<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended March 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From________________ To _________________
Commission File Number 1-9108
CHAMBERS DEVELOPMENT COMPANY, INC.
(Exact name of registrant as specified in its charter)
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)
(412) 242-6237
(Registrant's telephone number, including area code)
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
--- ---
Number of shares of common stock outstanding as of May 5, 1995:
Common Stock: 15,439,668
Class A Common Stock: 51,349,459
<PAGE> 2
CHAMBERS DEVELOPMENT COMPANY, INC.
INDEX
<TABLE>
<CAPTION>
Page
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the
Three Months Ended March 31, 1995 and 1994 3
Condensed Consolidated Balance Sheets at March 31, 1995
and December 31, 1994 4
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1995 and 1994 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings 20
Item 6. Exhibits and Reports 27
SIGNATURE
</TABLE>
2
<PAGE> 3
CHAMBERS DEVELOPMENT COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
- ------------------------------------------------------------
Three Months Ended March 31,
---------------------------
1995 1994
- ------------------------------------------------------------
<S> <C> <C>
REVENUES $54,734 $59,766
COSTS AND EXPENSES
Operating 38,442 41,776
General and administrative 5,837 5,356
Depreciation and amortization 7,737 9,319
------- -------
Income from Operations 2,718 3,315
OTHER INCOME (EXPENSE)
Other income, primarily interest 629 560
Interest expense (8,591) (5,726)
------- -------
Loss Before Income Taxes (5,244) (1,851)
Provision for Income Taxes 25 124
------- -------
Net Loss $(5,269) $(1,975)
======= =======
LOSS PER COMMON SHARE $ (.08) $ (.03)
======= =======
WEIGHTED AVERAGE NUMBER OF SHARES
OUTSTANDING 66,789 66,789
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
CHAMBERS DEVELOPMENT COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<TABLE>
<CAPTION>
- ----------------------------------------------------------------
March 31, December 31,
1995 1994
-------------------------
(Unaudited)
- ----------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 16,432 $ 23,548
Accounts receivable
Trade, less allowances of
$1,441 and $1,383, respectively 26,206 28,961
Other 978 13,673
Funds held in escrow 12,574 2,210
Net assets held for sale 9,432 9,298
Other current assets 7,608 7,076
-------- --------
Total current assets 73,230 84,766
-------- --------
PROPERTY AND EQUIPMENT, less
accumulated depreciation and
amortization of $164,958 and
$158,755, respectively 355,463 354,428
-------- --------
OTHER ASSETS
Funds held for escrow requirements
and construction 22,726 23,506
Other 24,944 25,798
-------- --------
Total other assets 47,670 49,304
-------- --------
$476,363 $488,498
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
CHAMBERS DEVELOPMENT COMPANY, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
March 31, December 31,
1995 1994
-------------------------
(Unaudited)
- -----------------------------------------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term
obligations $ 36,874 $ 46,465
Trade accounts payable 7,237 10,889
Accrued liabilities 33,737 34,751
Deferred revenues 4,343 4,881
-------- --------
Total current liabilities 82,191 96,986
LONG-TERM OBLIGATIONS,
LESS CURRENT MATURITIES 210,799 211,016
ACCRUED SHAREHOLDER LITIGATION SETTLEMENT 75,300 75,300
OTHER NONCURRENT LIABILITIES 49,410 41,264
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 51,197,459 and
50,829,559 shares, respectively 25,599 25,415
Common Stock - authorized 50,000,000
shares; par value $.50 per share;
convertible into Class A Common
Stock; issued 15,961,268 and
16,329,168 shares, respectively 7,981 8,165
Additional paid-in capital 395,121 395,121
Accumulated deficit (365,888) (360,619)
-------- --------
62,813 68,082
Treasury stock, at cost -
Class A Common Stock, 400 shares;
Common Stock, 369,200 shares (4,150) (4,150)
-------- --------
Total stockholders' equity 58,663 63,932
-------- --------
$476,363 $488,498
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
CHAMBERS DEVELOPMENT COMPANY, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars In Thousands)
(Unaudited)
<TABLE>
<CAPTION>
- -----------------------------------------------------------------
Three Months Ended March 31,
----------------------------
1995 1994
- -----------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating activities $18,172 $ 2,210
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (8,096) (6,894)
(Increase) decrease in funds held in escrow (9,496) 9,279
Other 2,313 643
------- -------
Net cash (used in) provided by investing
activities (15,279) 3,028
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on long-term
obligations (10,009) (18,188)
Other -- 3
------- -------
Net cash used in financing activities (10,009) (18,185)
------- -------
Net decrease in cash and cash equivalents (7,116) (12,947)
Cash and cash equivalents at beginning
of period 23,548 44,553
------- -------
Cash and cash equivalents at end of
period $16,432 $31,606
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE A - FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of
Chambers Development Company, Inc. (the "Company") have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10-Q and Rule 10-01 of Regulation S-X
of the Securities and Exchange Commission. They do not include all information
and footnotes which would be required by generally accepted accounting
principles for complete financial statements. These financial statements
should be read in conjunction with the consolidated financial statements and
notes included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994. In the opinion of management, these financial statements
contain all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation of financial position, results of operations
and cash flows for the periods presented. Operating results for the
three-month period ended March 31, 1995 are not necessarily indicative of the
results that may be expected for the year ending December 31, 1995.
NOTE B - PROPOSED MERGER
The Company has entered into an Amended and Restated Agreement and Plan of
Merger dated as of November 28, 1994 (the "Merger Agreement"), pursuant to
which the Company would become a wholly-owned subsidiary of USA Waste Services,
Inc. ("USA Waste") through the merger of an existing wholly-owned subsidiary of
USA Waste with and into the Company (the "Merger"). The Merger Agreement
provides, among other things, for each outstanding share of the Company's
Common Stock and Class A Common Stock to be converted into .41667 of a share of
USA Waste's Common Stock. Based upon the 15,439,668 shares of the Company's
Common Stock and the 51,349,459 shares of Class A Common Stock outstanding as
of May 5, 1995, the Company's stockholders will collectively be issued
approximately 27,829,000 shares of USA Waste's Common Stock, representing
approximately 55.2% of the expected total issued and outstanding shares of USA
Waste's Common Stock after the Merger.
The Merger is subject to a number of conditions, including obtaining the
approval of the stockholders of the Company and of USA Waste, final settlement
of the shareholder litigation discussed in Note C and certain other proceedings
involving the Company, and obtaining any necessary regulatory waivers and
approvals. It is anticipated that the Merger will be completed by June 30,
1995.
NOTE C--SETTLEMENT OF SHAREHOLDER LITIGATION
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
7
<PAGE> 8
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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
$362,000,000 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 negligence against its former auditors (the "Federal Derivative
Action"). Derivative claims were also filed in state courts on behalf of the
Company (which was 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 "Related Actions").
On February 24, 1995, representatives of the plaintiffs in the Federal Class
Action, representatives of the plaintiffs in the Federal Derivative Action, the
Company and certain individual defendants entered into a Class Action
Stipulation and Agreement of Compromise and Settlement (the "Class Action
Settlement Agreement") and a Derivative Action Stipulation and Agreement of
Compromise and Settlement (the "Derivative Action Settlement Agreement" and,
together with the Class Action Settlement Agreement, the "Settlement
Agreements"), which are the definitive settlement documents for the class
actions and the derivative actions described above. Implementation of the
Settlement Agreements is conditioned upon the dismissal, with prejudice, of the
Related Actions referred to above. On March 22, 1995, the court granted
preliminary approval of the settlements and distribution of notices to the
Company's stockholders and the plaintiff class members regarding the
settlements. The hearing upon the fairness, reasonableness and adequacy of the
proposed settlements has been scheduled for May 19, 1995.
The Settlement Agreements provide that the sum of $10,000,000 will be paid by
the Company's directors and officers liability insurance carrier and the sum of
$70,000,000 will be paid by the Company in two installments following final
court approval of the settlements. The first installment of $25,000,000 is to
be paid within thirty days after the settlement effective date (the date upon
which the court has finally approved the settlements of the class actions and
derivative actions described above, and all times for appeal have expired or
all appeals have been finally rejected) and the second installment of
$45,000,000 (the "Second Installment") is to be paid one year after the
settlement effective date subject to possible earlier payments based on the
8
<PAGE> 9
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
Merger and subsequent refinancing. If the Merger or a comparable transaction is
consummated, the total settlement payment will be adjusted by a base increase
of $5,000,000, which will be adjusted upward or downward by an amount
consisting of $16,000 for each penny above or below $4.50 of merger
consideration received in the transaction by the Company's stockholders per
share of the Company's Common Stock and Class A Common Stock, together with
interest from the settlement effective date to the payment date (the base
increase, together with any adjustment thereto, collectively referred to as the
"Adjustment"). Based on the market value of USA Waste Common Stock on May 11,
1995, the Adjustment would be $8,136,000. Any amount by which the sum of the
Second Installment and the Adjustment exceeds $50,600,000 will be paid by John
G. Rangos, Sr., Chairman and Chief Executive Officer of the Company. John G.
Rangos, Sr. has also agreed to guarantee the Company's obligations to make
certain payments in the Class Action Settlement in an amount not to exceed
$15,000,000.
Synergy Associates has agreed, under the Derivative Action Settlement
Agreement, to contribute to the Company the headquarters property presently
leased by the Company from Synergy Associates, subject to assumption or
discharge by the Company of an existing mortgage.
The Settlement Agreements will be subject to certain conditions, including
court approval, and to the refinancing of the Company's principal borrowings.
The current lending agreements of the Company restrict the Company from making
the settlement payments without the consent of the lending groups. The terms
of the Class Action Settlement Agreement also include a right to terminate the
settlements based on appeals or opt-outs with respect to the Federal Class
Action.
After the Company entered into the Settlement Agreements, the class and
derivative plaintiffs entered into settlements with the Company's former
independent auditors. The Company then entered into an agreement with the class
plaintiffs to settle their claims against a group of underwriters of certain of
the Company's securities offerings. The Company agreed to pay $300,000 to the
class plaintiffs to resolve these claims for which the underwriters sought
indemnity from the Company.
As a result of the foregoing, the Company accrued $85,300,000 for the cost of
the settlements and $4,100,000 for other litigation related costs in 1994. Of
that total, $79,400,000 was recorded as a charge to unusual items as a
component of other income (expense) and $10,000,000 recoverable under the
Company's directors and officers liability insurance policy was recorded
as a current asset.
9
<PAGE> 10
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
While the Company believes the above-mentioned accruals and charges are
adequate to provide for the settlement and related costs, certain of these
amounts are estimates, and actual amounts will depend on the outcome of future
events. If such estimated amounts are not adequate, additional charges against
income would be made when such determinations are made.
NOTE D - SETTLEMENT OF SECURITIES AND EXCHANGE COMMISSION INVESTIGATION
Shortly after the Company's March 17, 1992 announcement of a change in
accounting policies concerning capitalization, the Securities and Exchange
Commission (the "Commission") initiated an informal investigation with respect
to the Company's accounting method and the accuracy of its financial statements
and into the possibility that persons or entities had traded in the Company's
securities on the basis of inside information prior to the announcement. On
September 30, 1992, a formal order of investigation was issued by the
Commission with respect to potential violations by the Company and others of
sections 10(b), 13(a) and 13(b) of the Securities Exchange Act of 1934
("Exchange Act") and various rules promulgated thereunder. The Company has
cooperated with the investigation through the production of documents and by
providing witnesses pursuant to the Commission's request. On May 9, 1995, the
Commission filed a complaint against the Company in the United States District
Court for the Western District of Pennsylvania alleging that the Company
violated the antifraud provisions of the Securities Act of 1933 ("Securities
Act") and the antifraud, reporting, internal controls and recordkeeping
provisions of the Exchange Act by issuing false and misleading earnings
announcements from 1989 through March 1992 and including false and misleading
financial statements in its reports on Forms 10-K and 10-Q and its registration
statements filed from 1989 through November 1991. The Company simultaneously
consented, without admitting or denying the Commission's allegations, to the
entry of an order enjoining it from violating certain provisions of the
Securities Act and the Exchange Act and requiring it to pay a civil penalty of
$500,000. The $500,000 was accrued in 1994.
The Commission also instituted administrative proceedings under section 21C
of the Exchange Act against four present and former officers of the Company,
including John G. Rangos, Sr., Chairman and Chief Executive Officer of
Chambers, Dale O. Nolder, Jr. and John J. Cushma, two of the Company's former
corporate controllers and William R. Nelson, a former chief financial officer
of the Company. The Commission found, among other things, that John G. Rangos,
Sr. and John J. Cushma each were a cause of the Company's violations of the
reporting, internal controls and recordkeeping provisions of the Exchange Act.
Each of these four persons consented to the issuance of a cease and desist
order without admitting or denying the Commission's findings.
10
<PAGE> 11
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE E - DIVESTITURES
Net assets held for sale consist of the following (in thousands):
<TABLE>
<CAPTION>
------------------------
March 31, December 31,
1995 1994
------------------------
<S> <C> <C>
Inventories and prepaid expenses $ 92 $ 96
Property and equipment, net 11,231 11,222
------- -------
11,323 11,318
Less allowance for losses 1,891 2,020
------- -------
Net assets held for sale $ 9,432 $ 9,298
======= =======
</TABLE>
Included in the results of operations for the three-month periods ended March
31, 1995 and 1994 are revenues of $868,000 and $1,055,000, respectively, for
businesses whose assets are held for sale. Operating losses of $129,000 and
$238,000 for the respective periods have been incurred and charged to the
previously established reserve for divestiture losses.
Also included in the results of operations for the three months ended March 31,
1994 are revenues of $385,000 and a loss from operations of $237,000, for
a business that was sold during 1994.
NOTE F - CURRENT ACCRUED LIABILITIES
Current accrued liabilities consist of the following (in thousands):
<TABLE>
<CAPTION>
------------------------
March 31, December 31,
1995 1994
------------------------
<S> <C> <C>
Shareholder litigation settlement $10,000 $10,000
Insurance 4,356 4,098
Other 19,381 20,653
------- -------
$33,737 $34,751
======= =======
</TABLE>
11
<PAGE> 12
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
NOTE G - INCOME TAXES
The provision for income taxes for the three months ended March 31, 1995 and
1994 is for current state and local income taxes. There was no provision for
federal income taxes as a result of the Company's loss for both periods.
NOTE H - CONTINGENCIES
EMPLOYMENT AGREEMENTS
In February 1993, the Company entered into employment agreements with certain
of its officers that provide such officers with rights to severance benefits if
employment with the Company ceases under specified circumstances in connection
with a "change of control" of the Company such as the Merger. Such agreements
were replaced effective as of February 1995 with agreements substantially
similar to the prior agreements except with respect to certain termination
provisions unrelated to the change of control termination provisions. If all
such rights were to be exercised, the Company would be obligated to pay a total
of approximately $7,635,000 to such officers. The term of each of these
agreements ends on February 2, 1996.
LITIGATION AND INVESTIGATIONS
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 discussed in Note C and the
Commission's investigation discussed in Note D.
The Company is cooperating with each of the investigations referred to in the
two preceding paragraphs.
A declaratory judgement action entitled Morel, et al. v. Chambers Waste Systems
of Florida, Inc., was filed on September 29, 1994 in the Circuit Court of the
Fifteenth Judicial Circuit of Florida in and for Palm Beach County, Florida.
The plaintiffs are asking the court to declare that they are entitled to
royalty payments from the Company as calculated by a
12
<PAGE> 13
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
percentage of gross revenues derived from the Company's landfill located at
Berman Road in Okeechobee County, Florida, as well as from any landfill that
may be sited in the future by the Company on nearby property. The Company has
responded by seeking, among other things, a declaration that any writing or
document that the plaintiffs contend such royalty entitlement is based upon is
void, voidable or otherwise of no effect or, alternatively, that any royalty
payments be solely based upon nearby property to the Company's landfill, when a
landfill is developed, if ever, on such property. The outcome of this action
is not presently determinable.
Since the announcement of the Merger, three cases have been filed in the Court
of Chancery of the State of Delaware in New Castle County against the Company,
its officers and directors and USA Waste and Envirofil, Inc. These cases
include Smith v. Rangos et al., C.A. No. 13906, Krim v. Rangos et al., C.A. No.
13985, and Adams v. Rangos et al., C.A. No. 13909. Each of these actions
relates to the Merger and all of them seek substantially similar relief.
Accordingly, a consolidation order was entered by the Court of Chancery on
March 1, 1995. The cases have been consolidated for all purposes under Smith
v. Rangos, et al. at C.A. No. 13906 and the caption of the consolidated case
is In Re Chambers Development Company, Inc. Shareholders Litigation,
Consolidated C.A. No. 13906. The complaint which will govern the consolidated
action is the compliant filed in the Krim action. The Krim complaint is
brought as a purported class action on behalf of the plaintiff and all
similarly situated Company security holders, excluding defendants and any
person, firm, corporation or similar entity related to or affiliated with any
of the defendants. The complaint alleges that the individual defendants, inter
alia, engaged in unfair dealing to the detriment of the putative class; the
Merger is grossly unfair to the members of the putative class; the members of
the putative class would be irreparably damaged if the Merger were to be
consummated; and the defendants' conduct constituted a breach of fiduciary and
other common law duties allegedly owed to the putative class. The complaint
alleges that the Merger consideration is inadequate for various reasons and
that the individual defendants failed to maximize shareholder value. The
complaint seeks a declaration that the Merger Agreement was the result of a
breach of fiduciary duty by the individual defendants, aided and abetted by the
USA Waste defendants, and is thus unlawful and unenforceable; an injunction to
enjoin defendants from proceeding with the Merger; an injunction to enjoin
defendants from consummating any merger or combination with a third party
absent procedures or processes such as an auction; an order invalidating
certain proxy arrangements; and an order awarding plaintiff and the class
members damages, costs and disbursements, including reasonable attorneys' and
experts' fees. Counsel for the parties have engaged in settlement discussions
and, based thereon, USA Waste and Chambers anticipate a definitive agreement
subject to court approval, will be finalized before the USA Waste Annual
Meeting and the Chambers Special Meeting.
13
<PAGE> 14
CHAMBERS DEVELOPMENT COMPANY, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
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 lawsuits, claims and proceedings which are pending or
asserted will not have a material adverse effect on the Company's financial
condition or liquidity. Given the Company's level of operating results, future
resolution of these matters may have a material effect on results of operations
for interim and annual periods.
14
<PAGE> 15
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
RESULTS OF OPERATIONS
The following table sets forth the items in the condensed consolidated
statements of operations as a percentage of revenues, and the percentage change
in dollar amounts of the items for the three months ended March 31, 1995, as
compared with the three months ended March 31, 1994.
<TABLE>
<CAPTION>
Three Months Ended
March 31, Percentage
------------------ Increase
1995 1994 (Decrease)
- ---------------------------------------------------------------------
<S> <C> <C> <C>
REVENUES 100% 100% (8)%
COSTS AND EXPENSES
Operating 70 70 (8)
General and administrative 11 9 9
Depreciation and amortization 14 15 (17)
-----------
Income from Operations 5 6 (18)
OTHER INCOME (EXPENSE)
Other income, primarily interest 1 1 12
Interest expense (16) (10) 50
-----------
Loss Before Income Taxes (10) (3) 183
Provision for Income Taxes -- -- (80)
-----------
Net Loss (10)% (3)% 167
===========
</TABLE>
The following table sets forth the components of revenue change for each of the
three months ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Price (9)% (5)%
Volume 1 2
Divestitures - (9)
--- ---
Total (8)% (12)%
=== ===
</TABLE>
15
<PAGE> 16
The following table sets forth revenues of the Company by each of the principal
lines of ongoing business and for divested businesses for each of the three
months ended March 31, 1995 and 1994 (dollar amounts in thousands):
<TABLE>
<CAPTION>
Quarter
Ended March 31,
----------------- Percentage
1995 1994 Increase (Decrease)
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Collection services $25,325 $25,816 (2)%
Disposal services (landfills) 18,815 18,883 --
Transfer stations 6,322 10,857 (42)
Incinerator 2,592 2,315 12
Recycling services 1,680 1,510 11
Divested businesses -- 385 (100)
------- -------
Total $54,734 $59,766 (8)
======= =======
</TABLE>
REVENUES
Revenues for the first quarter of 1995 decreased by $5.1 million to $54.7
million from $59.8 million for the first quarter of 1994. The 8% decrease in
revenues, as discussed in detail below, resulted from a 9% decrease related to
price, partially offset by a 1% increase in volume. During 1994, the Company
sold one recycling operation with a resulting decrease in revenues attributable
to that operation of $0.4 million in the first quarter of 1995.
Landfill revenues for the first quarter of 1995 remained relatively constant
compared to the first quarter of 1994. Increased volume at the Company's
landfills in Okeechobee County, Florida, Richland County, South Carolina, and
Southern Alleghenies, Pennsylvania was partially offset by a reduction in
volume at the Charles City County, Virginia site. Landfill revenues were
derived from municipal solid waste and from special waste, which consists of
nonhazardous waste materials such as sewage sludges, contaminated soils,
incinerator ash and industrial residues.
In addition, collection revenues for the first quarter of 1995 were
reduced primarily as a result of the Company's contract with Bergen County, New
Jersey. 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, commencing on March 1, 1994. The contract for the
transportation and disposal of ash generated by the Essex County incinerator
was awarded to a competitor effective March 16, 1994. The decline in
collection revenues is partially offset by increased volume at the Mainline,
Pennsylvania facility.
16
<PAGE> 17
Transfer station revenues declined during the first quarter of 1995 by $4.6
million or 42%, to $6.3 million, from $10.9 million in the first quarter of
1994, due primarily to a rate reduction resulting from the sale but continued
operation of the two Morris County, New Jersey, transfer stations on December
31, 1993.
Management believes that progress has been made in replacing a portion of such
revenues and waste streams, although at lower operating margins than the
terminated contracts, and efforts will continue toward increasing the Company's
customer base and marketing its special waste programs.
OPERATING COSTS AND EXPENSES
Operating costs and expenses, which decreased by $3.4 million to $38.4 million
from $41.8 million, remained constant as a percentage of revenues to 70% in the
first quarter of 1995 as compared with the same period of 1994.
During 1994, the Company sold one recycling operation, with a resulting
decrease in operating costs and expenses attributable to that operation of $0.6
million in the first quarter of 1995. In addition, costs for disposal of waste
at third-party landfills and transportation expenses were reduced as a result
of continued emphasis on the utilization of internal disposal capacity and the
decrease in waste volume received by the Company from the Essex County, New
Jersey, incinerator, as previously discussed. Further reductions in operating
expenses resulted from lower landfill closure and post-closure rates resulting
from increases in projected airspace for future expansions of existing landfill
sites, partially offset by volume increases at the Company's landfills.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses increased as a percentage of revenues to
11% in the first quarter of 1995 as compared with 9% during the comparable
period of 1994, while increasing by $0.5 million. The percentage increase,
which included the effect of severance benefits of $0.7 million during the
first quarter of 1995, is due primarily to a decline in revenues, as
previously discussed, and merger related expenses of $0.3 million partially
offset by the cumulative benefit of the Company's reorganization efforts
in 1992, 1993 and late 1994. The first quarter 1995 reorganization efforts
are expected to reduce general and administrative expenses in future periods.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization decreased as a percentage of revenues to 14% in
the first quarter of 1995 from 15% for the same period of 1994, while
decreasing by $1.6 million. The dollar decrease reflects primarily the effect
of increases to projected airspace resulting from future expansions of existing
landfill sites, partially offset by higher landfill construction cost
amortization associated with volume increases at the Company's landfills.
17
<PAGE> 18
OTHER INCOME, PRIMARILY INTEREST
Other income, primarily interest, remained constant at $0.6 million during the
first quarter of 1995 and 1994, respectively.
INTEREST EXPENSE
Interest expense increased $2.9 million to $8.6 million for the first quarter
of 1995 as compared with $5.7 million for the first quarter of 1994. Interest
expense in each period was less than total interest charges as a result of
interest capitalization related to the Company's development of landfills.
Capitalized interest totaled $0.9 million and $0.6 million during the first
quarter of 1995 and 1994, respectively. Interest costs, before capitalized
interest, increased to $9.5 million for the first quarter of 1995 as compared
with $6.3 million for the same period of 1994. The increase in interest costs
is attributable primarily to an early redemption premium and escalating
extension fees resulting from amendments to the Company's credit facility and
senior note agreements in November 1994.
INCOME TAXES
The provision for income taxes for the first quarter of 1995 and 1994
represents provisions for state and local income taxes. There was no provision
for federal income taxes as a result of the Company's operating loss
carryforwards.
NET LOSS
The net loss was $5.3 millon for the first quarter of 1995, as compared with a
net loss of $2.0 million for the first quarter of 1994. This increase in net
loss resulted from a decrease in revenues and an increase in interest expense,
partially offset by a decrease in operating costs and depreciation and
amortization, as discussed above.
LIQUIDITY AND CAPITAL RESOURCES
During the first quarter of 1995, cash and cash equivalents decreased by $7.1
million, from $23.5 million at December 31, 1994 to $16.4 million at March 31,
1995. Working capital, although a deficit, improved by $3.2 million, to $9.0
million at March 31, 1995. Cash flow activity for the first quarter of 1995
included $18.2 million provided by operating activities of which $10.0 million
was received from the Company's directors and officers liability insurance
carrier, more than offset by $15.3 million used by investing activities and
$10.0 million utilized in financing activities.
Investing activities in the first quarter of 1995 included escrow activity of
$9.5 million, primarily resulting from $10.0 million in proceeds from the
Company's directors and officers liability insurance carrier placed in excrow
to fund the Settlement Agreements discussed in Note C to the condensed
consolidated financial statements, net of $0.5 million in other escrow
activity. Investing activities also included $8.1 million utilized for capital
expenditures.
18
<PAGE> 19
Cash used in financing activities during the first quarter of 1995 consisted of
$10.0 million of principal payments on long-term obligations.
The Company's operation within the environmental services industry subjects it
to future financial obligations with regard to closure and post-closure
monitoring and site maintenance costs associated with the solid waste landfills
it operates. Final closure and post-closure monitoring and site maintenance
costs represent the costs related to cash expenditures to be incurred after a
landfill ceases to accept waste and closes. Such costs include final capping
of the site and site inspections, groundwater monitoring, leachate management,
methane gas control and maintenance costs to be incurred for up to 30 years
after the facility closes. Final closure and post-closure monitoring and site
maintenance costs are estimated to be $85,000,000 at the time all Company
landfills have reached their respective capacity. The accrual for these costs
is recorded as airspace at the respective landfill site is consumed.
As of March 31, 1995, accrued liabilities for all closure and post-closure
monitoring and maintenance costs totaled $26,919,000, of which $1,534,000 is
classified as a current liability in the accompanying condensed consolidated
balance sheet. The Company periodically reviews and updates the underlying
assumptions used to determine such estimates and, accordingly, the estimate of
such total projected costs is subject to periodic revision and adjustment.
The Company anticipates that the final settlement of the shareholder
litigation, the Merger and the refinancing of substantially all of the
indebtedness of Chambers and USA Waste will be completed in late June 1995.
Management believes that the operations of the existing sites plus a
combination of existing cash and asset sales 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. Over the past three
years, however, the Company's access to capital markets for purposes of new
development has been restricted. Management believes the Merger will open
capital markets that will enable new landfill development as well as
continued development of existing sites. However, should the Merger not
be consummated, development of additional new landfill sites will be limited.
Except as disclosed herein, there have been no material changes in the
Company's financial condition from that reported at December 31, 1994.
19
<PAGE> 20
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
As discussed in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994 and in Note C to the accompanying condensed consolidated
financial statements, between March 18, 1992 and May 7, 1992, various Chambers
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 Chambers, 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 Chambers' securities between March
18, 1988 and October 20, 1992, is the allegation that the decrease in Chambers'
stock price during the period from Chambers' 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 Chambers' 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 Chambers (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 were filed in state courts. Two
derivative actions, asserting waste and mismanagement claims on behalf of
Chambers 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, 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" and, together
with the Federal Class Action, the "Class Actions").
The complaints in the Class Actions allege that Chambers, in publicly
disseminated materials, intentionally or negligently misstated its earnings
during the class period, thereby deceiving Chambers' shareholders and others
with respect to its growth prospects and profitability. In particular, the
plaintiffs allege that Chambers' 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 Chambers had an inadequate information
system and failed to maintain the records necessary to support the
capitalization of such costs and expenses.
20
<PAGE> 21
The Federal Class Action claims assert violations of section 10(b) of
the Securities Exchange Act of 1934 ("Exchange Act") and Rule 10b-5 promulgated
hereunder, section 11 of the Securities Act of 1993 ("Securities Act") and
negligent misrepresentation against Chambers. Claims under section 12(2) and
20(a) of the Securities Act have been asserted against Chambers'
officers and directors who are named as defendants, but not against Chambers.
The State Class Action asserts similar violations of the Pennsylvania
securities laws. These actions seek to recover damages in an unspecified amount
which the class members allegedly sustained by purchasing Chambers' 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 Chambers' 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 Chambers' 6 3/4% Convertible Subordinated
Debentures Due September 15, 2004 (subsequently converted in Class A Common
Stock on or about September 16, 1991 at $21.125 per share), and the sale in
June 1992 of 7 million shares of Chambers' 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. Chambers has been advised by its counsel
that the plaintiffs have alleged that the restatement of Chambers' 1990 and
1989 consolidated financial statements is an admission that they were
materially misstated. However, Chambers has also been advised by its counsel
that Chambers' former auditors and former chief financial officer have
contended that Chambers' prior consolidated financial statements were fairly
presented in accordance with generally accepted accounting principles. If a
plaintiff were to establish that Chambers' consolidated financial statements
were materially misstated, Chambers would be liable for statutorily prescribed
damages under section 11 (subject to a causation defense in which Chambers
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 Chambers had no affirmative defense.)
The Federal Derivative Action and the Delaware Derivative Actions assert,
inter alia, that Chambers' officers and directors committed acts of waste,
mismanagement and breach of fiduciary duty by allegedly instituting or
approving Chambers' accounting policies relating to capitalization of certain
costs and expense for the purpose of increasing their salaries, fees, stock and
other benefits. These actions, which seek recovery of unspecified damages on
behalf of Chambers, allege that Chambers has been damaged because it has become
exposed to the risk of an adverse judgment or settlement in the class actions,
that it has incurred and will incur costs to defend the class actions, and that
it has suffered injury to its reputation.
21
<PAGE> 22
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. (the "Pennsylvania Derivative Action" and, together with the
Federal and Delaware Derivative Actions, the "Derivative Actions"). This
action asserts derivative claims on behalf of Chambers similar in nature to
those asserted in the Federal and Delaware Derivative Actions.
On November 18, 1994, Chambers and shareholder representatives executed
memoranda of understanding with respect to the settlement and dismissal of the
Class Actions and Derivative Actions. On February 24, 1995, representatives of
the plaintiffs in the Federal Class Action, representatives of the plaintiffs
in the Federal Derivative Action, Chambers and certain individual defendants
entered into a Class Action Stipulation and Agreement of Compromise and
Settlement (the "Class Action Settlement Agreement") and a Derivative Action
Stipulation and Agreement of Compromise and Settlement (the "Derivative Action
Settlement Agreement" and, together with the Class Action Settlement Agreement,
the "Settlement Agreements"), which are the definitive settlement documents for
the Class Actions and the Derivative Actions.
The Class Action Settlement Agreement provides that the sum of $8 million
will be paid by Chambers' directors and officers liability insurance carrier
and the sum of $70 million will be paid by Chambers in two installments
following final court approval of the settlement. The first installment of $25
million, together with interest calculated from the Settlement Effective Date
(as hereinafter defined) to the date of payment, is to be made no later than
the earlier of (i) 30 days after the Settlement Effective Date or (ii) after
the Settlement Effective Date and two days after the Merger or any comparable
transaction (as defined in the Class Action Settlement Agreement) of Chambers
with any other company has been consummated. The second installment of $45
million, together with interest calculated from the Settlement Effective Date
to the date of payment (the "Second Installment"), is to be made no later than
the earlier of (i) one year after the Settlement Effective Date or (ii) the
date after the Settlement Effective Date and five days after certain
refinancing shall have been obtained by the combined entity resulting from the
Merger or a comparable transaction. "Settlement Effective Date" is defined as
that date upon which (i) the court has finally approved the Class Action
settlement after due notice and hearing, (ii) final judgment dismissing the
Class Actions as to the settling defendants has been entered, (iii) all times
for appeal or other direct attack on the adequacy of the settlement have
expired or any such direct attack shall have been finally rejected, and (iv)
all related actions (as defined in the Class Action Settlement Agreement) have
been dismissed with prejudice; provided, however, that the dismissal of any
such related actions may be conditioned upon the subsequent approval of the
settlement and the occurrence of the Settlement Effective Date. If the Merger
or a comparable transaction is consummated, the total settlement payment will
be adjusted by a base increase of $5 million, which will be adjusted upward or
downward by an amount consisting of $16,000 for each penny above or below $4.50
of Merger consideration received by Chambers stockholders per share of Chambers
Common Stock or Class A Common Stock, together with interest from the
Settlement Effective Date to the payment date
22
<PAGE> 23
(the base increase, together with any adjustment thereto, collectively
referred to as the "Adjustment"). Any amount by which the sum of the Second
Installment and the Adjustment exceed $50.6 million will be paid by John G.
Rangos, Sr., Chairman and Chief Executive Officer of Chambers. The Adjustment
shall be payable no later than the earlier of (i) one year after the Settlement
Effective Date or (ii) five days after certain refinancing shall have been
obtained by the combined entity in the Merger or a comparable transaction.
However, the Adjustment shall be payable only if (i) the Merger or a comparable
transaction shall have been consummated within one year after the Settlement
Effective Date or (ii) the Merger Agreement or an agreement for a comparable
transaction is in effect on the date one year after the Settlement Effective
Date and the Merger or such comparable transaction is consummated thereafter.
John G. Rangos, Sr. has also agreed to guarantee Chambers' obligations to make
certain payments in the Class Action settlement in an amount not to exceed $15
million.
The Derivative Action Settlement Agreement provides that the consideration
from the defendants to Chambers shall include the following: (i) payment of the
sum of $2 million from Chambers' directors and officers liability insurance
carrier; (ii) the continued implementation by Chambers, for a period of at
least two years after the effective date of the settlement, of certain
corporate governance measures; (iii) the contribution to Chambers by Synergy
Associates of the headquarters property currently leased to Chambers by Synergy
Associates; and (iv) the $15 million guarantee of John G. Rangos, Sr. with
respect to certain payments to be made by Chambers to the plaintiff class
pursuant to the Class Action settlement.
In addition, in order for the settlements to be effective, certain related
actions, as described in the Settlement Agreements, must be dismissed with
prejudice, including the State Class Action and the Delaware and Pennsylvania
Derivative Actions. These related actions do not include the cases captioned
Option Resource Group, et al. v. Chambers Development Company, Inc., et al., and
Southeast Investments v. Chambers Development Company, Inc., et al., which are
described below; these matters may still be pending after the Class Action and
Derivative Action settlements.
The Settlement Agreements provide that Chambers and its present and former
officers, directors and employees will receive releases from the plaintiffs.
Under the Settlement Agreements, the plaintiffs' actions continued against
certain defendants other than Chambers. The terms of settlement also include a
right to terminate the settlements based on appeals or opt-outs with respect to
the Class Actions. After Chambers entered into the Settlement Agreements, the
class and derivative plaintiffs entered into settlements with Grant Thornton,
which previously served as Chambers' accountants. Chambers then entered into
an agreement with the class plaintiffs to settle their claims against a group
of underwriters of certain of Chambers' securities offerings. Chambers has
agreed to pay $300,000 to the class plaintiffs to resolve these claims for
which the underwriters sought indemnity from Chambers. The Settlement
Agreements provide for the seeking of bar orders and also have judgment
reduction provisions that are intended to protect Chambers and the settling
individual defendants from claims over by Grant Thornton and the underwriters
in the event that their
23
<PAGE> 24
settlements are not approved by the court or otherwise do not become
final. On March 22, 1995, the court granted preliminary approval of the
settlements and the distribution of notices to Chambers' stockholders and the
plaintiff class members regarding the settlements. A hearing upon the
fairness, reasonableness and adequacy of the proposed settlements has been
scheduled for May 19, 1995.
On May 12, 1995, Chambers was informed that several potential class
members, representing approximately 673,000 shares of Chambers stock, have
requested exclusion from the Class Action Settlement Agreement. While the
Settlement Agreements provide that such opt-outs would give Chambers and
certain other settling defendants, including Grant Thornton, the right to
withdraw from the Settlement Agreements, Chambers' management intends to
proceed with the settlements. Under the terms of the Settlement Agreements,
Chambers may still proceed with the settlements whether or not such other
defendants elect to withdraw. Chambers has also been informed that the Option
Resource Group action described below will still be pending after the
settlement of the Class Action and the Derivative Action. In addition, two
objections were filed to the Derivative Action Settlement Agreement. It is
believed that such objections are not significant and are unlikely to prevent
approval of the settlement. Objections to the Settlement Agreements were
required to be filed with the court by May 11, 1995 and requests for exclusion
were required to be mailed by May 11, 1995.
Shortly after Chambers' March 17, 1992 announcement of a change in
accounting policies concerning capitalization, the Securities and Exchange
Commission initiated an informal investigation with respect to Chambers'
accounting method and the accuracy of its financial statements and into the
possibility that persons or entities had traded in Chambers' securities on the
basis of inside information prior to the announcement. On September 30, 1992,
a formal order of investigation was issued by the Commission with respect to
potential violations by Chambers and others of sections 10(b), 13(a) and 13(b)
of the Exchange Act and various rules promulgated thereunder. Chambers has
cooperated with the investigation through the production of documents and by
providing witnesses pursuant to the Commission's request. On May 9, 1995, the
Commission filed a complaint against Chambers in the United States District
Court for the Western District of Pennsylvania alleging that Chambers violated
the antifraud provisions of the Securities Act and the antifraud, reporting,
internal controls and recordkeeping provisions of the Exchange Act by issuing
false and misleading earnings announcements from 1989 through March 1992 and
including false and misleading financial statements in its reports on Forms
10-K and 10-Q and its registration statements filed from 1989 through November
1991. Chambers simultaneously consented, without admitting or denying the
Commission's allegations, to the entry of an order enjoining it from violating
certain provisions of the Securities Act and the Exchange Act and requiring it
to pay a civil penalty of $500,000.
The Commission also instituted administrative proceedings under section
21C of the Exchange Act against four present and former officers of Chambers,
including John G. Rangos, Sr., Chairman and Chief Executive Officer of
Chambers, Dale O. Nolder, Jr. and John J. Cushma, two of Chambers' former
corporate controllers and William R. Nelson, a former chief financial officer
of Chambers. The Commission found, among other things, that John G. Rangos,
Sr. and John J. Cushma each were a cause of Chambers' violations of the
reporting, internal controls and recordkeeping provisions of the Exchange Act.
Each of these four persons consented to the issuance of a cease and desist
order without admitting or denying the Commission's findings.
The American Stock Exchange and the Chicago Board of Options Exchange have
also informed the Company that they are conducting investigations into insider
activity on their respective exchanges in Chambers' securities and in put
options on Chambers' securities prior to the March 17, 1992 announcement.
On December 4, 1992, Chambers 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. Chambers has responded to the subpoena by
24
<PAGE> 25
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
Commission investigation described above.
Chambers is cooperating with each of the investigations referred to in the
two preceding paragraphs.
On or about March 8, 1993, an action was filed in the United States
District Court for the Western District of Pennsylvania, captioned Option
Resource Group, et al. v. Chambers Development Company, Inc., et al., C.A. No.
93-354. This action was brought by a market maker in Chambers stock and two of
its general partners and asserts federal securities law and common law claims
similar to those alleged in the Class Actions against essentially the same
group of defendants. These plaintiffs allege that, as a result of large
amounts of put options traded on the Chicago Board of Options Exchange between
March 13 and March 18, 1992, they bought Chambers stock and also sold it short
to assure fluidity in the market, resulting in approximately $2.1 million in
losses. On March 19, 1993, another action was filed in the United States
District Court for the Eastern District of Arkansas, captioned Southeast
Investments, Inc. v. Chambers Development Company, Inc., No. MDL-982 (the
"Arkansas Action"). This action was brought by an individual investor which
claims to have purchased Chambers stock on March 20, 1992 in reliance on
Chambers' March 17, 1992 announcement and suffered an alleged loss of
approximately $75,000 upon the subsequent sale of the stock. The complaint
asserts federal securities law and common law claims similar to those alleged
in the Class Action. Chambers' motion to the Judicial Panel on Multidistrict
Litigation ("MDL") to transfer the Arkansas Action to the Western District of
Pennsylvania was granted by the MDL. These actions are in discovery and
Chambers is vigorously defending these actions.
Since the announcement of the Merger, three cases have been filed in the
Court of Chancery of the State of Delaware in New Castle County against
Chambers, its officers and directors and USA Waste and Envirofil. These cases
include Smith v. Rangos, et al., C.A. No. 13906, Krim v. Rangos et al., C.A.
No. 13985, and Adams v. Rangos, et al., C.A. No. 13909. Each of these actions
relates to the Merger and all of them seek substantially similar relief.
Accordingly, a consolidation order was entered by the Court of Chancery on
March 1, 1995. The cases have been consolidated for all purposes under Smith
v. Rangos, et al., and the caption of the consolidated case is In Re Chambers
Development Company, Inc. Shareholder Litigation, Consolidated C.A. No. 13906.
The complaint which will govern the consolidated action is the complaint filed
in the Krim action. The Krim complaint is brought as a purported class action
on behalf of the plaintiff and all similarly situated Chambers security
holders, excluding defendants and any person, firm, corporation or similar
entity related to or affiliated with any of the defendants. The complaint
alleges that the individual defendants, inter alia, engaged in unfair dealing
to the detriment of the putative class; the Merger is grossly unfair to the
members of the putative class; the members of the putative class would be
irreparably damaged if the Merger were to be consummated; and the defendants'
conduct constituted a breach of fiduciary and other common law duties allegedly
owed to the putative class. The complaint alleges that the Merger
consideration is inadequate for various
25
<PAGE> 26
reasons and that the individual defendants failed to maximize shareholder
value. The complaint seeks a declaration that the Merger Agreement was the
result of a breach of fiduciary duty by the individual defendants, aided and
abetted by the USA Waste defendants, and is thus unlawful and enforceable; an
injunction to enjoin defendants from proceeding with the Merger; an injunction
to enjoin defendants from consummating any merger or combination with a third
party absent procedures or processes such as an auction; an order invalidating
certain proxy arrangements; and an order awarding plaintiff and the class
members damages, costs and disbursements, including reasonable attorneys' and
experts' fees. Counsel for the parties have engaged in settlement discussions
and, based thereon, USA Waste and Chambers anticipate a definitive agreement,
subject to court approval, will be finalized before the USA Waste Annual
Meeting and the Chambers Special Meeting.
26
<PAGE> 27
Item 6. Exhibits and Reports.
(a) The following exhibit is attached hereto:
27.1 Financial Data Schedule.
(b) No reports on Form 8-K were filed by the registrant during the
quarter ended March 31, 1995.
27
<PAGE> 28
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CHAMBERS DEVELOPMENT COMPANY, INC.
Date: May 15, 1995 By: /s/ William Rodgers, Jr.
-------------------------
Senior Vice President and
Chief Financial Officer
<PAGE> 29
EXHIBITS
TO
FORM 10-Q
OF
CHAMBERS DEVELOPMENT COMPANY, INC.
FOR THE
QUARTER ENDED MARCH 31, 1995
<PAGE> 30
EXHIBIT INDEX
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Company's condensed consolidated financial statements for the three months ended
March 31, 1995 and is qualified in its entirety by reference to such financial
statements. (In thousands, except per share amounts)
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 16,432
<SECURITIES> 0
<RECEIVABLES> 27,647
<ALLOWANCES> 1,441
<INVENTORY> 0
<CURRENT-ASSETS> 73,230
<PP&E> 520,421
<DEPRECIATION> 164,958
<TOTAL-ASSETS> 476,363
<CURRENT-LIABILITIES> 82,191
<BONDS> 210,799
<COMMON> 33,580
0
0
<OTHER-SE> 29,233
<TOTAL-LIABILITY-AND-EQUITY> 476,363
<SALES> 54,734
<TOTAL-REVENUES> 54,734
<CGS> 46,179
<TOTAL-COSTS> 46,179
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,591
<INCOME-PRETAX> (5,244)
<INCOME-TAX> 25
<INCOME-CONTINUING> (5,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,269)
<EPS-PRIMARY> (.08)
<EPS-DILUTED> (.08)
</TABLE>
