grounds that it was his opinion that
his duties, status and responsibilities had been diminished. Mr. Johannes
subsequently filed a demand for arbitration, claiming approximately $1,200,000
in severance benefits pursuant to employment agreements dated October 6, 1992,
and February 3, 1993. The arbitration hearing is scheduled for late
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<PAGE> 15
March 1994. The Company believes it has meritorious defenses to Mr. Johannes'
claim and it intends to defend vigorously against the claim.
Due to the increasingly complex regulatory environment and heightened
public awareness of and community sensitivity toward waste management
operations, including particularly the siting or expansion of waste disposal
facilities, the Company could become involved in a variety of potentially
significant legal proceedings, in addition to other more routine litigation
incidental to its business, including, for example, proceedings relating to
permit applications for proposed facilities, personal injury claims and other
proceedings.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
At the Annual Meeting of Stockholders of the Company held on November 10,
1993, the holders of the majority of the voting power of the shares of the
Company's Common Stock and Class A Common Stock, voting together as a single
class, re-elected John G. Rangos, Sr. for a two-year term and Alexander W.
Rangos and Joseph G. Stotlemyer for three-year terms on the Board of Directors.
The holders of shares of Class A Common Stock re-elected Michael J. Peretto for
a two-year term and John M. Arthur for a three-year term on the Board of
Directors. The holders of a majority of the voting power of the shares of Common
Stock and Class A Common Stock also elected Peter J. Gibbons for a two-year term
on the Board of Directors. The votes were cast as follows:
<TABLE>
<CAPTION>
VOTES
NAME VOTES FOR WITHHELD
---- ----------- ---------
<S> <C> <C>
John G. Rangos, Sr. 196,480,147 1,809,953
Alexander W. Rangos 196,628,369 1,661,731
Joseph G. Stotlemyer 196,658,479 1,597,186
Peter J. Gibbons 196,750,070 1,537,030
Michael J. Peretto 40,382,781 939,989
John M. Arthur 40,389,850 932,920
</TABLE>
Continuing on the Board of Directors were John G. Rangos, Jr. and William
E. Moffett, whose terms expire in 1994.
The Board of Directors on October 4, 1993, and the stockholders on November
10, 1993, approved the Company's 1993 Stock Incentive Plan. The Plan allows the
granting of stock options and restricted shares of Class A Common Stock and
other forms of incentive based compensation and replaced the Company's 1988
Stock Option Plan. In voting upon this proposal, 190,475,203 votes were cast in
favor of the proposal, 7,199,055 votes were cast against the proposal and
612,492 abstained.
15
<PAGE> 16
PART II
ITEM 5. MARKET FOR THE COMPANY'S CLASS A COMMON STOCK AND COMMON STOCK AND
RELATED STOCKHOLDER MATTERS.
The Company's Class A Common Stock (Symbol: CDVA) and Common Stock (Symbol:
CDVB) are listed on the American Stock Exchange ("AMEX").
The table below sets forth the range of high and low sales prices on the
AMEX of the Company's Class A Common Stock and Common Stock.
<TABLE>
<CAPTION>
CLASS A COMMON STOCK HIGH LOW COMMON STOCK HIGH LOW
- ------------------------ ------- ------- ------------------------ ------- -------
<S> <C> <C>
1992 1992
First quarter $ 37 $ 8 5/8 First quarter $36 3/8 $ 9 3/4
Second quarter 9 3/4 6 1/2 Second quarter 11 3/8 6 3/4
Third quarter 9 3/4 6 3/4 Third quarter 10 6 7/8
Fourth quarter 7 5/8 3 5/8 Fourth quarter 7 1/2 3 1/2
1993 1993
First quarter $ 7 1/4 $ 4 11/16 First quarter $ 7 3/8 $ 4 11/16
Second quarter 4 13/16 3 1/8 Second quarter 5 3 3/16
Third quarter 5 3/8 3 3/4 Third quarter 5 1/4 3 11/16
Fourth quarter 4 1/2 3 9/16 Fourth quarter 4 1/2 3 11/16
</TABLE>
The sales prices for the Company's Class A Common Stock and Common Stock
were $4 1/16 and $4 1/4 per share, respectively, as of the close of business on
March 18, 1994.
There were 3,646 stockholders of record of the Company's Class A Common
Stock and 557 stockholders of record of its Common Stock as of March 18, 1994.
The Company paid a cash dividend of $.01 per share on its Class A Common
Stock on November 14, 1990, and has not paid any dividends since that date. The
Company has not made any commitment to pay cash dividends on either its Class A
Common Stock or its Common Stock. The Company is currently precluded by the
terms of its Credit Facility and Senior Note agreements from paying dividends to
shareholders, and it is expected that the ability of the Company to make
payments of dividends will be limited for the foreseeable future (see Item 1,
"Business, Financing").
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<PAGE> 17
ITEM 6. SELECTED FINANCIAL DATA (DOLLARS IN THOUSANDS, EXCEPT
PER SHARE AMOUNTS).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------
1993 1992 1991 1990 1989
-------- -------- -------- -------- --------
OPERATING STATEMENT DATA(1)
<S> <C> <C> <C> <C> <C>
Revenues $288,481 $294,310 $249,384 $214,052 $163,106
Income (loss) from continuing
operations(2) 8,303 (70,255) (64,482) (35,962) (14,437)
Income (loss) from continuing
operations per common share .12 (1.05) (1.08) (.66) (.28)
BALANCE SHEET DATA
Working capital $ 30,067 $ 52,631 $142,487 $129,322 $ 72,066
Total assets 533,622 592,790 699,859 516,017 346,954
Long-term obligations, less
current maturities 261,803 302,354 359,540 388,264 184,878
Stockholders' equity 154,173 145,870 216,456 16,385 57,049
</TABLE>
(1) A $.01 per share cash dividend on the Class A Common Stock was distributed
on November 14, 1990. No cash dividends were paid in the other years
presented.
(2) Includes a net unusual credit of $6,351 in 1993 and unusual charges of
$55,144 and $16,938 in 1992 and 1991, respectively.
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<PAGE> 18
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
On July 9, 1993, Chambers Development Company, Inc. (the "Company"), executed
comprehensive amendments (the "Amendments") to its bank credit facility (the
"Credit Facility") and its note purchase agreements under which the Company in
1988 issued $30,000,000 of 10.95% (currently 11.95%) Senior Notes and in 1990
issued $192,000,000 of 10.45% (currently 11.45%) Senior Notes (collectively, the
"Senior Notes"). The amendments to the Credit Facility and Senior Note
agreements (collectively as amended, the "Amended Agreements") included
revisions to the terms and conditions of the original agreements and provided
for additional terms and conditions with respect to future periods. The
Company's lenders and bonding company have been granted security interests in
substantially all of the assets of the Company, and an intercreditor agreement
has been executed among the Credit Facility banks, the Senior Note holders and
the bonding company with respect to priority of interests in collateral and
access to assets.
The amendments to the Credit Facility eliminated the provisions permitting new
borrowings and the issuance of new letters of credit. The letters of credit
existing on July 9, 1993, which had scheduled expiration dates, may be
automatically extended, but not beyond the Credit Facility's final maturity date
of December 31, 1996. Three letters of credit currently totaling $44,526,000 and
scheduled to expire in November 1994, December 1994 and March 1995 were not
eligible for automatic maturity extension at the time the Credit Facility
amendments were executed. On February 22, 1994, the Company received consents
from all of the participating Credit Facility banks to extend the maturities of
these three letters of credit. Such consents require the completion of letter of
credit reductions of $6,000,000, which the Company has commenced, and are
subject to the Company being in compliance with all covenants at the time of
renewal.
The Amended Agreements required the Company to sell certain assets in order to
produce minimum net proceeds of $50,000,000 during 1993. Net proceeds from such
asset sales during 1993 totaled $51,324,000, of which $24,999,000 was applied in
1993 and $6,502,000 was applied in early 1994 against the Senior Notes and to
prepay industrial revenue bonds (the "IRBs") supported by letters of credit
issued under the Credit Facility. The Company is also required to pay to the
holders of the Senior Notes and the Credit Facility banks the amount by which
its daily average unrestricted cash balance exceeds $50,000,000 for any calendar
month, and 50% of the net proceeds from sales of assets as permitted by the
Amended Agreements. The Amended Agreements require that principal payments made
to the holders of the Senior Notes and IRBs maintain the relative exposure of
the holders of the Senior Notes and the Credit Facility banks on a pro rata
basis.
The Amended Agreements also provided that, at the option of the Company, the
scheduled aggregate principal payments of $28,722,000 on the Senior Notes
originally due in 1993 and 1994 could be deferred until July 1, 1995. Through
March 1, 1994, principal payments of $27,098,000 related to such deferrals had
been made. In addition to any remaining unpaid deferred amounts under the Senior
Notes, the Amended Agreements require aggregate principal payments of
$75,000,000 on July 1, 1995, which payments are to be applied pro rata against
the remaining principal payments originally due on the Senior Notes and to
reduce the IRBs. The Company will be required to explore available financing
alternatives including, but not limited to, the renegotiation of the Amended
Agreements prior to July 1, 1995, when the principal payments aggregating
$75,000,000 become due. Management believes that a satisfactory renegotiation or
other alternative will be effected. However, in the event that a satisfactory
resolution is not achieved, the liquidity and operations of the Company would be
materially, adversely affected.
The Amended Agreements contain financial covenants which require the Company to
maintain minimum levels of tangible net worth, working capital and quarterly
cash flows from operations. The Amended Agreements also prohibit the incurrence
of additional indebtedness and the payment of cash dividends and limit annual
cash capital expenditures.
The Company received federal and state tax refunds of $17.3 million during 1993
and $26.2 million during 1992 and anticipates receiving additional tax refunds
of up to $5.3 million in 1994. The Company does not anticipate that significant
federal income tax payments will be required for the foreseeable future due to
available net operating loss carryforwards.
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<PAGE> 19
The Company had at December 31, 1993 a total of $12.9 million available from
previously issued IRBs held in escrow awaiting future capital needs. It is
anticipated that these funds will be spent over the next two years to satisfy
capital expenditure requirements at the landfills for which these borrowings
were made.
The Company has been restricted in its access to external sources of capital due
to the terms of the Amended Agreements and as a result of the shareholder
litigation related to the revision of previously announced financial results for
1991 and the restatement of its prior years' financial statements. The Company
expects to continue to meet its operating and financial requirements by
controlling expenditures and by generating cash through a combination of its
existing financial resources, sales of assets, tax refunds and cash flows from
operations.
LIQUIDITY AND CAPITAL RESOURCES, 1993
The Company's working capital level decreased to $30.1 million at the end of
1993 from $52.6 million at the end of 1992, primarily due to the nonscheduled
payments on long-term obligations and the reclassification of certain assets
between assets held for sale and operating assets during the fourth quarter of
1993 as a result of re-evaluating the businesses included in the Company's
divestiture program in light of prevailing market conditions. If market
conditions change, additional businesses may be sold as part of the Company's
divestiture program. The Company must obtain lender approval prior to the sale
of these additional businesses.
Cash flow activity of continuing operations for 1993 included $38.0 million
provided by operating activities, $9.5 million provided by investing activities
and $51.2 million utilized in financing activities. Included in the $38.0
million provided by operating activities is $17.3 million of tax refunds.
Discontinued operations provided $2.4 million in 1993, principally as a result
of the receipt of final settlement proceeds from the December 1992 sale of the
Company's security services business, net of payment of liabilities related to
the discontinued operations.
Investing activities in 1993 included $38.1 million of capital expenditures, a
substantial reduction from the $132.8 million used for capital and acquisition
expenditures in 1992. Included in 1992 was $20.9 million for the acquisition of
eight hauling companies and property and permit rights related to two landfills.
In addition, 1992 included a higher level of landfill construction activity as
compared with 1993 as a number of landfill sites previously under development
were constructed. Investing activities in 1993 also included cash of $48.6
million provided from the disposition of assets in connection with the Company's
divestiture program.
Cash used in financing activities during 1993 included $60.7 million of
principal payments on long-term obligations, $25.0 million of which was obtained
from the proceeds of the disposition of assets. In addition, 1993 included the
receipt of $10.2 million previously used as cash collateral to support certain
of the Company's business activities, which are now collateralized by letters of
credit.
LIQUIDITY AND CAPITAL RESOURCES, 1992
During 1992, cash and cash equivalents decreased by $60.6 million, while
marketable securities were reduced by $50.3 million. For 1992, operating
activities of continuing operations generated cash of $18.0 million, which
represented a significant improvement from 1991 when $45.6 million was used.
Capital expenditures and other investing activities for continuing operations
utilized $35.8 million and financing activities utilized $56.2 million.
Discontinued operations generated $13.3 million in cash, principally as a result
of the sale of the Company's security services business.
Financing activities included the March 1992 completion of a $21.0 million issue
of industrial revenue bond financing for development of the Company's Okeechobee
County, Florida, landfill project. In response to the Company's overall efforts
to reduce its debt obligations, $65.4 million was utilized in 1992 to repay
various short-and long-term borrowings.
NATURE OF EXPENDITURES
LANDFILL EXPENDITURES, GENERAL. At the beginning of 1986, the Company's
operations were limited to three landfill sites and related collection and
hauling activities. Since that time, the Company has substantially expanded the
number of landfill sites which it has designed, permitted and constructed.
Currently the
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<PAGE> 20
Company owns or operates 14 sanitary landfills and one construction and
demolition debris landfill, having made the necessary capital investments since
1986 to establish these landfill sites, and to develop the related collection,
hauling, transfer station and recycling operations.
The Company has expended substantial amounts of capital to establish an
integrated waste services business, from waste collection enterprises to
disposal facilities, to meet the long-term needs of the communities and
customers it services. Historically, the Company has also expended capital to
acquire additional waste services businesses, to fund property and equipment
needs for internal expansion and to develop the infrastructure of its landfills.
The infrastructure expenditures with respect to each site are in major part
nonrecurring, being required at the initial phase at each site in order to
prepare the site for the receipt of waste and to support the operations of the
landfill throughout its useful life. However, the Company will continue to incur
capital expenditures with respect to the construction of cells at existing sites
to accommodate the daily receipt of waste and to ensure its compliance with
environmental and other regulations.
The liquidity of the Company's operations is more heavily influenced by its
landfill operations than by its collection, hauling, transfer station and
recycling operations. The Company's liquidity is adversely affected during
periods of increased construction activity involved in the establishment of new
landfill sites, with revenues commencing only upon opening the sites for the
receipt of waste and the delivery of waste to the sites. Liquidity is improved
following the opening of new sites, to the extent that landfill capital
expenditures for additional cell construction are substantially lower than the
initial construction costs.
However, additional capital is required later in the life cycle of a landfill to
support closure and post-closure costs. Therefore, it is important for the
Company to increase the volume received in each landfill as soon as possible
after commencement of operations.
Management believes that the operations of the currently existing sites plus a
combination of existing cash, asset sales, tax refunds and construction escrow
fund withdrawals will support the operational requirements of the Company,
including the construction of additional cells for the receipt of waste. Funds
supporting those sites which the Company has under development have previously
been generated from capital markets and through project financing from
industrial revenue bond sources. However, given the Company's current liquidity
position, new development will be selectively limited for the foreseeable future
as the Company concentrates on maximizing cash generated from its existing
operations.
The existence of litigation arising from the Company's revision of previously
announced financial results for 1991 and the restatement of its prior years'
financial statements will inhibit the Company in obtaining funds from debt or
equity offerings. Therefore, it is the view of management that, in the near
term, there will be reduced development of additional new landfill sites, other
than those developed in cooperation with governmental entities under project
financing arrangements.
HISTORICAL CAPITAL EXPENDITURES. Construction and development expenditures of
$26.7 million in 1993, $81.1 million in 1992 and $94.5 million in 1991 were
related principally to the various phases of the permitting, design and
construction of new landfill sites and the expansion of existing sites. During
1993, the Company opened a landfill in Amelia County, Virginia. During 1992, the
Company opened landfills in Atlanta, Georgia, and Allegany County, Maryland, and
acquired a landfill in Okeechobee County, Florida, having incurred expenditures
with respect to such sites in 1992 and prior years. Similarly, the Company
commenced operations at its Berkeley County site in West Virginia, its Laurel
Highlands and Dauphin Meadows sites in Pennsylvania and its Scott County,
Mississippi, site in 1991, having incurred substantial capital expenditures in
1991 and prior years to prepare such landfills for use.
Capital equipment additions of $11.0 million in 1993 include the lease buyouts
of vehicles and equipment. Capital equipment additions of $25.6 million in 1992
include the purchase of equipment for the Company's intermodal rail
transportation system and the lease buyouts of vehicles and equipment. Capital
equipment additions of $24.9 million in 1991 include purchases of equipment for
the intermodal rail transportation system and the purchase of a corporate
aircraft.
Other property and equipment additions of $0.4 million, $5.2 million and $9.3
million were made in 1993, 1992 and 1991, respectively, for buildings, building
improvements, furniture and fixtures, computer equipment and other assets.
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<PAGE> 21
The Company also invested $20.9 million and $20.5 million in the acquisition of
waste services businesses in 1992 and 1991, respectively.
CAPITAL EXPENDITURES, 1994
The Company anticipates that approximately $40 million will be expended in 1994
for construction and development activities, of which approximately $10 million
will be funded through remaining industrial development bond funds held in
escrow. The anticipated capital expenditures are principally for construction of
disposal capacity at existing landfills. The Company anticipates that it will
also spend approximately $5 million for vehicles and equipment during 1994.
However, if the Company is unable to generate the anticipated levels of proceeds
from asset sales and cash flow from operations, the level of 1994 capital
expenditures would be reduced.
REGULATION
Revisions to regulations under Subtitle D of the Resource Conservation and
Recovery Act ("RCRA"), which were promulgated by the United States Environmental
Protection Agency in October 1991, established guidelines for the design,
construction and operation of environmentally sound waste disposal facilities.
These revisions generally became effective in October 1993, other than with
respect to groundwater monitoring requirements, which will be phased in over a
five-year period, and financial responsibility requirements, which are scheduled
to become effective in April 1995. The Company anticipates that, in the
near-term, it will continue to experience the discount pricing of landfill
airspace by competitors, as facilities that anticipate the cessation of
operations seek to maximize the utilization of current airspace prior to their
closure.
More stringent regulation, while requiring greater expenditures, is expected to
increase opportunities for the Company and others who have landfills that comply
with these regulations, as noncomplying landfills have been and will be
required, under the Company's interpretation of current legislation, to cease
operations. The Company expects, however, that certain of the older, less
environmentally secure landfills will continue to operate in 1994 and beyond,
depressing market prices for solid waste disposal in the interim.
The Company's principal development efforts from 1987 through 1993 have been in
the creation of permitted landfill disposal capacity, with the design, operation
and construction of environmentally sound facilities to serve its customers on a
long-term basis. Since 1987, the Company had advanced its program of site
development, moving from a level of 10 million tons of permitted airspace
capacity in 1987 to 160 million tons of remaining permitted airspace capacity in
1993, which includes 60 million tons of airspace related to two permitted
landfill projects. The strategic direction of the Company's efforts has been
consistent with the industry trend of the closure of landfill sites which do not
provide adequate protection for the environment and the creation of sound
disposal facilities which minimize the risk to the environment from
contamination.
The Company has made every effort to meet the numerous regulatory challenges
facing the waste services industry, and management believes that the Company
will not experience a negative impact from the implementation of the regulations
under Subtitle D of RCRA. Current landfill design and construction by the
Company have been performed in compliance with state regulations and in
anticipation of the federal requirements.
RESULTS OF OPERATIONS
On December 11, 1992, the Company completed the sale of its security services
business. The following discussion excludes the operational activity and results
of the security services business, which has been included in the accompanying
consolidated financial statements as discontinued operations.
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<PAGE> 22
The following table sets forth the items in the consolidated statements of
operations related to continuing operations as a percentage of revenues, and the
percentage change in dollar amounts of the items compared with previous years.
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE (DECREASE)
YEAR ENDED DECEMBER -------------------------
31, 1993 1992
--------------------- COMPARED TO COMPARED TO
1993 1992 1991 1992 1991
---- ---- ---- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues 100% 100% 100% (2)% 18%
Costs and Expenses
Operating 67 70 79 (6) 5
General and administrative 8 13 17 (39) (12)
Depreciation and amortization 14 13 14 8 8
Unusual items (2) 19 7 - 226
--- --- ---
Income (Loss) from Operations 13 (15) (17) - 3
Other Income, Primarily Interest 1 2 5 (45) (47)
Interest Expense (10) (10) (12) (8) 4
--- --- ---
Income (Loss) from Continuing Operations
Before Income Taxes 4 (23) (24) - 13
Provision for Income Taxes 1 1 2 21 (63)
--- --- ---
Income (Loss) from Continuing Operations 3% (24)% (26)% - 9
--- --- ---
--- --- ---
</TABLE>
REVENUES
The following table sets forth the components of revenue change for the Company
during the years indicated.
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Price (1)% 2% 5%
Volume 4 10 7
Acquisitions - 6 5
Divestitures (5) - -
---- ---- ----
Total (2)% 18% 17%
---- ---- ----
---- ---- ----
</TABLE>
1993. Revenues for 1993 decreased by $5.8 million to $288.5 million from $294.3
million for 1992, principally as a result of the sale of certain businesses as
part of the Company's divestiture program. As discussed below, the Company sold
its two transfer stations in Morris County, New Jersey, on December 31, 1993. In
addition, during 1993 the Company sold six collection and hauling operations,
one transfer station and one landfill, with a resulting decrease in revenues
attributable to those operations of $15.4 million in 1993. This divestiture
program will reduce future revenues.
Landfill revenues for 1993 increased by $12.3 million, or 18%, which was
primarily attributable to the full period operations and increased waste streams
at the newly constructed landfills in Amelia County, Virginia, which opened in
May 1993, Allegany County, Maryland, which opened in February 1992, and Atlanta,
Georgia, which opened in May 1992, and the acquisition of a landfill in
Okeechobee County, Florida, in January 1992. Landfill revenues were also
enhanced by additional special waste volumes resulting from the Company's
increasing emphasis on the disposal of special wastes, which consist of
nonhazardous waste materials such as sewage sludges, contaminated soils,
incinerator ash and certain industrial residues.
Revenues for 1993 also reflect a $3.3 million, or 52%, increase in medical and
special waste revenues from the operation of the Hampton County, South Carolina,
incinerator, which also benefited from the Company's increased emphasis on the
special waste market.
Revenues for 1993 were reduced by a decrease in waste volume from the Company's
New York City sludge contract and a decrease in waste volume from the Company's
New Jersey municipal customers, which are
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<PAGE> 23
redirecting portions of their solid waste to the Essex County, New Jersey,
waste-to-energy incinerator and reducing their solid waste volume as a result of
the state's recycling program. Also during 1993, the Company determined that
certain collection and hauling services that were not generating an adequate
level of profitability would not be continued.
On December 31, 1993, the Company sold its two transfer stations in Morris
County, New Jersey, to the Morris County Municipal Utilities Authority. As part
of the agreement of sale, the Company will continue to operate the transfer
stations and provide transportation services until the county's long-term solid
waste system is in operation or December 31, 1996, if later. The county has an
option to extend the operation and transportation agreement for two six-month
periods beyond 1996, if its long-term solid waste system is not yet operational.
The previous operation, transportation and disposal agreement had been scheduled
to expire on December 31, 1994. The current operation, transportation and
disposal agreement generated annual revenues of $42.1 million in 1993 and is
expected to generate annual revenues of approximately $35 million in 1994, which
includes recognition of $4.0 million of deferred gain on the sale of the
transfer stations. The two-year extension of the Morris County operation and
transportation agreement is expected to generate annual revenues of
approximately $14 million in each of 1995 and 1996, provided that the county's
long-term solid waste system is not yet in operation.
During 1993, events occurred that will reduce waste services revenues and
operating profit in the future related to the Company's New Jersey operations.
As discussed above, the Company sold its two transfer stations in Morris County,
New Jersey, but will continue to operate the transfer stations at a reduced rate
until the county's long-term solid waste system is in operation or December 31,
1996, if later. The Company also provided disposal and transportation of solid
waste from Union County, New Jersey, under contracts which expired in December
1993. In addition, in October 1993, the New Jersey Department of Environmental
Protection and Energy approved the Passaic County Utilities Authority's contract
redirecting the county's solid waste to a competitor's landfill for a two-year
period commencing on December 1, 1993. As a result, the Company will no longer
receive waste under its contract with the Passaic County Utilities Authority and
will pursue a previously filed claim for damages against the Authority. The
contract with the Authority generated revenues of $10.5 million in the
eleven-month period ended November 30, 1993.
The Company's contract with Bergen County, New Jersey, to transport and dispose
of that county's solid waste either to a Company landfill or to the Essex
County, New Jersey, incinerator also included the transportation and disposal of
ash generated by the Essex County incinerator. The Bergen County contract, which
expired in February 1994, produced $33.9 million, or 12%, of the Company's 1993
revenues. In December 1993, the Company was awarded a new three-year agreement
at a reduced rate from the prior contract for the municipal solid waste from
Bergen County, New Jersey, to commence March 1, 1994. The agreement provides the
county options for two one-year renewal periods. The contract for the
transportation and disposal of ash generated by the Essex County incinerator was
awarded to a competitor effective March 16, 1994.
As a result of the contract renegotiations and terminations discussed above, the
Company's 1994 revenues related to the aforementioned New Jersey activities are
expected to be $51 million as compared with $92 million for 1993, and 1994
income from operations related to these activities is expected to be $11 million
as compared with $24 million for 1993. In anticipation of the potential changes
in its New Jersey contracts, the Company intensified its marketing efforts
during the fourth quarter of 1993 for additional waste streams. Management
believes that progress has been made in replacing such waste streams and efforts
will continue towards increasing its customer base and marketing of its special
waste programs.
1992. The Company achieved substantial growth in landfill disposal volumes,
particularly at its Charles City County, Virginia, facility and at its
Pennsylvania sites at Monroeville, Southern Alleghenies and Dauphin Meadows,
which were able to accept full volumes of waste following the completion of
repermitting in 1990 and construction activity during 1991. The Company also
benefited during 1992 from landfill disposal revenues generated at its
facilities in Allegany County, Maryland, Atlanta, Georgia and Okeechobee County,
Florida.
Revenues attributable to waste handled under the transportation and disposal
agreement with Bergen County, New Jersey, increased, as the Company's operations
for the long haul transportation and disposal of such waste benefited from
increased volumes and a full year's operation in 1992 as compared with 1991.
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<PAGE> 24
Revenues in 1992 were also favorably impacted by a disposal agreement for sludge
from New York City. Following a proposal process initiated by the New York City
Department of Environmental Protection, the Company commenced service in January
1992 under a 6 1/2-year special waste contract to transport and dispose of
sewage sludge in amounts varying from 70 to 550 tons per day. The sewage sludge
is being transported by truck in intermodal containers designed for leakproof
transportation to a Company landfill. Revenues from this contract in 1992
amounted to $11.5 million.
Acquisitions in 1992 and a full year's revenues from businesses acquired in the
latter part of 1991 accounted for a 6% increase in revenues in 1992 as compared
with 1991.
OPERATING COSTS AND EXPENSES
Operating costs and expenses, which decreased to $194.7 million in 1993 from
$206.8 million in 1992 and $196.6 million in 1991, also decreased as a
percentage of revenues to 67% in 1993 from 70% in 1992 and 79% in 1991.
During 1993, the Company continued to experience a reduction in costs for
disposal of waste at third-party landfills as compared with 1992. The reduction
in these costs, which reflects the increased emphasis on the utilization of
internal disposal capacity, was, however, partially offset by an increase in
community host fees resulting from the redirection of waste to Company-owned
landfills. In addition, operating costs and expenses for 1993 reflect an
increase in subcontract hauling expense resulting from increased special waste
volume at the Hampton County, South Carolina, incinerator.
The decrease as a percentage of revenues in 1992 is primarily attributable to
the increased volumes of waste being handled, which enabled the Company to
realize efficiencies in its landfill and transfer station operations. The
Company also experienced a reduction in disposal costs at third-party landfills,
as a percentage of revenues in 1992 as compared with 1991, due to the operation
throughout 1992 of four of its five Pennsylvania landfill sites. By 1992,
construction activities required by Pennsylvania's repermitting process had been
completed at all but one of the Company's Pennsylvania sites. The Company,
having completed the activities, was able to deliver waste to its own sites for
disposal, rather than to the sites of third parties, thereby reducing operating
expenses.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses decreased as a percentage of revenues to 8%
in 1993 from 13% in 1992 and 17% in 1991, and decreased in dollar amount by
$14.6 million in 1993 and $5.1 million in 1992.
As anticipated, general and administrative expenses declined in 1993 compared
with 1992 due largely to the full year benefit of the Company's reorganization
efforts. Prior to 1992, the Company, in anticipation of rapid growth, had
positioned itself with additional management and administrative personnel,
primarily in the areas of development, engineering, legal and regional
operations, to support landfills under development throughout the permitting and
construction process and to obtain waste streams to support these landfills
through new long-term contracts and acquisitions. During 1992, management
implemented a reorganization of its corporate and regional staffing levels,
having determined that the emphasis on internal growth through the utilization
of disposal capacity for which permits have been issued would not require the
same levels of administrative personnel that existed previously. These reduced
expenses include compensation as well as travel and professional fees.
The decrease as a percentage of revenues in 1992 as compared with 1991 was due
largely to the increase in revenues associated with the Company's Bergen County,
New Jersey, waste transportation and disposal operations and the disposal
agreement for New York City sludge, which require proportionately lower levels
of general and administrative expenses. Additionally, waste volume and price
increases permitted certain fixed components of general and administrative
expenses to be spread over an expanded revenue base. The decrease in dollar
amount in 1992 is mainly attributable to a decrease in the level of
developmental activity and associated professional service and related costs for
1992 compared with 1991.
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<PAGE> 25
DEPRECIATION AND AMORTIZATION
Depreciation and amortization increased as a percentage of revenues to 14% in
1993 from 13% in 1992 after a decrease from 14% in 1991, while increasing in
dollar amount by $3.0 million and $2.8 million in 1993 and 1992, respectively.
The increase in the dollar amount for 1993 and 1992 reflects higher landfill
construction cost amortization associated with volume increases at the Company's
landfills, partially offset by the effects of increases to projected airspace
resulting from future expansions of existing landfill sites. In addition, the
Company extended the estimated useful lives of certain of its equipment during
1992 based upon historical data. The increase in the amounts of depreciation in
both 1993 and 1992 also reflect the procurement of equipment associated with new
landfills and transportation and disposal contracts.
UNUSUAL ITEMS
During 1993, the Company sold certain businesses as part of its divestiture
program, which resulted in a net gain of $20.7 million. In addition, the Company
recorded a charge of $5.5 million for additional legal fees related to
shareholder litigation related to the revision of previously announced financial
results for 1991 and the restatement of its prior years' financial statements.
The Company also recorded an $8.8 million net charge for the abandonment of
certain development activities as a result of the corporate restructuring,
directors' and officers' insurance and provision for loss on asset divestitures
as a result of a re-evaluation of the businesses included in the Company's
divestiture program.
Excluding the two transfer stations in Morris County, New Jersey, the businesses
sold during 1993 generated approximately $14.4 million of revenues and
approximately $1.1 million of income from operations in 1993. The businesses
classified as assets held for sale at December 31, 1993 generated approximately
$8.1 million of revenues and incurred a loss from operations of approximately
$0.7 million in 1993.
On March 17, 1992, the Company announced a change in its accounting method with
respect to capitalization of certain costs and expenses which resulted in a
revision of previously announced financial results for the year ended December
31, 1991. Subsequently, on October 20, 1992, the Company announced a restatement
of its previously reported financial results for 1991 and prior years, and a
reduction of $362 million in both earnings originally reported since its
inception and retained earnings at December 31, 1991. As a result, the Company
became a defendant in litigation arising out of these financial statement
revisions.
As a result of various of the events described above, the Company in 1992 and
early 1993 was not in compliance with certain covenants of its various long-term
borrowing agreements and commenced the restructuring of its principal credit
facilities and surety arrangements. In addition, the Company undertook
significant steps to reorganize its corporate and regional activities
principally during 1992. The Company also decided to divest certain businesses
that did not meet strategic and performance objectives and decided that certain
developmental activities would not be pursued.
As a result of these events, the Company recorded a charge for unusual items
totaling $55.1 million in 1992, principally for costs related to the litigation
arising out of the restatements, restructuring of its credit facilities and
surety arrangements, reorganizing its corporate and regional activities,
disposition of certain businesses and abandonment of certain development
activities as a result of the corporate restructuring.
The outcome of the litigation is not presently determinable; accordingly, no
provision for any liability that may result from the resolution of this
litigation has been recorded. In the event that the Company is unsuccessful in
its defense, the result would have a material adverse effect on the Company.
Unusual items of $16.9 million in 1991 consisted of charges of $12.1 million for
asset impairments and $4.8 million for losses related to planned asset
divestitures and contractual commitments.
OTHER INCOME
Other income, primarily interest, decreased to $3.6 million in 1993 from $6.5
million in 1992 and $12.3 million in 1991. The 1991 amount reflects the
short-term investment of funds generated by the issuance of $192 million of
senior notes in December 1990 and the $164.7 million in net proceeds from the
sale of Class A
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<PAGE> 26
Common Stock in June 1991. The decreases in 1993 and 1992 reflect the use of
funds for debt reductions and capital expenditures, and the reduction in market
interest rates.
INTEREST EXPENSE
Interest expense decreased to $29.2 million in 1993 from $31.6 million in 1992
and $30.5 million in 1991. The level of interest expense for each year was less
than actual interest charges as a result of interest capitalization related to
the Company's development of its landfills. Capitalized interest totaled $3.5
million, $6.7 million and $5.4 million in 1993, 1992 and 1991, respectively.
Interest costs, excluding the effect of capitalized interest, decreased to $32.6
million in 1993 compared with $38.3 million in 1992. The decrease in interest
costs is attributable principally to the reduced level of debt outstanding,
which is also expected to benefit future results.
The increase in interest expense for 1992 is principally attributable to the one
percentage point increase, effective March 17, 1992, in both the letter of
credit fee under the Credit Facility and the interest rates on the Senior Notes,
and to the issuance of $77 million of industrial revenue bonds late in 1991, net
of the reduction in interest expense resulting from the conversion in September
1991 of $110 million of outstanding 6 3/4% debentures into approximately 5.2
million shares of Class A Common Stock.
INCOME TAXES
The provision for income taxes for 1993 reflects the benefit of estimated
temporary differences and includes $460,000 of additional state income tax
related to the gain on sale of the Company's collection, hauling and landfill
operations in Indiana in connection with the Company's divestiture program. The
provision for income taxes for each of the years 1992 and 1991 results primarily
from limitations imposed on the net operating loss carrybacks for federal and
state income tax purposes. The Company has approximately $250 million of federal
income tax net operating loss carryforwards available for financial reporting
purposes.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standard ("SFAS") No. 109, "Accounting for Income Taxes," under which income
taxes are accounted for on the liability method. That statement supersedes SFAS
No. 96 which was adopted by the Company in 1988. There was no effect on the
Company's financial statements upon adoption of the new standard using the
cumulative effect method.
26
<PAGE> 27
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Auditors 28
Financial Statements:
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1992 and 1991 29
Consolidated Balance Sheets, December 31, 1993 and 1992 30
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1992 and 1991 32
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1993, 1992 and 1991 33
Notes to Consolidated Financial Statements 34
</TABLE>
27
<PAGE> 28
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF CHAMBERS DEVELOPMENT COMPANY,
INC.:
We have audited the accompanying consolidated balance sheets of Chambers
Development Company, Inc. and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of operations, stockholders' equity 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 consolidated financial statements present fairly, in all
material respects, the financial position of Chambers Development Company, Inc.
and subsidiaries as of December 31, 1993 and 1992, and the results of their
operations and their 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 O to the consolidated financial statements, certain actions
have been brought under federal and state securities laws against the Company,
certain of its present and former officers and directors, and others alleging,
among other things, misrepresentation by the Company of its earnings and
financial condition. The outcome of these actions is not presently determinable.
Accordingly, no provision for any liability that may result from the resolution
of these actions has been made in the accompanying consolidated financial
statements.
Deloitte & Touche
Pittsburgh, Pennsylvania
March 25, 1994
28
<PAGE> 29
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
REVENUES $288,481 $294,310 $249,384
COSTS AND EXPENSES
Operating 194,722 206,761 196,565
General and administrative 23,210 37,853 42,908
Depreciation and amortization 41,397 38,363 35,611
Unusual items (6,351) 55,144 16,938
-------- -------- --------
Income (Loss) from Operations 35,503 (43,811) (42,638)
OTHER INCOME (EXPENSE)
Other income, primarily interest 3,563 6,509 12,270
Interest expense (29,163) (31,628) (30,514)
-------- -------- --------
Income (Loss) from Continuing Operations Before Income
Taxes 9,903 (68,930) (60,882)
Provision for Income Taxes 1,600 1,325 3,600
-------- -------- --------
Income (Loss) from Continuing Operations 8,303 (70,255) (64,482)
DISCONTINUED OPERATIONS
Loss from operations -- (1,407) (7,722)
Gain on sale of assets -- 939 --
-------- -------- --------
Net Income (Loss) $ 8,303 $(70,723) $(72,204)
-------- -------- --------
-------- -------- --------
INCOME (LOSS) PER COMMON SHARE
Continuing operations $ .12 $ (1.05) $ (1.08)
Discontinued operations -- (.01) (.13)
-------- -------- --------
Net Income (Loss) $ .12 $ (1.06) $ (1.21)
-------- -------- --------
-------- -------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE> 30
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 44,553 $ 45,899
Accounts receivable
Trade, less allowances of $1,062 and $1,302, respectively 28,573 28,440
Other 2,977 15,957
Refundable taxes 5,334 20,793
Inventories and prepaid expenses 4,751 6,552
Divestiture proceeds held in escrow 11,287 --
Net assets held for sale 11,030 45,452
-------- --------
Total current assets 108,505 163,093
-------- --------
PROPERTY AND EQUIPMENT
Land, primarily landfill sites 312,886 272,291
Vehicles and equipment 107,183 87,292
Other 23,290 38,385
Construction in progress 42,382 38,024
-------- --------
485,741 435,992
Less accumulated depreciation and amortization 128,730 105,063
-------- --------
Property and equipment--net 357,011 330,929
-------- --------
OTHER ASSETS
Funds held for escrow requirements and construction 31,954 42,250
Net assets held for sale -- 29,548
Intangible assets 21,995 18,404
Refundable income taxes 3,910 4,500
Other 10,247 4,066
-------- --------
Total other assets 68,106 98,768
-------- --------
$533,622 $592,790
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE> 31
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term obligations $ 29,748 $ 50,482
Trade accounts payable 9,344 11,152
Income taxes 261 2,691
Accrued liabilities 30,448 40,242
Deferred revenue 8,637 5,895
-------- --------
Total current liabilities 78,438 110,462
-------- --------
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES 261,803 302,354
DEFERRED REVENUE 200 6,780
OTHER NONCURRENT LIABILITIES 39,008 27,324
COMMITMENTS AND CONTINGENCIES -- --
STOCKHOLDERS' EQUITY
Preferred Stock--authorized 10,000,000 shares; no par value;
no shares issued -- --
Class A Common Stock--authorized 100,000,000 shares; par value $.50
per share; issued 50,742,377 and 50,732,227 shares, respectively 25,371 25,366
Common Stock--authorized 50,000,000 shares; par value $.50 per
share; convertible into Class A Common Stock; issued 16,415,750
and 16,425,900 shares, respectively 8,208 8,213
Additional paid-in capital 395,119 395,119
Accumulated deficit (270,375) (278,678)
-------- --------
158,323 150,020
Treasury stock, at cost--Class A Common Stock, 400 shares;
Common Stock, 369,200 shares (4,150) (4,150)
-------- --------
Total stockholders' equity 154,173 145,870
-------- --------
$533,622 $592,790
-------- --------
-------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE> 32
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Income (loss) from continuing operations $ 8,303 $ (70,255) $ (64,482)
Adjustments to reconcile to net cash provided by (used in)
continuing operations
Depreciation and amortization 41,397 38,363 35,611
Unusual items (7,618) 42,112 16,938
Deferred income taxes -- 12,000 1,600
Provision for doubtful accounts 839 454 1,500
Interest earned on escrow funds (878) (2,844) (1,713)
Change in assets and liabilities, net of effects from acquisitions
and divestitures
Accounts receivable (3,085) 749 (9,773)
Refundable taxes 16,049 12,495 (23,488)
Accounts payable and accrued liabilities (20,330) (13,608) 3,867
Deferred revenue (7,169) (9,018) (7,574)
Other assets and liabilities 9,476 4,008 1,635
Other 1,033 3,578 236
-------- --------- ---------
Net cash provided by (used in) continuing operations 38,017 18,034 (45,643)
Net cash used in operating activities of discontinued operations (2,148) (5,885) (2,005)
-------- --------- ---------
Net cash provided by (used in) operating activities 35,869 12,149 (47,648)
-------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (38,085) (111,869) (128,686)
Acquisitions of business -- (20,916) (20,490)
Proceeds from disposition of assets 48,595 12,575 1,281
Purchases of marketable securities -- (18,491) (150,590)
Maturities and sales of marketable securities -- 68,840 112,305
(Increase) decrease in funds held in escrow (404) 32,933 (41,347)
Other (603) 1,150 (6,758)
Proceeds from sale of discontinued operations 4,500 22,930 --
Other net investing activities of discontinued operations -- (3,258) (3,204)
-------- --------- ---------
Net cash provided by (used in) investing activities 14,003 (16,106) (237,489)
-------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Short-term note (payments) borrowings -- (10,000) 1,635
Principal payments on long-term obligations (60,669) (55,388) (16,471)
Proceeds from issuance of long-term obligations -- 21,100 86,645
Proceeds from issuance of Class A Common Stock -- -- 164,684
Funds provided by (used for) replacement of letters of credit 10,243 (10,243) --
Other (792) (1,626) (1,284)
Net financing activities of discontinued operations -- (506) (1,459)
-------- --------- ---------
Net cash (used in) provided by financing activities (51,218) (56,663) 233,750
-------- --------- ---------
Net decrease in cash and cash equivalents (1,346) (60,620) (51,387)
Cash and cash equivalents at beginning of year 45,899 106,519 157,906
-------- --------- ---------
Cash and cash equivalents at end of year $ 44,553 $ 45,899 $ 106,519
-------- --------- ---------
-------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE> 33
CHAMBERS DEVELOPMENT COMPANY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE YEARS ENDED DECEMBER 31, 1993
----------------------------------------------------------
CLASS A ADDITIONAL
COMMON COMMON PAID-IN ACCUMULATED TREASURY
STOCK STOCK CAPITAL DEFICIT STOCK
------- ------ --------- ----------- --------
<S> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1991 $19,173 $8,336 $ 128,777 $ (135,751) $ (4,150)
Conversion of 6 3/4% Convertible
Subordinated Debentures Due September
15, 2004 2,603 -- 104,623 -- --
Sale of Class A Common Stock 3,450 -- 161,234 -- --
Exchange of Common Stock 119 (119) -- -- --
Exercise of stock options 13 -- 352 -- --
Net loss -- -- -- (72,204) --
------- ------ --------- ----------- --------
BALANCE AT DECEMBER 31, 1991 25,358 8,217 394,986 (207,955) (4,150)
Exchange of Common Stock 4 (4) -- -- --
Exercise of stock options 4 -- 133 -- --
Net loss -- -- -- (70,723) --
------- ------ --------- ----------- --------
BALANCE AT DECEMBER 31, 1992 25,366 8,213 395,119 (278,678) (4,150)
Exchange of Common Stock 5 (5) -- -- --
Net income -- -- -- 8,303 --
------- ------ --------- ----------- --------
BALANCE AT DECEMBER 31, 1993 $25,371 $8,208 $ 395,119 $ (270,375) $ (4,150)
------- ------ --------- ----------- --------
------- ------ --------- ----------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE> 34
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Chambers
Development Company, Inc. and its subsidiaries (the "Company"), after
appropriate elimination of intercompany accounts and transactions.
Revenue Recognition
The Company recognizes revenues as services are provided.
Cash and Cash Equivalents
Cash and cash equivalents include cash on hand and on deposit and highly liquid
debt instruments purchased with original maturities of three months or less.
Funds Held for Escrow Requirements and Construction
Funds held for escrow requirements and construction consist principally of
amounts held for landfill construction arising from industrial revenue
financings and funds deposited in connection with landfill closure and
post-closure obligations. Amounts are invested in fixed income securities of
federal, state and local governmental entities and financial institutions,
generally with maturities of one year or less.
Inventories
Inventories, consisting of parts and supplies, are stated at the lower of
first-in, first-out cost or market.
Property and Equipment
Landfill sites, including land and related landfill preparation and improvement
costs, are stated at cost. Such costs, which include construction, engineering,
permitting, interest and other costs, are amortized as airspace is consumed.
Also included in the cost of landfill sites are acquisition, engineering and
other costs related to the permitting and development of planned landfills and
proposed expansions of existing landfills, which costs management of the Company
believes are recoverable.
Other items of property and equipment are stated at cost. Depreciation of such
property and equipment is provided over the estimated useful lives of the
assets, on the straight-line method, as follows: buildings--7 to 25 years;
vehicles and equipment--3 to 20 years; and office furniture and fixtures--5
years.
Effective January 1, 1992, the Company extended the estimated useful lives of
certain of its equipment based upon historical data. Asset depreciation lives
were extended generally as follows: from 7 to 10 years for collection and
hauling vehicles, from 10 to 12 years for heavy equipment and from 10 to 20
years for railcars. The effect of the change in lives was to reduce depreciation
expense and the net loss by $2,150,000, or $.03 per common share, for the year
ended December 31, 1992.
Depreciation and amortization of property and equipment was $35,639,000,
$32,088,000 and $28,945,000 for the years ended December 31, 1993, 1992 and
1991, respectively.
Items of an ordinary maintenance or repair nature are charged directly to
operations, whereas betterments and major expenditures that extend the life of
the asset are capitalized.
Intangible Assets
Intangible assets consist principally of the excess of cost over fair value of
the net assets of acquired businesses, which is being amortized on a
straight-line basis over 20 years, and covenants not to compete and customer
contracts and routes of acquired businesses, which are being amortized on a
straight-line basis over periods of up to 10 years. Accumulated amortization of
intangible assets was $15,631,000 and $9,924,000
34
<PAGE> 35
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(excluding $1,279,000 and $4,442,000 related to assets held for sale) at
December 31, 1993 and 1992, respectively.
Landfill Site Closure and Post-Closure Costs
The Company's engineers estimate landfill site closure and post-closure costs,
including leachate treatment, groundwater monitoring, gas extraction,
maintenance and other costs. The accruals for these costs are recorded as
airspace at the respective landfill sites is consumed.
Included in Other Noncurrent Liabilities at December 31, 1993 and 1992 are
accrued closure and post-closure costs of $18,114,000 and $14,052,000,
respectively. The current portions of accrued closure and post-closure costs of
$1,858,000 and $2,428,000 at December 31, 1993 and 1992, respectively, are
included in current accrued liabilities.
Interest Rate Swap Agreements
The Company has used interest rate swap agreements, the last of which expired in
November 1993, to minimize the impact of rate fluctuations on floating interest
rate long-term borrowings. The differential paid or received on interest rate
swap agreements is recognized as an adjustment to interest expense.
Capitalized Interest
During the years ended December 31, 1993, 1992 and 1991, the interest costs of
continuing operations were $32,613,000, $38,349,000 and $35,868,000,
respectively, of which $3,450,000, $6,721,000 and $5,354,000 were capitalized
with respect to landfills and facilities under construction.
Income Taxes
Deferred income taxes are recorded based upon temporary differences between the
financial statement and tax bases of assets and liabilities and net operating
loss carryforwards available for income tax purposes.
Effective January 1, 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes," using an asset and liability
approach. If it is more likely than not that some portion or all of a deferred
tax asset will not be realized, a valuation allowance is recognized. There was
no effect on the Company's financial statements upon adoption of the new
standard using the cumulative effect method.
Income (Loss) Per Common Share
Income (loss) per common share is computed using the weighted average number of
shares outstanding during the year. Common stock equivalents, which consist of
stock options outstanding, had an antidilutive effect on income (loss) per
common share for each of the years presented and, accordingly, have not been
included in the computation. The weighted average number of common shares
outstanding was 66,788,000 for the years ended December 31, 1993 and 1992, and
59,895,000 for the year ended December 30, 1991.
If the conversion in September 1991 of the 6 3/4% Convertible Subordinated
Debentures Due September 15, 2004 into 5,206,988 shares of Class A Common Stock
had taken place at the beginning of 1991, the loss per common share for that
year would have been $1.05.
35
<PAGE> 36
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE B--DIVESTITURES AND DISCONTINUED OPERATIONS
Divestitures
In late 1992, the Company initiated a program to divest certain businesses that
did not meet strategic and performance objectives, and in 1993, completed a
series of asset sales to various parties. On March 11, 1993, the Company sold
assets of its collection, hauling and transfer station operations in Rhode
Island, Massachusetts and Texas for $12,093,000 in cash, which resulted in a
gain of $4,715,000.
On September 30, 1993, the Company sold its collection and hauling operation and
its landfill in Indiana. Proceeds from the sale were $20,187,000, consisting of
$16,131,000 in cash and $4,056,000 in notes and other receivables payable
through 1996. The sale resulted in a net gain of $13,598,000.
On November 30, 1993, the Company sold a collection and hauling operation in
South Carolina for $5,110,000 in cash, and on December 20, 1993, sold a
collection and hauling operation in Georgia for $2,145,000 in cash, which
resulted in gains of $2,587,000 and $899,000, respectively.
On December 31, 1993, the Company sold its two transfer stations in Morris
County, New Jersey, to the Morris County Municipal Utilities Authority ("MCMUA")
for $9,500,000 in cash, which resulted in a deferred gain of $3,950,000.
Simultaneous with entering into the agreement for the sale of these transfer
stations, the Company and the MCMUA amended the agreement pursuant to which the
Company operates the transfer stations and provides waste disposal services,
reducing the rates charged for such services in 1994. As a result of the
interrelationship of the sale of the transfer stations and the operating and
disposal service agreement, the gain on sale was deferred and will be recognized
in 1994 as services are provided. As part of the agreement of sale, the Company
will continue to operate the transfer stations and provide waste disposal
services until the county's long-term solid waste system is in operation or
December 31, 1996, if later.
In 1993, the Company also sold land in Georgia for $1,284,000 in cash and
received $996,000 with respect to a development project in California, which
resulted in losses of $964,000 and $134,000, respectively.
Approximately $24,999,000 and $6,502,000 of the net proceeds from these
divestitures were applied to reduce long-term obligations of the Company in 1993
and early 1994, respectively (see Note E).
The following are summarized operating results of the businesses that were sold
during 1993, which are included in the results of continuing operations,
excluding the two transfer stations in Morris County, New Jersey, that the
Company will continue to operate (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
------- ------- --------
<S> <C> <C> <C>
Revenues $14,429 $29,865 $ 28,094
Income (loss) from operations 1,116 (4,597) (13,251)
</TABLE>
In light of prevailing market conditions, during the fourth quarter of 1993 the
Company re-evaluated the businesses subject to its divestiture program. As a
result, current assets of $180,000, property and equipment of $54,311,000,
intangibles and other assets of $13,952,000 and noncurrent liabilities of
$3,871,000 were reclassified from assets held for sale to their respective
balance sheet classifications. Additionally, total assets of $12,828,000,
principally property and equipment, related to businesses added to the
divestiture program have been reclassified to assets held for sale. The Company
must obtain lender approval prior to the sale of these additional businesses.
The Company had recorded a provision of $10,466,000 in 1992 for estimated losses
on the disposition of certain of the businesses. The provision reflected the
expected loss from the disposition of net assets, anticipated operating losses
from the measurement date through the expected dates of disposal and estimated
disposal costs. Accruals of $6,636,000, consisting principally of provisions
previously recorded for expected losses on the disposition of certain of these
businesses, have been reversed and are included in unusual items in 1993. Also,
in the fourth quarter of 1993, the Company recorded in unusual items a provision
of $3,181,000 for
36
<PAGE> 37
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
estimated losses on the disposition of the additional businesses classified as
assets held for sale and $2,334,000 for additional estimated losses related to
the remaining assets held for sale (see Note J).
The following are summarized operating results of the businesses whose assets
are held for sale at December 31, 1993 which are included in the results of
continuing operations (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1993 1992 1991
------ ------ -------
<S> <C> <C> <C>
Revenues $8,079 $8,779 $ 9,774
Loss from operations (718) (847) (3,327)
</TABLE>
Net assets held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1993 1992
------- -------
<S> <C> <C>
Inventories and prepaid expenses $ 724 $ 1,399
Property and equipment, net 16,260 70,815
Intangibles and other noncurrent assets 743 17,268
Other noncurrent liabilities -- (3,871)
------- -------
17,727 85,611
Less allowance for losses 6,697 10,611
------- -------
Net assets held for sale 11,030 75,000
Less amount classified as noncurrent -- 29,548
------- -------
Net assets held for sale--current $11,030 $45,452
------- -------
------- -------
</TABLE>
Discontinued Operations
On December 11, 1992, the Company sold substantially all of the assets of its
security services business to Baker Industries, Inc./BPS Guard Services, Inc.
for approximately $27,430,000, of which $22,930,000 was received at closing with
the balance received in 1993.
Following are summarized operating results of the security services business for
the nine months ended September 30, 1992 and for the year ended December 31,
1991, which have been classified in the consolidated statements of operations as
discontinued operations (in thousands):
<TABLE>
<CAPTION>
1992 1991
------- -------
<S> <C> <C>
Revenues $68,079 $73,096
Costs and expenses 69,310 80,754
Interest expense 26 60
Loss from operations (1,407) (7,722)
</TABLE>
Costs and expenses in 1991 include unusual charges of $2,172,000 for asset
impairments.
NOTE C--BUSINESS COMBINATIONS
During 1992, the Company acquired ten waste businesses and one security business
which have been accounted for by the purchase method and are included in the
consolidated financial statements from the dates of acquisition. The cost of the
waste business acquisitions totaled $28,680,000, including liabilities incurred
or assumed of $8,025,000, and the cost of the security business acquisition
totaled $1,174,000. The pro forma effect of the businesses acquired during 1992
was not material.
A 1991 acquisition agreement requires contingent payments to the sellers based
on approval of permits. At December 31, 1993 and 1992, obligations for such
contingent payments totaled $4,000,000 and $3,871,000, respectively.
37
<PAGE> 38
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE D--CURRENT ACCRUED LIABILITIES
Current accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
------- -------
<S> <C> <C>
Insurance $ 7,308 $ 7,917
Shareholder litigation costs, principally legal fees 4,239 7,440
Taxes, other than income 3,979 3,681
Compensation 3,797 4,484
Other 11,125 16,720
------- -------
$30,448 $40,242
------- -------
------- -------
</TABLE>
NOTE E--LONG-TERM OBLIGATIONS
Long-term obligations consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
-------- --------
<S> <C> <C>
Senior notes, interest at 11.45%, principal payable in annual
installments, maturing in 2000 $152,843 $180,074
Senior notes, interest at 11.95%, principal payable in annual
installments, maturing in 1998 20,525 24,180
Industrial revenue bonds, variable interest rates (3.25% to
3.60% at December 31, 1993), principal payable in annual
installments, maturing in 2001-2007, collateralized by
letters of credit 95,200 116,400
Economic development bonds, variable interest rate, principal
payable in semiannual installments, maturing in January 1993 -- 3,400
Noninterest-bearing notes, principal payable in annual
installments, maturing in 2002, less unamortized discount of
$4,464 and $5,350, respectively, based on imputed interest
rate of 12% 7,686 8,150
Other notes payable and equipment loans, various interest
rates (6.0% to 10.5% at December 31, 1993), maturities
through 2000, collateralized by vehicles, equipment and
other assets 12,979 18,208
Capital lease obligation on building (see Note F) 2,318 2,424
-------- --------
291,551 352,836
Less current maturities 29,748 50,482
-------- --------
$261,803 $302,354
-------- --------
-------- --------
</TABLE>
The aggregate estimated payments, including scheduled maturities, of long-term
obligations for the five years ending December 31, 1994 through 1998 are:
1994-$29,748,000; 1995-$82,460,000; 1996-$31,132,000; 1997-$36,083,000; and
1998-$30,530,000.
On July 9, 1993, the Company executed comprehensive amendments (the
"Amendments") to its bank credit facility (the "Credit Facility") and its note
purchase agreements under which the Company in 1988 issued $30,000,000 of 10.95%
(currently 11.95%) Senior Notes and in 1990 issued $192,000,000 of 10.45%
(currently 11.45%) Senior Notes (collectively, the "Senior Notes"). The
amendments to the Credit Facility and Senior Note agreements (collectively as
amended, the "Amended Agreements") included revisions to the terms and
conditions of the original agreements and provided for additional terms and
conditions with respect to future periods. The Company's lenders and bonding
company have been granted security interests in substantially all of the assets
of the Company, and an intercreditor agreement has been executed among the
Credit Facility banks, the Senior Note holders and the bonding company with
respect to priority of interests in collateral and access to assets.
38
<PAGE> 39
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The amendments to the Credit Facility eliminated the provisions permitting new
borrowings and the issuance of new letters of credit. The letters of credit
existing on July 9, 1993, which had scheduled expiration dates, may be
automatically extended, but not beyond the Credit Facility's final maturity date
of December 31, 1996. Three letters of credit currently totaling $44,526,000 and
scheduled to expire in November 1994, December 1994 and March 1995 were not
eligible for automatic maturity extension at the time the Credit Facility
amendments were executed. On February 22, 1994, the Company received consents
from all of the participating Credit Facility banks to extend the maturities of
these three letters of credit. Such consents require the completion of letter of
credit reductions of $6,000,000, which the Company has commenced, and are
subject to the Company being in compliance with all covenants at the time of
renewal.
The Amended Agreements required the Company to sell certain assets in order to
produce minimum net proceeds of $50,000,000 during 1993. Net proceeds from such
asset sales during 1993 totaled $51,324,000, of which $24,999,000 was applied in
1993 and $6,502,000 was applied in early 1994 against the Senior Notes and to
prepay industrial revenue bonds (the "IRBs") supported by letters of credit
issued under the Credit Facility. The Company is also required to pay to the
holders of the Senior Notes and the Credit Facility banks the amount by which
its daily average unrestricted cash balance exceeds $50,000,000 for any calendar
month, and 50% of the net proceeds from sales of assets as permitted by the
Amended Agreements. The Amended Agreements require that principal payments made
to the holders of the Senior Notes and IRBs maintain the relative exposure of
the holders of the Senior Notes and the Credit Facility banks on a pro rata
basis.
The Amended Agreements also provided that, at the option of the Company, the
scheduled aggregate principal payments of $28,722,000 on the Senior Notes
originally due in 1993 and 1994 could be deferred until July 1, 1995. Through
March 1, 1994, principal payments of $27,098,000 related to such deferrals had
been made. In addition to any remaining unpaid deferred amounts under the Senior
Notes, the Amended Agreements require aggregate principal payments of
$75,000,000 on July 1, 1995, which payments are to be applied pro rata against
the remaining principal payments originally due on the Senior Notes and to
reduce the IRBs.
The Amended Agreements contain financial covenants which require the Company to
maintain minimum levels of tangible net worth, working capital and quarterly
cash flows from operations. The Amended Agreements also prohibit the incurrence
of additional indebtedness and the payment of cash dividends and limit annual
cash capital expenditures.
The Credit Facility at December 31, 1993 provided for letters of credit
supporting IRBs, performance of landfill closure and post-closure requirements,
insurance and other contracts. Letters of credit outstanding at December 31,
1993 aggregated $131,103,000, the maximum amount then issuable under the Credit
Facility. The Company pays a commission of 2% on the amount of letters of credit
outstanding.
The IRBs outstanding at December 31, 1993 were collateralized by letters of
credit totaling $97,087,000. The terms of the IRBs provide that the Company may
convert them to fixed interest rate obligations prior to the expiration of the
applicable letters of credit, at prevailing market interest rates. The holders
of such IRBs, upon giving notice, may tender them for redemption to the
designated agent who will either remarket the obligations or use the letters of
credit to fund their retirement. In the latter situation, the Company would be
indebted to the Credit Facility banks for the amounts advanced, and the banks
could request cash collateral in the amount thereof.
NOTE F--COMMITMENTS
Capital Lease on Building
The Company's headquarters facility is leased from the principal stockholders of
the Company under a lease with an initial term expiring in October 2006 and
which has a ten-year renewal option. The agreement provides for aggregate lease
payments of $986,000 during 1994, payable monthly, and for rental increases
based on increases in taxes and other costs. The rent may be adjusted upward for
increases in certain costs of
39
<PAGE> 40
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the lessor on an annual basis. As of December 31, 1993, future minimum payments
for the initial term of the lease based on the aforementioned annual lease
obligation were $11,819,000, including $1,060,000 representing interest and
$8,441,000 representing executory costs. The Company has guaranteed the demand
note borrowing by the lessor to finance the building, which is collateral for
such note. The outstanding balance of the note was $2,035,000 at December 31,
1993. In 1988, the Company prepaid $752,000 on the lease payments due in the
final year of the original lease term; such prepayment has been deducted in
arriving at the above-mentioned future minimum payments.
Operating Leases
The Company has entered into a number of noncancelable operating leases for
vehicles, equipment, offices and other facilities which expire through 2012.
Lease expense aggregated $11,020,000, $12,027,000 and $11,934,000 during 1993,
1992 and 1991, respectively. The following is a summary of the future minimum
lease payments under operating leases in effect at December 31, 1993 (in
thousands):
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31,
-------------------------
<S> <C>
1994 $ 6,138
1995 4,255
1996 2,339
1997 1,228
1998 364
Thereafter 1,474
-------
$15,798
-------
-------
</TABLE>
NOTE G--CAPITAL STOCK
The Class A Common Stock is entitled to a noncumulative quarterly dividend
preference of $.003125 per share before any dividend may be paid on the Common
Stock. Additional dividends declared on the Class A Common Stock and the Common
Stock are shared equally on a per share basis. Holders of Class A Common Stock
are entitled to one vote per share, whereas holders of Common Stock have ten
votes per share. Common Stock is convertible into Class A Common Stock at the
option of the holder on a one-for-one basis.
At December 31, 1993, approximately 18,971,000 shares of Class A Common Stock
were reserved for issuance under the Company's stock option plans and for the
conversion of Common Stock.
During 1991, 5,206,988 shares of Class A Common Stock were issued upon the
conversion of the 6 3/4% Convertible Subordinated Debentures Due September 15,
2004 and 6,900,000 shares were sold in a public offering.
In addition, during the years ended December 31, 1993, 1992 and 1991, 10,150,
8,700 and 238,200 shares, respectively, of the Company's Common Stock were
exchanged for an equal number of shares of Class A Common Stock. During 1992 and
1991, 8,366 and 24,610 shares, respectively, of Class A Common Stock were issued
upon the exercise of stock options.
NOTE H--STOCK OPTION PLANS
The Company has two plans under which stock options for the purchase of Class A
Common Stock currently may be granted: the 1993 Stock Incentive Plan (the "1993
Plan") and the 1991 Stock Option Plan for Non-Employee Directors (the
"Directors' Plan"). The 1990 Stock Option Plan for Consultants and Advisors was
terminated on March 16, 1994.
The 1993 Plan, which replaces the Company's 1988 Stock Option Plan (the "1988
Plan"), was adopted by the Board of Directors on October 4, 1993 and approved by
the stockholders on November 10, 1993. The maximum number of shares of Class A
Common Stock available for grant under the 1993 Plan in each
40
<PAGE> 41
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
calendar year is equal to one percent of the total number of outstanding shares
of Class A Common Stock as of the beginning of the year, plus any shares then
reserved but not subject to grant under the Company's 1988 Plan. Any unused
shares available for grant in any calendar year are carried forward and
available for award in succeeding calendar years.
The 1993 Plan permits the granting to key officers and employees, including
directors who are employees, the following types of awards: (i) stock options
including incentive stock options, (ii) stock appreciation rights, (iii)
restricted stock, (iv) deferred stock, (v) performance awards, (vi) dividend
equivalents and (vii) other stock-based awards. The type and number of awards to
be granted, as well as the terms, conditions and other provisions applicable to
each award, are determined by the Human Resource Committee of the Board of
Directors.
Under the 1993 Plan, the exercise price of stock options granted may be more or
less than the fair market value of the stock on the date of grant, but in no
event may it be less than the par value of the stock. Stock appreciation rights
may be granted, either alone or in tandem with stock options. These rights
entitle the optionee to receive the excess of the fair market value of the stock
on the date of exercise over the grant price which generally may not be less
than the fair market value of the stock on the date of grant.
The Directors' Plan provides for the granting of options for the purchase of a
maximum of 150,000 shares of Class A Common Stock. Under the Directors' Plan,
each person serving as a director and who is not employed by the Company will
automatically be granted options for the purchase of 2,000 shares of stock on
the third business day following each annual stockholders' meeting. In addition,
each nonemployee director at the effective date of the plan was granted options
to purchase 2,000 shares of stock for each year previously served on the
Company's Board of Directors. Options granted under the Directors' Plan become
fully exercisable one year after the date of grant.
Provisions of the 1988 Plan continue with respect to stock options previously
granted. Options outstanding under the 1988 Plan become exercisable (i) in
cumulative annual increments of 25 percent each year, commencing one year after
the date of grant, or (ii) in cumulative annual increments of 50 percent each
year, commencing three years after the date of grant.
Information related to stock options under all plans is as follows (shares in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1993 1992 1991
------------ ------------- -------------
<S> <C> <C> <C>
Outstanding at beginning of year 1,451 876 687
Granted 481 751 299
Cancelled (310) (168) (85)
Exercised -- (8) (25)
------------ ------------- -------------
Outstanding at end of year 1,622 1,451 876
------------ ------------- -------------
------------ ------------- -------------
Exercisable at end of year 572 372 208
Available for future grants at end of
year 934 662 1,245
Price range:
Granted $ 4.03 $ 4.38 $16.81-$24.63
Cancelled 4.38-17.44 4.38- 21.19 12.22- 17.44
Exercised -- 12.22- 17.44 12.22- 17.44
Outstanding at end of year 4.03-24.63 4.38- 24.63 12.22- 24.63
</TABLE>
NOTE I--REVENUES FROM MAJOR CUSTOMERS
The Company operates in one industry segment, integrated waste management.
Revenues from the Bergen County Utilities Authority totaled $33,870,000,
$33,476,000 and $27,933,000, or 11.7%, 11.4% and 11.2% of revenues from
continuing operations, for the years ended December 31, 1993, 1992 and 1991,
respectively.
41
<PAGE> 42
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE J--UNUSUAL ITEMS
During 1993, the Company sold certain businesses as part of its divestiture
program, which resulted in a net gain of $20,701,000. In addition, the Company
recorded net provisions aggregating $14,350,000, related principally to
additional legal fees for shareholder litigation, abandonment of certain
development activities as a result of corporate restructuring and re-evaluation
of the businesses included in the Company's divestiture program.
During 1992, in addition to the shareholder litigation described in Note O, the
Company, as a result of its non-compliance with certain covenants of its various
long-term borrowing agreements, commenced the restructuring of its principal
credit facilities and surety arrangements. The Company also initiated action in
1992 to dispose of certain businesses that did not meet strategic and
performance objectives, reorganized its corporate and regional activities and
abandoned certain developmental activities as part of the corporate
restructuring. As a result of these events, the Company recorded charges for
unusual items of $55,144,000 in 1992.
The Company recorded charges for unusual items of $16,938,000 in 1991 related to
asset impairments and losses on asset divestitures and contractual commitments.
A summary of these unusual items is as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Net gains on asset divestitures $(20,701) $ -- $ --
Provision for loss on asset divestitures and
contractual commitments 8,687 10,525 4,811
Reversal of 1992 provision for loss on certain asset
divestitures (6,636) -- --
Shareholder litigation costs, principally legal fees 5,500 10,853 --
Asset impairments and abandoned projects 4,929 12,425 12,127
Financing and related professional fees -- 10,388 --
Directors' and officers' insurance 1,555 7,134 --
Corporate and regional restructuring costs 315 3,819 --
-------- ------- -------
$ (6,351) $55,144 $16,938
-------- ------- -------
-------- ------- -------
</TABLE>
See Note B with respect to unusual charges of $2,172,000 in 1991 related to
discontinued operations.
NOTE K--SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental information related to the consolidated statements of cash flows is
as follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1993 1992 1991
------- ------- -------
<S> <C> <C> <C>
Cash paid during the year for:
Income taxes $ 563 $ 1,390 $ 26,308
Interest (net of amount capitalized) 29,278 32,252 33,140
Noncash investing and financing activities:
Receivables from sales of businesses 4,056 4,500 --
Liabilities incurred or assumed in acquisitions of
businesses -- 8,025 7,019
Conversion of subordinated debentures into Class A
Common Stock -- -- 107,911
Capital lease obligations -- 776 12,405
</TABLE>
42
<PAGE> 43
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE L--INCOME TAXES
The provision for income taxes, all of which is applicable to continuing
operations, consists of the following
(in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------
1993 1992 1991
------ -------- ------
<S> <C> <C> <C>
Current
Federal (benefit) provision $ -- $(12,000) $ 800
State and local 1,600 1,325 1,200
------ -------- ------
1,600 (10,675) 2,000
Deferred provision -- 12,000 1,600
------ -------- ------
$1,600 $ 1,325 $3,600
------ -------- ------
------ -------- ------
</TABLE>
Deferred income taxes are recorded based upon temporary differences between the
financial statement and tax bases of assets and liabilities and net operating
loss carryforwards available for income tax purposes. Temporary differences and
net operating loss carryforwards relate principally to the capitalization of
costs and expenses for income tax purposes that were deducted for financial
reporting purposes, partially offset by the use of accelerated depreciation for
income tax purposes.
The tax treatment of certain costs and expenses deducted for financial statement
purposes in open tax years has not been settled with the Internal Revenue
Service; accordingly, the amounts of certain temporary differences and net
operating loss carryforwards available for income tax purposes, if any, are not
presently determinable. However, the Company has approximately $250 million of
net operating loss carryforwards to offset future taxable income for financial
reporting purposes, the majority of which expire between the years 2000 and
2007.
Deferred income tax assets and liabilities at December 31, 1993 are comprised of
the following (in thousands):
<TABLE>
<S> <C>
Differences between the financial statement and tax bases of property
and equipment and intangible assets, and/or tax net operating loss
carryforwards $ 57,490
Other (principally losses from planned asset divestitures and asset
impairments) 28,930
--------
Gross deferred income tax assets 86,420
Less valuation allowance (86,420)
--------
Deferred income tax assets, net $ --
--------
--------
Deferred income tax liabilities $ --
--------
--------
</TABLE>
The valuation allowance for deferred income tax assets decreased by $830,000 in
1993 principally due to the realization of deferred income tax benefits relating
to estimated temporary differences, after an increase of $1,906,000 in both the
deferred income tax assets and related valuation allowance resulting from the
federal corporate income tax rate increase enacted in 1993.
43
<PAGE> 44
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the provision (credit) for income taxes applicable to
continuing operations computed using the statutory federal income tax rate to
the tax provision shown in the consolidated statements of operations is as
follows (in thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
Computed at federal statutory rate $ 3,500 $(23,400) $(20,700)
Deferred benefit related to estimated temporary
differences (3,500) -- --
Operating losses not utilized -- 23,400 20,700
Deferred benefit lost due to carryback limitation -- -- 1,600
State income taxes 1,600 1,325 1,200
Other -- -- 800
------- -------- --------
Provision for income taxes $ 1,600 $ 1,325 $ 3,600
------- -------- --------
------- -------- --------
</TABLE>
The statute of limitations has expired for the Company's federal income tax
return for 1987 and prior years. The returns for 1988 through 1992 are currently
under examination by the Internal Revenue Service. The Company believes that any
adjustments which may result from such examination will not have a material
adverse effect on the Company's financial statements.
In June 1992, the Company filed applications with the Internal Revenue Service
in which it requested a change in its tax accounting method for certain costs
and expenses previously capitalized for financial and tax reporting purposes.
The Company believes the applications will be approved and that it will be
permitted to deduct the temporary differences resulting from the tax accounting
method change in 1992 and future years.
NOTE M--FAIR VALUE OF FINANCIAL INSTRUMENTS
The following disclosures of the estimated fair value of financial instruments
is made in accordance with the requirements of Statement of Financial Accounting
Standards No. 107, "Disclosure about Fair Value of Financial Instruments." The
Company has used the following methods and assumptions to estimate the fair
value of each class of financial instrument:
Cash and cash equivalents
The fair value approximates the carrying amount due to the short maturity (three
months or less) of the instruments.
Divestiture proceeds held in escrow
The fair value approximates the carrying amount due to the short maturity (three
months or less) of the instruments.
Funds held for escrow requirements and construction
The estimated fair value of financial instruments that reprice or mature in less
than three months approximates the carrying amount due to the short maturity of
the instruments. The fair value of financial instruments with maturities greater
than three months are estimated based on quoted market prices for the same or
similar financial instruments.
Long-term obligations
The fair value of the Company's debt maturing within one year approximates the
carrying amount due to the short-term maturities involved.
44
<PAGE> 45
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The fair value of the senior note obligations approximates the carrying amount
as the interest rates on the notes were established in December 1992 and
remained unchanged when the comprehensive amendments to the agreements were
executed in July 1993.
The fair value of the industrial revenue bonds approximates the carrying amount
as the interest rates on the bonds are reset weekly based on the credit quality
of the letters of credit which collateralize the bonds.
The fair value of the noninterest bearing notes approximates the carrying amount
which represents the discounted value of the notes using an interest rate
considered market for a borrowing of similar credit quality and maturity.
The fair value of other notes payable and equipment loans, excluding capital
leases, is estimated by discounting future cash flows using an interest rate
considered market for borrowings of similar credit quality and maturity.
Letters of credit
The fair value of letters of credit is based upon the fees paid to obtain the
obligation.
Interest rate swap agreements
The Company has used interest rate swap agreements to minimize the impact of
rate fluctuations on floating interest rate long-term obligations. The fair
value of the interest rate swap agreements, the last of which expired in
November 1993, was the estimated amount the Company would have to pay to
terminate the agreements.
The carrying or notional amounts and estimated fair values of the Company's
financial instruments are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1993 DECEMBER 31, 1992
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
BALANCE SHEET INSTRUMENTS
Cash and cash equivalents $ 44,553 $ 44,553 $ 45,899 $ 45,899
Divestiture proceeds held in escrow 11,287 11,287 -- --
Funds held for escrow requirements and
construction 31,954 31,944 42,250 42,321
Long-term obligations (including current
maturities) 286,104 285,853 346,043 345,571
</TABLE>
<TABLE>
<CAPTION>
NOTIONAL FAIR NOTIONAL FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
OFF BALANCE SHEET INSTRUMENTS
Letters of credit $131,103 $ -- $156,336 $ --
Interest rate swap agreements -- -- 53,400 (975)
</TABLE>
45
<PAGE> 46
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE N--SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following information summarizes the Company's quarterly financial results
(in thousands, except per share amounts):
<TABLE>
<CAPTION>
CONTINUING OPERATIONS PER COMMON SHARE
---------------------------------------- ----------------------------
INCOME INCOME
OPERATING (LOSS) FROM (LOSS) FROM
INCOME CONTINUING NET INCOME CONTINUING NET INCOME
REVENUES (LOSS) OPERATIONS (LOSS) OPERATIONS (LOSS)
-------- -------- ----------- ---------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
First quarter $ 67,687 $ 9,111(1) $ 1,788 $ 1,788 $ .03 $ .03
Second quarter 75,878 8,332 1,503 1,503 .02 .02
Third quarter 75,274 16,486 9,527 9,527 .14 .14
Fourth quarter 69,642 1,574 (4,515) (4,515) (.07) (.07)
-------- --------- --------- -------- ------- ------
$288,481 $ 35,503 $ 8,303 $ 8,303 $ .12 $ .12
-------- --------- --------- -------- ------- ------
-------- --------- --------- -------- ------- ------
YEAR ENDED DECEMBER 31, 1992
First quarter $ 67,905 $ (16,527) $ (21,355) $(22,559) $ (.32) $ (.34)
Second quarter 75,625 2,267 (4,366) (4,813) (.07) (.07)
Third quarter 78,223 7,390 501 745 .01 .01
Fourth quarter 72,557 (36,941) (45,035) (44,096) (.67) (.66)
-------- --------- --------- -------- ------- ------
$294,310 $ (43,811) $ (70,255) $(70,723) $ (1.05) $(1.06)
-------- --------- --------- -------- ------- ------
-------- --------- --------- -------- ------- ------
</TABLE>
- ---------
(1) Operating income for the first quarter of 1993 includes the reclassification
of the $4,860 divestiture gain from other income to unusual items.
Results of continuing operations include net credits for unusual items of
$4,563,000, $758,000 and $6,532,000 for the first, second and third quarters of
1993, respectively, and a net unusual charge of $5,502,000 for the fourth
quarter of 1993 (see Note J).
Results of continuing operations include a provision for unusual items of
$16,500,000 and $38,644,000 for the first and fourth quarters of 1992,
respectively (see Note J).
NOTE O--CONTINGENCIES
Litigation and Investigations
Between March 18, 1992 and May 7, 1992, various Company shareholders filed
twenty-three actions in the United States District Court for the Western
District of Pennsylvania asserting federal securities fraud claims and pendent
state law claims against the Company, certain of its officers and directors, its
former auditors, and the underwriters of its securities (the "Federal Class
Action"). The significant part of these actions, as amended and consolidated on
November 4, 1992, under the caption In Re: Chambers Development Company, Inc.
Shareholders Litigation, Civil Action No. 92-0679, and brought on behalf of a
putative class of purchasers of the Company's securities between March 18, 1988
and October 20, 1992, is the allegation that the decrease in the Company's stock
price during the period from the Company's March 17, 1992 announcement of a
change in accounting method relating to capitalization of certain costs and
expenses through its October 20, 1992 announcement of a $362 million reduction
in retained earnings as of December 31, 1991, as compared with the amount
previously reported, and a restatement of its 1990 and 1989 consolidated
financial statements, was caused by the Company's misrepresentation of its
earnings and financial condition. One of the original twenty-three complaints,
Yeager v. Rangos, et al., C.A. No. 92-1081, also asserts derivative claims on
behalf of the Company (which is named as a nominal defendant) for breach of
fiduciary duty against certain of its officers and directors and for negligence
against its former auditors (the "Federal Derivative Action").
46
<PAGE> 47
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, three parallel lawsuits have been filed in state courts. Two
derivative actions, asserting waste and mismanagement claims on behalf of the
Company against certain of its officers and directors, have been filed in the
Delaware Court of Chancery for New Castle County (the "Delaware Derivative
Actions") and are pending under the caption In Re: Chambers Development Company,
Inc. Shareholders Litigation, Consolidated C.A. No. 12508. One purported class
action, alleging state securities law and common law claims, has been filed in
the Court of Common Pleas of Allegheny County, Commonwealth of Pennsylvania,
under the caption Integrated Investments, Inc., et al. v. Chambers Development
Company, Inc., et al., No. G.D. 92-7036 (the "State Class Action").
The complaints in the Federal and State Class Actions allege that the Company,
in publicly disseminated materials, intentionally or negligently misstated its
earnings during the class period, thereby deceiving the Company's shareholders
and others with respect to its growth prospects and profitability. In
particular, the plaintiffs allege that the Company's earnings were improperly
increased by capitalizing certain costs and expenses in violation of generally
accepted accounting principles, in part through the use of a formula which
arbitrarily allocated indirect costs and expenses to landfill and development
activities. In addition, the plaintiffs allege that the Company had an
inadequate information system and failed to maintain the records necessary to
support the capitalization of such costs and expenses.
The Federal Class Action claims assert violations of section 10(b) of the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder, section
11 of the Securities Act of 1933 and negligent misrepresentation against the
Company. Claims under sections 12(2) and 20(a) of the Securities Act of 1933
have been asserted against the Company's officers and directors who are named as
defendants, but not against the Company. The State Class Action asserts similar
violations of the Commonwealth of Pennsylvania securities laws. These actions
seek to recover damages in an unspecified amount which the class members
allegedly sustained by purchasing the Company's securities at artificially
inflated prices, as well as related relief.
The section 11 claims relate to the sale in April 1989 of 2.85 million shares of
the Company's Class A Common Stock at $25 per share (equivalent to 5.7 million
shares of its Class A Common Stock at $12.50 per share after a subsequent
two-for-one stock split), the issuance in September 1989 of $110 million
principal amount of the Company's 6 3/4% Convertible Subordinated Debentures Due
September 15, 2004 (subsequently converted into Class A Common Stock on or about
September 16, 1991 at $21.125 per share), and the sale in June 1991 of 7 million
shares of the Company's Class A Common Stock at $24.875 per share, and may be
asserted by plaintiffs who, subject to certain conditions, are able to trace
their purchases to these offerings. The section 10(b) fraud and negligent
misrepresentation claims relate to these three offerings and open market
transactions, whether or not the plaintiffs are able to trace their purchases to
a specific offering. The Company has been advised by its counsel that the
plaintiffs have alleged that the restatement of the Company's 1990 and 1989
consolidated financial statements is an admission that they were materially
misstated. However, the Company has also been advised by its counsel that the
Company's former auditors and former chief financial officer have contended that
the Company's prior consolidated financial statements were fairly presented in
accordance with generally accepted accounting principles. If a plaintiff were to
establish that the Company's consolidated financial statements were materially
misstated, the Company would be liable for statutorily prescribed damages under
section 11 (subject to a causation defense in which the Company bears the burden
of proving that some or all of the loss resulted from factors other than the
misstatement and subject to the statute of limitations defense) and for damages
established by case law under section 10(b) and the common law claims if that
plaintiff were able to establish the remaining elements of those claims and the
Company had no affirmative defense.
The Federal Derivative Action and the Delaware Derivative Actions assert, inter
alia, that the Company's officers and directors committed acts of waste,
mismanagement and breach of fiduciary duty by allegedly instituting or approving
the Company's accounting policies relating to capitalization of certain costs
and expenses for the purpose of increasing their salaries, fees, stock and other
benefits. These actions, which seek recovery of unspecified damages on behalf of
the Company, allege that the Company has been damaged
47
<PAGE> 48
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
because it has become exposed to the risk of an adverse judgment or settlement
in the class actions, that it has and will incur costs to defend the class
actions, and that it has suffered injury to its reputation.
The twenty-three separate actions comprising the Federal Class Action have been
consolidated, and the plaintiffs have filed amended consolidated class action
complaints. On February 23, 1994, the court substantially denied the motions of
the Company and its officers and directors to dismiss the complaint in the
Federal Class Action.
The Company intends to defend vigorously each of these actions. The outcome of
these actions is not presently determinable; accordingly, no provision for any
liability that may result from the resolution of these actions has been
recorded. In the event that the Company is unsuccessful in its defense, the
result would have a material adverse effect on the Company.
Shortly after the Company's March 17, 1992 announcement of a change in
accounting method, the Securities and Exchange Commission (the "SEC") initiated
an informal investigation into the possibility that persons or entities had
traded in the Company's securities on the basis of inside information prior to
the announcement and with respect to the Company's accounting policies
concerning capitalization and the accuracy of its financial statements. On
September 30, 1992, a formal order of investigation was issued by the SEC with
respect to potential violations by the Company and others of sections 10(b) and
13(a) and (b) of the Securities Exchange Act of 1934 and various rules
promulgated thereunder. The Company is cooperating with the investigation
through the production of documents and by providing witnesses pursuant to the
SEC's request.
The American Stock Exchange and the Chicago Board of Options Exchange are
conducting investigations into trading activity on their respective exchanges in
the Company's securities and in put options on the Company's securities prior to
the March 17, 1992 announcement.
On December 4, 1992, the Company was served with a grand jury subpoena out of
the United States District Court for the Eastern District of New York seeking
production of public filings and reports disseminated to its shareholders,
documents referring to the preparation of its financial statements and other
materials. The Company has responded to the subpoena by producing documents. The
grand jury investigation is ongoing and it appears to be focusing on issues
similar to those raised by the civil litigation and the SEC investigation
described above.
The Company is cooperating with each of the investigations referred to in the
three preceding paragraphs.
In December 1992, an action was filed in the Court of Common Pleas of
Northampton County, Commonwealth of Pennsylvania, captioned Charles Chrin and
Nicholas Chrin, individually and trading as Chrin Bros., et al. v. Chambers
Development Company, Inc., et al., seeking a special and preliminary injunction
to enjoin the defendants from allegedly tortiously interfering with the
plaintiffs' permit modification application and with certain engineers
developing the application for a landfill which the Company was in the process
of purchasing. On March 2, 1993, the plaintiffs filed an amended complaint
seeking rescission and damages relating to certain contracts entered into
between the plaintiffs and a subsidiary of the Company with respect to the sale
of a landfill and the prior sale of a waste collection and hauling company in
eastern Pennsylvania previously owned by one of the plaintiffs. The plaintiffs
allege that they were induced to enter into these contracts for the sale of the
landfill and the waste collection and hauling company based upon false and
misleading statements made by the Company as to its financial condition and
future prospects. The Company defendants have filed an answer generally denying
the allegations of the complaint and have counterclaimed against the Chrin
entities for breach of contract and are seeking damages. Discovery on this
matter has recently commenced.
On July 29, 1993, the Circuit Court of Berkeley County, West Virginia, issued an
order requiring the Company to obtain the approval of the Berkeley County
Commission in order to continue operation of its LCS landfill. In November 1993,
the Supreme Court of West Virginia accepted the Company's appeal of the lower
48
<PAGE> 49
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
court order and granted a continuing stay of the order pending decision by the
state Supreme Court upon appeal. A hearing date upon the appeal has not been
set.
On February 5, 1993, an action was filed in the Circuit Court of Kanawha County,
West Virginia, under the caption Lenzi, et al. v. Chambers of West Virginia,
Inc., et al. This action was brought by two individuals who claim to have been
owners of a majority interest in the corporation which owned the LCS landfill
until it was sold to the Company in 1989. The plaintiffs allege that they were
induced to sell the stock of the corporation which owned the landfill to the
Company and to accept royalty payments based on the amounts of waste deposited
in the landfill, as part of the consideration for the sale, as a result of false
and misleading statements made by the Company as to its financial condition and
future prospects. This action seeks to enjoin the Company from disposing of its
interest in the landfill, to impose a constructive trust, and to rescind the
sale or, in the alternative, to obtain compensatory damages of approximately
$21.5 million, plus punitive damages. On March 22, 1993, the Company filed an
answer generally denying the allegations of the complaint and a motion to
dismiss the complaint. Additionally, the Company filed a counterclaim against
the plaintiffs seeking compensatory and punitive damages resulting from
misrepresentations and omissions of fact made by the plaintiffs which induced
the Company to proceed with this acquisition. The Company intends to defend
vigorously this action and to prosecute its counterclaim.
On July 23, 1993, a former officer of the Company filed a Demand for Arbitration
with the Pittsburgh, Pennsylvania, office of the American Arbitration
Association claiming approximately $1,200,000 in severance benefits pursuant to
employment agreements dated October 6, 1992 and February 3, 1993. The
arbitration hearing is scheduled for late March, 1994. The Company believes it
has meritorious defenses to the former officer's demand and it intends to defend
vigorously against the claim.
Other lawsuits, claims and proceedings have been or may be instituted or
asserted against the Company from time to time. Although the outcome of these
matters cannot be predicted with certainty, management of the Company believes
that disposition of these other lawsuits, claims and proceedings which are
pending or asserted will not have a material adverse effect on the Company's
financial statements.
Insurance
The Company self-insures certain of its comprehensive general liability and
workers compensation risks, while maintaining third-party coverage to protect
against catastrophic loss. The Company has not incurred significant fines,
penalties or liabilities for pollution or environmental liabilities at any of
its facilities; however, the Company's operating results could be adversely
affected in the future in the event of uninsured losses.
49
<PAGE> 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
Information relating to directors is incorporated herein by reference from
the captions "ELECTION OF DIRECTORS" and "DIRECTORS WHOSE TERMS OF OFFICE WILL
CONTINUE AFTER THE MEETING" on pages 4 and 5 of the Company's 1994 Proxy
Statement. Information relating to the executive officers is incorporated by
reference from the caption "INFORMATION REGARDING OTHER EXECUTIVE OFFICERS OF
THE COMPANY" on pages 6 and 7 of the Company's 1994 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
Information under the caption "EXECUTIVE COMPENSATION" on pages 13 through
16 of the Company's 1994 Proxy Statement is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS.
Information under the captions "VOTING SECURITIES" on page 1 and "SECURITY
OWNERSHIP OF MANAGEMENT AND CERTAIN BENEFICIAL OWNERS" on pages 2 and 3 of the
Company's 1994 Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information under the caption "HUMAN RESOURCES COMMITTEE INTERLOCK AND
INSIDER PARTICIPATION" on page 14 and the caption "INTEREST OF MANAGEMENT IN
MATERIAL TRANSACTIONS" on page 17 of the Company's 1994 Proxy Statement is
incorporated herein by reference.
50
<PAGE> 51
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<S> <C>
(a)(1) Financial Statements:
Report of Independent Auditors
Consolidated Statements of Operations for the Years Ended December 31, 1993, 1992
and 1991
Consolidated Balance Sheets, December 31, 1993 and 1992
Consolidated Statements of Cash Flows for the Years Ended December 31, 1993, 1992
and 1991
Consolidated Statements of Stockholders' Equity for the Years Ended December 31,
1993, 1992 and 1991
Notes to Consolidated Financial Statements
(a)(2) Financial Statement Schedules for the Three Years Ended December 31, 1993:
Report of Independent Auditors
II Amounts Receivable from Directors, Officers and Employees
V Property and Equipment
VI Accumulated Depreciation and Amortization of Property and Equipment
VIII Valuation and Qualifying Accounts
IX Short-term Borrowings
X Supplementary Income Statement Information
All other schedules are omitted because they are not applicable or the required
information is included in the consolidated financial statements or notes
thereto.
</TABLE>
51
<PAGE> 52
<TABLE>
<S> <C>
(a)(3) Exhibits:
3.1 Certificate of Incorporation of Chambers Development Company, Inc. (Exhibit 3.1
of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1988 is hereby incorporated by reference.)
3.2 By-laws of Chambers Development Company, Inc.
10.1 Lease dated December 16, 1953 between the City of Washington and William H.
Martin; Extension Agreement dated September 30, 1973 between the City of
Washington and William H. Martin; Agreement dated March 19, 1981 between William
H. Martin, Inc. and the City of Washington (Exhibit 10.3 of Registration
Statement on Form S-1, Registration No. 33-00085, is hereby incorporated by
reference); Extension Agreement dated February 25, 1988 between the City of
Washington and William H. Martin, Inc. (Exhibit 10.1(a) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1987 is hereby incorporated
by reference.)
10.2 Lease Agreement dated July 1, 1973 between Yolanda Nau and Southern Alleghenies
Disposal Service, Inc. (Exhibit 10.5 of Registration Statement on Form S-1,
Registration No. 33-00085, is hereby incorporated by reference); Assignment of
Lease dated December 24, 1985 from Yolanda Nau to Gary A. Nau, David M. Nau and
James B. Smith. (Exhibit 10.5 of Company's Annual Report on Form 10-K for the
year ended December 31, 1985 is hereby incorporated by reference.)
10.3 Amended, Modified and Restated Loan Agreement dated as of March 15, 1991 among
Chambers Development Company, Inc., NCNB National Bank of North Carolina, Bank of
New England, N.A., Bank of New York, National City Bank, National Westminster
Bank USA, Bank One, Columbus, N.A., CoreStates Bank, N.A., Sovran Bank, N.A.,
Security Pacific National Bank, PNC Bank and Commerzbank Aktiengesellschaft.
(Exhibit 10.4(c) of the Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1991 is hereby incorporated by reference.)
10.3(a) Seventh Amendment and Waiver to Amended, Modified and Restated Loan Amended
Agreement dated as of July 9, 1993 by and among Chambers Development Company,
Inc. and NationsBank of North Carolina, N.A., Bank of New York, National City
Bank, National Westminster Bank USA, Bank of America NT & SA, Bank One, Columbus,
N.A., Philadelphia National Bank, Commerzbank Aktiengesellschaft, NationsBank of
Virginia, N.A., PNC Bank N.A., Fleet Bank of Massachusetts, N.A. and Michigan
National Bank. (Exhibit 10.3(b) of the Company's Annual Report on Form 10-K for
the year ended December 31, 1992 are hereby incorporated by reference.)
10.4 Indenture between Allegheny County Industrial Development Authority and PNC Bank,
as Trustee, and agreed to by John G. Rangos, Sr., Alexander W. Rangos and John G.
Rangos, Jr., individuals trading as Synergy Associates, dated as of November 1,
1985; Reimbursement Agreement by and between John G. Rangos, Sr., John G. Rangos,
Jr. and Alexander W. Rangos, trading and doing business as Synergy Associates,
and Dollar Bank, Federal Savings Bank, dated as of November 1, 1985; and Guaranty
and Suretyship Agreement of William H. Martin, Inc., U.S. Services Corporation,
Chambers of Georgia, Inc., Chambers of South Carolina, Inc., Carrier Engineering,
Inc., Security Bureau, Inc., Sandman Waste Management, Inc., Chambers Development
Company, Inc., John G. Rangos, Sr., John G. Rangos, Jr., and Alexander W. Rangos,
dated as of November 1, 1985. (Exhibit 10.8 of the Company's Annual Report on
Form 10-K for the year ended December 31, 1985 is hereby incorporated by
reference.)
</TABLE>
52
<PAGE> 53
<TABLE>
<S> <C>
10.5 Lease dated December 29, 1986 between Chambers Development Company, Inc., as
Lessee, and Synergy Associates, as Lessor. (Exhibit 10.10 of Registration
Statement on Form S-1, Registration No. 33-12903, is hereby incorporated by
reference.); Letter dated April 3, 1987 from Chambers Development Company, Inc.
to Synergy Associates, amending the Lease dated December 29, 1986 between such
parties. (Exhibit 10.10(a) of Amendment No. 2 to Registration Statement on Form
S-1, Registration No. 33-14519, is hereby incorporated by reference.); Addendum
to Office Lease Agreement dated April 22, 1988 between Chambers Development
Company, Inc., as Lessee, and Synergy Associates, as Lessor. (Exhibit 10.8(b) of
the Company's Annual Report on Form 10-K for the year ended December 31, 1988 is
hereby incorporated by reference.)
10.6 Chambers Development Company, Inc. 1988 Stock Option Plan, as amended. (Exhibit
10 of the Company's Registration Statement on Form S-8, Registration No.
33-33788, is hereby incorporated by reference.)
10.6(a) Chambers Development Company, Inc. 1991 Stock Option Plan for Non-Employee
Directors (Exhibit A of the Company's 1991 Proxy Statement is hereby incorporated
by reference.)
10.7 Chambers Development Company, Inc. 1988 Employee Incentive Plan. (Exhibit 10.13
of the Company's Annual Report on Form 10-K for the year ended December 31, 1987
is hereby incorporated by reference.)
10.8 Chambers Development Company, Inc. 1993 Stock Incentive Plan (Exhibit A of the
Company's 1993 Proxy Statement is hereby incorporated by reference.)
10.9 Employment Contract by and between Chambers Development Company, Inc. and William
Rodgers, Jr., dated February 3, 1993. (Exhibit 10.7(a)(iv) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1992 is hereby
incorporated by reference.)
10.9(a) Employment Contract by and between Chambers Development Company, Inc. and Jack D.
Weertman, dated February 3, 1993. (Exhibit 10.7(a)(viii) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 is hereby incorporated
by reference.)
10.9(b) Employment Contract by and between Chambers Development Company, Inc. and Peter
V. Morse, dated February 3, 1993. (Exhibit 10.7(a)(v) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 is hereby incorporated
by reference.)
10.9(c) Employment Contract by and between Chambers Development Company, Inc. and Edward
N. Durand, dated February 3, 1993. (Exhibit 10.7(a)(i) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 is hereby incorporated
by reference.)
10.9(d) Employment Contract by and between Chambers Development Company, Inc. and David
J. Feals, dated February 3, 1993. (Exhibit 10.7(a)(iii) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 is hereby incorporated
by reference.)
10.9(e) Employment Contract by and between Chambers Development Company, Inc. and Ronald
H. Jones, dated February 3, 1993. (Exhibit 10.7(a)(vi) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 is hereby incorporated
by reference.)
10.9(f) Employment Contract by and between Chambers Development Company, Inc. and
Lawrence J. Yatch, dated February 3, 1993. (Exhibit 10.7(a)(vii) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1992 is hereby
incorporated by reference.)
10.9(g) Employment contract by and between Chambers Development Company, Inc. and Joseph
G. Stotlemyer, dated February 3, 1993. (Exhibit 10.7(a)(ix) of the Company's
Annual Report on Form 10-K for the year ended December 31, 1992 is hereby
incorporated by reference.)
10.9(h) Employment contract by and between Chambers Development Company, Inc. and Allan
D. Pass, dated, September 2, 1991. (Exhibit 10.7(a)(x) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 is hereby incorporated
by reference.)
</TABLE>
53
<PAGE> 54
<TABLE>
<S> <C>
10.10 Note Purchase Agreement and Note dated as of November 15, 1988 between Chambers
Development Company, Inc. and New York Life Insurance Company; Note Purchase
Agreement and Note dated as of November 15, 1988 between Chambers Development
Company, Inc. and Home Life Insurance Company; Note Purchase Agreement and Note
dated as of November 15, 1988 between Chambers Development Company, Inc. and Home
Life Financial Assurance Corporation. (Exhibit 10.16 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1988 is hereby incorporated
by reference.)
10.10(a) Amended and Restated Note Agreement dated as of July 9, 1993 by and among
Chambers Development Company, Inc. and New York Life Insurance Company, Phoenix
Home Mutual Life Insurance Company and Home Life Financial Assurance Corporation.
(Exhibit 10.11(b) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1992 is hereby incorporated by reference).
10.11 Note Agreement, dated as of December 1, 1990, among Chambers Development Company,
Inc., and Kemper Investors Life Insurance Company, Lumbermens Mutual Casualty
Company, Federal Kemper Life Assurance Company, The Equitable Life Assurance
Society of the United States, Equitable Variable Life Insurance Company, IDS Life
Insurance Company, IDS Life Insurance Company of New York, American Enterprise
Life Insurance Company, The Mutual Life Insurance Company of New York, MONY Life
Insurance Company of America, MONY Legacy Life Insurance Company, Monumental Life
Insurance Company, AUSA Life Insurance Company, Pacific Fidelity Life Insurance
Company, Bankers United Life Assurance Company, General Services Life Insurance
Company, Aid Association for Lutherans, Jefferson-Pilot Life Insurance Company,
Massachusetts Mutual Life Insurance Company, American Family Mutual Insurance
Company, American Family Life Insurance Company, The Canadian Life Assurance
Company, Great-West Life & Annuity Insurance Company, Fidelity & Guaranty Life
Insurance Company, Safeco Life Insurance Company, Modern Woodman of America,
Pan-American Life Insurance Company, American Life & Casualty Insurance Company
and West American Insurance Company. (Exhibit 4 of the Company's Current Report
on Form 8-K dated as of December 20, 1990 is hereby incorporated by reference.)
10.11(a) Amended and Restated Note Agreement dated as of July 9, 1993 by and among
Chambers Development Company, Inc. and Kemper Investors Life Insurance Company,
Lumbermens Mutual Casualty Company, Federal Kemper Life Assurance Company, The
Equitable Life Assurance Society of the United States, Equitable Variable Life
Insurance Company, IDS Life Insurance Company, IDS Life Insurance Company of New
York, American Enterprise Life Insurance Company, The Mutual Life Insurance
Company of New York, MONY Life Insurance Company of America, MONY Legacy Life
Insurance Company, Monumental Life Insurance Company, AUSA Life Insurance
Company, Pacific Fidelity Life Insurance Company, Bankers United Life Assurance
Company, General Services Life Insurance Company, Aid Association for Lutherans,
Jefferson-Pilot Life Insurance Company, Massachusetts Mutual Life Insurance
Company, American Family Mutual Insurance Company, The Canada Life Assurance Com-
pany, Great-West Life & Annuity Insurance Company, Fidelity & Guaranty Life
Insurance Company, Safeco Life Insurance Company, Modern Woodmen of America,
Pan-American Life Insurance Company, American Life & Casualty Insurance Company
and West American Insurance Company. (Exhibit 10.12(b) of the Company's Annual
Report on Form 10-K for the year ended December 31, 1992 is hereby incorporated
by reference).
10.12 Agreement of Sale dated as of November 1, 1989 between Industrial Development
Authority of the County of Charles City and Chambers Development of Virginia,
Inc.; Guaranty Agreement dated as of November 1, 1989 by and among Chambers
Development Company, Inc. and Sovran Bank, N.A., as Trustee. (Exhibit 10.16 of
the Company's Annual Report on Form 10-K for the year ended December 31, 1989 is
hereby incorporated by reference.)
</TABLE>
54
<PAGE> 55
<TABLE>
<S> <C>
10.12(a) First Supplemental Agreement of Sale dated March 1, 1990 between Industrial
Development Authority of the County of Charles City and Chambers Development of
Virginia, Inc. (Exhibit 10.16(a) of the Company's First Quarter Report on Form
10-Q for the quarter ended March 31, 1990 is hereby incorporated by reference.)
10.12(b) Loan Agreement dated November 1, 1991 between Industrial Development Authority of
the County of Charles City and Chambers Development of Virginia, Inc. (Exhibit
10.13(b) of the Company's Annual Report on Form 10-K for the year ended December
31, 1991 is hereby incorporated by reference.)
10.13 Loan Agreement dated December 1, 1990 between South Carolina Jobs-Economic
Development Authority and Chambers Oakridge Landfill, Inc. (Exhibit 10.17 of the
Company's Annual Report on Form 10-K for the year ended December 31, 1990 is
hereby incorporated by reference.)
10.14 Agreement of Sale dated as of December 1, 1991 between Industrial Development
Authority of Amelia County, Virginia and Chambers Waste Systems of Virginia, Inc.
(Exhibit 10.15 of the Company's Annual Report on Form 10-K for the year ended
December 31, 1991 is hereby incorporated by reference.)
10.15 Contract dated as of February 19, 1991 between Bergen County Utilities Authority
and Chambers Waste Systems of New Jersey, Inc. (Exhibit 10.16 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1991 is hereby
incorporated by reference.)
10.16 Loan Agreement dated March 1, 1992 between Okeechobee County, Florida and
Chambers Waste Systems of Florida, Inc. (Exhibit 10.17 of the Company's Annual
Report on Form 10-K for the year ended December 31, 1991 is hereby incorporated
by reference.)
10.17 Reliance Insurance Company Underwriting and Continuing Indemnity Agreement, dated
as of February 26, 1993, among Chambers Development Company, Inc., certain
subsidiaries of Chambers Development Company, Inc., John G. Rangos, Sr., and
Reliance Insurance Company, Reliance Insurance Company of New York, United
Pacific Insurance Company, United Pacific Insurance Company of New York and
Planet Insurance Company (collectively referred to as "Reliance"). (Exhibit 10.18
of the Company's Annual Report on Form 10-K for the year ended December 31, 1992
is hereby incorporated by reference.)
10.18 Security Agreement, dated as of February 26, 1993, among Chambers Development
Company, Inc., certain subsidiaries of Chambers Development Company, Inc. and
Reliance Insurance Company. (Exhibit 10.19 of the Company's Annual report on Form
10-K for the year ended December 31, 1992 is hereby incorporated by reference.)
11.1 Computations of Income (Loss) Per Share.
21.1 Subsidiaries of the Company.
</TABLE>
(b) No reports on Form 8-K were filed during the fourth quarter of the
fiscal year covered by this report.
55
<PAGE> 56
SIGNATURES
Pursuant to the requirements of Section 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.
CHAMBERS DEVELOPMENT COMPANY, INC.
By: /s/ JOHN G. RANGOS, SR.
-------------------------------------
John G. Rangos, Sr.
Chairman and Chief Executive Officer
Dated: March 28, 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
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME DATE
- ----------------------------------------- ---------------
<S> <C>
/s/ JOHN G. RANGOS, SR. March 28, 1994
- -----------------------------------------
John G. Rangos, Sr., Director
Chairman and Chief Executive Officer
/s/ JOHN G. RANGOS, JR. March 28, 1994
- -----------------------------------------
John G. Rangos, Jr., Director
Vice Chairman -- Administration and
Technology, and Secretary
/s/ ALEXANDER W. RANGOS March 28, 1994
- -----------------------------------------
Alexander W. Rangos, Director
President and Chief Operating Officer
/s/ WILLIAM RODGERS, JR. March 28, 1994
- -----------------------------------------
William Rodgers, Jr.
Senior Vice President and
Chief Financial Officer
/s/ JOSEPH G. STOTLEMYER March 28, 1994
- -----------------------------------------
Joseph G. Stotlemyer, Director
Vice President -- Support Services
/s/ DAVID J. FEALS March 28, 1994
- -----------------------------------------
David J. Feals
Vice President and Corporate Controller,
and Chief Accounting Officer
/s/ MICHAEL J. PERETTO March 28, 1994
- -----------------------------------------
Michael J. Peretto, Director
/s/ WILLIAM E. MOFFETT March 28, 1994
- -----------------------------------------
William E. Moffett, Director
/s/ JOHN M. ARTHUR March 28, 1994
- -----------------------------------------
John M. Arthur, Director
/s/ PETER J. GIBBONS March 28, 1994
- -----------------------------------------
Peter J. Gibbons, Director
</TABLE>
56
<PAGE> 57
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and Stockholders of
Chambers Development Company, Inc.:
We have audited the consolidated balance sheets of Chambers Development
Company, Inc. and subsidiaries as of December 31, 1993 and 1992, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended December 31, 1993, and have issued
our report thereon dated March 25, 1994, which report includes an explanatory
paragraph as to an uncertainty because of certain legal actions; such financial
statements and report are included elsewhere in this Form 10-K. Our audits also
included the consolidated financial statement schedules of Chambers Development
Company, Inc., 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.
Deloitte & Touche
Pittsburgh, Pennsylvania
March 25, 1994
<PAGE> 58
SCHEDULE II
CHAMBERS DEVELOPMENT COMPANY, INC.
AMOUNTS RECEIVABLE FROM DIRECTORS, OFFICERS AND EMPLOYEES
THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE BALANCE
BEGINNING END
OF YEAR ADDITIONS DEDUCTIONS OF YEAR(1)
--------- --------- ---------- ----------
<S> <C> <C> <C> <C>
1993
John J. Cushma $ 250 $ -- $ -- $250
Edward N. Durand 250 -- -- 250
Dale O. Nolder, Jr. 250 -- (250)(2) --
Joseph R. Stotlemyer 250 -- -- 250
1992
John J. Cushma $ -- $ 250(3) $ -- $250
Edward N. Durand -- 250(3) -- 250
Dale O. Nolder, Jr. -- 250(3) -- 250
Joseph R. Stotlemyer -- 250(3) -- 250
</TABLE>
(1) Included in "Other assets - other" (noncurrent).
(2) Note receivable reclassified to a non-employee note receivable as a result
of employment terminating in 1993.
(3) During 1992, the Company acquired loans made by a bank to the named officers
for the purpose of purchasing common stock of the Company. Each loan, which
was due for payment on December 7, 1992, is at an interest rate of prime
plus 1/2 percent and is collateralized by 13,534 shares of the Company's
Class A Common Stock or (as to Mr. Stotlemyer) 14,050 shares of the
Company's Common Stock.
There were no reportable amounts receivable from directors, officers and
employees for the year ended December 31, 1991.
<PAGE> 59
SCHEDULE V
CHAMBERS DEVELOPMENT COMPANY, INC.
PROPERTY AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE (1) BALANCE
BEGINNING ADDITIONS END
OF YEAR AT COST RETIREMENTS OTHER OF YEAR
--------- --------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
1993
Land, primarily landfill sites $272,291 $ 22,127 $ (5,622) $ 24,090 $312,886
Vehicles and equipment 87,292 10,252 (6,908) 16,547 107,183
Other 38,385 548 (14,848) (795) 23,290
Construction in progress 38,024 3,546(2) -- 812 42,382
-------- -------- --------- -------- --------
$435,992 $ 36,473 $(27,378) $ 40,654(3) $485,741
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
1992
Land, primarily landfill sites $217,953 $ 86,844 $ (125) $(32,381) $272,291
Vehicles and equipment 116,097 27,868 (25,162) (31,511) 87,292
Other 41,624 5,061 (1,635) (6,665) 38,385
Construction in progress 43,192 14,874(2) -- (20,042) 38,024
-------- -------- --------- -------- --------
$418,866 $134,647 $(26,922) $(90,599)(4) $435,992
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
1991
Land, primarily landfill sites $126,314 $ 92,407 $ (753) $ (15) $217,953
Vehicles and equipment 70,493 49,875 (2,895) (1,376) 116,097
Other 32,912 10,096 (100) (1,284) 41,624
Construction in progress 37,923 5,269(2) -- -- 43,192
-------- -------- --------- -------- --------
$267,642 $157,647 $ (3,748) $ (2,675)(5) $418,866
-------- -------- --------- -------- --------
-------- -------- --------- -------- --------
</TABLE>
(1) Land expenditures relate to the permitting, design and construction of new
and existing landfill sites and the repermitting and reconstruction of
existing Pennsylvania landfill sites. Vehicles and equipment expenditures
relate to the expansion of the businesses of the Company, with a
substantial portion in 1991 attributable to startup operations.
(2) Costs of assets acquired, net of cost of assets placed in service.
(3) Includes costs of assets reclassified from "Net assets held for sale" of
$59,374, net of cost of assets reclassified to "Net assets held for sale"
of $13,695 and other adjustments to "Net assets held for sale" of $534.
Also includes costs of assets related to terminated projects and impaired
assets of $4,491.
Reclassifications from and to "Net assets held for sale" consist of the
following:
<TABLE>
<CAPTION>
FROM TO
------- --------
<S> <C> <C>
Land, primarily landfill sites $28,735 $ (4,212)
Vehicles and equipment 18,301 (1,371)
Other 1,737 (1,995)
Construction in progress 10,601 (6,117)
------- --------
$59,374 $(13,695)
------- --------
------- --------
</TABLE>
(4) Includes cost of assets reclassified to "Net assets held for sale" and cost
of assets related to terminated construction in progress projects of
$7,470.
(5) Cost of assets of discontinued operations reclassified to "Net assets held
for sale."
Landfill disposal sites, including land and related landfill preparation and
improvement costs, which include construction, engineering, permitting,
interest and other direct costs, are amortized as airspace is consumed.
Depreciation and amortization of other property and equipment is provided over
the estimated useful lives of the assets, on the straight-line method, as
follows: buildings - 7 to 25 years; vehicles and equipment - 3 to 20 years;
and office furniture and fixtures - 5 years.
<PAGE> 60
SCHEDULE VI
CHAMBERS DEVELOPMENT COMPANY, INC.
ACCUMULATED DEPRECIATION AND AMORTIZATION OF PROPERTY AND EQUIPMENT
THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED
BALANCE TO COSTS BALANCE
BEGINNING AND END
OF YEAR EXPENSES RETIREMENTS OTHER OF YEAR
--------- -------- ----------- -------- --------
<S> <C> <C> <C> <C> <C>
1993
Land, primarily landfill sites $ 60,497 $20,666 $ (2,851) $ 1,201 $ 79,513
Vehicles and equipment 27,973 10,851 (3,221) 3,395 38,998
Other 16,593 2,745 (9,304) 185 10,219
-------- ------- --------- -------- --------
$105,063 $34,262(1) $(15,376) $ 4,781(2) $128,730
-------- ------- --------- -------- --------
-------- ------- --------- -------- --------
1992
Land, primarily landfill sites $ 46,151 $16,764 $ (102) $ (2,316) $ 60,497
Vehicles and equipment 36,596 11,876 (11,454) (9,045) 27,973
Other 14,460 3,448 (362) (953) 16,593
-------- ------- --------- -------- --------
$ 97,207 $32,088 $(11,918) $(12,314)(3) $105,063
-------- ------- --------- -------- --------
-------- ------- --------- -------- --------
1991
Land, primarily landfill sites $ 32,507 $13,682 $ (33) $ (5) $ 46,151
Vehicles and equipment 27,685 11,571 (2,120) (540) 36,596
Other 10,844 4,163 (52) (495) 14,460
-------- ------- --------- -------- --------
$ 71,036 $29,416(4) $ (2,205) $ (1,040)(5) $ 97,207
-------- ------- --------- -------- --------
-------- ------- --------- -------- --------
</TABLE>
(1) Excludes depreciation and amortization of $1,377 related to assets held
for sale.
(2) Includes accumulated depreciation and amortization on assets reclassified
from "Net assets held for sale" of $5,063, accumulated depreciation and
amortization on assets reclassified to "Net assets held for sale" of $957
and additional accumulated depreciation and amortization on assets related
to adjustments to "Net assets held for sale" of $675.
Reclassifications from and to "Net assets held for sale" consist of the
following:
<TABLE>
<CAPTION>
FROM TO
------ -----
<S> <C> <C>
Land, primarily landfill sites $1,065 $(147)
Vehicles and equipment 3,630 (573)
Other 368 (237)
------ -----
$5,063 $(957)
------ -----
------ -----
</TABLE>
(3) Accumulated depreciation and amortization on assets reclassified to "Net
assets held for sale."
(4) Includes depreciation and amortization on assets of discontinued operations.
(5) Accumulated depreciation and amortization on assets of discontinued
operations reclassified to "Net assets held for sale."
<PAGE> 61
SCHEDULE VIII
CHAMBERS DEVELOPMENT COMPANY, INC.
VALUATION AND QUALIFYING ACCOUNTS
THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE CHARGED CHARGED BALANCE
BEGINNING TO COSTS TO OTHER END
OF YEAR EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
--------- -------- --------- ---------- --------
<S> <C> <C> <C> <C> <C>
1993
Allowance for doubtful
accounts $3,345 $ 932 $-- $(1,452)(1) $2,825(2)
------- -------- --- -------- --------
1992
Allowance for doubtful
accounts $1,651 $2,454 $80(3) $ (840)(1) $3,345(2)
------- -------- --- -------- --------
Allowance for unrealized
loss on marketable
equitable securities $ 133 $ -- $-- $ (133)(4) $ --
------- -------- --- -------- --------
1991
Allowance for doubtful $(2,540)(1)
accounts $2,930 $1,562(5) $-- (301)(6) $1,651(2)
------- -------- --- -------- --------
Allowance for unrealized
loss on marketable
equitable securities $ 908 $ -- $-- $ (775)(4) $ 133
------- -------- --- -------- --------
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
(2) Includes $363, $643 and $263 related to "Accounts receivable - other" in
1993, 1992 and 1991, respectively, and $1,400 related to "Other assets -
other" in 1993 and 1992.
(3) Reclassified from accrued expenses.
(4) Credited to "Other income, primarily interest."
(5) Includes charge related to discontinued operations.
(6) Allowance related to discontinued operations reclassified to "Net assets
held for sale."
<PAGE> 62
SCHEDULE IX
CHAMBERS DEVELOPMENT COMPANY, INC.
SHORT-TERM BORROWINGS
THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DAILY WEIGHTED
MAXIMUM WEIGHTED AVERAGE
AMOUNT AVERAGE INTEREST
BALANCE INTEREST OUTSTANDING AMOUNT RATE
END RATE END DURING DURING DURING
OF YEAR OF YEAR THE YEAR THE YEAR THE YEAR(1)
------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
1992
Note payable to bank $ -- -- $10,000 $4,986 5.54%
1991
Note payable to bank $10,000 6.17% $10,000 $9,917 7.33%
</TABLE>
There were no short-term borrowings during 1993.
(1) The weighted average interest rate is calculated by dividing the related
interest expense by the weighted average amount of short-term borrowings
outstanding during the year.
<PAGE> 63
SCHEDULE X
CHAMBERS DEVELOPMENT COMPANY, INC.
SUPPLEMENTARY INCOME STATEMENT INFORMATION
THREE YEARS ENDED DECEMBER 31, 1993
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C>
1993
Maintenance and repairs $10,920
Other taxes, excluding payroll and income taxes 3,407
1992
Maintenance and repairs $10,696
Other taxes, excluding payroll and income taxes 3,466
1991
Maintenance and repairs $10,351
Other taxes, excluding payroll and income taxes 4,277
</TABLE>
<PAGE> 64
EXHIBITS
TO
FORM 10-K
CHAMBERS DEVELOPMENT COMPANY, INC.
Year Ended December 31, 1993
<PAGE> 65
Exhibit Index
3.2 By-Laws of Chambers Development Company, Inc.
11.1 Computations of Income (Loss) Per Share.
21.1 Subsidiaries of the Company.
<PAGE> 1
EXHIBIT 3.2
CHAMBERS DEVELOPMENT COMPANY, INC.
********
BY-LAWS
********
ARTICLE I
OFFICES
Section 1. The registered office shall be located in the City of Wilmington,
County of New Castle, State of Delaware.
Section 2. The corporation may also have offices at such other places both
within and without the State of Delaware as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETING OF SHAREHOLDERS
Section 1. All meetings of the shareholders shall be held in the City of
Pittsburgh, Commonwealth of Pennsylvania at such place as may be fixed from
time to time by the Board of Directors or at such place either within or
without the State of Delaware as may be designated from time to time by the
Board of Directors.
Section 2. An annual meeting of shareholders, commencing with the year 1986,
shall be held on either (a) the third Wednesday in April if not a legal holiday
and, if a legal holiday, then on the next succeeding business day which is not
a legal holiday or (b) on any business day which is not a legal holiday in
April or May as determined by the Board of Directors; at which meeting the
shareholders shall elect in accordance with the corporation's Certificate of
Incorporation and By-laws a Board of Directors, and transact such other
business as may properly be brought before the meeting.
Section 3. Special meetings of the shareholders for any purpose or purposes,
unless otherwise prescribed by statute or by the Certificate of Incorporation,
may be called at any time only by the Board of Directors pursuant to a
resolution approved by the majority of the entire Board of Directors. Business
transacted at all special meetings shall be limited to the purposes stated in
the notice.
Section 4. Written notice of every meeting of the shareholders, specifying
the place, date and hour and the general nature of the business of the meeting,
shall be served upon or mailed, postage prepaid, at least ten days prior to the
meeting, unless a greater period of notice is required by statute, to each
shareholder entitled to vote thereat.
<PAGE> 2
Section 5. The holders of issued and outstanding shares of the stock of the
corporation entitled to vote and representing a majority of the voting power of
the corporation, present in person or represented by proxy, shall be requisite
and shall constitute a quorum at all meetings of the shareholders for the
transaction of business, except as otherwise provided by statute or by the
Certificate of Incorporation or by these By-Laws. If, however, any meeting of
shareholders cannot be organized because a quorum has not attended, the
shareholders entitled to vote thereat, present in person or by proxy, shall
have power, except as otherwise provided by statute, to adjourn the meeting at
such time and place as they may determine, but in case of any meeting called
for the election of directors such meeting may be adjourned only from day to
day or such longer periods not exceeding fifteen days each as the holders of a
majority of the shares present in person or by proxy shall direct, and those
who attend the second of such adjourned meetings, although less than a quorum,
shall nevertheless constitute a quorum for the purpose of electing directors.
At any adjourned meeting at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 6. When a quorum is present or represented at any meeting, the vote
of the majority of the voting power of the corporation, present in person or
represented by proxy, shall decide any question brought before such meeting,
unless the question is one upon which, by express provision of the statutes or
of the Certificate of Incorporation or of these By-Laws, a different vote is
required, in which case such express provision shall govern and control the
decision of such question.
Section 7. (a) Except as expressly provided herein or in the Certificate of
Incorporation, at every meeting of shareholders of the corporation, every
holder of Class A Common Stock shall be entitled to one vote in person or by
proxy for each share of Class A Common Stock standing in his name on the
transfer books of the corporation and every holder of Common Stock shall be
entitled to ten votes in person or by proxy for each share of Common Stock
standing in his name on the transfer books of the corporation. At every
meeting of the shareholders called for the election of directors, the holders
of Class A Common Stock entitled to vote shall be entitled to elect one-quarter
(1/4) of the number of directors to be elected at such meeting and if
one-quarter (1/4) of such number of directors is not a whole number, then the
holders of Class A Common Stock entitled to vote shall be entitled to elect the
next higher whole number of directors to be elected at such meeting, and the
holders of Common Stock shall have no voting rights with respect to the
election of such directors. The holders of Common Stock and Class A Common
Stock entitled to vote, voting as a single class, shall be entitled to elect
the remaining directors to be elected at such meeting.
(b) Except as may otherwise be provided herein or required by law or by
the Certificate of Incorporation, the holders of Class A Common Stock and
Common Stock shall vote together as a single class.
-2-
<PAGE> 3
Section 8. Any action required or permitted to be taken by the shareholders
must be effected at a duly called annual or special meeting of such
shareholders and may not be effected by any consent in writing by such
shareholders.
ARTICLE III
DIRECTORS
Section 1. The number of directors which shall constitute the whole Board
shall be fixed, from time to time, by resolution of a majority of the entire
Board of Directors, provided that the number shall not be fixed at less than
five directors. At the 1986 annual meeting of shareholders, the term of the
then existing directors shall expire and the directors shall be divided into
three classes, with each class being as nearly equal in number as possible. At
such meeting, one class of directors shall be elected for a one-year term, one
class for a two-year term, and one class for a three-year term. At each
succeeding annual meeting of the shareholders, successors to the class of
directors whose term expires in that year will be elected for a three-year
term. If the number of directors is changed, any increase or decrease in
directors shall be apportioned among the classes so as to maintain all the
classes as nearly equal in number as possible and any additional director
elected to any class shall hold office for a term which shall coincide with the
term of such class.
Section 2. Except as otherwise provided, herein or in the Certificate of
Incorporation, no director shall be removed without a 66 2/3% vote of the
voting power of the corporation in favor of such removal, unless a majority of
the Board of Directors has previously voted in favor of said removal, in which
case the shareholder voting requirements specified under Delaware General
Corporation Law shall apply.
Section 3. Newly created directorships resulting from any increase in the
authorized number of directors shall be filled by a majority vote of all of the
remaining directors then in office, even if less than a quorum, and each person
so elected shall be a director until his successor is elected by the
shareholders.
Section 4. If, during the interval between annual meetings of shareholders
for the election of directors, the number of directors who have been elected by
either the holders of Class A Common Stock entitled to vote or by the holders
of Common Stock and Class A Common Stock entitled to vote, shall, by reason of
resignation, death, retirement, disqualification or removal, be reduced, the
vacancy or vacancies in the directors so created may be filled by a majority
vote of all the remaining directors then in office, even if less and a quorum,
or by a sole remaining director. Any director elected by the remaining
directors then in office to fill any vacancy in the directors designated by the
holders of Class A Common Stock entitled by vote may be removed from office by
vote of the holders of a majority of the shares of Class A Common Stock
entitled to vote.
-3-
<PAGE> 4
Section 5. The business of the corporation shall be managed by its Board of
Directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Certificate of
Incorporation or by these By-Laws directed or required to be exercised and done
by the shareholders.
Section 6. The Board of Directors of the corporation may hold meetings, both
regular and special, either within or without the State of Delaware. Regular
meetings of the Board of Directors may be held without notice at such time and
at such place as shall from time to time be determined by resolution of at
least a majority of the Board at a duly convened meeting, or by unanimous
written consent. Special meetings of the Board of Directors may be called by
the President on two days notice to each director, either personally or by mail
or by telegram; special meetings may also be called by the President or
Secretary in like manner and on like notice on the written request of two
directors.
Section 7. One or more directors or shareholders may participate in a meeting
of the Board of Directors or a committee of the Board of Directors or of the
shareholders by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participating in such a meeting shall constitute attendance at the
meeting.
Section 8. At all meetings of the Board of Directors a majority of the
directors in office shall be necessary to constitute a quorum for the
transaction of business, and the acts of a majority of the directors present at
a meeting at which a quorum is present shall be the acts of the Board of
Directors, except as may be otherwise specifically provided by statute or by
the Certificate of Incorporation. If a quorum shall not be present at any
meeting of directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the meeting, until
a quorum shall be present.
Section 9. If all the directors shall severally or collectively consent in
writing to any action to be taken by the corporation, such action shall be as
valid a corporate actions as though it had been authorized at a meeting of the
Board of Directors.
Section 10. Directors, as such, shall not receive any stated salary for their
services, but, by resolution of the Board, a fixed sum, and expenses of
attendance, if any, may be allowed for attendance at each regular or special
meeting of the Board; provided that nothing herein contained shall be construed
to preclude any director from serving the corporation in any other capacity and
receiving compensation therefor.
Section 11. Unless otherwise restricted by the Certificate of Incorporation
or these By-Laws, any action required or permitted to be taken at any meeting
of the Board of Directors or any committee thereof may be taken without a
meeting, if all members of the Board or committee, as the case may be, consent
thereto in writing, and the writing or writings are filed with the minutes of
proceedings of the Board or committee.
-4-
<PAGE> 5
Section 12. The Board of Directors may, by resolution passed by a majority of
the whole Board, designate one or more committees, each committee to consist of
one or more of the directors of the corporation. The Board may designate one
or more directors as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of the committee. In the absence
or disqualification of a member of a committee, the member or members thereof
present at any meeting and not disqualified from voting, whether or not he or
they constitute a quorum, may unanimously appoint another member of the Board
of Directors to act at the meeting in the place of any such absent or
disqualified member. Any such committee, to the extent provided in the
resolution of the Board of Directors, shall have and may exercise all the
powers and authority of the Board of Directors in the management of the
business and affairs of the corporation, and may authorize the seal of the
corporation to be affixed to all papers which may require it; but no such
committee shall have the power or authority in reference to amending the
Certificate of Incorporation, adopting an agreement of merger or consolidation,
recommending to the shareholders the sale, lease or exchange of all or
substantially all of the corporation's property and assets, recommending to the
shareholders a dissolution of the corporation or a revocation of a dissolution,
or amending the By-Laws of the corporation; and, unless the resolution or the
Certificate of Incorporation expressly so provide, no such committee shall have
the power or authority to declare a dividend or to authorize the issuance of
stock. Such committee or committees shall have such name or names as may be
determined from time to time by resolution adopted by the Board of Directors.
Section 13. Each committee shall keep regular minutes of its meetings and
report the same to the Board of Directors when required.
ARTICLE IV
NOTICES
Section 1. Notices to directors and shareholders shall be in writing and
delivered personally or mailed to the directors or shareholders at their
addresses appearing on the books of the corporation. Notice by mail shall be
deemed to be given at the time when the same shall be mailed. Notice to
directors may also be given by telegram.
Section 2. Whenever any notice is required to be given under the provisions
of the statutes or of the Certificate of Incorporation or of these By-Laws, a
waiver thereof in writing signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a Chairman of the Board, one or more Vice Chairmen of
-5-
<PAGE> 6
the Board, a President, Vice President, a Secretary and a Treasurer, all of
whom shall be natural persons of full age. The Board of Directors may also
choose additional Vice Presidents and one or more Assistant Secretaries and
Assistant Treasurers. Any two of the aforesaid offices, except those of
President and Vice President or President and Secretary, may be held by the
same person.
Section 2. The salaries of all officers and agents of the corporation shall
be fixed by the Board of Directors.
Section 3. The officers of the corporation shall hold office until their
successors are chosen and qualify. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of the
corporation shall be filled by the Board of Directors.
Section 4. The Chairman shall be the chief executive officer of the
corporation, shall preside at all meetings of the shareholders and the Board of
Directors, shall have general management of the business of the corporation,
and shall see that all orders and resolutions of the Board of Directors are
carried into effect.
Section 5. The Vice Chairman, or if there shall be more than one, the Vice
Chairmen in the order determined by the Board of Directors, shall, in the
extraordinary absence or disability of the Chairman, perform the duties and
exercise the powers of the Chairman, and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 6. The President shall be the chief operating officer of the
corporation and shall have active management of the business of the
corporation. He shall execute bonds, mortgages and other contracts requiring a
seal, under the seal of the corporation, except where required or permitted by
law to be otherwise signed and executed and except where the signing and
execution thereof shall be expressly delegated by the Board of Directors to
some other officer or agent of the corporation.
Section 7. The Vice President, or if there shall be more than one, the Vice
Presidents in the order determined by the Board of Directors, shall, in the
extraordinary absence or disability of the President, perform the duties and
exercise the powers of the President, and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
Section 8. The Secretary shall attend all meetings of the Board of Directors
and all meetings of the shareholders and record all the proceedings of the
meetings of the corporation and of the Board of Directors in a book to be kept
for that purpose. He shall give, or cause to be given, notice of all meetings
of the shareholders and special meetings of the Board of Directors, and shall
perform such other duties as may be prescribed by the Board of Directors or
President, under whose supervision he shall be. He shall keep in safe custody
the seal of the corporation, and, when authorized by the Board of Directors,
-6-
<PAGE> 7
affix the same to any instrument requiring it and, when so affixed, it shall be
attested by his signature or by the signing of an Assistant Secretary.
Section 9. The Assistant Secretary, or if there be more than one, the
Assistant Secretaries in the order determined by the Board of Directors, shall,
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
Section 10. The Treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the President and the Board of Directors, at its regular
meetings, or when the Board of Directors so requires, an account of all of his
transactions as Treasurer and of the financial condition of the corporation.
Section 11. If required by the Board of Directors, the Treasurer shall give
the corporation a bond in such sum and with such surety or sureties as shall be
satisfactory to the Board of Directors for the faithful performance of the
duties of his office and for the restoration to the corporation, in case of his
death, resignation, retirement or removal from office, of all books, papers,
vouchers, money and other property of whatever kind in his possession or under
his control belonging to the corporation.
Section 12. The Assistant Treasurer, or if there shall be more than one, the
Assistant Treasurers in the order determined by the Board of Directors, shall,
in the absence or the disability of the Treasurer, perform the duties and
exercise the powers of the Treasurer and shall perform such other duties and
have such other powers as the Board of Directors may from time to time
prescribe.
ARTICLE VI
CERTIFICATES OF SHARES
Section 1. The certificates of shares of the corporation shall be numbered
and registered in a share register as they are issued. They shall exhibit the
name of the registered holder and the number and class of shares and the
series, if any, represented thereby and the par value of each share or a
statement that such shares are without par value, as the case may be.
Section 2. Every share certificate shall be signed by the President or Vice
President and the Secretary or an Assistant Secretary or the Treasurer or an
Assistant Treasurer and shall be sealed with the corporate seal which may be
facsimile, engraved or printed.
-7-
<PAGE> 8
Section 3. The Board of Directors shall direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, destroyed or
wrongfully taken, upon the making of an affidavit of that fact by the person
claiming the share certificate to be lost, destroyed or wrongfully taken. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, destroyed or wrongfully taken
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and give the corporation a bond in such sum
as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate or certificates alleged to have
been lost, destroyed or wrongfully taken.
Section 4. Upon surrender to the corporation of a certificate for shares duly
endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the corporation to issue a new
certificate to the person entitled thereto, cancel the old certificate and
record the transaction upon its books.
Section 5. The corporation shall be entitled to treat the holder of record of
any share or shares as the holder in fact thereof and shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, and shall not be liable for any registration or transfer
of shares which are registered or to be registered in the name of a fiduciary
or the nominee of a fiduciary unless made with actual knowledge that a
fiduciary or nominee of a fiduciary is committing a breach of trust in
requesting such registration or transfer, or with knowledge of such facts that
its participation therein amounts to bad faith.
ARTICLE VII
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. A director of the corporation shall not be personally liable to
the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (A) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (B) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (C) under Section 174 of the Delaware General
Corporation Law or (D) for any transaction from which the director derives an
improper personal benefit. If the Delaware General Corporation Law is amended
after approval by the stockholders of this Article VII to authorize corporate
action further eliminating or limiting the personal liability of directors,
then the liability of a director of the corporation shall be eliminated or
limited to the fullest extent permitted by the Delaware General Corporation Law
as so amended. Any repeal or modification of this article by the stockholders
of the corporation shall not adversely affect any right or protection of a
director of the corporation existing at the time of such repeal or
modification.
-8-
<PAGE> 9
Section 2. To the fullest extent permitted by Section 145 of the Delaware
General Corporation Law or any successor provision thereto, (A) the corporation
shall (1) indemnify any person who was or is a party, or is threatened to be
made a party, to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative, by reason
of the fact that such person is or was a director or officer of the
corporation, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding and (2) pay expenses incurred
by such person in defending a civil or criminal action, suit or proceeding in
advance of the final disposition of such action, suit or proceeding, and (B)
the corporation may (1) indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative,
by reason of the fact that such person is or was an employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, agent or fiduciary of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such action,
suit or proceeding and (2) pay expenses incurred by such person in defending a
civil or criminal action, suit or proceeding in advance of the final
disposition of such action, suit or proceeding. The foregoing indemnification
and advancement of expenses provisions shall not be deemed exclusive of any
other rights to indemnification or advancement of expenses to which any such
person may be entitled under any statute, by-law, agreement, vote of
stockholders or disinterested directors or otherwise. Any change in law that
purports to restrict the ability of the corporation to indemnify or advance
expenses to any such person shall not affect the corporation's or right to
indemnify and advance expenses to any such person with respect to any action,
claim, suit or proceeding that occurred or arose or that is based on events or
acts that occurred or arose prior to such change in law.
ARTICLE VIII
GENERAL PROVISIONS
Section 1. Dividends upon the shares of the corporation may be declared by
the Board of Directors at any regular or special meeting, pursuant to law and
to the provisions of the Certificate of Incorporation. Dividends may be paid
in cash, in property, or in shares of stock of the corporation. Before payment
of any dividend, there may be set aside out of any funds of the corporation
available for dividends such sum or sums as the directors from time to time, in
their absolute discretion, think proper as a reserve or reserves to meet
contingencies, or for equalizing dividends, or for repairing or maintaining any
property of the corporation, or for such other purposes as the director shall
think conductive to the interest of the corporation, and the directors may
modify or abolish any such reserve in the manner in which it was created.
Section 2. The directors shall be required to send, or cause to be sent, to
the shareholders annual financial reports.
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Section 3. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
Section 4. The fiscal year of the corporation shall begin on the first day of
January and end on the last day of December in each year.
Section 5. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its incorporation and the words "Seal" and "Delaware".
The seal may be used by causing it or a facsimile thereof to be impressed or
affixed or reproduced or otherwise.
ARTICLE IX
AMENDMENTS
Section 1. These By-Laws may be altered, amended or repealed by a majority
vote of the members of the Board of Directors at any regular or special meeting
duly convened after notice to the directors of that purpose.
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EXHIBIT 11.1
CHAMBERS DEVELOPMENT COMPANY, INC.
COMPUTATIONS OF INCOME (LOSS) PER SHARE
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Year Ended December 31,
-------------------------------
1993 1992 1991
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Income (Loss) from Continuing
Operations $ 8,303 $(70,255) $(64,482)
Loss from Discontinued Operations -- (468) (7,722)
------- -------- --------
Net Income (Loss) $ 8,303 $(70,723) $(72,204)
------- -------- --------
------- -------- --------
INCOME (LOSS) PER COMMON SHARE
Continuing Operations $ .12 $ (1.05) $ (1.08)
Discontinued Operations -- (.01) (.13)
------- -------- --------
Net Income (Loss) $ .12 $ (1.06) $ (1.21)
------- -------- --------
------- -------- --------
COMPUTATION OF WEIGHTED AVERAGE COMMON SHARES
Common Shares Outstanding at
Beginning of Year 66,788 66,780 54,648
Effect of:
Issuance of Class A Common Stock -- -- 3,686
Conversion of subordinated
debentures -- -- 1,550
Other -- 8 11
------ ------ ------
------ ------ ------
Weighted Average Number of Common
Shares Outstanding 66,788 66,788 59,895
------ ------ ------
------ ------ ------
</TABLE>
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EXHIBIT 21.1
SUBSIDIARIES OF CHAMBERS DEVELOPMENT COMPANY, INC.
<TABLE>
<CAPTION>
COMPANY NAME JURISDICTION OF INCORPORATION
- ------------ -----------------------------
<S> <C>
Chambers Atlanta Landfill, Inc. (2) Georgia
Chambers Clearview Environmental
Landfill, Inc. (9) Mississippi
Chambers Development Europe B.V. (11) Netherlands
Chambers Development of Ohio, Inc. Ohio
Chambers Development of Virginia, Inc. (6) Virginia
Chambers Environmental Systems Hellas S.A. (12) Greece
Chambers Enterprises, Inc. Pennsylvania
Chambers International, Inc. Delaware
Chambers Laurel Highlands Landfill, Inc. (7) Pennsylvania
Chambers Maplewood Landfill, Inc. (6) Virginia
Chambers Medical Technologies, Inc. (2/12/85 Incorporation) Pennsylvania
Chambers Medical Technologies, Inc. (4/26/91 Incorporation) Pennsylvania
Chambers Medical Technologies of
South Carolina, Inc. (8) South Carolina
Chambers New Jersey Land, Inc. (4) New Jersey
Chambers New Jersey Trucking Inc. (4) New Jersey
Chambers Oakridge Landfill, Inc. (3) South Carolina
Chambers Orange County Landfill, Inc. (13) Florida
Chambers Resources, Inc. Pennsylvania
Chambers Richland County Landfill, Inc. (3) South Carolina
Chambers Services, Inc. Delaware
Chambers Smyrna Landfill,Inc. (2) Georgia
Chambers Waste Systems of California, Inc. California
Chambers Waste Systems of Florida, Inc. Florida
Chambers Waste Systems of Mississippi, Inc. Mississippi
Chambers Waste Systems of New York, Inc. New York
Chambers Waste Systems of North Carolina, Inc. North Carolina
Chambers Waste Systems of Ohio, Inc. Ohio
Chambers Waste Systems of New Jersey, Inc. (4) New Jersey
Chambers Waste Systems of Rhode Island, Inc. Rhode Island
Chambers Waste Systems of South Carolina, Inc. South Carolina
Chambers Waste Systems of Texas, Inc. Texas
Chambers Waste Systems of Virginia, Inc. Virginia
Chambers of Asia, Limited (11) Hong Kong
Chambers of Delaware, Inc. Delaware
Chambers of Georgia, Inc. Georgia
Chambers of Hong Kong Limited (14) Hong Kong
Chambers of Illinois, Inc. Illinois
Chambers of Indiana, Inc. Indiana
Chambers of New Jersey Inc. New Jersey
Chambers of New Jersey Recycling, Inc. (4) New Jersey
Chambers of Maryland, Inc. Maryland
Chambers of Massachusetts, Inc. Massachusetts
Chambers of Mississippi, Inc. (10) Mississippi
Chambers of Pennsylvania, Inc. Pennsylvania
</TABLE>
<PAGE> 2
<TABLE>
<S> <C>
Chambers of Tennessee, Inc. Tennessee
Chambers of West Virginia, Inc. West Virginia
China Harbour-Chambers Environmental
Services, Limited (16) Hong Kong
Dauphin Meadows, Inc. Pennsylvania
H. Sienknecht Co. (15) Tennessee
LCS Services, Inc. (5) West Virginia
William H. Martin, Inc. Pennsylvania
Morris County Transfer Station, Inc. (4) New Jersey
Rail-It Corporation Illinois
Rail-It Limited Partnership Illinois
Remote Landfill Services, Inc. (15) Tennessee
CDC Services, Inc. (formerly Security Bureau, Inc.) Delaware
Southern Alleghenies Disposal Service, Inc. (1) Pennsylvania
U.S. Services Corporation Pennsylvania
U.S. Utilities Services Corporation (1) Pennsylvania
</TABLE>
- ------------------------------------------------------------------
(1) Subsidiary of U.S. Services Corporation
(2) Subsidiary of Chambers of Georgia, Inc.
(3) Subsidiary of Chambers of South Carolina, Inc.
(4) Subsidiary of Chambers of New Jersey Inc.
(5) Subsidiary of Chambers of West Virginia, Inc.
(6) Subsidiary of Chambers Waste Systems of Virginia, Inc.
(7) Subsidiary of Chambers of Pennsylvania, Inc.
(8) Subsidiary of Chambers Medical Technologies, Inc. (4/26/91 Incorporation).
(9) Subsidiary of Chambers of Mississippi, Inc.
(10) Subsidiary of Chambers Waste Systems of Mississippi, Inc.
(11) Subsidiary of Chambers International, Inc.
(12) Subsidiary of Chambers Development Europe, B.V.
(13) Subsidiary of Chambers Waste Systems of Florida, Inc.
(14) Subsidiary of Chambers of Asia, Limited
(15) Subsidiary of Chambers of Tennessee, Inc.
(16) 50% Owned by Chambers of Hong Kong, Limited and
50% Owned by China Harbour Environmental Company Limited
(ALL SUBSIDIARIES are 100% OWNED except as noted)
Business address for all Companies: 10700 Frankstown Road
Pittsburgh, Pennsylvania 15235
2205a
