AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 8, 1997
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
------------------------
COACH USA, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>
<S> <C> <C>
DELAWARE 4141 76-0496471
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
ONE RIVERWAY - SUITE 600
HOUSTON, TEXAS 77056-1903
(888) COACH-US
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
RICHARD H. KRISTINIK
CHIEF EXECUTIVE OFFICER
COACH USA, INC.
ONE RIVERWAY - SUITE 600
HOUSTON, TEXAS 77056-1903
(888) COACH-US
(NAME AND ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE)
------------------------
COPY TO:
Douglas M. Cerny
Coach USA, Inc.
One Riverway - Suite 600
Houston, Texas 77056-1903
(888) COACH-US
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the Registration Statement becomes effective.
------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------
Common Stock, $.01 par value...... $22,325,878 $6,766(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Calculated in accordance with Rule 457(c), based on the average of the high
and low prices of the Common Stock on the New York Stock Exchange on August
4, 1997.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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<PAGE>
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* *
* INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A *
* REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED *
* WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT *
* BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE *
* REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT *
* CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR *
* SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH *
* OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR *
* QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. *
* *
******************************************************************************
SUBJECT TO COMPLETION
AUGUST 8, 1997
779,086 SHARES
COMMON STOCK
------------------------
This Prospectus covers 779,086 shares of common stock, $.01 par value (the
"Common Stock"), which may be offered by certain stockholders (the "Selling
Stockholders") of Coach USA, Inc. (the "Company") from time to time directly
or through one or more broker-dealers, in one or more transactions on the New
York Stock Exchange ("NYSE"), otherwise in the over-the-counter market, in
negotiated transactions or otherwise, or through a combination of such methods,
at fixed prices, which may be changed, at market prices or at negotiated prices.
All of the shares to be sold by any of the Selling Stockholders were issued
pursuant to the acquisition by the Company of various businesses which were
previously owned by the Selling Stockholders. The Company will not receive any
of the proceeds from the sale of any shares by the Selling Stockholders. All
expenses of registration of the shares which may be offered hereby under the
Securities Act of 1933, as amended (the "Securities Act") will be paid by the
Company (other than underwriting discounts and selling commissions, and fees and
expense of advisers to the Selling Stockholders).
As of August 5, 1997 the Company had 19,517,974 shares of its Common Stock
outstanding, of which 10,329,604 are registered and available for unrestricted
trading on the NYSE. The shares of Common Stock offered hereby have been
approved for trading on the New York Stock Exchange. On August 6, 1997, the
closing price of the Common Stock on the New York Stock Exchange was $29 7/8
per share as published in THE WALL STREET JOURNAL on August 7, 1997.
The Company is a Delaware corporation and all references herein to the
Company refer to the Company and its subsidiaries.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1997.
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the information requirements of the Exchange Act,
and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Such reports, proxy statements and other information can be inspected and copied
at the public reference facilities maintained by the Commission at Judiciary
Plaza Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
its regional offices located at 7 World Trade Center, 13th Floor, New York, New
York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such materials can be obtained from the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549,
at prescribed rates. The Commission maintains an Internet Web site that contains
reports, proxy and information statements and other information regarding
issuers that file electronically with the Commission. The address of that site
is http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on Form
S-3 under the Securities Act with respect to the Common Stock offered hereby.
This Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits and schedules thereto. For further
information with respect to the Company and such Common Stock, reference is made
to such Registration Statement and exhibits. A copy of the Registration
Statement on file with the Commission may be obtained from the Commission's
principal office in Washington, D.C. upon payment of the fees prescribed by the
Commission or through the Commission's Internet Web site.
The Company's Common Stock is traded on the NYSE. Proxy statements and
other information concerning the Company can also be inspected at the offices of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission pursuant to the Exchange
Act are incorporated herein by reference.
(i) the Company's Annual Report on Form 10-K for the year ended December
31, 1996;
(ii) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1997;
(iii) the description of the Common Stock contained in the Company's
registration statement on Form 8-A (File No. 1-12939) filed with the
Commission on April 29, 1997 pursuant to Section 12 of the Exchange
Act;
(iv) the Company's report on Form 8-K, filed with the Commission on
September 13, 1996, as amended by the Company's Form 8-K/A filed
with the Commission on November 12, 1996; and
(v) the Company's report on Form 8-K, filed with the Commission on August
8, 1997.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the offering of the shares shall be
deemed to be incorporated herein by reference and to be a part hereof from the
date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to
be incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Prospectus.
The Company will furnish without charge to each person to whom this
Prospectus is delivered, upon the written or oral request of such person, a copy
of the documents, including exhibits to such documents (unless such exhibits are
specifically incorporated by reference into such documents). Requests should be
made to: Coach USA, Inc., One Riverway, Suite 600, Houston, Texas 77056,
Attention: Corporate Secretary; telephone 1-888-COACH-US.
2
<PAGE>
THE COMPANY
Coach USA is the largest provider of motorcoach charter, tour and
sightseeing services and one of the five largest non-municipal providers of
commuter and transit motorcoach services in the United States. The Company also
provides airport ground transportation, paratransit and taxicab and other
related passenger ground transportation services. The Company operates across
the U.S., serving a broad customer base (no single customer accounted for more
than 3% of revenues in 1996) with a fleet of approximately 3,400 motorcoaches
and other high occupancy vehicles.
The motorcoach industry is highly fragmented with approximately 5,000
motorcoach operators which collectively generated approximately $20 billion in
revenues in 1995. The motorcoach industry in the United States can be broadly
divided into three types of services: (i) recreation and excursion (charter,
tour and sightseeing); (ii) commuter and transit; and (iii) regularly scheduled
intercity services. The Company operates primarily in the first two categories,
which collectively generated approximately $19 billion in revenues in 1995. The
Company believes there will be increasing demand for recreation and excursion
services, commuter and transit motorcoach services and airport related services
for a broad range of customers based on a number of factors, including: growing
travel and tourism industry, privatization, outsourcing, expanding metropolitan
areas and increasing airport congestion.
The Company enjoys a number of business attributes that position it to
benefit, both financially and operationally, from the consolidation of this
highly fragmented industry. The Company believes that it can continue to achieve
significant economies of scale as it acquires and integrates additional
motorcoach operators (such as savings in insurance, equipment purchases,
financing and the centralization of certain administrative functions), which
should provide continued margin expansion. The Company also believes that the
centralization of these attention-diverting administrative and support functions
will allow the management of the operating companies and any other acquired
businesses to focus on pursuing new business opportunities and improving
equipment utilization and yields. The Company is diversified from the standpoint
of geography, customer base and type of business, characteristics which provide
it with insulation from disruption in any particular area, customer or business.
In addition, the Company benefits from a strong balance sheet as a result of its
two 1996 equity offerings in which it raised $96.6 million, as well as from its
strategy of using its common stock, par value $.01 per share (the "Common
Stock"), as a significant component of the consideration for its acquisitions.
The Company's objective is to be the largest provider of regional and local
motorcoach and passenger ground transportation services in the United States by
implementing a growth strategy which concentrates on acquisitions, internal
growth and economies of scale.
ACQUISITION STRATEGY
The Company has used Common Stock and convertible securities to finance a
significant portion of the acquisition consideration (including debt assumed) to
date and plans to continue using its Common Stock for acquisitions as
appropriate in the future. In anticipation of such use, the Company has
registered 3.5 million additional shares of Common Stock under the Securities
Act.
3
<PAGE>
ENTER NEW GEOGRAPHIC MARKETS
The Company intends to expand into geographic markets it does not currently
serve by acquiring well-established motorcoach and other passenger ground
transportation service providers that, like its existing operating subsidiaries,
are leaders in their regional markets. Since its founding in 1995 and through
June 30, 1997, the Company has completed 13 new-market acquisitions.
EXPAND EXISTING MARKETS
The Company also plans to acquire additional motorcoach and other passenger
ground transportation service providers in many of the markets in which it
operates, including acquisitions that either broaden the range of services
provided by the Company in that market or expand the geographic scope of the
Company's operations in that market, as well as "tuck-in" acquisitions of
smaller operations. The Company believes that tuck-in acquisitions will increase
operating efficiencies without a proportionate increase in administrative costs
and, in some instances, will broaden the Company's range of services. Since its
founding in 1995 and through June 30, 1997, the Company has completed seven
existing-market acquisitions.
INTERNAL GROWTH STRATEGY
OFFER OF A FULL RANGE OF SERVICES IN EACH REGION
The Company intends to increase growth in each of its regions by adding
complementary services, as appropriate, including motorcoach charter, tour and
sightseeing, commuter and transit, airport ground transportation, paratransit
and taxicab services. Many of the acquired companies do not offer all of such
services and the Company believes they will benefit from the expertise of
affiliated operations.
DEVELOP PRIVATIZATION AND OUTSOURCING
The Company believes that it is well positioned to benefit from the
accelerating trend toward governmental privatization and corporate outsourcing,
as more transit authorities and businesses such as hotels, casinos, rental car
agencies, colleges and other institutions that operate their own fleets decide
to privatize or outsource non-core operations. For example, in February 1997 the
Company was awarded a three-year commuter service contract in the Seattle,
Washington area, which is expected to generate approximately $19 million in
revenues and which may be extended at the option of the customer for two
additional one-year periods. The Company is actively pursuing other
privatization contracts.
ESTABLISH A NATIONAL SALES AND MARKETING PROGRAM
The Company has begun to establish a national sales and marketing program
as a means to expand its recreational and excursion business to position itself
to benefit from the significant growth in the travel and tourism industry. This
program will target travel and tour companies, national and international travel
agencies and convention organizers, as well as organizations such as AAA, AARP
and professional and amateur athletic teams.
ECONOMIES OF SCALE
CENTRALIZE ADMINISTRATIVE FUNCTIONS
The Company believes that it will continue to have greater purchasing
power, resulting in significant cost savings in such areas as equipment and
parts, tires, insurance and financing, than the acquired companies had
independently. The Company has begun to realize cost savings through the
consolidation of administrative functions such as employee benefits, safety and
maintenance programs and risk management. The Company believes that by
continuing to remove the burden and attention-diverting responsibility of
administrative and support functions,
4
<PAGE>
the management of the operating companies and any other acquired businesses will
be able to focus on pursuing new business opportunities and improving equipment
utilization and yields.
INCREASE OPERATING EFFICIENCIES
The Company believes that there are additional opportunities to eliminate
redundant facilities and equipment through coordination among its current
operations as well as operations to be acquired in the future. The Company also
expects to continue to benefit from cross-marketing, increased equipment
utilization and implementation of best practices throughout its operating
regions. For example, the Company has consolidated the operational and
maintenance facilities of two of the companies it acquired in Houston into one
location.
RECENT RESULTS
The Company has publicly announced pro forma revenues of $199.3 million,
pro forma income before extraordinary item of $10.3 million and earnings per
share before extraordinary item of $0.52 for the six months ended June 30, 1997.
In addition, in July 1997 the Company completed the private placement of $150
million aggregate principal amount of 9 3/8% Senior Subordinated Notes due 2007
(the "Notes").
The Company is currently a party to an $181 million Credit Facility (the
"Credit Facility"). The Company has recently announced that it anticipates
that such facility will be amended to provide for borrowings of up to $300
million and additional borrowings outside such facility of up to $80 million.
5
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMPANY INVOLVES A SIGNIFICANT DEGREE OF RISK.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN
ADDITION TO OTHER INFORMATION INCLUDED IN THIS PROSPECTUS BEFORE MAKING AN
INVESTMENT IN THE COMMON STOCK. THIS PROSPECTUS CONTAINS FORWARD-LOOKING
STATEMENTS CONCERNING THE COMPANY'S OPERATIONS, ECONOMIC PERFORMANCE AND
FINANCIAL CONDITION, INCLUDING, IN PARTICULAR, THE LIKELIHOOD OF THE COMPANY'S
SUCCESS IN DEVELOPING AND EXPANDING ITS BUSINESS. THESE STATEMENTS ARE BASED
UPON A NUMBER OF ASSUMPTIONS AND ESTIMATES THAT ARE INHERENTLY SUBJECT TO
SIGNIFICANT UNCERTAINTIES AND CONTINGENCIES, MANY OF WHICH ARE BEYOND THE
CONTROL OF THE COMPANY, AND REFLECT FUTURE BUSINESS DECISIONS THAT ARE SUBJECT
TO CHANGE. SOME OF THESE ASSUMPTIONS INEVITABLY WILL NOT MATERIALIZE, AND
UNANTICIPATED EVENTS WILL OCCUR THAT WILL AFFECT THE COMPANY'S RESULTS.
EFFECTS OF LEVERAGE
The Company is highly leveraged. On March 31, 1997, the Company, after
giving pro forma effect to the acquisition of eight companies subsequent to
March 31, 1997, the sale of the Notes in transactions not registered under the
Securities Act in reliance upon the exemption provided in Section 4(2) of the
Securities Act and the application of the net proceeds therefrom, the Company
would have had total indebtedness of approximately $249.6 million (of which
$150.0 million would have consisted of the Notes, $40.6 million would have
consisted of convertible subordinated notes issued in connection with the
acquisition of certain businesses and the balance would have consisted of
capital lease and other obligations). The Company's ability to make scheduled
payments of principal of, or to pay the interest or liquidated damages, if any,
on, or to refinance, its indebtedness, or to fund planned capital expenditures
or future acquisitions will depend on its future performance, which, to a
certain extent, is subject to general economic, financial, competitive,
legislative, regulatory and other factors that are beyond its control. Based
upon the current level of operations and anticipated cost savings and revenue
growth, management believes that cash flow from operations and available cash,
together with available borrowings under the Company's revolving Credit
Facility, will be adequate to meet the Company's anticipated future requirements
for working capital, budgeted capital expenditures, acquisitions and scheduled
payments of principal and interest on its indebtedness for the next several
years. The Company may, however, need to refinance all or a portion of the
principal of its indebtedness on or prior to maturity. There can be no assurance
that the Company's business will generate sufficient cash flow from operations
or that anticipated revenue growth and operating improvements will be realized
or that future borrowings will be available under the Credit Facility in an
amount sufficient to enable the Company to service its indebtedness, make
anticipated capital expenditures or fund future acquisitions. In addition, there
can be no assurance that the Company will be able to effect any such refinancing
on commercially reasonable terms or at all.
LIMITED COMBINED OPERATING HISTORY
The Company was founded in September 1995 but conducted no operations and
generated no revenues prior to the closing of the initial public offering. The
Company acquired six founding companies (the "Founding Companies")
simultaneously with the closing of the initial public offering. Prior to their
acquisition by the Company, the Founding Companies and all subsequent
acquisitions operated as separate independent entities, and there can be no
assurance that the Company will be able to successfully integrate the operations
of these businesses or institute the necessary Company-wide systems and
procedures to successfully manage the combined enterprise on a profitable basis.
The Company's management group has been assembled for over one year, and there
can be no assurance that the management group will be able to effectively manage
the combined entity or effectively implement the Company's internal growth
strategy and acquisition program. The historical financial results of the
Company, the Founding
6
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Companies and the subsequent acquisitions cover periods when the Company, the
Founding Companies and the subsequent acquisitions were not under common control
or management and, therefore, may not be indicative of the Company's future
financial or operating results. The inability of the Company to successfully
integrate the Founding Companies and the subsequent acquisitions could have a
material adverse effect on the Company's business, financial condition and
results of operations and would make it unlikely that the Company's acquisition
program could continue to be successful. See "Management."
HOLDING COMPANY STRUCTURE
The Company conducts all of its operations through subsidiaries.
Accordingly, the Company relies on dividends and cash advances from its
subsidiaries to provide funds necessary to meet its obligations. The ability of
any such subsidiary to pay dividends or make cash advances is subject to
applicable laws and contractual restrictions, including restrictions under
credit agreements between such subsidiaries and third party lenders.
CAPITAL AVAILABILITY RISKS RELATED TO ACQUISITION FINANCING
The Company intends to continue to finance future acquisitions by issuing
shares of its Common Stock for all or a substantial portion of the consideration
to be paid. In the event that the Common Stock does not maintain a sufficient
market value, or potential acquisition candidates are otherwise unwilling to
accept Common Stock as part of the consideration for the sale of their
businesses, the Company may be required to utilize more of its cash resources,
if available, in order to maintain its acquisition program. If the Company does
not have sufficient cash resources, its growth could be limited unless it is
able to obtain additional capital through debt or equity financings. Although
the Company has established a line of credit which provides for aggregate credit
capacity of $221 million, there can be no assurance that the Company will be
able to obtain all the financing it will need in the future on terms the Company
deems acceptable.
The Credit Facility contains customary restrictive covenants, including
requiring the Company to maintain: consolidated Net Worth, as defined therein,
plus consolidated Subordinated Debt, as defined therein, at a level not less
than (i) the greater of 90% of the consolidated Net Worth of the Company as of
June 30, 1996, or $35,000,000, plus (ii) 90% of the Company's cumulative annual
consolidated net earnings, plus (iii) 100% of the net proceeds resulting from
sales or issuances of stock or subordinated debt; Tangible Net Worth, as defined
therein, of the Company at not less than 40% of the consolidated Net Worth of
the Company; a ratio of consolidated Funded Debt, as defined therein, of the
Company less the Subordinated Debt, as defined therein, of the Company to the
consolidated EBITDA, as defined therein, of the Company of no greater than 3.0
to 1.0; and a Fixed Charge Coverage Ratio, as defined therein, of not less than
1.25 to 1.0.
RISKS RELATED TO THE COMPANY'S ACQUISITION STRATEGY
The Company intends to continue to grow primarily through the acquisition
of additional motorcoach and other passenger ground transportation businesses.
Increased competition for acquisition candidates may develop, in which event
there may be fewer acquisition opportunities available to the Company as well as
higher acquisition prices. There can be no assurance that the Company will be
able to continue to identify, acquire or profitably manage additional businesses
or successfully integrate acquired businesses, if any, into the Company without
substantial costs, delays or other operational or financial problems. Further,
acquisitions involve a number of special risks, including possible adverse
effects on the Company's operating results, diversion of management's attention,
failure to retain key acquired personnel, risks associated with unanticipated
events or liabilities and amortization of acquired intangible assets, some or
all of which could have a material adverse effect on the Company's business,
financial condition and results of
7
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operations. In addition, there can be no assurance that the Founding Companies,
the subsequent acquisitions or other businesses acquired in the future will
achieve anticipated revenues and earnings. See "Business -- Business
Strategy."
LABOR RELATIONS
The Company currently has approximately 7,600 employees, approximately
5,000 of whom are motorcoach drivers. At March 31, 1997, approximately 2,800 of
the Company's employees were members of various labor unions. The Company's
inability to negotiate acceptable contracts with these unions as existing
agreements expire could result in strikes by the affected workers and increased
operating costs as a result of higher wages or benefits paid to union members.
If the unionized employees were to engage in a strike or other work stoppage, or
other employees were to become unionized, the Company could experience a
significant disruption of its operations and higher ongoing labor costs, which
could have a material adverse effect on the Company's business and results of
operations. See "Business -- Drivers and Other Personnel."
SUBSTANTIAL SEASONALITY OF THE MOTORCOACH BUSINESS
The motorcoach business is subject to seasonal variations in operations.
During the winter months, operating costs are higher due to the cold weather and
demand for motorcoach services is lower, particularly because of a decline in
tourism. As a result, the Company expects its revenues and results of operations
to be lower in the first and fourth quarters than in the second and third
quarters of each year.
FUEL PRICES AND TAXES
Fuel is a significant cost to the Company. Fuel prices are subject to
sudden increases as a result of variations in supply levels and demand. Any
sustained increase in fuel prices could adversely affect the Company's results
of operations unless it were able to increase prices. From time to time, there
are efforts at the Federal or state level to increase fuel or highway use taxes,
which, if enacted, also could adversely affect the Company's results of
operations. See "Business -- Fuel Availability and Costs."
INSURANCE COSTS; CLAIMS
The Company's cost of maintaining personal injury, property damage and
workers' compensation insurance is significant. The Company could experience
higher insurance premiums as a result of adverse claims experience or because of
general increases in premiums by insurance carriers for reasons unrelated to the
Company's own claims experience. As an operator of motorcoaches and other
vehicles, the Company is exposed to claims for personal injury or death and
property damage as a result of accidents. The Company is self-insured for the
first $100,000 of losses per incident involving a motorcoach and is self-insured
for the first $250,000 of losses per incident involving a taxicab. If the
Company were to experience a significant increase in the number of claims for
which it is self-insured or claims in excess of its insurance limits, its
results of operations and financial condition would be adversely affected. See
"Business -- Risk Management and Insurance."
CAPITAL REQUIREMENTS
The Company's operations require significant capital in order to maintain a
modern fleet of motorcoaches and to achieve internal growth. The Company has
historically financed the acquisition of new motorcoaches with debt financing. A
new motorcoach costs in excess of $300,000, and there can be no assurance that
adequate financing will be available in the future on terms favorable to the
Company to enable the Company to efficiently maintain operations and implement
any expansion of service through a larger fleet. In addition, as motorcoaches
age, they require increasing amounts of maintenance and, therefore, are more
expensive to operate. The Company's inability to obtain, or a material delay in
obtaining, the financing necessary to acquire
8
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replacement motorcoaches as needed would have an adverse effect on the Company's
results of operations due to higher operating costs associated with operating an
aging fleet. See "Business -- Equipment."
GOVERNMENT SUBSIDIES
Payments to the Company under a number of its commuter and transit
contracts are funded through Federal or state subsidy programs, and, without
these subsidies, the state or local transit authority may be unwilling to
continue to renew these contracts. In addition, many of the motorcoaches
provided at nominal rent to the Company under these contracts are purchased with
funds provided by Federal programs. If funding for these Federal programs were
eliminated or curtailed, the Company would be required to operate existing
motorcoaches longer than economically practicable or be forced to acquire
replacement equipment. Either alternative could result in an increase in the
Company's costs of operations or could cause the Company to decide not to renew
some of its contracts. See "Business -- Services Provided."
SIGNIFICANT REGULATION
As a result of the enactment of the ICC Termination Act of 1995, interstate
motorcoach operations previously regulated by the Interstate Commerce Commission
became subject, as of January 1, 1996, to regulatory requirements administered
by the Federal Highway Administration (the "FHWA") and the new Surface
Transportation Board, both units of the United States Department of
Transportation. Motorcoach operators subject to FHWA jurisdiction are required
to be registered with the FHWA and to maintain minimum amounts of insurance. The
Surface Transportation Board (the "STB") must approve or exempt any
consolidation or merger of two or more regulated interstate motorcoach operators
or the acquisition of one such operator by another. As of May 15, 1997, the STB
had exempted from regulatory approval requirements each of the acquisition
transactions involving federally-regulated interstate motorcoach operators
entered into by the Company through February 1997. However, acquisitions
subsequent to March 1, 1997 and future acquisitions of other motorcoach
operators must be approved or exempted from the need for regulatory approval by
the STB. There can be no assurance that the Company will be able to obtain such
approval or exemption with respect to such acquisitions. Motorcoach operators
are also subject to extensive safety requirements and requirements imposed by
environmental laws, workplace safety and anti-discrimination laws, including the
Americans with Disabilities Act. Safety, environmental and vehicle accessibility
requirements for motorcoach operators have increased in recent years, and this
trend could continue. The FHWA and state regulatory agencies have broad power to
suspend, amend or revoke the Company's operating authorizations for failure to
comply with statutory requirements, including safety and insurance requirements.
A number of states, such as New Jersey, Nevada and Pennsylvania, require
motorcoach operators to obtain authority to operate over certain specified
intrastate routes, and, in some instances, such authority cannot be obtained if
another operator already has obtained authority to operate on that route. As a
result, there may be regulatory constraints on the expansion of the Company's
operations in these states. Furthermore, the Company currently has a competitive
advantage with respect to certain of its existing route authorities as a result
of this regulatory posture. Therefore, if New Jersey or another highly regulated
state in which the Company has operations were to reduce the level of
regulation, the Company's competitive advantage arising from such regulation
could be lost. Similarly, the Company's taxicab service operations are regulated
primarily at the local municipality level. Local regulations applicable to
taxicab services focus on the entry of new operators into the marketplace and
the aggregate number of vehicles which will have authority to operate as well as
the fares that can be charged for providing transportation services via
taxicabs. These regulations may limit the Company's ability to expand the size
of its taxicab fleet. See "Business -- Regulation."
9
<PAGE>
POTENTIAL EXPOSURE TO ENVIRONMENTAL LIABILITIES
The Company's operations are subject to various environmental laws and
regulations, including those dealing with air emissions, water discharges and
the storage, handling and disposal of petroleum and hazardous substances. The
motorcoach and ground passenger transportation services industry may in the
future become subject to stricter regulations. There have been spills and
releases of hazardous substances, including petroleum and petroleum related
products, at several of the Company's operating facilities in the past. As a
result of past and future operations at these facilities, the Company may be
required to incur remediation costs and may be subject to penalties. In
addition, although the Company intends to conduct appropriate due diligence with
respect to environmental matters in connection with future acquisitions, there
can be no assurance that the Company will be able to identify or be indemnified
for all potential environmental liabilities relating to any acquired business.
See "Business -- Environmental Matters."
SUBSTANTIAL COMPETITION
The motorcoach and ground transportation industry is highly competitive,
fragmented and subject to rapid change, particularly with regard to recreational
and excursion services and commuter and transit services. There are numerous
other companies that provide these services, a number of which are as large or
larger than the Company on a national or regional basis and thousands of which
are small, independent and serve local populations. Certain of these competitors
operate in several of the Company's existing or target markets, and others may
choose to enter those markets in the future. The majority of the Company's
competition is made up of smaller regional or local operators with a strong
presence in their respective local markets. As a result of these factors, the
Company may lose customers or have difficulty in acquiring new customers. See
"Business -- Competition."
RELIANCE ON KEY PERSONNEL
The Company's operations are dependent on the continued efforts of its
executive officers and the senior management of the operating subsidiaries.
Furthermore, the Company will likely be dependent on the senior management of
any businesses acquired in the future. If any of these persons becomes unable to
continue in his or her present role, or if the Company is unable to attract and
retain other qualified employees, the Company's business or prospects could be
adversely affected. Although the Company or an operating subsidiary has entered
into an employment agreement with each of the Company's executive officers and
key managers, there can be no assurance that any individual will continue in his
present capacity with the Company or operating subsidiary for any particular
period of time. The Company does not intend to obtain key man life insurance
covering any of its executive officers or other members of senior management.
See "Management."
10
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDEND POLICY
The Company's Common Stock traded on the Nasdaq National Market from May
14, 1996 to May 8, 1997, when it began trading on the NYSE. The following table
sets forth the high and low last sale prices for the Common Stock for the period
from May 14, 1996, the date of the initial public offering.
HIGH LOW
------- --------
1996
Second quarter (from May 14)......... $22 3/4 $ 17 5/8
Third quarter........................ 27 1/2 18
Fourth quarter....................... 32 25
1997
First quarter........................ 34 1/4 28
Second quarter....................... 30 1/4 25 1/4
Third quarter (through August 5)..... 29 7/8 24 5/16
At August 6, 1997, there were approximately 178 stockholders of record of
the Company's Common Stock. On August 6, 1997, the last reported sale price of
the Common Stock on the NYSE was $29 7/8 per share.
The Company intends to retain all of its earnings, if any, to finance the
expansion of its business and for general corporate purposes, including future
acquisitions, and does not anticipate paying any cash dividends on its Common
Stock for the foreseeable future. In addition, the Company's revolving credit
facility includes, and any additional lines of credit established in the future
may include, restrictions on the ability of the Company to pay dividends without
the consent of the lender.
11
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information as of August 5, 1997
regarding the beneficial ownership of the Common Stock of the Company by (i)
each person known to beneficially own more than 5% of the outstanding shares of
Common Stock; (ii) each of the Company's directors; (iii) each named executive
officer; (iv) all executive officers and directors as a group; and (v) each of
the Selling Stockholders. All persons listed have an address in care of the
Company's principal executive offices and have sole voting and investment power
with respect to their shares unless otherwise indicated. The information
presented under "Shares Beneficially Owned After Offering" assumes that all of
the shares offered by the Selling Stockholders will be sold.
<TABLE>
<CAPTION>
SHARES SHARES SHARES
BENEFICIALLY OWNED BEING BENEFICIALLY OWNED
PRIOR TO OFFERING OFFERED AFTER OFFERING
----------------------- ------- -----------------------
NAME NUMBER PERCENT NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
Richard H. Kristinik(1).............. 240,000 1.2% 0 240,000 1.2%
John Mercadante, Jr.(2).............. 392,425 2.0 0 392,425 2.0
Douglas M. Cerny(3).................. 109,000 * 0 109,000 *
Frank P. Gallagher(4)................ 199,810 1.0 0 199,810 1.0
Lawrence K. King(3).................. 134,000 * 0 134,000 *
Gerald Mercadante(5)................. 951,400 4.9 0 951,400 4.9
Charles D. Busskohl(6)............... 401,141 2.1 0 401,141 2.1
Steven S. Harter(7).................. 353,095 1.8 0 353,095 1.8
William J. Lynch(8).................. 38,468 * 0 38,468 *
Paul M. Verrochi(9).................. 65,000 * 0 65,000 *
Thomas A. Werbe(10).................. 326,038 1.7 0 326,038 1.7
John Gibson.......................... 9,166 * 4,492 4,674 *
Pat H. Gibson........................ 9,166 * 4,492 4,674 *
Anne W. Efird........................ 10,003 * 4,902 5,101 *
Tom D. Efird......................... 8,331 * 4,083 4,248 *
A. Grayson Kellar.................... 14,997 * 7,349 7,648 *
Doris H. Kellar...................... 3,337 * 1,636 1,701 *
Billy Ray Rhyne...................... 18,333 * 8,984 9,349 *
Edward Steinberg(11)................. 231,457 1.2 113,413 118,044 *
Martin Zilber(11).................... 93,229 * 45,682 47,547 *
Sigmund Zilber Trust No. 1........... 50,000 * 24,500 25,500 *
Sigmund Zilber Trust No. 2........... 28,229 * 13,832 14,397 *
Amy K. Dupuis........................ 25,306 * 12,400 12,906 *
Bertha Dupuis........................ 33,663 * 16,495 17,168 *
Danielle Dupuis...................... 25,306 * 12,400 12,906 *
Nicole Dupuis........................ 25,305 * 12,399 12,906 *
Michael Dupuis....................... 25,305 * 12,399 12,906 *
Raynald Dupuis....................... 265,070 1.4 129,885 135,185 *
Isabel Crowley....................... 9,559 * 4,684 4,875 *
Joanne Devlin........................ 7,785 * 3,815 3,970 *
Italia Maria English................. 2,557 * 1,253 1,304 *
Ron English.......................... 19,578 * 9,594 9,984 *
Working Venture Canadian Fund........ 221,507 1.1 108,539 112,968 *
Allan Bolton......................... 66,289 * 32,482 33,807 *
</TABLE>
(TABLE CONTINUED ON FOLLOWING PAGE)
12
<PAGE>
<TABLE>
<CAPTION>
SHARES SHARES SHARES
BENEFICIALLY OWNED BEING BENEFICIALLY OWNED
PRIOR TO OFFERING OFFERED AFTER OFFERING
----------------------- ------- -----------------------
NAME NUMBER PERCENT NUMBER PERCENT
<S> <C> <C> <C> <C> <C>
James Devlin......................... 58,503 * 28,667 29,836 *
Joanne McMynn........................ 7,785 * 3,815 3,970 *
Robert McMynn........................ 58,503 * 28,667 29,836 *
William Cotter(11)................... 75,000 * 36,750 38,250 *
Dean E. Nichols(11).................. 75,000 * 36,750 38,250 *
Sigmund Zilber, Living Trust(11)..... 60,000 * 29,400 30,600 *
MTC, Inc.(12)........................ 51,687 * 25,327 26,360 *
All executive officers and directors
as a group (11 persons)............ 3,210,377 16.3 0 3,210,377 16.3
</TABLE>
- ------------
* Less than 1%.
(1) These shares are held by the Kristinik Family Partnership, of which Mr.
Kristinik is a general partner. Includes 40,000 shares which may be
acquired upon the exercise of options exercisable within 60 days.
(2) Includes 137,774 shares held by Mr. Mercadante's spouse, as to which shares
Mr. Mercadante disclaims beneficial ownership. Includes 20,000 shares which
may be acquired upon the exercise of options exercisable within 60 days;
excludes 80,000 shares which may be acquired upon the exercise of options
not exercisable within 60 days.
(3) Includes 20,000 shares which may be acquired upon the exercise of options
exercisable within 60 days.
(4) Includes 90,885 shares held by Mr. Gallagher's spouse, as to which shares
Mr. Gallagher disclaims beneficial ownership, 13,039 shares held in a trust
for the benefit of Mr. Gallagher's daughter for which Mr. Gallagher is a
trustee. Includes 20,000 shares which may be acquired upon the exercise of
options exercisable within 60 days; excludes 80,000 shares which may be
acquired upon the exercise of options not exercisable within 60 days.
(5) Includes 167,943 shares held by Mr. Mercadante's spouse as to which shares
Mr. Mercadante disclaims beneficial ownership.
(6) These shares are held by two family trusts for which Mr. Busskohl is a
trustee.
(7) These shares are held by Harter Investment Partners, Ltd., of which Mr.
Harter is a general partner. Includes 15,000 shares which may be issued
upon exercise of options granted under the Directors' Plan and 33,714
shares held by the Victoria Harter and Phyllis Spisak Educational Trust, of
which Mr. Harter's minor children are beneficiaries, as to which shares Mr.
Harter disclaims beneficial ownership.
(8) Includes 15,000 shares which may be acquired upon exercise of options
granted under the Directors' Plan.
(9) Includes 15,000 shares which may be acquired upon exercise of options
granted under the Directors' Plan and 50,000 shares held in a trust for the
benefit of Mr. Verrochi's children, as to which shares Mr. Verrochi
disclaims beneficial ownership.
(10) These shares are held by the Robert K. Werbe Grantor Retained Annuity Trust
for which Mr. Thomas Werbe is a trustee.
(11) Some or all of the shares owned by this individual, and the proceeds from
the sale of such shares, are being currently held in escrow pending the
approval of the Company's acquisition of this individual's company by the
Colorado Public Utility Commission.
(12) Mr. Terry J. Mauro and Mr. Eugene F. Bronson are the stockholders of MTC,
Inc.
13
<PAGE>
PLAN OF DISTRIBUTION
The shares of Common Stock registered hereunder and owned by the Selling
Stockholders may be offered and sold by means of this Prospectus from time to
time as market conditions permit in the over-the-counter market, or otherwise,
at prices and terms then prevailing or at prices related to the then-current
market price, or in negotiated transactions. These shares may be sold by one or
more of the following methods, without limitation: (a) a block trade in which a
broker or dealer so engaged will attempt to sell the shares as agent but may
position and resell a portion of the block as principal to facilitate the
transaction; (b) purchases by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this Prospectus; (c) ordinary
brokerage transactions and transactions in which the broker solicits purchasers;
and (d) face-to-face transactions between sellers and purchasers without a
broker/dealer. In effecting sales, brokers or dealers engaged by the Selling
Stockholders may arrange for other brokers or dealers to participate. Such
brokers or dealers may receive commissions or discounts from Selling
Stockholders in amounts to be negotiated.
The Selling Stockholders and any broker/dealers who act in connection with
the sale of the Shares hereunder may be deemed to be "underwriters" within the
meaning of 2(11) of the Securities Act, and any commissions received by them and
profit on any resale of the Shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. The Company has
agreed to indemnify the Selling Stockholders and any securities broker/dealers
who may be deemed to be underwriters against certain liabilities, including
liabilities under the Securities Act as underwriters or otherwise.
The Company has advised the Selling Stockholders that they and any
securities broker/dealers or others who may be deemed to be statutory
underwriters will be subject to the Prospectus delivery requirements under the
Securities Act. The Company has also advised each Selling Stockholder that in
the event of a "distribution" of the shares owned by the Selling Stockholder,
such Selling Stockholder, any "affiliated purchasers", and any broker/dealer
or other person who participates in such distribution may be subject to Rule
10b-6 under the Securities Exchange Act of 1934 ("1934 Act") until their
participation in that distribution is completed. A "distribution" is defined
in Rule 10b-6 as an offering of securities "that is distinguished from ordinary
trading transactions by the magnitude of the offering and the presence of
special selling efforts and selling methods". The Company has also advised the
Selling Stockholders that Rule 10b-7 under the 1934 Act prohibits any
"stabilizing bid" or "stabilizing purchase" for the purpose of pegging,
fixing or stabilizing the price of the Common Stock in connection with this
offering.
Rule 10b-6 makes it unlawful for any person who is participating in a
distribution to bid for or purchase stock of the same class as is the subject of
the distribution. If Rule 10b-6 applies to the offer and sale of any of the
Shares, then participating broker/dealers will be obligated to cease
market-making activities nine business days prior to their participation in the
offer and sale of such Shares and may not recommence market-making activities
until their participation in the distribution has been completed. If Rule 10b-6
applies to one or more of the principal market-makers in the Company's Common
Stock, the market price of such stock could be adversely affected.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus has been passed upon for the Company by Douglas M. Cerny, General
Counsel to the Company.
Mr. Cerny owns 89,000 shares of Common Stock of the Company and holds
options to purchase 100,000 shares of Common Stock, 20,000 of which are
exercisable within the next 60 days and 80,000 of which are not exercisable
within the next 60 days.
14
<PAGE>
INDEX TO FINANCIAL STATEMENTS
Page
----
COACH USA, INC. AND SUBSIDIARIES
Report of Independent Public Accountants ............................ F-2
Consolidated Balance Sheets ......................................... F-3
Consolidated Statements of Income ................................... F-4
Consolidated Statements of Stockholders' Equity ..................... F-5
Consolidated Statements of Cash Flows ............................... F-6
Notes to Consolidated Financial Statements .......................... F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Coach USA, Inc.:
We have audited the accompanying consolidated balance sheets of Coach USA,
Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995 and 1996,
and the related consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1996. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
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 consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Coach USA, Inc. and subsidiaries as of December 31, 1995 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1996, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Houston, Texas
March 31, 1997
F-2
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
------------------------ MARCH 31,
1995 1996 1997
----------- ----------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents.......... $ 3,411 $ 1,470 $ 6,544
Accounts receivable, less allowance
of $996, $2,096, and $2,213..... 8,890 18,659 22,526
Inventories........................ 3,641 8,758 9,701
Notes receivable, current
portion......................... 3,045 2,811 4,098
Prepaid expenses and other current
assets.......................... 4,540 12,628 14,925
----------- ----------- -----------
Total current assets......... 23,527 44,326 57,794
PROPERTY AND EQUIPMENT, net............. 65,395 210,754 269,925
NOTES RECEIVABLE, less allowance of
$500.................................. 1,978 4,231 5,013
GOODWILL, net........................... 71 30,142 72,447
OTHER ASSETS, net....................... 11,636 10,497 10,945
----------- ----------- -----------
Total assets................. $ 102,607 $ 299,950 $ 416,124
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of convertible
subordinated notes.............. $ -- $ 4,000 $ --
Current maturities of long-term
obligations..................... 12,065 10,877 6,452
Accounts payable and accrued
liabilities..................... 19,309 36,948 72,131
----------- ----------- -----------
Total current liabilities.... 31,374 51,825 78,583
LONG-TERM OBLIGATIONS, net of current
maturities............................ 43,685 98,106 160,368
CONVERTIBLE SUBORDINATED NOTES, net of
current maturities................. -- 18,500 36,830
LONG-TERM OBLIGATIONS DUE TO
STOCKHOLDERS, net of current
maturities......................... 16,467 -- --
DEFERRED INCOME TAXES................... 6,702 21,593 28,537
----------- ----------- -----------
Total liabilities............ 98,228 190,024 304,318
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common Stock, $.01 par, 30,000,000
shares authorized, 3,862,369,
17,777,126 and 17,778,107 shares
issued and outstanding,
respectively.................... 39 178 178
Additional paid-in capital......... 5,160 101,325 101,325
Retained earnings (deficit)........ (820) 8,423 10,303
----------- ----------- -----------
Total stockholders' equity... 4,379 109,926 111,806
----------- ----------- -----------
Total liabilities and
stockholders' equity....... $ 102,607 $ 299,950 $ 416,124
=========== =========== ===========
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------------- THREE MONTHS ENDED
PRO FORMA MARCH 31,
COMBINED ------------------------
1994 1995 1996 1996 1996 1997
---------- ----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
REVENUES................................ $ 88,060 $ 103,403 $ 205,838 $ 250,776 $ 28,294 $ 69,311
OPERATING EXPENSES...................... 65,460 75,002 152,298 189,084 21,234 54,386
---------- ----------- ----------- ----------- ----------- -----------
Gross profit....................... 22,600 28,401 53,540 61,692 7,060 14,925
GENERAL AND ADMINISTRATIVE EXPENSES..... 15,223 16,772 24,471 26,554 4,311 8,238
ACQUISITION RELATED COSTS............... -- -- 1,101 -- -- 117
---------- ----------- ----------- ----------- ----------- -----------
Operating income................... 7,377 11,629 27,968 35,138 2,749 6,570
INTEREST EXPENSE........................ 4,904 6,627 9,467 9,934 1,868 3,199
---------- ----------- ----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEMS................... 2,473 5,002 18,501 25,204 881 3,371
PROVISION FOR INCOME TAXES.............. 1,130 2,050 7,684 9,958 431 1,402
---------- ----------- ----------- ----------- ----------- -----------
INCOME BEFORE EXTRAORDINARY ITEMS....... 1,343 2,952 10,817 15,246 450 1,969
EXTRAORDINARY ITEMS, net of income
taxes................................. -- -- 2,723 2,723 -- (89)
---------- ----------- ----------- ----------- ----------- -----------
NET INCOME.............................. $ 1,343 $ 2,952 $ 13,540 $ 17,969 $ 450 $ 1,880
========== =========== =========== =========== =========== ===========
EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE:
INCOME BEFORE EXTRAORDINARY
ITEMS........................... $ .35 $ .76 $ .91 $ 1.00 .12 .10
EXTRAORDINARY ITEMS................ -- -- .23 .18 -- --
---------- ----------- ----------- ----------- ----------- -----------
NET INCOME......................... $ .35 $ .76 $ 1.14 $ 1.18 $ .12 $ .10
========== =========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL RETAINED TOTAL
---------------- PAID-IN EARNINGS STOCKHOLDERS'
SHARES AMOUNT CAPITAL (DEFICIT) EQUITY
------ ------ ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993............ 3,863 $ 39 $ 4,954 $ (3,346) $ 1,647
S Corporation dividends paid by
certain Pooled Companies........ -- -- -- (690) (690)
Net income......................... -- -- -- 1,343 1,343
Other.............................. -- -- (30) -- (30)
------ ------ ---------- -------- -------------
BALANCE AT DECEMBER 31, 1994............ 3,863 39 4,924 (2,693) 2,270
S Corporation dividends paid by
certain Pooled Companies........ -- -- -- (1,079) (1,079)
Net income......................... -- -- -- 2,952 2,952
Other.............................. -- -- 236 -- 236
------ ------ ---------- -------- -------------
BALANCE AT DECEMBER 31, 1995............ 3,863 39 5,160 (820) 4,379
Issuance of Common Stock:
Proceeds of stock offerings..... 6,224 62 96,502 -- 96,564
Merger with Predecessor......... 2,166 22 2,055 (2,053) 24
Acquisition of Founding
Companies.................... 5,099 51 6,323 9,155 15,529
Cash Distribution to Founding
Companies' Shareholders......... -- -- (23,810) -- (23,810)
Reorganization..................... -- -- 4,402 (4,402) --
Conversion from S Corporation to C
Corporation for Founding
Companies....................... -- -- -- (5,426) (5,426)
Conversion of debt to equity....... 425 4 10,198 -- 10,202
S Corporation dividends paid by
certain Pooled Companies........ -- -- -- (1,838) (1,838)
Adjustment to conform fiscal year
ends of Pooled Companies........ -- -- -- 267 267
Net income......................... -- -- -- 13,540 13,540
Capital contributions equal to
the current income taxes of S
Corporations.................... -- -- 341 -- 341
Other.............................. -- -- 154 -- 154
------ ------ ---------- -------- -------------
BALANCE AT DECEMBER 31, 1996............ 17,777 178 101,325 8,423 109,926
Net income (unaudited)............. -- -- -- 1,880 1,880
Other (unaudited).................. 1 -- -- -- --
------ ------ ---------- -------- -------------
BALANCE AT MARCH 31, 1997 (unaudited)... 17,778 $ 178 $ 101,325 $ 10,303 $ 111,806
====== ====== ========== ======== =============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
--------------------------------- --------------------
1994 1995 1996 1996 1997
--------- --------- ----------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................ $ 1,343 $ 2,952 $ 13,540 $ 450 $ 1,880
Adjustments to reconcile net income to
net cash provided by operating
activities --
Adjustment to conform fiscal year
ends of Pooled Companies....... -- -- 267 -- --
Extraordinary gain................ -- -- (7,007) -- --
Depreciation and amortization..... 5,937 7,702 13,744 2,213 5,288
(Gain) loss on sale of assets..... 216 (620) (350) -- --
Deferred income tax provision..... 1,206 1,743 7,026 521 1,930
Changes in operating assets and
liabilities, net of effect of
Purchased Companies --
Accounts receivable, net..... 115 (1,337) (944) 37 (56)
Inventories.................. (1,094) (2,593) (4,507) (826) (372)
Notes receivable, net........ 175 (1,828) (1,672) (2,618) (2,069)
Prepaid expenses and other
current assets............. (631) (611) (3,856) 15 (1,149)
Accounts payable and accrued
liabilities................ (1,523) 2,111 (6,761) 1,822 20,278
Other........................ 850 (163) (473) 309 93
--------- --------- ----------- --------- ---------
Net cash provided by
operating activities..... 6,594 7,356 9,007 1,923 25,823
--------- --------- ----------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment... (22,926) (14,359) (25,714) (4,058) (31,672)
Proceeds from sales of property and
equipment........................... 1,196 1,961 4,685 -- 2,057
Cash consideration paid for the
Founding Companies, net of cash
acquired............................ -- -- (22,112) -- --
Cash consideration paid for Purchased
Companies, net of cash acquired..... -- -- (12,666) -- (26,128)
Proceeds from sales of investments.... -- -- 1,419 -- --
--------- --------- ----------- --------- ---------
Net cash used in investing
activities............... (21,730) (12,398) (54,388) (4,058) (55,743)
--------- --------- ----------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments on long-term
obligations......................... (12,032) (18,544) (125,638) (2,276) (34,384)
Proceeds from issuance of long-term
obligations......................... 26,276 26,091 74,198 4,048 69,378
Sales of Common Stock................. -- -- 96,564 -- --
S Corporation Dividends paid by
certain Pooled Companies............ (690) (1,079) (1,838) (487) --
Other................................. 286 181 154 -- --
--------- --------- ----------- --------- ---------
Net cash provided by
financing activities..... 13,840 6,649 43,440 1,285 34,994
--------- --------- ----------- --------- ---------
NET INCREASE (DECREASE) IN CASH......... (1,296) 1,607 (1,941) (850) 5,074
CASH AND CASH EQUIVALENTS, beginning of
year.................................. 3,100 1,804 3,411 3,411 1,470
--------- --------- ----------- --------- ---------
CASH AND CASH EQUIVALENTS, end of
year.................................. $ 1,804 $ 3,411 $ 1,470 $ 2,561 $ 6,544
========= ========= =========== ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest.............. $ 3,524 $ 5,329 $ 9,236 1,647 3,520
Cash paid for income taxes.......... 410 125 4,732 82 477
Assets acquired under capital
leases............................ 1,931 2,404 7,891 2,981 2,355
Convertible debt issued for
Purchased Companies............... -- -- 22,500 -- 18,330
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BUSINESS AND ORGANIZATION:
In September 1995, Coach USA, Inc. (Coach USA), was founded to create a
national company providing motorcoach transportation services, including charter
and tour services, and related passenger ground transportation services.
In May 1996, Coach USA acquired, simultaneously with the closing of its
initial public offering (the Offering), six established businesses.
Consideration for these businesses consisted of a combination of cash and common
stock of Coach USA (the Common Stock). These six businesses are referred to
herein as the "Founding Companies." Coach USA acquired nine additional
businesses in 1996. Of these nine additional businesses acquired, six were
accounted for as poolings-of-interests and, together with an additional business
acquired in February 1997 accounted for as a pooling-of-interests, are referred
to herein as the "Pooled Companies." The remaining three businesses acquired
in 1996, and two additional businesses acquired in February 1997 were accounted
for as purchases and are referred to herein as the "Purchased Companies" (see
Note 3).
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Coach USA and the Founding Companies from June 1, 1996, the effective date used
to account for the acquisitions of the Founding Companies, the Purchased
Companies since their date of acquisition, and give retroactive effect to the
acquisitions of the Pooled Companies. The Pooled Companies, the Founding
Companies subsequent to May 31, 1996, and the Purchased Companies since date of
acquisition, are collectively referred to herein as the "Company." All
significant intercompany transactions and balances have been eliminated in
consolidation.
The unaudited pro forma combined statement of income for the year ended
December 31, 1996 includes the accounts of Coach USA and the Founding Companies
from January 1, 1996, the Purchased Companies since their date of acquisition,
and gives retroactive effect to the acquisitions of the Pooled Companies.
Certain pro forma adjustments further discussed in Note 3 have been made to the
unaudited pro forma combined statement of income.
Two of the Pooled Companies have previously reported on an October fiscal
year end. As such, the accounts of these companies for their 1994 and 1995
fiscal years have been consolidated with the accounts of the Company as of
December 31, 1994 and 1995, respectively. Unaudited revenues and net income for
these two companies for the two-month period ended December 31, 1995, were
approximately $6,292,000 and $267,000, respectively. Accordingly, an adjustment
is included in the consolidated statement of stockholders' equity for the net
income attributed to this two-month period.
INTERIM FINANCIAL INFORMATION
The interim consolidated financial statements are unaudited, and certain
information and footnote disclosures, normally included in financial statements
prepared in accordance with generally accepted accounting principles, have been
omitted. In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary to fairly present the financial
position, results of operations and cash flows with respect to the interim
consolidated financial statements, have been included. The results of operations
for the interim periods are not necessarily indicative of the results for the
entire fiscal year.
F-7
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with an original
maturity of three months or less as cash equivalents.
INVENTORIES
Inventories consist of motorcoach and taxicab replacement parts and
taxicabs held for sale. Inventory cost for replacement parts is accounted for on
the first-in, first-out basis and inventory cost for taxicabs held for sale or
on short-term leases are accounted for on the specific identification basis, and
both are reported at the lower of cost or market. Taxicabs held for sale are
depreciated over their estimated useful lives of 4.5 years. Depreciation and
amortization expense in the accompanying consolidated financial statements
includes $1,053,000, $1,457,000 and $1,940,000 of depreciation related to
taxicabs held for sale in 1994, 1995 and 1996.
NOTES RECEIVABLE
Notes receivable result from the sale of taxicabs to independent
contractors. The notes bear interest and are due in weekly installments over
periods ranging up to 42 months.
NOTES RECEIVABLE FROM STOCKHOLDERS
The Company had notes receivable from former stockholders of certain of the
Pooled Companies totaling $439,000 at December 31, 1995. These notes receivable
were unsecured, noninterest-bearing and payable on demand and were repaid in
full in connection with the respective mergers with Coach USA.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Expenditures for maintenance
and repairs, including replacement of engines and certain other significant
costs, are expensed as costs are incurred.
Depreciation on transportation equipment and other assets for financial
reporting purposes is computed on the straight-line basis over the estimated
useful lives of the assets, net of their estimated residual values. Gains or
losses on the sale of equipment are included in operating expenses.
GOODWILL
Goodwill represents the excess of the aggregate price paid by the Company
in acquisitions accounted for as purchases over the fair market value of the net
tangible assets acquired. Goodwill is amortized on a straight-line basis
generally over 40 years.
OTHER ASSETS
Taxicab permits are carried at cost, less accumulated amortization. The
permit costs are amortized using the straight-line method over a period of 40
years. Annual renewal fees are charged to expense as incurred.
The Company applies Statement of Financial Accounting Standards (SFAS) No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of". Management continually evaluates whether events or
circumstances have occurred that indicate that the remaining estimated useful
lives of property and equipment, other identifiable intangible assets and
goodwill may warrant revision or that the remaining balances may not be
recoverable.
F-8
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
CONCENTRATIONS OF CREDIT RISK
The Company provides services to a broad range of geographical regions. The
Company's credit risk primarily consists of receivables from a variety of
customers, including casinos and various other tourism-based companies and
governmental units. In addition, the Company's accounts and notes receivable
include amounts due from independent taxicab contractors. Management performs
ongoing credit evaluations of its customers and independent taxicab contractors
and provides allowances as deemed necessary.
The activity in the allowance for doubtful accounts is as follows (in
thousands):
<TABLE>
<CAPTION>
BEGINNING
BALANCE OF
BALANCE AT FOUNDING AND CHARGED TO BALANCE AT
BEGINNING PURCHASED COSTS AND END OF
OF PERIOD COMPANIES EXPENSES WRITE-OFFS PERIOD
---------- ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994............ $1,088 $ -- $ 821 $ (1,049) $ 860
Year ended December 31, 1995............ 860 -- 870 (734) 996
Year ended December 31, 1996............ 996 955 931 (786) 2,096
</TABLE>
REVENUE RECOGNITION
The Company recognizes revenue from recreation, excursion, commuter,
transit and taxicab support services and sales to independent taxicab operators
when such services and sales are performed. The Company recognizes financing
income on notes receivable using the effective interest method over the term of
the notes. Costs associated with the revenues are incurred and recorded as
services and sales are performed.
The Company has a 50 percent interest in a joint venture which provides
various paratransit services to a governmental agency in South Florida. Income
from this joint venture was $1.0 million, $0.6 million and $0.7 million in 1994,
1995 and 1996, respectively, and is included in revenues in the accompanying
consolidated financial statements.
INCOME TAXES
The Company will file a consolidated return for federal income tax
purposes. Income taxes are provided under the liability method considering the
tax effects of transactions reported in the financial statements which are
different from the tax return. The deferred income tax assets and liabilities
represent the future tax consequences of those differences, which will either be
taxable or deductible when the underlying assets or liabilities are realized or
settled.
Certain of the Pooled Companies were S Corporations for income tax purposes
and, accordingly, any income tax liabilities for the periods prior to the
acquisition date are the responsibility of the respective stockholders. For
purposes of these consolidated financial statements, federal and state income
taxes have been provided as if these companies had filed C Corporation tax
returns for the pre-acquisition periods. The current income tax expense of these
S Corporations is reflected in the consolidated financial statements in the
provision for income taxes and as an increase to additional paid-in capital.
USE OF ESTIMATES
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
F-9
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
The computation of net income per common and common equivalent share for
the years ended December 31, 1994 and 1995 and for the three months ended
March 31, 1996 includes 3,862,369 shares issued in connection with the
acquisitions of the Pooled Companies.
The computation of net income per common and common equivalent share for
the year ended December 31, 1996 is based upon 11,923,064 weighted average
shares outstanding which includes (a) the 3,862,369 shares discussed above, (b)
the weighted average portion of the 2,165,724 shares issued prior to the Initial
Public Offering, (c) the weighted average portion of the 5,099,687 shares issued
to the stockholders of the Founding Companies, (d) the weighted average portion
of the 4,140,000 shares sold in the Initial Public Offering, (e) the weighted
average portion of the 425,039 shares issued in connection with the conversion
of indebtedness to equity at one of the Pooled Companies, (f) the weighted
average portion of the 2,084,307 shares sold in a secondary stock offering, and
(g) 305,605 shares representing the weighted average portion of shares for the
dilution attributable to outstanding options to purchase common stock, using the
treasury stock method.
The computation of net income per share for the three months ended March
31, 1997 is based upon 18,512,629 weighted average shares outstanding which
include (i) 17,778,107 shares issued and outstanding for the entire three month
period, (ii) 981 shares issued a minority interest of one of the Pooled
Companies, and (iii) 734,522 shares representing the weighted average portion of
shares for the dilution attributable to outstanding options to purchase common
stock, using the treasury stock method.
The computation of unaudited pro forma combined net income per common and
common equivalent share for the year ended December 31, 1996 is based upon
15,254,806 weighted average shares outstanding which includes (a) the 3,862,369
shares discussed above, (b) the 2,165,724 shares issued prior to the Initial
Public Offering, (c) 5,099,687 shares issued to the stockholders of the Founding
Companies, (d) 1,700,714 of the 4,140,000 shares sold in the Initial Public
Offering to pay the cash portion of the consideration for the Founding
Companies; (e) 118,142 of the 4,140,000 shares sold in the Initial Public
Offering to pay excess S Corporation distributions, (f) the weighted average of
the remaining 2,321,144 shares issued in the Initial Public Offering, (g) the
weighted average portion of 425,039 shares issued in connection with the
conversion of indebtedness to equity at one of the Pooled Companies, (h) the
weighted average portion of the 2,084,307 shares sold in the secondary stock
offering, and (i) 227,743 shares representing the weighted average portion of
shares for the dilution attributable to outstanding options to purchase common
stock, using the treasury stock method.
In March 1996, the Company authorized 500,000 shares of $.01 par value
preferred stock, none of which has been issued.
NEW ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, "Earnings Per Share." SFAS No. 128 revises the methodology to be used in
computing earnings per share (EPS) such that the computations required for
primary and fully diluted EPS are to be replaced with "basic" and "diluted"
EPS. Basic EPS is computed by dividing net income by the weighted average number
of shares of common stock outstanding during the year. Diluted EPS is computed
in the same manner as fully diluted EPS, except that, among other changes, the
average share price for the period is used in all cases when applying the
treasury stock method to potentially dilutive outstanding options.
F-10
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The Company will adopt SFAS No. 128 effective December 15, 1997, and will
restate EPS for all periods presented. The Company anticipates that the amounts
reported for basic EPS for the years ended December 31, 1994, 1995 and 1996 will
be $0.35, $0.76 and $1.17, and that basic EPS for the unaudited pro forma twelve
months ended December 31, 1996 will be $1.20. The Company anticipates that the
amounts reported for diluted EPS for the years ended December 31, 1994, 1995 and
1996 will be $0.35, $0.76 and $1.14 and that diluted EPS for the unaudited pro
forma twelve months ended December 31, 1996 will be $1.18.
3. BUSINESS COMBINATIONS:
The Founding Companies were merged with Coach USA effective June 1, 1996,
for financial reporting purposes. The unaudited pro forma data presented below
consists of the income statement data as presented in these consolidated
financial statements combined with the Founding Companies, including certain pro
forma adjustments further discussed below, as if the Founding Companies were
combined with the Pooled Companies and Coach USA as of January 1, 1995 (in
thousands):
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1996
------------- -------------
(UNAUDITED)
Revenues............................. $ 216,892 $ 250,776
Income before extraordinary items.... 11,140 15,246
Income per share before extraordinary
items.............................. .83 1.00
POOLINGS
During 1996 and through February 28, 1997, the Company acquired all of the
outstanding stock of the Pooled Companies in exchange for 3,862,369 shares of
Common Stock. Six of these companies provide motorcoach transportation services
and one provides primarily taxicab services. These acquisitions have been
accounted for as poolings-of-interests and the results of operations of these
seven companies are included for all periods presented herein.
The consolidated financial statements for 1994 and 1995 represent the
operations of the Pooled Companies prior to their acquisition by the Company.
The combined revenues, income before extraordinary items, and net income of the
Pooled Companies for the preacquisition period in 1996 were $107.7 million, $4.9
million and $4.8 million, respectively. In addition, the Consolidated Statements
of Cash Flows reflect an acquisition by one of the Pooled Companies during the
pre acquisition period in 1996 which was accounted for as a purchase for a total
cash price of $323,000.
F-11
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The following table reconciles the consolidated revenues and net income of
the Company after giving retroactive effect to the one pooling-of-interests
transaction completed subsequent to year end with the consolidated revenues and
net income previously reported in the Company's 1996 Form 10-K filing (in
thousands, except per share data).
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31,
---------------------------------------------------------------
1994 1995 1996
------------------ ------------------ -------------------
NET NET NET
REVENUES INCOME REVENUES INCOME REVENUES INCOME
-------- ------ -------- ------ -------- -------
<S> <C> <C> <C> <C> <C> <C>
As previously reported in
10-K................... $ 68,421 $ 649 $ 83,925 $2,411 $185,728 $12,915
Subsequent Pooling....... 19,639 694 19,478 541 20,110 625
-------- ------ -------- ------ -------- -------
After Subsequent
Pooling................ $ 88,060 $1,343 $103,403 $2,952 $205,838 $13,540
======== ====== ======== ====== ======== =======
Net income per share --
After Subsequent
Pooling............. $ .35 $ .76 $ 1.14
====== ====== =======
</TABLE>
PURCHASES
On August 29, 1996, the Company acquired three businesses which were
accounted for as purchases. The aggregate consideration paid in these
transactions was $14.5 million in cash and $22.5 million in the form of
subordinated notes convertible into 750,460 shares of Common Stock. The
accompanying consolidated balance sheet as of December 31, 1996 includes
allocations of the respective purchase prices and is subject to final
adjustment. The allocations resulted in goodwill recognized of $30.3 million
representing the excess of purchase price over fair value of the net assets
acquired. In conjunction with the acquisitions, liabilities were assumed as
follows (in thousands):
YEAR ENDED
DECEMBER 31, 1996
------------
Fair value of assets acquired, net of cash acquired ......... $ 63,963
Goodwill .................................................... 30,341
Cash paid, net of cash acquired ............................. (12,343)
Issuance of convertible notes ............................... (22,500)
------------
Liabilities assumed ......................................... $ 59,461
============
The following table sets forth further adjustments to the unaudited pro
forma income statement data above to present the effect of the acquisitions of
the Purchased Companies on the Company's results of operations for the years
ended December 31, 1995 and 1996. The following unaudited pro forma income
statement data includes the Founding Companies and the Pooled Companies, plus
all Purchased Companies through December 31, 1996 as if the acquisitions were
effective on the first day of the year being reported (in thousands):
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1995 1996
------------ ------------
(UNAUDITED)
Revenues................................ $252,744 $276,796
Income before extraordinary items....... 12,531 16,153
Income per share before extraordinary
items................................. .94 1.06
Pro forma adjustments included in the preceding tables regarding the
Founding Companies and the Purchased Companies primarily relate to (a) owners'
compensation differential,
F-12
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(b) adjustments to depreciation and amortization due to the purchase price
allocations, (c) adjustments of historical interest expense related to certain
subordinated debt and cash payments related to the Purchased Companies, (d)
elimination of interest on debt converted to equity of one of the Pooled
Companies, (e) elimination of merger costs in connection with the acquisition of
the Pooled Companies, and (f) adjustments to the federal and state income tax
provisions based on the combined operations.
The pro forma combined results presented above are not necessarily
indicative of actual results which might have occurred had the operations and
management teams of the Company, the Founding Companies, the Pooled Companies
and the Purchased Companies been combined at the beginning of the periods
presented.
Through March 31, 1997, the Company acquired two additional companies
accounted for as purchases. The aggregate consideration paid in these
transactions was $34.3 million in cash and $18.3 million of subordinated notes
convertible into 484,239 shares of the Company's Common Stock.
4. PREPAID EXPENSES AND OTHER CURRENT ASSETS:
Prepaid expenses and other current assets consist of the following (in
thousands):
DECEMBER 31
---------------------
1995 1996
--------- ----------
Prepaid insurance....................... $ 1,410 $ 2,757
Deferred income tax asset, current...... 1,283 3,392
Prepaid licenses, registrations and
other taxes........................... 918 3,683
Other................................... 929 2,796
--------- ----------
$ 4,540 $ 12,628
========= ==========
5. PROPERTY AND EQUIPMENT:
Property and equipment consist of the following (in thousands):
DECEMBER 31
ESTIMATED ------------------------
USEFUL LIVES 1995 1996
------------ ----------- -----------
(YEARS)
Transportation equipment............. 3-15 $ 79,681 $ 241,371
Building and leasehold
improvements....................... 5-31.5 6,624 11,527
Computer equipment................... 5-7 7,960 9,022
Other................................ 3-10 2,519 12,496
----------- -----------
96,784 274,416
Less -- Accumulated depreciation..... (31,389) (63,662)
----------- -----------
$ 65,395 $ 210,754
=========== ===========
Included in transportation equipment at December 31, 1995 and 1996, are
approximately $10.9 million and $21.0 million, respectively, of assets held
under capital leases.
F-13
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. OTHER ASSETS:
Other assets consist of the following (in thousands):
DECEMBER 31
----------------------
1995 1996
---------- ----------
Taxicab permits, net of accumulated
amortization of $2,194 and $2,298..... $ 4,263 $ 4,159
Noncurrent deferred income tax asset.... 6,089 3,782
Other, net of accumulated amortization
of $672 and $838...................... 1,284 2,556
---------- ----------
$ 11,636 $ 10,497
========== ==========
Amortization expense related to other assets for the years ended December
31, 1995 and 1996 was $201,000 and $270,000, respectively.
7. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Accounts payable and accrued liabilities consist of the following (in
thousands):
DECEMBER 31
----------------------
1995 1996
---------- ----------
Trade accounts payable.................. $ 3,900 $ 8,721
Accrued insurance claims................ 6,608 13,847
Accrued compensation.................... 2,929 4,422
Due to affiliates....................... 642 --
Property and other taxes................ 941 1,237
Accrued interest payable................ 889 849
Deferred revenue........................ 883 1,448
Other................................... 2,517 6,424
---------- ----------
$ 19,309 $ 36,948
========== ==========
F-14
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
8. LONG-TERM OBLIGATIONS:
Long-term obligations consist of the following:
DECEMBER 31
------------------------
1995 1996
----------- -----------
(IN THOUSANDS)
Revolving credit facility with a bank
syndicate, interest at LIBOR plus
1.50% (7.03% at December 31, 1996),
secured by substantially all of the
assets of the Company................. $ -- $ 60,110
Notes payable to finance companies,
interest rates ranging from 7.70% to
15.00%, due in monthly installments of
$567,098, maturing at various dates
through 2011; secured by certain
transportation equipment and real
property.............................. 38,971 20,728
Obligations under capital leases of
certain transportation equipment,
implicit interest rates ranging from
5.00% to 11.00%, due in monthly
installments of $344,508, maturing at
various dates through 2003............ 6,643 18,037
Various notes payable to stockholders,
including $600 of accrued interest
payable in 1996....................... 18,387 259
Other................................... 8,816 9,849
----------- -----------
Total Long-term Obligations............. 72,817 108,983
Less -- Current maturities.............. (12,065) (10,877)
Less -- Accrued Interest................ (600) --
----------- -----------
$ 60,152 $ 98,106
=========== ===========
At December 31, 1996, future principal payments of long-term debt and
minimum lease payments under capital lease obligations are as follows (in
thousands):
LONG-TERM CAPITAL LEASE
DEBT OBLIGATIONS
--------- -------------
Year ending December 31 --
1997............................... $ 8,300 $ 4,201
1998............................... 4,998 3,341
1999............................... 65,189 3,221
2000............................... 4,816 3,976
2001............................... 3,247 2,858
Thereafter......................... 4,397 6,404
--------- -------------
$ 90,947 24,001
=========
Less -- Amounts representing
interest........................ (5,964)
-------------
$ 18,037
=============
REVOLVING CREDIT AGREEMENT
In May 1996, the Company entered into a $30 million revolving credit
agreement with one bank. This credit facility was primarily utilized to
refinance certain indebtedness of the Founding Companies not repaid with
proceeds of the Offering.
In August 1996 and February 1997, the Company amended and restated the
credit agreement. The credit agreement, as amended, provides for a revolving
credit facility of $181 million through a syndicate of eight banks and allows
for an additional $40 million of debt outside
F-15
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
the credit facility (in addition to the convertible subordinated notes). The
proceeds of the facility are to be used for working capital, capital
expenditures and acquisitions, including refinancing of indebtedness related to
acquisitions. The facility is secured by substantially all of the assets of the
Company and matures in August 1999, at which time all amounts then outstanding
become due. Interest on outstanding borrowings is charged, at the Company's
option, at the bank's prime rate plus up to 1.0% or the London Interbank Offered
Rate ("LIBOR") plus 1.0% to 2.25%, both as determined by the ratio of the
Company's funded debt to cash flow, as defined. A commitment fee ranging from
0.25% to 0.50% is payable on the unused portion of the facility. Under the terms
of the credit agreement, the Company must maintain certain minimum financial
ratios. The credit agreement prohibits the payment of cash dividends. As of
December 31, 1996, the Company had a total of $109.0 million outstanding under
the revolving and other outside credit facilities and had utilized $5.0 million
of the facility for letters of credit securing certain insurance obligations and
performance bonds, resulting in a borrowing availability of $16.0 million under
the revolving and other outside credit facilities.
In September 1996, the Company entered into an interest rate cap agreement
with a bank. The agreement has a term of one year and a notional principal
amount of $50 million. The agreement provides that if the 90-day LIBOR rate
exceeds 6.5% for certain measurement periods, the bank will pay to the Company
the difference between such rate and 6.5%. The cost of the agreement is being
amortized over its term.
CONVERTIBLE SUBORDINATED NOTES
In August 1996, the Company issued $22.5 million of convertible
subordinated notes to former owners of the Purchased Companies as partial
consideration of the acquisition purchase price. The convertible subordinated
notes bear interest, payable quarterly, at a weighted average interest rate of
5.0% and are convertible by the holder into shares of the Company's Common Stock
at a weighted average price of $29.98 per share. The convertible subordinated
notes are redeemable for cash at the option of the Company at any time after one
year of issuance. The terms of the convertible subordinated notes require $4.0
million of principal payments in 1997 and $18.5 million in 1999.
Management estimates that the fair value of its debt obligations is
$112,619,000, compared to the historical value of $114,659,000 at December 31,
1996. The estimated fair value was determined by applying an estimated discount
rate to the scheduled cash payments under the obligations.
F-16
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. INCOME TAXES:
The Company has implemented SFAS No. 109, "Accounting for Income Taxes,"
which provides for a liability approach to accounting for income taxes. The
provision for income taxes consists of the following (in thousands):
YEAR ENDED DECEMBER 31
-------------------------------
1994 1995 1996
--------- --------- ---------
Current --
Federal............................ $ (129) $ 335 $ 612
State.............................. 53 (28) 171
--------- --------- ---------
(76) 307 783
--------- --------- ---------
Deferred --
Federal............................ 1,115 1,464 5,663
State.............................. 91 279 1,238
--------- --------- ---------
1,206 1,743 6,901
--------- --------- ---------
Provision for income taxes before
extraordinary
items................................. 1,130 2,050 7,684
--------- --------- ---------
Extraordinary Items --
Current............................ -- -- 1,690
Deferred........................... -- -- 125
--------- --------- ---------
-- -- 1,815
--------- --------- ---------
$ 1,130 $ 2,050 $ 9,499
========= ========= =========
Deferred income taxes result from the effect of transactions which are
recognized in different periods for financial and tax reporting purposes and
relate primarily to depreciation, accrued insurance claims payable and net
operating loss carryforwards. Deferred income taxes are recognized for the tax
consequences of temporary differences by applying enacted statutory tax rates to
differences between the financial reporting and the tax bases of existing assets
and liabilities.
The components of deferred income tax liabilities and assets are as follows
(in thousands):
DECEMBER 31
------------------------
1995 1996
----------- -----------
Deferred income tax liabilities --
Property and equipment............. $ 9,529 $ 30,648
Other.............................. 558 679
----------- -----------
Total deferred income tax
liabilities................ 10,087 31,327
----------- -----------
Deferred income tax assets --
Accounts receivable/allowance for
doubtful accounts............... (148) (854)
Accrued liabilities/expenses....... (5,190) (8,574)
Net operating losses............... (3,357) (2,520)
Other assets....................... (2,074) (1,965)
Tax credits........................ (268) (2,775)
Other.............................. (227) (824)
----------- -----------
Total deferred income tax
assets..................... (11,264) (17,512)
Less -- Valuation allowance............. 5 904
----------- -----------
Net deferred income tax
(assets) liabilities....... $ (1,172) $ 14,719
=========== ===========
The differences in income taxes provided and the amounts determined by
applying the federal statutory tax rate to income before income taxes result
from the following (in thousands):
YEAR ENDED DECEMBER 31,
-------------------------------
1994 1995 1996
--------- --------- ---------
Tax at federal statutory rate........ $ 866 $ 1,751 $ 8,064
Add (deduct) --
State income taxes, net of
federal benefit........... 119 162 983
Nondeductible expenses.... 124 155 383
Tax-exempt income......... (9) (3) --
Other..................... 30 (15) 69
--------- --------- ---------
$ 1,130 $ 2,050 $ 9,499
========= ========= =========
For purposes of the consolidated federal tax return, the Company has net
operating loss carryforwards available to offset taxable income of the Company
in the future. The net operating loss carryforwards will expire at various dates
from 1997 to 2010. The Company also has tax credit carryforwards which have been
partially offset by a valuation allowance. Certain tax credit carryforwards will
expire at various periods from 1996 through 2002. In connection with the
acquisition of the Pooled Companies, ownership changes occurred resulting in
various limitations on certain tax attributes of the Pooled Companies. However,
the Company expects full utilization of these tax attributes prior to their
expiration.
F-17
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
10. COMMITMENTS AND CONTINGENCIES:
PURCHASE COMMITMENTS
As of December 31, 1996, the Company has entered into commitments to
purchase 108 motorcoaches for approximately $32,636,000. The Company intends to
sell or trade-in a number of older motorcoaches and finance the balance of the
new motorcoaches under the revolving and other outside credit facilities. In
addition, at December 31, 1996, the Company has entered into a commitment to
purchase certain property for approximately $1,050,000.
LEASES
The Company leases certain facilities and equipment under cancelable and
noncancelable operating leases. Rental expense for the years ended December 31,
1994, 1995 and 1996 was $1,808,000, $1,952,000 and $3,594,000, respectively.
Concurrent with the acquisitions of certain Founding and Purchased Companies,
the Company entered into various agreements with previous owners to lease land
and buildings used in the Company's operations. The terms of these leases range
from May 1996 through October 2030 and provide for certain escalations in the
rent expense each year. Included in the 1996 rent expenses above is
approximately $467,000 of rent paid to these related parties. The following
represents future minimum rental payments under noncancelable operating leases
(in thousands):
Year ending December 31 --
1997............................ $ 3,224
1998............................ 2,424
1999............................ 2,182
2000............................ 2,019
2001............................ 1,557
Thereafter...................... 16,260
----------
$ 27,666
==========
CLAIMS AND LAWSUITS
The Company is subject to certain claims and lawsuits arising in the normal
course of business, most of which involve claims for personal injury and
property damage incurred in connection with its operations. The Company
maintains various insurance coverages in order to minimize financial risk
associated with the claims. The Company has provided accruals for certain of
these actions in the accompanying supplemental consolidated financial
statements. In the opinion of management, uninsured losses, if any, resulting
from the ultimate resolution of these matters will not have a material effect on
the Company's financial position or results of operations.
REGULATORY MATTERS
The Surface Transportation Board ("STB") must approve or exempt any
consolidation or merger of two or more regulated interstate motorcoach operators
or the acquisition of one such operator by another. On November 7, 1996, the STB
granted the Company's petition for exemption in connection with the Pooled
Companies acquired in August 1996 and the Purchased Companies. However, future
acquisitions of other motorcoach operators must be approved or exempted from the
need for regulatory approval by the Surface Transportation Board. There can be
no assurance that the Company will be able to obtain such approval or
F-18
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
exemption with respect to future acquisitions, including the acquisitions of
businesses in December 1996 and acquisitions subsequent to year-end.
ESTIMATED INSURANCE CLAIMS PAYABLE
The primary risks in the Company's operations are bodily injury and
property damage to third parties and workers' compensation. The Company has
commercial liability insurance policies that provide coverage by the insurance
company, subject to deductibles ranging from $5,000 to $250,000. The Company is
consolidating its insurance program under a program which provides for
deductibles ranging from $100,000 to $250,000. As such, any claim within the
deductible per incident would be the financial obligation of the Company.
The accrued insurance claims payable represents management's estimate of
the Company's potential claims costs in satisfying the deductible provisions of
the insurance policies for claims occurring through December 31, 1996. The
accrual is based on known facts and historical trends. Management believes such
accrual to be adequate.
EMPLOYEE BENEFIT PLANS
The Company maintains certain 401(k) plans which allow eligible employees
to defer a portion of their income through contributions to the plans. The
Company contributed $69,000, $85,000 and $246,000 to its plans during the year
ended December 31, 1994, 1995 and 1996, respectively.
COLLECTIVE BARGAINING AGREEMENTS
The Company is a party to various collective bargaining agreements with
certain of its employees. The agreements require the Company to pay specified
wages and provide certain benefits to its union employees. These agreements will
expire at various times through 2000.
COMMITMENTS
The Company has entered into agreements with Exel Motorcoach Partnership
("Exel") whereby Exel will provide introductions to other motorcoach
businesses and provide other consulting services for a term of three years. The
consideration to be paid to Exel will be approximately $100,000 per year. In
addition, Exel will be paid a commission on any acquisition completed by the
Company with motorcoach businesses introduced to it by Exel, based on a formula
ranging from 5% of the first $1,000,000 of consideration paid for the acquired
business, and decreasing to a level of 1% of the consideration in excess of
$4,000,000 paid for such business. A director of the Company is a principal of
Exel. In connection with several acquisitions, the Company paid Exel commissions
of $503,600 in 1996, based on the formula outlined above.
RISK FACTORS
An investment in shares of Common Stock or debt obligations of the Company
involve a high degree of risk, including, among others, those risks related to
the effects of leverage of the Company, the Company's limited combined operating
history, risks related to acquisition financing and implementation of the
Company's acquisition strategy, seasonality of the motor coach business, fuel
price volatility, potential exposure to environmental liabilities, and reliance
on key personnel.
F-19
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
11. EMPLOYEE STOCK OPTION PLAN:
The Company's 1996 Long-Term Incentive Plan provides for the granting of
options to key employees to purchase an aggregate of not more than the greater
of 1,500,000 shares or 15% of the total number of shares of the Company's Common
Stock outstanding at the time of grant at fair market value on the date of
grant. One-fifth of granted options generally become exercisable after one year,
and continue to become exercisable in one-fifth increments each year thereafter.
The options expire after ten years from the date of grant if unexercised.
Outstanding options may be canceled and reissued under terms specified in the
plan.
The following table summarizes activity under the Company's stock option
plans:
1996
----------
Options outstanding, beginning of year ..................... --
Granted (exercise price per share)
1996 ($14.00 to $27.25) ............................ 1,807,017
Forfeited (exercise price per share)
1996 ($14.00 to $23.75) ............................ (15,500)
----------
Options outstanding, end of year ........................... 1,791,517
==========
The Company accounts for its stock-based compensation under Accounting
Principles Board Statement No. 25 "Accounting for Stock Issued to Employees."
Under this accounting method, no compensation expense is recognized in the
supplemental consolidated statements of income if no intrinsic value of the
option exists at the date of grant. In October 1995, the Financial Accounting
Standards Board issued SFAS No. 123, "Accounting for Stock Based
Compensation." SFAS No. 123 encourages companies to account for stock based
compensation awards based on the fair value of the awards at the date they are
granted. The resulting compensation cost would be shown as an expense in the
statement of income. Adoption of the standard is required for fiscal years
beginning after December 15, 1995. Companies can choose not to apply the new
accounting method and continue to apply current accounting requirements;
however, disclosure is required as to what net income and earnings per share
would have been had the new accounting method been followed. While the Company
did not adopt SFAS No. 123 for accounting purposes, it has implemented the
disclosure requirements below which include annual pro forma disclosures of its
effects on options granted since the initial grant in May 1996. Had compensation
cost for these plans been determined consistent with SFAS No. 123, the Company's
net income and earnings per share would have been reduced to the following pro
forma amounts (in thousands except per share data):
1996
----------
Net Earnings As reported............................. $ 13,540
Pro forma............................... $ 12,023
Earnings Per Share As reported............................. $ 1.14
Pro forma............................... $ 1.01
F-20
<PAGE>
COACH USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
The effects of applying SFAS No. 123 in the pro forma disclosure may not be
indicative of future amounts as additional awards in future years are
anticipated. The fair value of each option grant is estimated on the date of
grant using the Black-Scholes option-pricing model with the following
assumptions:
Expected dividend yield................. 0.00%
Expected stock price volatility......... 34.59% - 34.78%
Risk free interest rate................. 6.43% - 6.96%
Expected life of options................ 10 years
Options outstanding at December 31, 1996, had exercise prices ranging from
$14.00 to $27.25, a weighted average remaining contractual life of 9.5 years, a
weighted average fair value of $14.29 per option and a weighted average exercise
price of $17.71 per option.
12. EXTRAORDINARY ITEMS:
In connection with the merger of a Pooled Company with Coach USA in August
1996, obligations due to stockholders of $17.2 million were retired in exchange
for shares of Coach USA Common Stock. The transactions resulted in an
extraordinary gain on early extinguishment of debt of approximately $4.2
million, net of taxes, representing the excess of the recorded value of the
obligations exchanged over the market value of the Coach USA Common Stock. This
gain was partially offset by extraordinary losses of approximately $1.5 million,
net of taxes, resulting from early extinguishment of debt at certain other
companies.
13. EVENTS SUBSEQUENT TO DATE OF AUDITORS' REPORT (UNAUDITED):
Subsequent to March 31, 1997, the Company acquired eight additional
companies. The aggregate consideration for these transactions was $8.5 million
in cash, 1,380,247 shares of the Company's Common Stock, and $3.8 million of
subordinated notes convertible into 102,128 shares of the Company's Common
Stock. The Company has entered into an agreement to acquire an additional
business, which is subject to regulatory approval, for consideration amounting
to 300,000 shares of the Company's common stock.
The Company completed the sale of $150 million 9 3/8% Senior Subordinated
Notes due 2007 during the second quarter of 1997.
The Company has recently announced that it anticipates the $181 million
Credit Facility will be amended to provide for borrowings of up to $300 million
and additional borrowings outside such facility to $80 million.
The Company and Exel have subsequently agreed to the termination of the
agreement discussed in Note 10 whereby Exel shall receive, upon completion of
the next acquisition of a motorcoach business identified by Exel with aggregate
consideration paid in excess of $5.0 million, $275,000 in cash and the grant of
a warrant to purchase 100,000 shares of Company Common Stock at an exercise
price of $26 per share. The warrant will be exercisable beginning six months
from the date of the agreement to terminate and expire two years from the date
of the agreement to terminate.
F-21
<PAGE>
================================================================================
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS AND,
IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED
HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO
MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information ............................................. 2
Incorporation of Certain Documents by Reference ................... 2
The Company ....................................................... 3
Risk Factors ...................................................... 6
Price Range of Common Stock and Dividend Policy.................... 11
Principal and Selling Stockholders ................................ 12
Plan of Distribution .............................................. 14
Legal Matters ..................................................... 14
Index to Financial Statements ..................................... F-1
================================================================================
================================================================================
779,086 SHARES
COACH USA, INC.
COMMON STOCK
-----------------
PROSPECTUS
-----------------
, 1997
================================================================================
<PAGE>
PART II
All capitalized terms used and not defined in Part II of this Registration
Statement shall have the meanings assigned to them in the Prospectus which forms
a part of this Registration Statement.
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses in connection with the offering
described in this Registration Statement. All of such amounts (except the SEC
Registration Fee) are estimated.
SEC Registration Fee ........................................ $ 6,766
Blue Sky Fees and Expenses .................................. 5,000
Printing and Engraving Costs ................................ 2,000
Legal Fees and Expenses ..................................... 20,000
Accounting Fees and Expenses ................................ 20,000
Transfer Agent and Registrar Fees and Expenses .............. 4,000
Miscellaneous ............................................... 2,234
------------
Total ............................................ $ 60,000
============
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws provide that the Company shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article Seven of the Company's Certificate of Incorporation provides that
the Company's directors will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except (a) for any breach of the duty of loyalty to the
Company 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 General Corporation Law of the State of Delaware, which makes
directors liable for unlawful dividends or unlawful stock repurchases or
redemptions, or (d) for transactions from which directors derive improper
personal benefit.
II-1
<PAGE>
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------
4.1 -- Form of certificate evidencing ownership of Common
Stock of Coach USA (Incorporated by reference to
Exhibit 4.1 to the Registration Statement on Form S-1
(File No. 333-2704) of the Company)
5.1 -- Opinion of Douglas M. Cerny
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Burnside &. Rishebarger PLLC
23.3 -- Consent of Douglas M. Cerny (contained in Exhibit 5.1)
27 -- Financial Data Schedule
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement to include
any material information with respect to the plan of distribution not
previously disclosed in the Registration Statement or any material change
to such information in the Registration Statement.
(2) That for the purpose of determining any liability under the
Securities Act of 1933, each post-effective amendment that contains a form
of prospectus shall be deemed to be a new registration statement relating
to the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment of the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
II-2
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF HOUSTON, STATE OF TEXAS, ON THE 8TH DAY OF AUGUST,
1997.
COACH USA, INC.
By: /s/ RICHARD H. KRISTINIK
RICHARD H. KRISTINIK
CHAIRMAN OF THE BOARD AND CHIEF
EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Richard H. Kristinik, Lawrence K. King and
Douglas M. Cerny and each of them, his true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for him and in his
name, place and stead, in any and all capacities, to sign, execute and file this
registration statement under the Securities Act and any and all amendments
(including, without limitation, post-effective amendments and any amendment or
amendments or additional registration statements filed pursuant to Rule 462
under the Securities Act increasing the amount of securities for which
registration is being sought) to this registration statement, and to file the
same, with all exhibits thereto, and all other documents in connection
therewith, with the Securities and Exchange Commission, to sign any and all
applications, registration statements, notices or other documents necessary or
advisable to comply with the applicable state security laws, and to file the
same, together with other documents in connection therewith, with the
appropriate state securities authorities, granting unto said attorney-in-fact
and agents full power and authority to do and perform each and every act and
thing requisite and necessary to be done, as fully to all intents and purposes
as he might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- --------------------------------------------------------------------------------
/s/ RICHARD H. KRISTINIK Chairman of the Board and Chief August 8, 1997
RICHARD H. KRISTINIK Executive Officer (Principal
Executive Officer)
/s/ LAWRENCE K. KING Senior Vice President, Chief August 8, 1997
LAWRENCE K. KING Financial Officer and Director
(Principal Financial and Accounting
Officer)
/s/ STEVEN S. HARTER Director August 8, 1997
STEVEN S. HARTER
II-3
<PAGE>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- --------------------------------------------------------------------------------
/s/ JOHN MERCADANTE, JR. President, Chief Operating Officer August 8, 1997
JOHN MERCADANTE, JR. and Director
/s/ FRANK P. GALLAGHER Senior Vice President -- Corporate August 8, 1997
FRANK P. GALLAGHER Development and Director
/s/ GERALD MERCADANTE Senior Vice President -- Northeast August 8, 1997
GERALD MERCADANTE Region Operations and Director
/s/ CHARLES D. BUSSKOHL Director August 8, 1997
CHARLES D. BUSSKOHL
/s/ WILLIAM J. LYNCH Director August 8, 1997
WILLIAM J. LYNCH
/s/ PAUL M. VERROCHI Director August 8, 1997
PAUL M. VERROCHI
Director
THOMAS A. WERBE
II-4
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------------------------ ------------------------------------------------------
4.1 -- Form of certificate evidencing ownership of Common
Stock of Coach USA (Incorporated by reference to
Exhibit 4.1 to the Registration Statement on Form S-1
(File No. 333-2704) of the Company)
5.1 -- Opinion of Douglas M. Cerny
23.1 -- Consent of Arthur Andersen LLP
23.2 -- Consent of Burnside &. Rishebarger PLLC
23.3 -- Consent of Douglas M. Cerny (contained in Exhibit 5.1)
27 -- Financial Data Schedule
EXHIBIT 5.1
August 6, 1997
Coach USA, Inc.
One Riverway, Suite 600
Houston, Texas 77056-1903
Re: Registration of Shares Pursuant to Registration Statement on Form S-3
Ladies and Gentlemen:
I am the Senior Vice President and General Counsel of Coach USA, Inc., a
Delaware corporation (the "Company"), and have acted as counsel to the Company
in connection with the preparation and filing with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "Act"), of a
Registration Statement on Form S-3 (the "Registration Statement") relating to
an aggregate of 779,086 shares of the Company's Common Stock, par value $.01 per
share, to be sold by certain selling shareholders.
In so acting, I have examined originals, or copies certified or otherwise
identified to my satisfaction, of the Amended and Restated Certificate of
Incorporation of the company, the By-laws of the Company and such other
documents, records, certificates and other instruments as in my judgment are
necessary or appropriate for purposes of this opinion.
Based on the foregoing, I am of the opinion that the Shares have been duly
authorized and validly issued by the Company and are fully paid for an
non-assessable.
I render this opinion as a member of the Bar of the State of Texas and
express no opinion as to any law other than the General Corporation Law of the
State of Delaware.
I consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of my name under the caption "Legal Matters" in the
Registration Statement. In giving this consent, I do not admit that I am acting
within the category of persons whose consent is required under Section 7 of the
Act.
Very truly yours,
Douglas M. Cerny
General Counsel
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
by reference in this registration statement of our report included in Coach
USA, Inc.'s Form 8-K dated August 8, 1997 and to the use of our reports (and to
all references to our Firm) included in or made a part of this registration
statement.
ARTHUR ANDERSEN LLP
Houston, Texas
August 8, 1997
EXHIBIT 23.2
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made a part of this
registration statement.
BURNSIDE & RISHEBARGER PLLC
August 6, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 6,836,000
<SECURITIES> 0
<RECEIVABLES> 28,697,000
<ALLOWANCES> (2,694,000)
<INVENTORY> 10,650,000
<CURRENT-ASSETS> 63,683,000
<PP&E> 363,693,000
<DEPRECIATION> (78,355,000)
<TOTAL-ASSETS> 445,129,000
<CURRENT-LIABILITIES> 89,364,000
<BONDS> 36,830,000
0
0
<COMMON> 189,000
<OTHER-SE> 113,577,000
<TOTAL-LIABILITY-AND-EQUITY> 445,129,000
<SALES> 79,868,000
<TOTAL-REVENUES> 79,868,000
<CGS> 64,237,000
<TOTAL-COSTS> 74,019,000
<OTHER-EXPENSES> 117,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,508,000
<INCOME-PRETAX> 2,224,000
<INCOME-TAX> 944,000
<INCOME-CONTINUING> 1,280,000
<DISCONTINUED> 0
<EXTRAORDINARY> 89,000
<CHANGES> 0
<NET-INCOME> 1,191,000
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
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