<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One )
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X Quarterly report pursuant to Section 13 or 15(d) of the
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Securities Exchange Act of 1934
For the quarterly period ended September 30, 1998 or
----
Transition report pursuant to Section 13 or 15(d) of the
----
Securities Exchange Act of 1934
For the transition period from ______________ to ______________
Commission file number 0-24247
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ATLANTIC EXPRESS TRANSPORTATION CORP.
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(Exact Name of Registrant as Specified in Its Charter)
New York 13-392-3467
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7 North Street, Staten Island, New York, 10302-1205
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(Address of Principal Executive Offices) (Zip Code)
(718) 442-7000
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(Registrant's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
_______ _______
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes_______ No_______
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
100 Shares of Common Stock, no par value.
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<PAGE>
TABLE OF CONTENTS
PART I. Financial Information
<TABLE>
<CAPTION>
Page
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<S> <C>
ITEM 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1998 (audited) and September 30, 1998
(unaudited)...................................................................... 1
Consolidated Statements of Operations for the Three Month Periods Ended September
30,1997 (unaudited) and 1998 (unaudited)......................................... 2
Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended
September 30, 1997 (unaudited) and 1998 (unaudited)............................. 3
Consolidated Statements of Cash Flows for the Three Month Periods Ended September
30, 1997 (unaudited) and 1998 (unaudited)........................................ 4
Notes to Consolidated Financial Statements (unaudited)................................ 5-7
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations....................................................................... 8-10
PART II. Other Information 11
Signatures............................................................................ 12
Index to Exhibits..................................................................... E-1
</TABLE>
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
1998 1998
-------------- --------------
(audited) (unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents ............................................ $ 13,772,537 $ 5,709,729
Current portion of marketable securities ............................. 2,786,000 850,000
Accounts receivable, net of allowance for doubtful accounts .......... 37,310,006 41,091,575
Inventories .......................................................... 10,762,839 11,984,909
Notes receivable ..................................................... 1,182,425 253,133
Prepaid expenses and other current assets ............................ 5,692,610 6,074,026
------------- -------------
Total current assets ....................................... 69,570,417 67,899,372
------------- -------------
Property, plant and equipment, less accumulated depreciation .............. 99,887,054 117,924,616
------------- -------------
Other assets:
Goodwill, net ........................................................ 12,469,422 12,387,945
Notes receivable from affiliates ..................................... 510,000 518,670
Investments .......................................................... 229,000 229,000
Marketable securities ................................................ 7,027,937 6,751,273
Deferred lease expense ............................................... 334,115 303,454
Transportation contract rights, net .................................. 3,807,743 3,617,640
Deferred financing and organization costs, net ....................... 8,310,723 7,937,656
Due from affiliates .................................................. 672,589 672,589
Notes receivable ..................................................... 25,000 23,000
Deposit and other noncurrent assets .................................. 1,394,301 1,720,523
Deferred tax assets .................................................. 2,087,000 4,733,583
Covenant not to compete, net ......................................... 160,000 150,000
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Total other assets ......................................... 37,027,830 39,045,333
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$ 206,485,301 $ 224,869,321
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Liabilities and Stockholder's Equity
Current:
Current portion of long-term debt .................................... $ 641,574 $ 1,191,427
Accounts payable ..................................................... 2.250,615 2,442,542
Accrued compensation ................................................. 4,703,334 6,440,535
Current portion of insurance reserve ................................. 3,657,442 3,760,000
Accrued interest ..................................................... 6,776,630 2,942,429
Other accrued expenses and current liabilities ....................... 4,158,333 3,884,679
------------- -------------
Total current liabilities .................................. 22,187,928 20,661,612
------------- -------------
Long-term debt, net of current portion .................................... 157,284,116 181,079,556
------------- -------------
Premium on bond issuance ............................................. 1,202,550 1,148,700
------------- -------------
Other long-term liabilities ............................................... 5,641,135 5,743,545
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Stockholder's equity:
Common Stock, authorized 200 shares, issued and outstanding
100 shares.......................................................... 250,000 250,000
Additional paid-in capital ........................................... 13,188,926 13,188,926
Retained earnings .................................................... 6,354,353 3,030,539
Accumulated other comprehensive income (loss):
Unrealized gain (loss) on marketable securities ................. 376,293 (233,557)
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Total stockholder's equity ................................. 20,169,572 16,235,908
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$ 206,485,301 $ 224,869,321
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</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1997 1998
------------ ------------
(unaudited)
<S> <C> <C>
Revenues .......................................................... $ 59,153,376 $ 71,032,787
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Costs and expenses:
Cost of operations ........................................... 51,254,085 64,656,073
General and administrative ................................... 3,772,320 4,584,422
Depreciation and amortization ................................ 3,292,279 2,855,986
------------ ------------
58,318,684 72,096,481
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Income (loss) from operations ........................... 834,692 (1,063,694)
Interest .......................................................... (4,137,672) (4,817,603)
Other income ...................................................... 108,154 --
------------ ------------
Loss before benefit for income taxes .................... (3,194,826) (5,881,297)
Benefit for income taxes .......................................... (1,341,827) (2,646,583)
------------ ------------
Net loss ................................................ $ (1,852,999) $ (3,234,714)
------------ ------------
------------ ------------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Comprehensive Income (Loss)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------
1997 1998
----------- -----------
(unaudited)
<S> <C> <C>
Net loss ............................................................. $(1,852,999) $(3,234,714)
Other comprehensive income (loss)
Unrealized gain (loss) on marketable securities ................. 254,885 (609,850)
----------- -----------
Comprehensive loss ................................................... $(1,598,114) $(3,844,564)
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1997 1998
------------ ------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ......................................................... $ (1,852,999) $ (3,234,714)
Adjustments to reconcile net loss to net cash provided by operating Activities:
(Gain) loss on sale of marketable securities ......................... (108,154) 23,940
Deferred income taxes ................................................ (1,341,777) (2,646,583)
Depreciation ......................................................... 2,865,361 2,494,083
Amortization ......................................................... 686,719 676,326
Reserve for doubtful accounts receivable ............................. -- 30,000
Interest accrued on notes receivable ................................. (81,570) (8,670)
Decrease (increase) in:
Accounts receivable and retainage ............................... (989,032) (3,811,569)
Inventories ..................................................... 258,241 (1,222,070)
Prepaid expenses and other current assets ....................... (2,395,535) (381,416)
Deferred lease expense .......................................... 5,531 30,661
Deposits and other noncurrent assets ............................ (7,051) (326,222)
Increase (decrease) in:
Accounts payable ................................................ (971,001) 191,927
Accrued expenses and other current liabilities .................. 1,061,473 (2,268,096)
Other long-term liabilities ..................................... 7,757 102,410
------------ ------------
Net cash (used in) operating activities ......................... (2,862,037) (10,349,993)
------------ ------------
Cash flows from investing activities:
Acquisition of subsidiaries (net of cash acquired of $207,441) ............ (21,519,397) --
Proceeds from sale of fixed assets ........................................ 62,739 --
Additions to property, plant and equipment ................................ (12,575,183) (14,845,029)
Purchase of transportation contract rights ................................ (16,722) --
Due from affiliates ....................................................... (260,638) --
Notes receivable .......................................................... (806,414) 931,292
Marketable securities sold (purchased), net ............................... 551,463 (2,293,126)
------------ ------------
Net cash used in investing activities ........................... (34,564,152) (16,206,863)
------------ ------------
Cash flows from financing activities:
Proceeds of additional borrowings ......................................... 43,035,000 18,760,246
Principal payments on borrowings .......................................... (13,052,950) (101,570)
Deferred financing and organization costs ................................. (2,962,775) (75,529)
Other ..................................................................... (87,378) (89,099)
------------ ------------
Net cash provided by financing activities ............................ 26,931,897 18,494,048
------------ ------------
Net increase (decrease) in cash and cash equivalents ........................... (10,494,292) (8,062,808)
Cash and cash equivalents, beginning of period ................................. 16,818,889 13,772,537
------------ ------------
Cash and cash equivalents, end of period ....................................... $ 6,324,597 $ 5,709,729
------------ ------------
------------ ------------
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest ............................................................. $ 6,145,081 $ 8,467,803
Income taxes ......................................................... 331,527 132,122
Supplemental schedule of noncash investing and financing activities:
Loans incurred for purchase of property, plant and equipment .............. $ 6,368,900 $ 5,686,617
Transfer of bus from inventory to fixed assets ............................ 47,558 --
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Accounting
These consolidated financial statements should be read in conjunction
with the consolidated financial statements and related notes contained in the
Company's financial statements as of and for the year ended June 30, 1998 as
filed on Form 10-K. In the opinion of management, all adjustments and accruals
(consisting only of normal recurring adjustments) which are necessary for a fair
presentation of operating results are reflected in the accompanying financial
statements.
Certain amounts in the fiscal 1998 financial statements have been
reclassified to conform with current period presentation.
Operating results for the periods presented are not necessarily
indicative of the results for the full fiscal year.
2. New Accounting Pronouncement
Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which requires that all components of comprehensive
income (loss) and total comprehensive income (loss) be reported on one of the
following: a statement of income and comprehensive income (loss), a statement of
comprehensive income (loss) or a statement of stockholder's equity. The Company
is reporting this information on a separate statement of comprehensive income
(loss) and all changes to stockholder's equity, except those due to investments
by owners (changes in paid in capital) and distributions to owners (dividends).
This statement did not change the current accounting treatment for components of
comprehensive income.
3. New Contracts
In March 1998, the Los Angeles Uniformed School District awarded a
contract to the Company for a period of 5 years, commencing September 1998 and
in May 1998, Longwood School District in New York awarded the Company a one year
contract for 166 buses and the City of Philadelphia School District awarded the
Company a one year contract for 32 school buses. Results of operations relative
to these contracts were not material through September 30, 1998. The Company
incurred in the current period, approximately $12.5 million of capital
expenditures in connection with these contracts.
4. Inventories
Inventories comprised the following:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1998
---------- ----------
<S> <C> <C>
Parts and fuel ...................................... 3,921,237 3,609,209
Buses ............................................... 6,841,602 8,375,700
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10,762,839 11,984,909
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---------- ----------
</TABLE>
5
<PAGE>
6. Supplemental Financial Information
The following are unaudited condensed consolidating financial
statements regarding the Company (on a stand-alone basis and on a consolidated
basis) and Guarantors and Non-Guarantors as of and for the three months ended
September 30, 1998, and a consolidating balance sheet as of June 30, 1998 and
consolidating statements of operations and cash flows for the three months ended
September 30, 1997.
Condensed Consolidating Balance Sheet
September 30, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non
Transportation Guarantor Guarantor Elimination
Corp Subsidiaries Subsidiaries Entries Consolidated
------------ ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets .............................. $ 6,720,985 $ 57,841,876 $ 6,646,784 $ 3,310,273 $ 67,899,372
Investment in affiliates .................... (57,199,524) -- -- (57,199,524) --
Total assets ................................ 205,214,904 139,467,143 14,281,264 (134,093,990) 224,869,321
Current liabilities ......................... 3,159,531 14,540,299 6,272,055 (3,310,273) 20,661,612
Total liabilities ........................... 174,533,231 99,079,047 11,915,601 (76,894,466) 208,633,413
Stockholder's equity ........................ 30,681,673 40,388,096 2,365,663 (57,199,524) 16,235,908
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended September 30, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non
Transportation Guarantor Guarantor Elimination
Corp Subsidiaries Subsidiaries Entries Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net revenues ................................ $ -- $ 70,976,555 $ 1,168,680 $ (1,112,448) $ 71,032,787
Income (loss) from operations ............... (53,491) (1,024,431) 14,228 -- (1,063,694)
Income (loss) before income taxes............ (53,491) (5,842,034) 14,228 -- (5,881,297)
Net income (loss) of subsidiaries ........... (3,205,294) -- -- 3,205,294 --
Net income (loss) ........................... (3,234,714) (3,211,697) 6,403 3,205,294 (3,234,714)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non
Transportation Guarantor Guarantor Elimination
Corp Subsidiaries Subsidiaries Entries Consolidated
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities ....................... $(20,428,687) $ 9,637,206 $ 441,488 $ -- $(10,349,993)
Net cash used in investing activities ....... (101,408) (13,812,329) (2,293,126) (16,206,863)
Net cash provided by (used in)
financing activities ...................... 18,595,618 (101,570) -- -- 18,494,048
Increase (decrease) in cash and
cash equivalents ....................... (1,934,477) (4,276,693) (1,851,638) -- (8,062,808)
Cash and cash equivalents,
beginning of period ......................... 6,932,910 4,014,584 2,825,043 -- 13,772,537
------------ ------------ ------------ ------------ ------------
Cash and cash equivalents,
end of period
$ 4,998,433 $ (262,109) $ 973,405 $ -- $ 5,709,729
</TABLE>
6
<PAGE>
Condensed Consolidating Balance Sheet
June 30, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non
Transportation Guarantor Guarantor Elimination
Corp Subsidiaries Subsidiaries Entries Consolidated
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets .............................. $ 13,459,022 $ 47,736,795 $ 8,374,600 $ -- $ 69,570,417
Investment in affiliates .................... 60,404,818 -- -- (60,404,818)
Total assets ................................ 193,219,371 165,426,379 15,993,943 (168,154,392) 206,485,301
Current liabilities ......................... 7,688,435 6,743,371 7,756,122 -- 22,187,928
Total liabilities ........................... 160,355,739 120,676,905 13,032,657 (107,749,572) 186,315,729
Stockholder's equity ........................ 32,863,632 44,749,474 2,961,286 (60,404,820) 20,169,572
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended September 30, 1997
<TABLE>
<CAPTION>
Atlantic
Express Non
Transportation Guarantor Guarantor Elimination
Corp Subsidiaries Subsidiaries Entries Consolidated
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues .................... $ -- $ 59,153,376 $ 1,187,910 $ (1,187,910) $ 59,153,376
Income (loss) from operations ... (649,448) 1,525,891 (41,751) -- 834,692
Income (loss) before income taxes (649,448) (2,698,105) 152,727 -- (3,194,826)
Net income (loss) of subsidiaries (1,203,551) -- -- 1,203,551 --
Net income (loss) (1,852,999) (1,287,551) 84,000 1,203,551 (1,852,999)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 1997
<TABLE>
<CAPTION>
Atlantic
Express Non
Transportation Guarantor Guarantor Elimination
Corp Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ --------------- --------- ---------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in) operating
activities ................................... $(29,442,370) $ 26,877,071 $ (296,738) $ -- $ (2,862,037)
Net cash used in investing activities ........ (21,536,460) (13,579,155) 551,463 -- (34,564,152)
Net cash provided by (used in)
financing activities .................... 39,984,847 (13,052,950) -- -- 26,931,897
Increase (decrease) in cash
and cash equivalents ......................... (10,993,983) 244,966 254,725 -- (10,494,292)
Cash and cash equivalents,
beginning of period ..................... 15,029,114 479,933 1,309,842 -- 16,818,889
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Cash and cash equivalents,
end of period ................................ $ 4,035,131 $ 724,899 $ 1,564,567 $ -- $ 6,324,597
</TABLE>
7. Subsequent Event- Change of Control of the Company
On October 27, 1998 the holders of a majority in principal amount of
the Company's 10 3/4% Senior Secured Notes due 2004 (the "Notes") consented to
an amendment to the Indenture relating to the Notes which in substance exempted
the transactions contemplated by Recapitalization and Stock Purchase Agreement
(the "Recapitalization") from the definition of "Change of Control" under the
Indenture. On November 4, 1998 the Recapitalization was consummated. As a
result, GSCP II Holdings (AE), LLC, an affiliate of Greenwich Street Capital
Partners, Inc., a New York based private equity fund, acquired an approximately
88% equity interest in a recapitalized Atlantic Express Transportation Group,
Inc. ("AETG"), which owns all of the issued and outstanding shares of capital
stock of the Company.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion contains forward-looking statements within the
meaning of the federal securities laws and as such involve known and unknown
risks and uncertainties. These statements may use forward-looking words such as
"anticipate", "estimate", "expect", "will" or other similar words. These
statements discuss future expectations or contain projections of future events.
Actual results may differ materially from those expressed or implied by the
forward-looking statements for various reasons, including general economic
conditions, reliance on suppliers, labor relations and other factors, many of
which are beyond the Company's control. Readers are cautioned not to place undue
reliance on such forward-looking statements.
Three months ended September 30, 1998 compared to three months ended September
30, 1997.
The Company's revenues from Transportation Operations are significantly
curtailed during the months of July and August due to school holidays, while
revenues from Bus Sales Operations have historically been significantly higher
during the first three months of the fiscal year. In addition, the quarterly
results of the Transportation Operations also fluctuate due to a variety of
factors, including variation in the number of school days in each quarter.
Consequently, revenues and results for the first fiscal quarter are not
representative of annual operations and quarterly results may vary
substantially, both within a fiscal year and between comparable fiscal years.
Revenues. Revenues from Transportation Operations were $35.6 million
for the three months ended September 30, 1998 compared to $31.6 million for the
three months ended September 30, 1997, an increase of $4.0 million or 12.8%.
This increase was due primarily to the net effect of (i) the award of new
contracts which added $4.6 million of revenues; (ii) $1.1 million of additional
summer revenues; and (iii) a decrease in billings on existing contracts of $1.7
million. This decrease resulted from a reduction in revenue days in September
1998 as compared to September 1997 (primarily 6 less revenue days in New York
City) which the Company estimates reduced revenues by $3.5 million. Revenues for
the Bus Sales Operations were $35.4 million for the three months ended September
30, 1998 compared to $27.6 million for the three months ended September 30,
1997, an increase of $7.8 million or 28.4%. Due to a strike affecting General
Motors Corporation, the Company was unable to obtain buses to meet all of its
orders in the first three months of the fiscal year. The Company estimates that
due to the strike, Bus Sales Operations revenues were reduced by approximately
$3.7 million less than anticipated. The Company expects to deliver these orders
in the next two quarters of the fiscal year.
Gross Profit. Gross profit for Transportation Operations was $2.3
million for the three months ended September 30, 1998 compared to $4.3 million
for the three months ended September 30, 1997, a decrease of $2.0 million or
46.2%. As a percentage of revenues, gross profit decreased to 6.5% for the three
months ended September 30, 1998 from 13.6% for the three months ended September
30, 1997. This decrease was due primarily to the reduction in revenue days
mentioned above, partially offset by a reduction in driver and escort payroll
days (2 fewer days in the New York City market), which resulted in an
approximate decrease of $2.9 million of gross profit. Gross profit for the Bus
Sales Operations was $4.1 million for the three months ended September 30, 1998
compared to $3.6 million for the three months ended September 30, 1997, an
increase of $0.5 million or 13.0%. As a percentage of revenues, gross profit
decreased to 11.5% for the three months ended September 30, 1998 from 13.0% for
the three months ended September 30, 1997. The reduction in gross profit
percentage was due primarily to an increase in the current quarter of the
proportion of sales made in the New Jersey market which has had historically
lower gross profit margins than the New York market.
General and administrative expenses. General and administrative
expenses for the Transportation Operations were $3.6 million for the three
months ended September 30, 1998 compared to $3.0 million for the three months
ended September 30, 1997, an increase of $0.6 million or 20.4%. This increase
was principally related to additional administrative payroll, benefits and other
general and administrative expenses due to expansion to new areas and expansion
of existing operations. As a percentage of revenues, general and administrative
expenses increased to 10.2% for the three months ended September 30, 1998 from
9.6% for the three months ended September 30, 1997. General and administrative
expenses for the Bus Sales Operations were $0.9 million for the three months
ended September 30, 1998 compared to $0.7
8
<PAGE>
million for the three months ended September 30, 1997, an increase of $0.2
million or 26.3%. As a percentage of revenues, general and administrative
expenses were 2.7% for the three months ended September 30, 1998 and 1997.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $2.7 million for the three
months ended September 30, 1998 compared to $3.0 million for the three months
ended September 30, 1997, a decrease of $0.3 million. This decrease was due to
the Company reassessing (on January 1, 1998) and extending the useful lives of
certain fixed assets which reduced depreciation by $0.7 million, which was
partially offset by increases in depreciation due to the purchase of new
vehicles. Depreciation and amortization expenses for the Bus Sales Operations
were $0.2 million for the three months ended September 30, 1998 compared to $0.3
million for the three months ended September 30, 1997.
Income (loss) from operations. Income from operations was $0.8 million
for the three months ended September 30, 1997 compared to a loss of $1.1 million
for the three months ended September 30, 1998 a decrease of $1.9 million. This
decrease was due to the net effect of the items discussed above.
Net interest expense. Net interest expense was $4.8 million for the
three months ended September 30, 1998 compared to $4.1 million for the three
months ended September 30, 1997, an increase of $0.7 million. This increase was
primarily due to the interest in connection with the $40,000,000 increase in the
aggregate principal amount of the Company's 103/4% Senior Secured Notes due 2004
issued in August 1997 of $0.4 million and increases in interest in connection
with equipment financing and amortization of deferred finance charges.
Net loss. The Company generated a net loss of $3.2 million for the
three months ended September 30, 1998 compared to a net loss of $1.9 million for
the three months ended September 30, 1997 an increase of $1.3 million due to the
net effect of the items discussed above.
9
<PAGE>
Liquidity and Capital Resources
Management anticipates total capital expenditures of $24.5 million in
fiscal 1999 of which approximately $20.5 million were made by September 30,
1998. This included approximately $18.9 million for purchase of new vehicles and
$1.6 million for other property and equipment.
Net Cash Used In Operating Activities. Net cash used in operating
activities was $10.3 million for the three months ended in September 30, 1998
primarily due to the following: (i) a net loss of $3.2 million plus non cash
items of depreciation and amortization of $3.2 million less a $2.6 million
increase in deferred tax benefit (ii) use of cash for working capital of $7.5
million and (iii) an increase in other assets of $0.2 million.
Net Cash Used In Investing Activities. For the three months ended
September 30, 1998, the Company made $20.5 million of capital expenditures to
acquire additional vehicles and equipment. Of these capital expenditures $5.7
million were directly financed. In addition, the Company made a net investment
of $2.3 million in marketable securities.
Net Cash Provided By Financing Activities. Net cash provided by
financing activities totaled $18.5 million for the three months ended September
30, 1998, due to $18.8 million net borrowing under the Company's revolving line
of credit, partially offset by principal payments of $0.1 on borrowings and $0.1
million in deferred financing and organization costs. In addition, the Company
incurred $5.7 million of indebtedness to directly finance capital expenditures
for the three months ended September 30, 1998.
The first quarter is historically the period of the Company's greatest
use of its revolving line of credit due to the purchase of vehicles for the
upcoming school year and seasonal lower revenues in this quarter. The Company
has an agreement with Congress Financial Corporation ("Congress"), its revolving
credit lender, to sell Congress excess receivables of up to $15.0 million
through November 30, 1998. The Company believes that this agreement, along with
its Revolving Credit Facility of $30.0 million (of which $9.3 million was
undrawn at September 30, 1998) will provide it with sufficient liquidity to
conduct its operations.
At September 30, 1998, the Company's total debt and stockholder's
equity were $182.3 million and $16.2 million respectively.
New Accounting Pronouncement
Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting
Comprehensive Income", which requires that all components of comprehensive
income (loss) and total comprehensive income (loss) be reported on one of the
following: a statement of income and comprehensive (loss), a statement of
comprehensive income (loss) or a statement of stockholder's equity. The Company
is reporting this information on a separate statement of comprehensive income
(loss). Comprehensive income (loss) is comprised of net income (loss) and all
changes to stockholder's equity, except those due to investments by owners
(changes in paid capital) and distributions to owners (dividends). This
statement did not change the current accounting treatment for components of
comprehensive income.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
See Exhibit Index on Page E-1 for exhibits filed with this report on
Form 10-Q.
b) Reports on Form 8-K
The Company filed a Current Report on Form 8-K dated November 10,
1998, reporting under Item 1 the consummation of the
Recapitalization of AETG.
11
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities and Exchange Act
of 1934, the Company has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized.
ATLANTIC EXPRESS TRANSPORTATION CORP.
By: /s/ NATHAN SCHLENKER
-------------------------------
Nathan Schlenker
Chief Financial Officer
November 13, 1998
12
<PAGE>
Index to Exhibits
The following documents are exhibits to this Quarterly Report on Form
10-Q. For convenient reference, each exhibit is listed according to the Exhibit
Table of Regulation S-K. The page number, if any, listed opposite an exhibit
indicates the page number in the sequential numbering system on the manually
signed original of this Quarterly Report on Form 10-Q where such exhibit can be
found.
<TABLE>
<CAPTION>
Exhibit Sequential Page
Number Exhibit Number
------- ------- ---------------
<S> <C> <C>
4.1 Third Supplemental Indenture, dated as of October 29, 1998, by
and among Atlantic Express Transportation Corp., the
Guarantors named therein and The Bank of New York, as Trustee
(incorporated by reference to Exhibit 1.1 to the Company's
Current Report on Form 8-K filed November 10, 1998).
27.1 Financial Data Schedule
</TABLE>
E-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM 10Q AT
SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> 5,709,729
<SECURITIES> 9,537,273
<RECEIVABLES> 44,108,967
<ALLOWANCES> 1,550,000
<INVENTORY> 11,984,909
<CURRENT-ASSETS> 67,899,372
<PP&E> 207,856,895
<DEPRECIATION> 89,932,279
<TOTAL-ASSETS> 224,869,321
<CURRENT-LIABILITIES> 20,661,612
<BONDS> 182,270,983
0
0
<COMMON> 250,000
<OTHER-SE> 15,985,908
<TOTAL-LIABILITY-AND-EQUITY> 224,869,321
<SALES> 35,440,196
<TOTAL-REVENUES> 71,032,787
<CGS> 31,379,503
<TOTAL-COSTS> 69,240,495
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 4,817,603
<INCOME-PRETAX> (5,881,297)
<INCOME-TAX> (2,646,583)
<INCOME-CONTINUING> (5,881,297)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,234,714)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
