COACH USA INC, 424B3, 1998-05-07

COACH USA INC
424B3, 1998-05-07
LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRANS

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4,000,000 SHARES
[LOGO]

COMMON STOCK

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Of the 4,000,000 shares of Common Stock ("Common Stock") offered hereby,
2,000,000 are being sold by Coach USA, Inc. ("Coach" or the "Company") and
2,000,000 are being sold by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Company will
not receive any of the proceeds from the sale of shares by the Selling
Stockholders. The Common Stock is traded on the New York Stock Exchange
("NYSE") under the symbol "CUI." On May 6, 1998, the last reported sale
price of the Common Stock was $45.18 per share. See "Price Range of Common
Stock."

------------------

THE COMMON STOCK OFFERED HEREBY INVOLVES A SIGNIFICANT DEGREE OF RISK.
SEE "RISK FACTORS" COMMENCING ON PAGE 7.

------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
==============================================================================================================
PRICE UNDERWRITING PROCEEDS PROCEEDS TO
TO DISCOUNTS AND TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(1) STOCKHOLDERS
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share........ $45.00 $1.98 $43.02 $43.02
Total(2)......... $180,000,000 $7,920,000 $86,040,000 $86,040,000
==============================================================================================================
</TABLE>
(1) Before deducting estimated expenses of $500,000, all of which will be paid
by the Company.

(2) The Company has granted the Underwriters a 30-day option to purchase up to
600,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares at the Price to Public shown above. If the
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $207,000,000,
$9,108,000 and $111,852,000, respectively. See "Underwriting."

------------------

The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, subject to the
right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of BT Alex. Brown, Baltimore, Maryland, on or about May 12, 1998.

BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC MONTGOMERY SECURITIES LLC

THE DATE OF THIS PROSPECTUS IS MAY 7, 1998.
<PAGE>
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents, which have been filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the
Securities Exchange Act of 1934, as amended ("Exchange Act"), are incorporated
herein by reference:

(i) the financial statements of Kerrville Bus Company, Inc. contained
in the Company's Current Report on Form 8-K, dated August 8, 1997;

(ii) the Company's Current Report on Form 8-K, dated May 7, 1998;

(iii) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997; and

(iv) 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.

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 this offering 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 incorporated herein by
reference. Requests should be made to: Coach USA, Inc., One Riverway, Suite 500,
Houston, Texas 77056, Attention: Corporate Secretary; telephone 1-888-COACH-US.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Prospectus, including documents incorporated herein by reference,
contains "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended ("Securities Act") and Section 21E of the
Exchange Act. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company, or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements. Such risks, uncertainties and other
important factors include, among others: the Company's limited combined
operating history; risks related to the Company's acquisition strategy; capital
availability and risks related to acquisition financing; effects of leverage;
substantial seasonality of the motorcoach business; fuel prices and taxes;
insurance costs and claims; capital requirements; substantial competition; labor
relations; government funded contracts; significant regulation; potential
exposure to environmental liabilities; reliance on key personnel; potential
effect of shares eligible for future sale on the price of Common Stock; and the
anti-takeover effect of certain charter provisions. These forward-looking
statements speak only as of the date of this Prospectus. The Company expressly
disclaims any obligation or undertaking to disseminate any updates or revisions
to any forward-looking statement contained herein to reflect any change in the
Company's expectations with regard thereto or any change in events, conditions
or circumstances on which any such statement is based.
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CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE COMMON
STOCK OFFERING AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE
OPEN MARKET. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ
IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND THE PRO FORMA FINANCIAL
DATA AND HISTORICAL FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING
ELSEWHERE OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS.

THE COMPANY

The Company is the largest provider of motorcoach charter, tour and
sightseeing services and one of the largest non-municipal providers of commuter
and transit motorcoach services in the United States. The Company also provides
airport ground transportation, paratransit and other related passenger ground
transportation services. The Company operates in 24 states and Canada and owns
approximately 7,000 motorcoaches, taxicabs, executive sedans and other vehicles
which transported passengers across more than 220 million miles in 1997. The
Company believes that it has one of the most modern fleets in the industry,
having purchased more than half of its vehicles within the last three years. The
charter and tour fleet features luxury, European style motorcoaches with plush
seats, televisions, VCRs and other amenities. The Company's taxicab and
executive sedan services include dispatching and vehicle sales, leasing and
financing for more than 2,500 vehicles owned primarily by independent contractor
drivers.

Coach was founded in September 1995 to create a nationwide provider of
motorcoach and other ground transportation services. Through the end of 1997,
the Company has acquired 48 motorcoach businesses and three taxicab and
executive sedan businesses. Subsequent to year-end and through March 31, 1998,
the Company completed the acquisition of 10 additional motorcoach businesses and
one additional taxicab service business.

The motorcoach industry is highly fragmented, with approximately 5,000
motorcoach operators that collectively generated more than $20 billion in
revenues in 1997. In the United States, the motorcoach industry 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 more than $19 billion in revenues in 1997. The
Company believes the taxicab services industry is similarly fragmented and
generated more than $5 billion in revenues in 1997. Coach 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 the growing travel and tourism industry,
privatization and outsourcing by governmental and corporate entities, expanding
metropolitan areas and continued airport congestion.

BUSINESS STRATEGY

The Company's objective is to be the largest provider of regional and local
motorcoach and passenger ground transportation services in the United States.
Management plans to achieve this goal by:

o EXPANDING THROUGH ACQUISITIONS. The Company intends to continue to
pursue an aggressive acquisition strategy to enhance its position
in its current markets and to acquire operations in new markets.

o ACCELERATING INTERNAL GROWTH. The Company believes internal growth
can be accelerated by coordinating its sales and marketing programs
among its operating subsidiaries, pursuing advertising
opportunities, capitalizing on privatization and outsourcing
arrangements and offering a full range of services in each region.
See " -- Recent Developments."

3
<PAGE>
o CAPITALIZING ON ECONOMIES OF SCALE. Since the Company's initial
public offering, its operating costs as a percentage of revenues
have declined by approximately seven percent through cost savings
in such areas as equipment and parts, tires, insurance and
financing. The Company intends to continue to further centralize
administrative functions in order to increase operating
efficiencies. For example, the Company has reduced costs associated
with redundant facilities through the consolidation of operations
in a number of its markets, including Houston, Philadelphia,
Atlantic City and Las Vegas.

RECENT DEVELOPMENTS

ADVERTISING AGREEMENT. In April 1998, the Company entered into an
advertising concession agreement with Transportation Displays Incorporated
("TDI"), an affiliate of Columbia Broadcasting System. Under the agreement,
TDI is responsible for obtaining advertising clients, creating advertising
materials and installing advertisements on vehicles, with the Company receiving
a percentage of the net advertising revenues. The agreement's initial five year
term gives TDI the right to sell, lease and service all advertising space,
displays, signs and other advertising media on the Company's entire fleet. The
Company believes that full and partial "wrapping" of vehicles represents the
greatest advertising opportunity. Vehicle "wrapping" refers to covering a
substantial portion of motorcoaches or vans with advertising.

ACQUISITIONS. In the first quarter of 1998, the Company acquired ten
additional motorcoach businesses and one additional taxicab service business.
Since its initial public offering in May 1996 (the "Initial Public Offering")
and through March 31, 1998, the Company has acquired 58 motorcoach businesses
and four taxicab and executive sedan businesses.

RESULTS OF OPERATIONS. On May 4, 1998, the Company announced results of
operations for the three months ended March 31, 1998. Revenues increased 55% to
$150.0 million for the first quarter of 1998 from $96.5 million for the first
quarter of 1997. Income before extraordinary items increased 21% to $2.4 million
for the first quarter of 1998 compared to pro forma income before extraordinary
items of $2.0 million for the first quarter of 1997; diluted earnings per share
rose to $0.11 for the first quarter of 1998 as compared to $0.09 for the first
quarter of 1997. Basic earnings per share for the first quarter were $0.11
versus $0.08 for the first quarter of 1997. The pro forma income before
extraordinary items for the first quarter of 1997 includes an adjustment to
present reduced compensation levels stipulated in certain of the acquisitions.
In addition, the pro forma income for the first quarter of 1997 includes an
incremental provision for income taxes as if all entities had been subject to
federal and state income taxes throughout the periods presented.

THE OFFERING
<TABLE>
<CAPTION>
<S> <C>
Common Stock offered by the Company............................... 2,000,000 shares

Common Stock offered by the Selling Stockholders.................. 2,000,000 shares

Common Stock to be outstanding after this offering................ 24,777,508 shares(1)

Use of proceeds................................................... Reduction of indebtedness under the
Company's revolving credit facility.

NYSE Symbol....................................................... CUI
</TABLE>
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(1) Includes (i) 60,000 shares of Common Stock underlying outstanding options,
which will be exercised and sold in this offering and (ii) 612,341 shares of
Common Stock to be issued upon conversion of approximately $21.2 million of
convertible subordinated notes issued in connection with certain
acquisitions (the "Convertible Subordinated Notes"), which shares will
also be sold in this offering. Excludes (i) 3,024,158 shares of Common Stock
issuable upon the exercise of stock options outstanding as of March 31,
1998, of which options to purchase 348,594 shares of Common Stock are
currently exercisable, (ii) 100,000 shares of Common Stock issuable upon the
exercise of warrants outstanding and exercisable as of March 31, 1998 and
(iii) 1,045,835 shares of Common Stock issuable upon the conversion of
approximately $39.4 million of Convertible Subordinated Notes. See "Risk
Factors -- Potential Effect of Shares Eligible for Future Sale."

4
<PAGE>
SUMMARY PRO FORMA FINANCIAL DATA

Coach acquired, simultaneously with the closing of the Initial Public
Offering, the six founding companies (the "Founding Companies"). During the
remainder of 1996 and through 1997, the Company completed 45 acquisitions, 19 of
which were accounted for as poolings-of-interests (the "Pooled Companies"),
three of which were accounted for as immaterial poolings-of-interests (the
"Immaterial Pooled Companies") and 23 of which were accounted for as purchases
(the "Purchased Companies"). The Pro Forma Statement of Income Data Including
Compensation Differential and Other Adjustments below include historical
financial statement data of the Founding Companies at historical cost, the
Company (including the Pooled Companies) for all periods presented, the
Immaterial Pooled Companies from the beginning of the quarter in which they were
acquired, and the Purchased Companies since the date of their respective
acquisitions. In addition, the data below give effect to (i) certain reductions
in salaries and benefits to the former owners of the Founding Companies and the
Pooled Companies, which were agreed to in connection with the mergers of the
Founding Companies and the acquisition of the Pooled Companies, as well as a
non-recurring, non-cash charge recorded by the Company (collectively, the
"Compensation Differential"); (ii) certain tax adjustments related to the
taxation of certain Founding Companies and Pooled Companies as S Corporations
prior to their acquisition; (iii) the tax impact of the Compensation
Differential in each period; (iv) for 1995 and 1996, the conversion of debt to
equity at one of the Pooled Companies; and (v) the elimination of non-recurring
pooling costs associated with the 1996 and 1997 Pooled Companies. The Pro Forma
for Purchased Companies data below give effect to all items above and to the
acquisitions of the Purchased Companies as if those acquisitions occurred on
January 1, 1996, including the pro forma effect of (i) the Compensation
Differential of the Purchased Companies; (ii) the amortization of goodwill;
(iii) interest expense attributable to Convertible Subordinated Notes issued in
connection with the purchases; (iv) interest expense on the 9 3/8% Senior
Subordinated Notes, due 2007 and related amortization of deferred financing
costs; and (v) income tax adjustments attributable to the above adjustments and
certain preacquisition earnings of the Purchased Companies previously taxed at
rates other than statutory rates.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PRO FORMA STATEMENT OF INCOME DATA
INCLUDING COMPENSATION DIFFERENTIAL
AND OTHER ADJUSTMENTS:
Total revenues................... $ 281,872 $ 282,397 $ 316,275 $ 370,781 $ 542,790
Operating expenses............... 226,471 221,839 241,103 281,924 398,945
Gross profit..................... 55,401 60,558 75,172 88,857 143,845
General and administrative
expenses....................... 33,193 37,253 40,527 41,365 62,029
Operating income................. 22,208 23,305 34,645 47,492 81,816
Income before extraordinary
items.......................... 7,108 7,961 13,494 20,461 35,682
Extraordinary items.............. 1,191 -- -- 2,648 (929)
Net income....................... 8,299 7,961 13,494 23,109 34,753
Basic earnings per share:
Income before extraordinary
items..................... 1.13 1.67
Net income.................. 1.27 1.62
Weighted average shares..... 18,152 21,412
Diluted earnings per share:
Income before extraordinary
items..................... 1.12 1.61
Net income.................. 1.26 1.57
Weighted average shares..... 18,543 22,954
PRO FORMA FOR PURCHASED COMPANIES:
Total revenues................... 571,060 615,770
Operating expenses............... 430,978 452,918
Gross profit..................... 140,082 162,852
General and administrative
expenses....................... 71,140 75,641
Operating income................. 68,942 87,211
Income before extraordinary items
(1)............................ 22,679 35,633
</TABLE>
5
<PAGE>
DECEMBER 31, 1997
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ACTUAL AS ADJUSTED(2)
--------- --------------
BALANCE SHEET DATA (AT END OF
PERIOD):
Working capital (deficit)........ $ (5,311) $ (5,311)
Total assets..................... 665,870 665,870
Total debt, including current
portion(3)...................... 320,764 234,189
Stockholders' equity............. 160,555 268,295
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(1) Excludes the effect of this offering, which includes an increase in income
before extraordinary items of approximately $4,169,000, representing the
reduction in interest expense, net of income taxes, incurred on (i) the
portion of the Company's $380 million revolving credit facility (the
"Credit Facility") to be repaid with the net proceeds of this offering and
(ii) $21.2 million of the Convertible Subordinated Notes to be converted
into 612,341 shares of Common Stock and sold in this offering. Weighted
average shares outstanding will be increased by 2,672,341, representing the
2,000,000 shares to be sold by the Company in this offering, the 612,341
shares issued as a result of the conversion of a portion of the Convertible
Subordinated Notes and 60,000 shares attributed to the exercise of options
in connection with this offering. Accordingly, pro forma income per share
before extraordinary items after giving effect to this offering would be
$1.63 per share-basic, and $1.59 per share-diluted, compared to Pro Forma
for Purchased Companies income per share before extraordinary items of $1.64
per share-basic, and $1.57 per share-diluted.

(2) Adjusted to reflect the conversion of $21.2 million of Convertible
Subordinated Notes into 612,341 shares of Common Stock, the issuance of
60,000 shares of Common Stock for $1,035,000 attributed to the exercise of
options in connection with this offering, the issuance and sale of 2,000,000
shares of Common Stock offered hereby by the Company and application of the
estimated net proceeds therefrom as described in "Use of Proceeds."

(3) Does not include $52.3 million of outstanding Convertible Subordinated Notes
outstanding as of December 31, 1997 and $31.1 million outstanding as
adjusted.

6
<PAGE>
RISK FACTORS

AN INVESTMENT IN THE COMPANY'S COMMON STOCK 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.

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. 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 continue to successfully integrate
the operations of the acquired businesses or institute the necessary
Company-wide systems and procedures to successfully manage the combined
enterprise on a profitable basis. The Company's management team has only worked
together for approximately two years, and there can be no assurance that the
management group will be able to effectively manage acquired operations or
effectively implement the Company's internal growth strategy and acquisition
program over a longer period of time. The historical financial results of the
Company, the Founding 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 continue to successfully integrate acquired operations would 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 would continue to be successful.

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 has begun to develop, which may
result in 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 operations. In addition, there can be no
assurance that businesses acquired in the future will achieve anticipated
revenues and earnings.

CAPITAL AVAILABILITY; RISKS RELATED TO ACQUISITION FINANCING

The Company expects to finance future acquisitions primarily through
borrowings under its Credit Facility or other debt instruments and, to a lesser
extent, by issuing shares of its Common Stock for all or a portion of the
consideration to be paid. The Company's Credit Facility provides for aggregate
credit capacity of $380 million and contains various restrictive covenants which
could limit the Company's ability to borrow. There can be no assurance that the
Company will be able to obtain all of the financing it will need in the future
on terms the Company deems acceptable. In addition, 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's ability to issue
Common Stock as acquisition consideration may be limited.

7
<PAGE>
EFFECTS OF LEVERAGE

The Company is highly leveraged. See "Capitalization." The Company's
ability to make scheduled payments of principal of, or to pay the interest 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. 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 amounts 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 refinancing on
commercially reasonable terms or at all.

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's revenues and results of operations are
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 operating expense of the Company. Fuel prices are
subject to sudden increases as a result of variations in supply levels demand.
While the Company attempts to hedge against such fluctuations, 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.

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 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.

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 more than $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 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.

8
<PAGE>
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 other
companies that provide these services, a number of which are as large or larger
than the Company on a regional basis, and many other smaller companies which
focus on local or regional markets. Many of the larger competitors operate in
several of the Company's existing or target markets, and others may choose to
enter those markets in the future. As a result of these factors, the Company may
lose customers or have difficulty in acquiring new customers. In addition, most
commuter and transit contracts are awarded in a competitive bid process, and
there can be no assurance that the Company will be awarded any additional
contracts or that any existing contracts will be renewed.

LABOR RELATIONS

As of December 31, 1997, the Company had approximately 10,600 employees, of
whom approximately 6,700 were motorcoach drivers and approximately 1,500 were
maintenance personnel. Approximately 3,300 of the Company's motorcoach drivers
and maintenance personnel are members of various labor unions. The Company's
inability to negotiate acceptable contracts with its existing union employees 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 a significant number of non-unionized employees were to seek 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.

GOVERNMENT FUNDED CONTRACTS

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 these contracts, which would result in lost revenues to the Company. 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 curtailed, the Company would be required
to operate existing motorcoaches longer than economically practicable or be
forced to acquire replacement equipment.

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 Surface
Transportation Board (the "STB"), both units of the United States Department
of Transportation. Motorcoach operators subject to FHWA are required to be
registered with the FHWA and to maintain minimum amounts of insurance. The STB
must exempt or approve any consolidation or merger of two or more regulated
interstate motorcoach operators or the acquisition of one such operator by
another and has the authority to consider the antitrust implications of any
proposed acquisition. The STB exempted from regulatory approval requirements
each of the acquisition transactions involving federally-regulated interstate
motorcoach operators entered into by the Company through September 1997 under
the previously used exemption process. In November 1997, at the suggestion of
the STB, the Company shifted from the exemption process to an approval process.
The Company has received approval for acquisition transactions through November
1997. The Company currently has nine acquisitions awaiting approval by the STB,
and all future acquisitions of other regulated interstate motorcoach operators
must be individually approved by the STB. There can be no assurance that

9
<PAGE>
the Company will be able to obtain any such approvals or that the STB will not
materially delay any proposed acquisition. 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 ("ADA"). Safety, environmental and vehicle accessibility
requirements for motorcoach operators have increased in recent years, and this
trend could continue. In March 1998, the U.S. Department of Transportation
proposed additional rules governing compliance by motorcoach operators with the
ADA, which, if adopted, may result in additional costs to the Company. 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. Many states 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 taxicab service regulations
focus on the entry of new operators into the marketplace and the aggregate
number of vehicles granted 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 or
prevent fares from increasing in response to rising operating costs.

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 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 environmental due diligence 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.

RELIANCE ON KEY PERSONNEL

The Company's continued success depends on the 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 or
her present capacity with the Company or operating subsidiary for any particular
period of time.

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE

The market price of the Common Stock may be adversely affected by the sale,
or availability for sale, of substantial amounts of the Common Stock in the
public market. After giving effect to this offering, the Company expects to have
approximately 24.8 million shares of Common Stock

10
<PAGE>
outstanding. Of these shares, approximately 17.8 million are freely tradeable.
The majority of the remaining 6.9 million shares are eligible for resale
pursuant to Rule 144 and Rule 145 of the Securities Act and are owned by the
Company's officers, directors and former owners of acquired businesses. The
Company, its executive officers, its directors, and the Selling Stockholders,
holding in the aggregate approximately 2.4 million shares of Common Stock
following completion of this offering, have agreed that until 180 days after the
date of this Prospectus, they will not, without the prior written consent of BT
Alex. Brown Incorporated, directly or indirectly offer, sell or otherwise
dispose of any shares of Common Stock, any shares of Common Stock issuable upon
exercise of options, rights or warrants or any securities convertible into
Common Stock. See "Underwriting."

ANTI-TAKEOVER EFFECT OF CERTAIN CHARTER PROVISIONS

The Board of Directors of the Company is empowered to issue preferred stock
in one or more series without stockholder action. The existence of this
"blank-check" preferred stock could render more difficult or discourage an
attempt to obtain control of the Company by means of a tender offer, merger,
proxy contest or otherwise. In addition, the Company's Amended and Restated
Certificate of Incorporation (the "Certificate of Incorporation") provides for
a classified Board of Directors, which may also have the effect of inhibiting or
delaying a change in control of the Company. Certain provisions of the Delaware
General Corporation Law may also discourage takeover attempts that have not been
approved by the Board of Directors.

11
<PAGE>
BUSINESS

INTRODUCTION

The motorcoach industry is highly fragmented, with approximately 5,000
motorcoach operators that collectively generated more than $20 billion in
revenues in 1997. In the United States the motorcoach industry 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 more than $19 billion in revenues in 1997. The
Company believes the taxicab services industry is similarly fragmented and
generated more than $5 billion in revenues in 1997. Coach 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 the growing travel and tourism industry,
privatization and outsourcing by governmental and corporate entities, expanding
metropolitan areas and continued airport congestion.

BUSINESS STRATEGY

The Company's objective is to be the largest provider of regional and local
motorcoach and passenger ground transportation services in the United States.
Management plans to achieve this goal by:

EXPANDING THROUGH ACQUISITIONS. The Company intends to continue to pursue
an aggressive acquisition strategy by:

ENTERING 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 are leaders in their regional markets.

EXPANDING 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 increase
operating efficiencies without a proportionate increase in administrative
costs and, in some instances, broaden the Company's range of services.

12
<PAGE>
ACCELERATING INTERNAL GROWTH. The Company believes internal growth can be
accelerated by:

COORDINATING SALES AND MARKETING PROGRAMS. The Company has begun to
establish a focused effort to coordinate, when appropriate, sales and
marketing programs among its operating subsidiaries as a means to expand
their recreational and excursion business. The operating subsidiaries will
continue to 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, in order to expand
services to larger users of their services. Over the past two years, the
Company has devoted significant time and effort to develop recognition of
the COACH USA name nationally by uniformly presenting the Company's name
and logo on all newly acquired vehicles. In addition, the Company has
provided transportation services to a number of major sporting events,
including the Super Bowl and Rose Bowl, providing significant national
exposure to the COACH USA name.

PURSUING ADVERTISING OPPORTUNITIES. The Company has recently entered
into an agreement with TDI, under which TDI is responsible for obtaining
advertising clients, creating advertising materials and installing
advertisements on vehicles, with the Company receiving a percentage of net
advertising revenues. The Company intends to pursue this and other
advertising opportunities in the future.

CAPITALIZING ON PRIVATIZATION AND OUTSOURCING. The Company believes
that the trend toward privatization and outsourcing will accelerate, as
more transit authorities, colleges and other institutions, and businesses
such as hotels, casinos, and rental car agencies that operate their own
fleets decide to privatize or outsource non-core operations. In 1997, the
Company entered into a multi-year privatization contract for transit
services with the City of Seattle which is expected to generate up to $32
million in revenues over the five-year life of the contract (assuming the
City exercises both of its one year renewal options), and a multi-year
privatization contract for transit services with the City of Los Angeles
which is expected to generate up to $44 million in revenues over the
five-year life of the contract (assuming the City exercises both of its one
year renewal options). Also in 1997, the Company entered into agreements to
provide shuttle services to employees of Continental Airlines at its Newark
airport hub and to passengers of Norwegian Cruise Lines in Miami.

OFFERING A FULL RANGE OF SERVICES IN EACH REGION. The Company intends
to accelerate 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.

CAPITALIZING ON ECONOMIES OF SCALE. The Company intends to continue to
capitalize on economies of scale by:

CENTRALIZING ADMINISTRATIVE FUNCTIONS. The Company believes that it
will continue to have greater purchasing power, resulting in further cost
savings in such areas as equipment and parts, tires, insurance and
financing. 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.

INCREASING OPERATING EFFICIENCIES. The Company has begun to
consolidate certain operations and eliminate redundant facilities and
redeploy equipment through coordination among the various operating
subsidiaries. For example, the Company has consolidated operations in a
number of its markets, including Houston, Philadelphia, Atlantic City and
Las

13
<PAGE>
Vegas. The Company believes that there will continue to be opportunities to
eliminate redundant facilities as well as to redeploy equipment.
Additionally, the Company expects to continue to benefit from
cross-marketing and increased equipment utilization that has occurred among
the various operating locations of the Company.

INDUSTRY OVERVIEW

The motorcoach industry is highly fragmented with approximately 5,000
motorcoach operators which collectively generated more than $20 billion in
revenues in 1997. 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 more than $19 billion in revenues in 1997. The
Company believes the taxicab services industry is similarly fragmented and
generated more than $5 billion in revenues in 1997.

The Company believes that 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. Travel and tourism continues to grow
in North America. Nationwide charter users include such large organizations as
AAA, AARP and convention organizers, whose members are potential users of
motorcoach services. As the population of the United States continues to age,
the Company believes more people will find motorcoach touring an attractive, low
cost alternative to travel by automobile. In addition, the Company has targeted
the increasing number of foreign tourists traveling in the United States who
view motorcoach touring as a desirable method of travel.

PRIVATIZATION. The Company expects state and local governments to
accelerate their efforts to privatize capital intensive operations, such as
commuter and transit services, and ancillary services, such as paratransit
services required under the ADA. The Company believes that this acceleration
will result primarily from a decrease in federal funds available to subsidize
operations and the increasing capital cost of acquiring equipment.

OUTSOURCING. Many hotels, casinos, rental car companies, colleges and
other institutions operate large motorcoach fleets and other high occupancy
vehicles. These entities are increasingly seeking to outsource these non-core
activities as a means to better manage their capital and operating resources and
to improve their profits.

EXPANDING METROPOLITAN AREAS. Metropolitan areas are continuing to expand
geographically and in population. As a result, state and local governments face
increasing automobile traffic congestion, deteriorating infrastructures and a
continuing migration of offices and commuters to suburban locations. These
trends should increase the Company's opportunities to provide motorcoach
commuter and transit services. The Company believes that the fuel and emissions
efficiency, flexibility and low capital cost of motorcoaches and other high
occupancy vehicles will make them increasingly viable alternatives to the high
cost of widening existing roads or establishing or expanding other transit and
commuter systems, such as subways and commuter trains.

INCREASING AIRPORT CONGESTION. The number of passengers served by the
current United States airport system is estimated to increase by as much as 25%
over the next five years. Currently, there is no coordinated effort to provide
seamless transportation between planes and motorcoaches or other modes of ground
transportation, and many passengers continue to use private automobiles for
local or regional travel to and from airports. The Company believes that
motorcoaches, vans and other high occupancy vehicles can alleviate airport
congestion and address the shortage of convenient parking at many airports. In
addition, taxicab and executive

14
<PAGE>
sedan services are an integral part of passenger ground transportation to and
from most major airports.

ACQUISITION STRATEGY

The Company believes that there are many attractive acquisition candidates
in the motorcoach and passenger ground transportation services industry because
of the highly fragmented nature of the industry, industry participants' need for
capital and their owners' desire for liquidity. The Company will continue to
pursue an aggressive acquisition program to consolidate and enhance its position
in its current markets and to acquire operations in new markets.

The Company believes that it can continue to successfully implement its
acquisition program due to: (i) its strategy for creating a national company,
which should enhance an acquired company's ability to compete in its local and
regional market through an expansion of offered services, improved equipment
utilization and lower operating costs; (ii) the additional capital available for
new equipment; (iii) the potential for increased profitability as a result of
the Company's centralization of certain administrative functions, greater
purchasing power and economies of scale; (iv) its financial strength and
visibility as a public company; and (v) its decentralized management strategy,
which should, in most cases, enable an acquired company's management to remain
involved in the operation of the company.

SERVICES PROVIDED

The type and level of services provided by the Company vary by market
served. The Company provides motorcoach and high occupancy vehicle (i.e.
shuttles, vans and minibuses) services on both a contracted and per seat basis.
The Company's taxicab and executive sedan service revenues are derived primarily
from services provided to independent contractors that own or lease and operate
vehicles under one of the Company's trade names.

MOTORCOACH SERVICES

The Company's motorcoaches are either owned by the Company or leased under
long-term leases, pursuant to which the Company is responsible for all
maintenance, insurance and upkeep. Certain transit privatization contracts
provide equipment and insurance to the Company.

RECREATION AND EXCURSION

CHARTER AND TOUR. The Company offers both daily and long-term charter and
tour arrangements (as long as 30 days) with various levels of luxury and price.
The Company has arrangements with tour agencies to provide various levels of
service and equipment for agent-sponsored and organized tours. In some
instances, the Company organizes its own tours and markets them on a per
passenger basis.

SIGHTSEEING. Per seat sightseeing services are provided on a scheduled
basis at an advertised or published price. The Company uses a network of hotel
lobby ticket counters, hotel concierges and travel agents to sell the Company's
sightseeing tours.

AIRPORT SERVICE. The Company picks up passengers at airports in various
cities and transports them to and from their hotel, casino, cruise ship or
convention site, using motorcoaches and other high occupancy vehicles. Taxicab
and executive sedan service operations are an integral part of the passenger
ground transportation services to and from the airports as well.

SPECIALIZED DESTINATION ROUTE. The Company provides specialized
destination route services, including daily scheduled service to casinos in
Connecticut, Illinois, New Jersey, Louisiana, Mississippi, Nevada and Colorado.
Tickets are sold through agents and at specified locations.

15
<PAGE>
COMMUTER AND TRANSIT SERVICES

COMMUTER SERVICES. In most of its commuter services, the Company has fixed
routes serviced on a daily basis. Most of these routes are owned (as a result of
having received Federal or state regular route authority) by the individual
operating subsidiaries. Many of the Company's motorcoaches that are dedicated to
commuter service are owned by a state or municipal transit authority and
provided to the Company at nominal rent or given by such authority to the
Company to service a particular route. Contracts with transit authorities for
this service typically have one to three year terms and are periodically
reviewed for rate and fare increases.

PRIVATIZATION TRANSIT CONTRACTS. In privatization transit contracts, the
Company has a contract with a transit authority for fixed routes on a daily
basis, with the schedule established by the transit authority. The Company
operates dedicated equipment owned by the Company or by the transit authority.
Contracts for this service range from three to five years and are periodically
reviewed for rate increases.

OUTSOURCING CONTRACTS. The Company has agreements with various
corporations, institutions and government entities to provide motorcoaches,
drivers and equipment for their employees and customers. The Company contracts
with the customer to provide the schedule of service required by the customer.

PARATRANSIT SERVICES. The Company has contracts with agencies of various
counties that are responsible for coordinating the non-emergency transportation
of medical aid patients. These contracts are generally on a multi-year basis and
require the Company to meet certain performance standards. Taxicab and executive
sedan service operations are an integral part of paratransit services as well.

TAXICAB SERVICES

Most of the Company's taxicabs and executive sedans are owned by
independent contractor drivers, with the remainder being owned by the Company
and leased on a daily or weekly basis to independent contractor drivers. None of
the taxicab drivers are employees of the Company. In addition to the daily or
weekly fee paid by the drivers to the Company for dispatching and other support
services, the Company derives revenues through vehicle sales and financing
services to drivers, maintenance, parts and labor provided to drivers' vehicles
and vehicle mini-billboard advertising.

USE OF PROCEEDS

The net proceeds to the Company from its sale of 2,000,000 shares of Common
Stock in this offering are estimated to be approximately $85.5 million ($111.4
million if the Underwriters' over-allotment option is exercised in full) after
deducting underwriting discounts and commissions and offering expenses. The
Company intends to use substantially all of these net proceeds to reduce amounts
outstanding under the Credit Facility. After giving effect to the reduction in
amounts outstanding under the Credit Facility, the Company expects to have
approximately $207.3 million of available borrowing capacity. Indebtedness under
the Credit Facility, which matures in August 2000, had a weighted average
interest rate of 6.93% per annum as of March 31, 1998.

The Company will not receive any of the proceeds from sale of Common Stock
offered by the Selling Stockholders.

16
<PAGE>
CAPITALIZATION

The following table sets forth the current maturities of long-term
obligations and the total capitalization of the Company at December 31, 1997 and
as adjusted to give effect to the sale by the Company of the 2,000,000 shares of
Common Stock offered by it hereby and application of the net proceeds therefrom
after deducting underwriting discounts and commissions and estimated offering
expenses.

ACTUAL AS ADJUSTED(1)
----------- --------------
Current maturities of long-term
obligations........................ $ 12,012 $ 12,012
=========== ==============
Long-term obligations:
Credit Facility................. $ 109,723 $ 23,148
Capital lease obligations and
other
senior indebtedness.......... 49,029 49,029
9 3/8% Senior Subordinated
Notes, due 2007.............. 150,000 150,000
Convertible Subordinated
Notes(2)..................... 52,300 31,135
----------- --------------
Total long-term
obligations............. 361,052 253,312
Stockholders' equity:
Preferred Stock: $0.01 par
value, 500,000 shares
authorized; 1 share
outstanding, actual and as
adjusted..................... -- --
Common Stock: $0.01 par value,
100,000,000 shares
authorized; 21,817,918 shares
outstanding, actual and
24,490,259 shares
outstanding, as adjusted..... 218 245
Additional paid-in capital...... 121,534 229,247
Cumulative translation
adjustment................... (479) (479)
Retained earnings............... 39,282 39,282
----------- --------------
Total stockholders'
equity.................. 160,555 268,295
----------- --------------
Total capitalization...... $ 521,607 $521,607
=========== ==============

- ------------

(1) Adjusted to reflect the issuance and sale of 2,000,000 shares of Common
Stock offered by the Company and the application of the estimated net
proceeds as described in "Use of Proceeds," and the issuance of 60,000
shares of Common Stock for $1,035,000 attributed to the exercise of options
in connection with this offering.

(2) In connection with this offering, approximately $21.2 million of these notes
will be converted into 612,341 shares of Common Stock, all of which will be
sold in this offering.

17
<PAGE>
PRICE RANGE OF COMMON STOCK

The Common Stock was traded on the Nasdaq National Market from May 14,
1996, the date of the Initial Public Offering, until May 7, 1997. Since May 8,
1997, the Common Stock has traded on the NYSE. The following table sets forth
the high and low last sale prices for the Common Stock as reported by Nasdaq for
the period from May 14, 1996 through May 7, 1997 and by the NYSE for the period
from May 8, 1997 through May 6, 1998.

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................... 30 5/16 24 15/16
Fourth quarter.................. 35 27
1998
First quarter................... 46 7/16 28 15/16
Second quarter (through May 6,
1998)........................ 48 3/16 43 7/8

At March 31, 1998, there were approximately 219 stockholders of record of
the Company's Common Stock.

DIVIDEND POLICY

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 Credit Facility and
the Company's 9 3/8% Senior Subordinated Notes, due 2007 include, 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.

18
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information as of April 8, 1998
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 of the Company's
five most highly compensated executive officers; (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.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OWNED AFTER
OFFERING NUMBER OF OFFERING
------------------------ SHARES ----------------------
STOCKHOLDER NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- ------------------------------------- ------------ -------- -------------- --------- --------
<S> <C> <C> <C> <C> <C>
Richard H. Kristinik(1).............. 280,100 1.3% 60,000 220,100 *
John Mercadante, Jr.(2).............. 392,425 1.8 117,718 274,707 1.1%
Douglas M. Cerny(3).................. 129,000 * 35,000 94,000 *
Frank P. Gallagher(4)................ 199,810 * 62,550 137,260 *
Lawrence K. King(3).................. 154,000 * 38,500 115,500 *
Gerald Mercadante(5)................. 884,000 4.0 265,200 618,800 2.5
Charles D. Busskohl(6)............... 363,141 1.6 153,054 210,087 *
Steven S. Harter(7).................. 353,095 1.6 33,714 319,381 1.3
William J. Lynch(8).................. 40,468 * -- 40,468 *
Paul M. Verrochi(9).................. 55,000 * -- 55,000 *
T. Rowe Price Associates, Inc.(10)... 1,398,800 6.3 -- 1,398,800 5.6
George Kamins........................ 627,226 2.8 377,226 250,000 1.0
Joseph Chernow....................... 64,787 * 34,787 30,000 *
Fred Kaiser(11)...................... 123,610 * 123,610 -- *
Suzan Kaiser(11)..................... 76,923 * 76,923 -- *
Scott Keller(11)..................... 195,759 * 195,759 -- *
Jesse P. Gaddis(11).................. 102,128 * 102,128 -- *
Capitani-Gerace Group(11)(12)........ 172,873 * 86,437 86,436 *
Schmidt Group(11)(13)................ 54,969 * 27,484 27,485 *
Lisa Gallagher....................... 13,039 * 6,519 6,520 *
Alice Gallagher...................... 116,010 * 50,000 66,010 *
John Gallagher....................... 116,010 * 50,000 66,010 *
Brian R. Worthen..................... 9,791 * 5,791 4,000 *
Greg Worthen......................... 9,791 * 1,600 8,191 *
H. Wayne and Sandra Worthen.......... 65,768 * 25,000 40,768 *
Martin Zilber........................ 51,095 * 35,000 16,095 *
Sigmund Zilber Trusts................ 39,897 * 36,000 3,897 *
All executive officers and directors
as a group (10 persons)............ 2,851,039 12.9% 765,917 2,085,303 8.4%
</TABLE>
- ------------

* Less than 1%

(1) These shares are held by the Kristinik Family Partnership, of which Mr.
Kristinik is a general partner. Includes 80,000 shares which may be
acquired upon the exercise of options exercisable within 60 days of this
offering. Mr. Kristinik has been Chairman of the Board of Directors and
Chief Executive Officer of the Company since March 1996.

(FOOTNOTES CONTINUED ON FOLLOWING PAGE)

19
<PAGE>
(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 of
this offering. Mr. Mercadante has been a director of the Company since May
1996. Mr. Mercadante served as President and Chief Operating Officer of the
Company from May 1996 to December 5, 1997. Since December 5, 1997, Mr.
Mercadante has served as President of the Company.

(3) Includes 40,000 shares which may be acquired upon the exercise of options
exercisable within 60 days of this offering. Mr. Cerny served as Senior
Vice President, General Counsel and Secretary of the Company from January
1996 to December 5, 1997. Since December 5, 1997, Mr. Cerny has served as
Senior Vice President -- Corporate Development, General Counsel and
Secretary of the Company. Mr. King has served as Senior Vice President,
Chief Financial Officer and a director of the Company since December 1995.

(4) Includes 83,385 shares held by Mr. Gallagher's spouse, as to which shares
Mr. Gallagher disclaims beneficial ownership, of which 28,015 are being
offered hereby, and 13,039 shares held in a trust for the benefit of Mr.
Gallagher's daughter for which Mr. Gallagher is a trustee, of which 6,519
are being offered hereby. Includes 20,000 shares which may be acquired upon
the exercise of options exercisable within 60 days of this offering. Mr.
Gallagher became a director of the Company in May 1996. Mr. Gallagher
served as the Senior Vice President-Corporate Development of the Company
from May 1996 to December 5, 1997. Since December 5, 1997, Mr. Gallagher
has served as Executive Vice President and Chief Operating Officer of the
Company.

(5) Includes 134,243 shares held by Mr. Mercadante's spouse as to which shares
Mr. Mercadante disclaims beneficial ownership, of which 40,273 are being
offered hereby. Mr. Mercadante became a director in, and has served as
Senior Vice President-Northeast Region since May 1996.

(6) These shares are held by two family trusts for which Mr. Busskohl is a
trustee. Mr. Busskohl became a director in May 1996.

(7) 304,381 of 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 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. All shares held by such trust are being offered
hereby. Mr. Harter has been a Director of the Company since September 1995.

(8) Includes 15,000 shares which may be acquired upon exercise of options.

(9) Includes 15,000 shares which may be acquired upon exercise of options and
40,000 shares which may be acquired upon exercise of warrants. Mr. Verrochi
became a director in May 1996.

(10) The address of T. Rowe Price Associates, Inc. ("Price Associates") is P.
O. Box 17218, Baltimore, Maryland 21203. These securities are owned by
various individual and institutional investors which Price Associates
serves as investment adviser with power to direct investments and/or sole
power to vote the securities. For purposes of the reporting requirements of
the Exchange Act, Price Associates is deemed to be a beneficial owner of
such securities; however, Price Associates expressly disclaims that it is,
in fact, the beneficial owner of such securities.

(11) Consists of shares to be received upon conversion of Convertible
Subordinated Notes.

(12) This group consists of members of two families that previously owned
capital stock of a company acquired by Coach in February 1997.

(13) This group consists of members of a family that previously owned capital
stock of a company acquired by Coach in February 1997.

The Company will pay all costs and expenses incurred in connection with the
registration under the Securities Act of the shares being offered by the Selling
Stockholders, including all registration and filing fees, the NYSE listing fee,
printing expenses and fees and disbursements of counsel and accountants for the
Company. The Selling Stockholders will pay underwriting discounts and
commissions applicable to the shares being sold by them.

20
<PAGE>
UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters") have severally agreed to
purchase from the Company and the Selling Stockholders the following respective
number of shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus:

NUMBER OF
NAME SHARES
- ------------------------------------- ----------
BT Alex. Brown Incorporated.......... 1,333,334
Donaldson, Lufkin & Jenrette
Securities Corporation............. 1,333,333
NationsBanc Montgomery Securities
LLC................................ 1,333,333
----------
Total........................... 4,000,000
==========

The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will purchase all of the shares of Common Stock offered hereby, if
any of such shares are purchased.

The Company and the Selling Stockholders have been advised that the
Underwriters propose to offer the shares of Common Stock to the public at the
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $1.15 per
share. The Underwriters may allow, and such dealers may reallow, a concession
not to exceed $0.10 per share to certain other dealers. After commencement of
this offering, the public offering price and other selling terms may be changed
by the Underwriters.

The Company has granted to the Underwriters an option, exercisable not
later than 30 days after the date of this Prospectus, to purchase up to 600,000
additional shares of Common Stock at the public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 4,000,000, and the Company will be
obligated, pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 4,000,000 are being offered.

The Underwriting Agreement contains covenants of indemnity and contribution
among the Underwriters, the Company and the Selling Stockholders with respect to
certain liabilities, including liabilities under the Securities Act.

To facilitate this offering of the Common Stock, the Underwriters may
engage in transactions that stabilize, maintain or otherwise affect the market
price of the Common Stock. Specifically, the Underwriters may over-allot shares
of the Common Stock in connection with this offering, thereby creating a short
position in the Underwriters' account. Additionally, to cover such over-
allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of the Common Stock at a level
above that which might otherwise prevail in the open market. The Underwriters
are not required to engage in these activities, and, if commenced, any such
activities may be discontinued at any time. The Underwriters also may reclaim
selling concessions allowed to an Underwriter or dealer, if the Underwriters
repurchase shares distributed by that Underwriter or dealer.

The Company, its executive officers, directors and the Selling
Stockholders, who hold in the aggregate approximately 2.4 million shares of
Common Stock following completion of this offering, have agreed that until 180
days after the date of this Prospectus, they will not, without

21
<PAGE>
the prior written consent of BT Alex. Brown Incorporated, directly or indirectly
offer, sell or otherwise dispose of any shares of Common Stock, any shares of
Common Stock issuable upon exercise of options, rights or warrants or any
securities convertible into Common Stock of the Company, except that the Company
may, without such consent, (i) grant options pursuant to the Company's existing
employee stock option plans, (ii) issue stock upon the exercise of outstanding
options or warrants or upon the conversion of outstanding convertible securities
and (iii) issue Common Stock as consideration for acquisitions.

NationsBank of Texas, N.A. ("NationsBank"), an affiliate of NationsBanc
Montgomery Securities LLC, acts as lead agent and lender under the Credit
Facility, for which it has received customary fees and expenses and may receive
customary fees and expenses for performing such services in the future.
Substantially all of the net proceeds of this offering will be used to repay
lenders under the Credit Facility, including NationsBank. Since the amount to be
repaid to such lenders exceeds 10% of the net proceeds from the sale of the
Common Stock offered hereby, this offering is being made pursuant to the
provisions of Rule 2710(c)(8) of the Conduct Rules of the National Association
of Securities Dealers, Inc.

LEGAL MATTERS

Certain legal matters relating to this offering will be passed upon for the
Company by Douglas M. Cerny, General Counsel to the Company, and Andrews & Kurth
L.L.P., Houston, Texas, and for the Underwriters by Piper & Marbury L.L.P.,
Baltimore, Maryland.

Mr. Cerny owns 89,000 shares of Common Stock and holds options to purchase
125,000 shares of Common Stock, 40,000 of which are exercisable within 60 days
of this offering.

EXPERTS

The audited financial statements of Coach USA, Inc. and subsidiaries
incorporated by reference in this Prospectus have been audited by Arthur
Andersen LLP, independent public accountants, as indicated in their report with
respect thereto, and are incorporated by reference herein in reliance upon the
authority of said firm as experts in giving said report. The audited financial
statements of Kerrville Bus Company, Inc. incorporated in this Prospectus by
reference have been audited by Burnside & Rishebarger PLLC, independent public
accountants, as stated in their report incorporated by reference herein.

AVAILABLE INFORMATION

The Company has filed with the Commission a registration statement on Form
S-3 (together with all amendments, supplements and exhibits thereto, the
"Registration Statement") under the Securities Act, with respect to the Common
Stock offered by this Prospectus. This Prospectus, which constitutes part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement or the exhibits and schedules thereto. For further
information pertaining to the Common Stock offered by this Prospectus and the
Company, reference is made to the Registration Statement and the exhibits and
schedules thereto. Statements made in this Prospectus as to the contents of any
agreement or other document are not necessarily complete, and in each instance
reference is made to the exhibit for a more complete description of the matter
involved, and each such statement shall be deemed qualified in its entirety by
such reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected, without charge, at the public reference facilities
maintained by the Commission in Washington, D.C. and copies of such material may
be obtained from the Commission upon payment of the prescribed fees.

The Company is subject to the informational requirements of the Exchange
Act and the rules and regulations promulgated thereunder and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. Reports, proxy statements and other

22
<PAGE>
information filed by the Company with the Commission may be inspected and copied
at the public reference facilities maintained by the Commission at Room 1024,
450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549-1004, and at the
following Regional Offices of the Commission: Chicago Regional Office, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661; and New York Regional
Office, 7 World Trade Center, 13th Floor, New York, New York 10048. Copies of
such material may also be obtained at the prescribed rates from the Public
Reference Section of the Commission at its principal office at 450 Fifth Street,
N.W., Judiciary Plaza, Washington, D.C. 20549-1004. The Company's Common Stock
is traded on the NYSE and, as a result, the Company also files reports, proxy
statements and other information with the NYSE, and such reports, proxy
statements and other information are available for inspection at the offices of
the NYSE at 20 Broad Street, New York, New York 10005. The Registration
Statement and other information filed by the Company with the Commission are
also available at the web site of the Commission at http://www.sec.gov.

<PAGE>
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY 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 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 DATE SUBSEQUENT TO THE DATE HEREOF.

------------------------

TABLE OF CONTENTS

PAGE
----
Incorporation of Certain Documents By
Reference.......................... 2
Special Note Regarding Forward
Looking Statements................. 2
Prospectus Summary................... 3
Risk Factors......................... 7
Business............................. 12
Use of Proceeds...................... 16
Capitalization....................... 17
Price Range of Common Stock.......... 18
Dividend Policy...................... 18
Principal and Selling Stockholders... 19
Underwriting......................... 21
Legal Matters........................ 22
Experts.............................. 22
Available Information................ 22

------------------------

4,000,000 SHARES

[LOGO]

COMMON STOCK

--------------------
PROSPECTUS
--------------------

BT ALEX. BROWN
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
NATIONSBANC MONTGOMERY
SECURITIES LLC

May 7, 1998