<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q/A
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended March 31, 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: PENDING
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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 No X Note: Registrant first became subject to Section 15(d)
----- -----
filing requirements January 27, 1998.
APPLICABLE ONLY TO ISSUER 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 ISSUERS
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
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
PAGE
<S> <C>
ITEM 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1997 and March 31, 1998 (unaudited) . . . . . 1
Consolidated Statements of Operations for the Three Month and Nine Month
Periods Ended March 31, 1997 and 1998 (unaudited) . . . . . . . . . . . . . 2
Consolidated Statements of Cash Flows for the Nine Month Periods Ended
March 31, 1997 and 1998 (unaudited) . . . . . . . . . . . . . . . . . . 3
Notes to Consolidated Financial Statements (unaudited) . . . . . . . . . . . . 4
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . 7
PART II. OTHER INFORMATION 10
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Index to Exhibits . . . . . . . . . . . . . . . . . . . . . . . E-1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC EXPRESS TRANSPORTATION CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, MARCH 31,
1997 1998
--------------- --------------
(UNAUDITED)
ASSETS
Current:
<S> <C> <C>
Cash and cash equivalents . . . . . . . . . . . . . . . $ 16,818,889 $ 9,546,450
Current portion of marketable securities . . . . . . . . . . . 1,030,000 3,000,000
Accounts receivable, net of allowance for doubtful accounts . . . . 31,237,975 35,378,568
Inventories . . . . . . . . . . . . . . . . . . . . 1,969,228 7,310,034
Notes receivable . . . . . . . . . . . . . . . . . . 191,600 1,348,013
Prepaid expenses and other current assets . . . . . . . . . . 4,986,656 5,752,513
------------- -------------
Total current assets . . . . . . . . . . . . . . 56,234,348 62,335,578
------------- -------------
Property, plant and equipment, less accumulated depreciation . . . . . 74,967,594 98,697,242
------------- -------------
Other assets:
Goodwill, net . . . . . . . . . . . . . . . . . . . . - 12,791,962
Restricted cash and cash equivalents . . . . . . . . . . . 2,314,408 1,400,000
Notes receivable from affiliates . . . . . . . . . . . . . 4,772,974 5,037,656
Investments . . . . . . . . . . . . . . . . . . . 229,000 229,000
Marketable securities . . . . . . . . . . . . . . . . 4,139,697 5,743,872
Deferred lease expense . . . . . . . . . . . . . . . . 488,212 374,035
Transportation contract rights, net . . . . . . . . . . . . 3,444,772 3,957,427
Deferred financing and organization costs, net . . . . . . . . 6,295,318 8,465,198
Due from affiliates . . . . . . . . . . . . . . . . . . - 516,417
Notes receivable . . . . . . . . . . . . . . . . . . 120,992 62,582
Deposit and other noncurrent assets . . . . . . . . . . . . 1,343,661 1,609,310
Deferred tax assets . . . . . . . . . . . . . . . . . . - 3,018,438
Covenant not to compete, net . . . . . . . . . . . . . . - 170,000
------------- -------------
Total other assets . . . . . . . . . . . . . . 23,149,034 43,375,897
------------- -------------
$ 154,350,976 $ 204,408,717
============== ==============
LIABILITIES AND STOCKHOLDER'S EQUITY
Current:
Current portion of long-term debt . . . . . . . . . . . . . $ 140,008 $ 627,687
Accounts payable . . . . . . . . . . . . . . . . . . 764,293 2,111,632
Accrued compensation . . . . . . . . . . . . . . . . . 4,053,567 7,871,293
Current portion of insurance reserve . . . . . . . . . . . . 2,336,738 2,957,449
Accrued interest . . . . . . . . . . . . . . . . . . 4,927,085 2,739,818
Other accrued expenses and current liabilities . . . . . . . . . 629,855 2,843,547
------------- -------------
Total current liabilities. . . . . . . . . . . . . 12,851,546 19,151,426
------------- -------------
Long-term debt, net of current portion. . . . . . . . . . . . . 110,488,215 155,995,175
------------- -------------
Premium on bond issuance . . . . . . . . . . . . . . . . . - 1,256,400
------------- -------------
Other long-term liabilities . . . . . . . . . . . . . . . . 2,997,018 4,402,363
------------- -------------
Deferred income taxes . . . . . . . . . . . . . . . . . . . 400,000 -
------------- -------------
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 . . . . . . . . . . . . . . . . . . 14,033,239 9,635,989
Unrealized gain on marketable securities, net . . . . . . . . . 142,032 528,438
------------- -------------
Total stockholder's equity . . . . . . . . . . . . 27,614,197 23,603,353
------------- -------------
$ 154,350,976 $ 204,408,717
============== ==============
</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 NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------------ -----------------------------
1997 1998 1997 1998
----------- ------------ ------------ ------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Revenues . . . . . . . . . . . . . . $45,546,940 $67,502,640 $115,713,501 $194,794,115
------------ ------------- ------------- ------------
Costs and expenses:
Cost of operations . . . . . . . . . . 37,736,152 55,264,597 97,392,122 164,433,718
General and administrative . . . . . . . . 3,042,330 4,869,509 8,595,279 15,642,719
Depreciation and amortization . . . . . . . 2,743,029 2,277,073 8,097,779 8,988,413
------------ ------------- ------------- ------------
43,521,511 62,411,179 114,085,180 189,064,850
------------ ------------- ------------- ------------
Income (loss) from operations. . . . . . 2,025,429 5,091,461 1,628,321 5,729,265
Interest . . . . . . . . . . . . . . (2,810,345) (4,343,472) (5,958,979) (13,400,641)
Other income . . . . . . . . . . . . . - 295,940 - 528,842
------------ ------------- ------------- ------------
Income (loss) before (provision)
benefit for income taxes and
extraordinary items . . . . . . . . . (784,916) 1,043,929 (4,330,658) (7,142,534)
(Provision) benefit for income taxes . . . . . . 386,048 (469,770) 1,818,800 3,214,140
------------ ------------- ------------- ------------
Income (loss) before
extraordinary items . . . . . . . . (398,868) 574,159 (2,511,858) (3,928,394)
Extraordinary items:
Loss on early extinguishment of
debt, net of tax benefit of $390,000 . . . . 552,369 - 552,369 -
Write-off of unamortized deferred
finance charges, net of tax benefit of
$368,000 as a result of refinancing . . . . 525,943 - 525,943 -
------------ ------------- ------------- ------------
Net income (loss) . . . . . . . . . . . $(1,477,180) $ 574,159 $(3,590,170) $(3,928,394)
=========== ============= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements
2
<PAGE>
<TABLE>
<CAPTION>
ATLANTIC EXPRESS TRANSPORTATION CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
NINE MONTHS ENDED
MARCH 31,
--------------------------------------------
1997 1998
--------------- --------------
(UNAUDITED)
Cash flows from operating activities:
<S> <C> <C>
Net income (loss) . . . . . . . . . . . . . . . . . . . . $ (3,590,170) $ (3,928,394)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Gain on sale of marketable securities . . . . . . . . . . . . - (527,817)
Deferred income taxes . . . . . . . . . . . . . . . . . (2,576,800) (3,418,438)
Depreciation . . . . . . . . . . . . . . . . . . . . 7,313,809 7,916,119
Amortization . . . . . . . . . . . . . . . . . . . . 783,970 2,299,465
Provision for doubtful accounts receivable . . . . . . . . . - 1,750,000
Interest accrued on notes receivable . . . . . . . . . . . - (239,346)
Gain on sale of fixed assets . . . . . . . . . . . . . . - (258,975)
Extraordinary items . . . . . . . . . . . . . . . . . 1,836,312 -
Decrease (increase) in:
Accounts receivable and retainage . . . . . . . . . . . (2,650,065) (1,146,944)
Inventories . . . . . . . . . . . . . . . . . . . (184,900) 3,320,241
Prepaid expenses and other current assets . . . . . . . . (1,044,827) (399,776)
Deferred lease expense . . . . . . . . . . . . . . . 10,581 114,177
Deposits and other noncurrent assets . . . . . . . . . . (338,311) (220,891)
Increase (decrease) in:
Accounts payable . . . . . . . . . . . . . . . . . (114,628) (376,571)
Accrued expenses and other current liabilities . . . . . . . 2,512,343 3,783,272
Other long-term liabilities . . . . . . . . . . . . . . 764,858 1,405,345
------------ -------------
Net cash provided by operating activities . . . . . . . . 2,722,172 10,071,467
------------ -------------
Cash flows from investing activities:
Acquisition of subsidiaries (net of cash acquired of $207,441) . . . . - (21,519,397)
Proceeds from sale of fixed assets . . . . . . . . . . . . . - 712,525
Additions to property, plant and equipment . . . . . . . . . . (9,574,493) (17,618,263)
Purchase of transportation contract rights . . . . . . . . . . (250,000) (57,139)
Due from affiliates . . . . . . . . . . . . . . . . . . 47,578 (541,753)
Notes receivable . . . . . . . . . . . . . . . . . . . 143,307 (517,685)
Marketable securities purchased . . . . . . . . . . . . . . . (4,170,338) (10,392,120)
Proceeds from sale of marketable securities . . . . . . . . . . - 7,699,972
------------ -------------
Net cash used in investing activities . . . . . . . . . (13,803,946) (42,233,860)
------------ -------------
Cash flows from financing activities:
Proceeds of additional borrowings . . . . . . . . . . . . . . 118,473,894 41,400,000
Principal payments on borrowings . . . . . . . . . . . . . . (79,536,124) (13,366,493)
Deferred financing and organization costs . . . . . . . . . . . (6,206,488) (3,589,107)
Transfer from restricted cash . . . . . . . . . . . . . . - 914,408
Other . . . . . . . . . . . . . . . . . . . . . . (267,274) (468,854)
------------ -------------
Net cash provided by (used in) financing activities . . . . 32,464,008 24,889,954
------------ -------------
Net increase (decrease) in cash and cash equivalents . . . . . . . . . 21,382,234 (7,272,439)
Cash and cash equivalents, beginning of period . . . . . . . . . . . 1,211,258 16,818,889
------------ -------------
Cash and cash equivalents, end of period . . . . . . . . . . . . . 22,593,492 9,546,450
============ =============
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest . . . . . . . . . . . . . . . . . . . . . . $ 3,260,367 $ 15,029,925
Income taxes . . . . . . . . . . . . . . . . . . . . . 80,000 362,809
============ =============
Supplemental schedule of noncash investing and financing activities:
Loans incurred for purchase of property, plant and equipment . . . . . 11,887,542 6,368,900
Use of restricted cash to pay down debt . . . . . . . . . . . . 750,000 -
Transfer of bus from inventory to fixed assets . . . . . . . . . . - 47,558
============ =============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<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 as of and for the
year ended June 30, 1997 contained in the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1997. 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.
Operating results for the periods presented are not necessarily
indicative of the results for the full fiscal year.
2. ACQUISITIONS
Effective July 1, 1997 the Company acquired 100% of the common stock
of Central New York Coach Sales and Services Inc. and Jersey Bus Sales, Inc. and
related real property (collectively "Central"). These companies are engaged in
the sale and service of buses as well as school bus contract operations. Total
consideration consisted of $26.5 million cash less Central's long-term
indebtedness as of July 1, 1997, which was $4.8 million, and the Company's
agreement to issue $2.2 million in mortgage notes relating to certain real
property. In connection with the acquisition, the following intangible assets
were recorded:
<TABLE>
<S> <C>
Convenant not to compete . . . . . . . . . $ 200,000
Transportation contract rights . . . . . . . 1,200,000
Goodwill . . . . . . . . . . . . . . 13,036,393
</TABLE>
The Consolidated Statements of Operations include the results of
operations of Central from July 1, 1997 through March 31, 1998. Had the
acquisition of Central occurred on July 1, 1996, the pro forma consolidated
results of operations of the Company for the three months and the nine months
ended March 31, 1997 after elimination of inter-company transactions and after
giving pro forma effect to employment agreements and taxes at 45% would have
been as follows:
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
MARCH 31, 1997 MARCH 31, 1997
-------------- --------------
<S> <C> <C>
Sales . . . . . . . . . . . . . . $ 54,694,962 $ 161,270,363
Net income (loss) . . . . . . . . . . (1,415,222) (2,189,902)
</TABLE>
In May, 1997, the Los Angeles Unified School District awarded three
contracts to the Company for a period of five years, commencing September, 1997.
In July, 1997 the Company was awarded a three-year contract to provide
paratransit services in Philadelphia, Pennsylvania ("SEPTA"). Results of
operations relative to these contracts were not material through March 31, 1998.
The Company incurred approximately $13 million of capital expenditures in
connection with its entry into the Los Angeles market, and insignificant
expenditures in connection with the SEPTA contract.
3. FINANCING
In connection with the above acquisitions, in August, 1997 the
Company issued $40,000,000 aggregate principal amount of 10 3/4% Senior Secured
Notes due 2004. Such notes were registered with the Securities and Exchange
Commission concurrently with registration of $110,000,000 aggregate principal
amount of the Company's 10 3/4% Senior Secured Notes due 2004 issued in
February, 1997.
4
<PAGE>
4. INVENTORIES
Inventories comprised the following:
<TABLE>
<CAPTION>
JUNE 30, MARCH 31,
1997 1998
---------- ---------
<S> <C> <C>
Parts and fuel . . . . . . . . . . . . . . . . . $ 1,969,228 $ 3,562,859
Buses. . . . . . . . . . . . . . . . . . . . . . - 3,747,175
--------- ---------
$ 1,969,228 $ 7,310,034
========= =========
</TABLE>
5. OTHER EVENTS
(a) In December, 1997, in connection with a five year extension of its
labor agreement with the Amalgamated Transit Union (which represents
approximately 1,500 drivers, escorts and mechanics render- ing services on
behalf of the New York City Board of Education), the Company negotiated and paid
a $1.7 million non-recurring lump sum bonus to all employees continuously and
actively employed from Decem- ber 1, 1996 to December 1, 1997. The agreement
also provided that there would be no further pay increases until November 1,
1998.
(b) In the quarter ended December 31, 1997 the Company recorded a $1.8
million provision for doubtful accounts in relation to a portion of its accounts
receivable. The majority of the accounts subject to the provision arose between
August 1993 and August 1996 from non-routine services furnished to certain
municipal customers. Following the conclusion of discussions with the relevant
customers during the quarter ended December 31, 1997, management determined that
the provision for doubtful accounts should be recorded.
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-Guarantor as of March 31, 1998 and for the three months and
nine months ended March 31, 1998.
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING BALANCE SHEET
MARCH 31, 1998
Atlantic
Express
Transportation Non Elimination
Corp. Guarantors Guarantor Entries Consolidated
- ---------------------------- ------------------ ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Current assets $ 8,890,487 $ 56,830,820 $ 9,410,938 $ (12,796,667) $ 62,335,578
Investment in affiliates 60,503,540 - - (60,503,540) -
Total assets 192,429,588 166,567,594 16,784,610 (171,373,075) 204,408,717
Current liabilities 1,047,200 23,276,929 8,642,883 (13,815,586) 19,151,426
Total liabilities 153,838,675 141,259,429 13,048,799 (127,341,539) 180,805,364
Stockholder's equity $ 38,590,913 $ 25,308,165 $ 3,735,811 $ (44,031,536) $ 23,603,353
- ---------------------------- ------------------ ------------------ ----------------- ------------------ ------------------
</TABLE>
5
<PAGE>
6. SUPPLEMENTAL FINANCIAL INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
Atlantic
Express
Transportation Non Elimination
Corp. Guarantors Guarantor Entries Consolidated
- --------------------------------- ------------------ ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ - $ 67,502,640 $ 1,386,474 $ (1,386,474) $ 67,502,640
Income (loss) from operations - 5,101,601 (10,140) - 5,091,461
Income before income taxes - 963,222 80,707 - 1,043,929
Net income of subsidiaries 574,159 - - (574,159) -
Net income $ 574,159 $ 520,892 $ 53,267 $ (574,159) $ 574,159
- --------------------------------- ------------------ ------------------ ----------------- ------------------ ------------------
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
NINE MONTHS ENDED MARCH 31, 1998
Atlantic
Express
Transportation Non Elimination
Corp. Guarantors Guarantor Entries Consolidated
- ------------------------------------ ------------------ ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C> <C>
Net revenues $ - $ 194,794,115 $ 4,465,288 $ (4,465,288) $ 194,794,115
Income (loss) from operations - 5,837,915 (108,650) - 5,729,265
Income (loss) before income taxes - (7,640,487) 497,953 - (7,142,534)
Net (loss) of subsidiaries (3,928,393) - - 3,928,393 -
Net income (loss) $ (3,928,393) $ (4,257,043) $ 328,649 $ 3,928,393 $ (3,928,394)
- ------------------------------------ ------------------ ------------------ ----------------- ------------------ ------------------
</TABLE>
<TABLE>
<CAPTION>
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 1998
Atlantic
Express
Transportation Non Elimination
Corp. Guarantors Guarantor Entries Consolidated
- -------------------------------------- ------------------ ------------------ ----------------- ------------------ -----------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities $ (22,684,533) $ 31,532,366 $ 1,223,634 $ - $ 10,071,467
Net cash (used in) investing
activities (21,942,765) (17,373,901) (2,917,194) - (42,233,860)
Net cash provided by (used in)
financing activities 37,342,039 (13,366,493) 914,408 - 24,889,954
Increase (decrease) in cash
and cash equivalents (7,285,259) 791,972 (779,152) - (7,272,439)
Cash and cash equivalents,
beginning of period 15,029,114 479,933 1,309,842 - 16,818,889
- -------------------------------------- ------------------ ------------------ ----------------- ------------------ -----------------
Cash and cash equivalents,
end of period $ 7,743,855 $ 1,271,905 $ 530,690 $ - $ 9,546,450
- -------------------------------------- ------------------ ------------------ ----------------- ------------------ -----------------
</TABLE>
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997
REVENUES. Revenues were $67.5 million for the three months ended
March 31, 1998 compared to $45.5 million for the three months ended March 31,
1997, an increase of $22.0 million or 48.2%. This increase was due primarily to
(i) $11.7 million in additional revenues as a result of the Central acquisition;
(ii) new contracts awarded to and increases in service requirements of existing
contracts in the Paratransit Division of $3.4 million; (iii) the award of the
Los Angeles contracts which added $2.4 million of revenues; (iv) the acquisition
of school bus routes in the State of New York in May 1997 which added $2.4
million of revenues; (v) the acquisition of a Pre-K/Medicaid business in the
State of New York which added $0.5 million of revenues; and (vi) $1.6 million in
contract rate increases and other billings.
GROSS PROFIT. Gross profit was $12.2 million for the three months
ended March 31, 1998 compared to $7.8 million for the three months ended March
31, 1997, an increase of $4.4 million or 56.7%. This increase was due primarily
to the increase in revenues described above and the gross profit of $1.9 million
generated by Central. As a percentage of revenues, gross profit increased to
18.1% for the quarter ended March 31, 1998 from 17.1% for the quarter ended
March 31, 1997. This increase was primarily due to a decrease in fuel costs.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses were $4.9 million for the three months ended March 31, 1998 compared to
$3.0 million for the three months ended March 31, 1997, an increase of $1.9
million or 60.1%. This increase was principally related to $0.7 million in
connection with the Central acquisition and $0.7 million in additional
administrative payroll and benefits related to infrastructure growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
was $2.3 million for the three months ended March 31, 1998 compared to $2.7
million for the three months ended March 31, 1997, a decrease of $0.4 million or
17.0%. In the three months ended March 31, 1998, the Company reassessed and
extended the useful life of certain fixed assets and contract rights, resulting
in lower depreciation and amortization expense of $0.9 million and $0.2 million,
respectively. These decreases were offset by depreciation expense of Central of
$0.2 million and amortization of goodwill and other items in connection with the
Central acquisition of $0.1 million and depreciation in connection with new
vehicle acquisitions.
INCOME (LOSS) FROM OPERATIONS. Income from operations was $5.1
million for the three months ended March 31, 1998 compared to $2.0 million for
the three months ended March 31, 1997, an increase of $3.1 million or 151.4%.
This increase was due primarily to the increased revenues and higher gross
profit margins offset in part by increases in general and administrative
expenses.
NET INTEREST EXPENSE. Net interest expense was $4.3 million for the
three months ended March 31, 1998 compared to $2.8 million for the three months
ended March 31, 1997, an increase of $1.5 million or 54.6%. This increase was
due primarily to interest in connection with the $110 million aggregate
principal amount of the Company's 10 3/4% Senior Secured Notes due 2004 issued
in February 1997 and $40 million aggregate principal amount of the Company's 10
3/4% Senior Secured Notes due 2004 (the "Additional Notes") issued in August
1997.
NET INCOME. The Company generated net income of $0.6 million for the
three months ended March 31, 1998 compared to a net loss of $1.5 million for the
three months ended March 31, 1997, an increase of $2.1 million, due to the
factors listed above.
7
<PAGE>
NINE MONTHS ENDED MARCH 31, 1998 COMPARED TO NINE MONTHS ENDED MARCH 31, 1997
REVENUES. Revenues were $194.8 million for the nine months ended
March 31, 1998 compared to $115.7 million for the nine months ended March 31,
1997, an increase of $79.1 million or 68.3%. This increase was due primarily to
(i) $53.7 million in additional revenues as a result of the Central acquisition;
(ii) new contracts awarded to and increases in service requirements of existing
contracts in the Paratransit Division of $7.9 million; (iii) the award of the
Los Angeles contracts which added $5.3 million of revenues; (iv) $1.5 million of
additional summer contract revenues; (v) the acquisition of school bus routes in
the State of New York in May 1997 which added $5.3 million of revenues; (vi) the
acquisition of a Pre-K/Medicaid business in the State of New York which added
$1.5 million of revenues; and (vii) $3.9 million in contract rate increases and
other billings.
GROSS PROFIT. Gross profit was $30.4 million for the nine months
ended March 31, 1998 compared to $18.3 million for the nine months ended March
31, 1997, an increase of $12.1 million or 65.7%. This increase was due primarily
to the increase in revenues described above and the gross profit generated by
Central of $7.7 million. As a percentage of revenues, gross profit decreased to
15.6% for the nine months ended March 31, 1998 from 15.8% for the nine months
ended March 31, 1997. This decrease was primarily due to a one time $1.7 million
bonus (see Note 5(a) of Notes to Consolidated Financial Statements) and the
generally lower gross margins of Central as compared to the school bus
transportation business.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses were $15.6 million for the nine months ended March 31, 1998 compared to
$8.6 million for the nine months ended March 31, 1997, an increase of $7.0
million or 82.0%. This increase was principally related to a provision for
doubtful accounts of $1.8 million (see Note 5(b) of Notes to Consolidated
Financial Statements), $2.4 million in connection with the Central acquisition
and $1.8 million in additional administrative payroll and benefits related to
infrastructure growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
was $9.0 million for the nine months ended March 31, 1998 compared to $8.1
million for the nine months ended March 31, 1997, an increase of $0.9 million or
11.0%. This increase was due to depreciation expense of Central of $1.1 million,
amortization of goodwill and other items in connection with the Central
acquisition of $0.4 million and depreciation in connection with the purchase of
new vehicles partially offset by a $1.1 million decrease in depreciation and
amortization due to the Company reassessing and extending the useful life of
certain fixed assets and contract rights.
INCOME (LOSS) FROM OPERATIONS. Income from operations was $5.7
million for the nine months ended March 31, 1998 compared to $1.6 million for
the nine months ended March 31, 1997, an increase of $4.1 million or 251.9%.
This increase was due primarily to increased revenues and higher gross margins
offset by increases in general and administrative costs.
NET INTEREST EXPENSE. Net interest expense was $13.4 million for the
nine months ended March 31, 1998 compared to $6.0 million for the nine months
ended March 31, 1997, an increase of $7.4 million or 124.9%. This increase was
due primarily to interest in connection with the $110 million aggregate
principal amount of the Company's 10 3/4% Senior Secured Notes due 2004 issued
in February 1997 and $40 million aggregate principal amount of the Additional
Notes issued in August 1997.
NET LOSS. The Company generated a net loss of $3.9 million for the
nine months ended March 31, 1998 compared to a net loss of $3.6 million
(including $1.1 million in extraordinary charges, net of taxes) for the nine
months ended March 31, 1997, a increase of $0.3 million, due to the factors
described above.
8
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Management anticipates total capital expenditures of $ 27.5 million
in fiscal 1998. Approximately $24.0 million were made by March 31, 1998,
including $9.3 million for the purchase of buses for Los Angeles contracts
(which was funded from the proceeds of the offering of the Additional Notes) and
$14.7 million of capital expenditures for additional vehicles, property and
equipment. In connection with the newly awarded school bus contracts, the
Company anticipates capital expenditures of approximately $11 million to be made
in the first quarter of fiscal 1999. The Company is reviewing its options as to
the method of financing these expenditures.
The statements regarding the Company's anticipated capital
expenditures are "forward-looking" statements which involve known and unknown
risks and uncertainties, such as the Company's ability to meet or exceed its
growth plans and/or available financing, which may cause the actual capital
expenditures to differ materially from the currently anticipated amounts.
NET CASH PROVIDED BY OPERATING ACTIVITIES. Net cash provided by
operating activities of $10.1 million for the nine months ended March 31, 1998,
resulted primarily from increases in working capital of $5.2 million, plus
noncash items of $12.0 million ($10.2 million of which relates to depreciation
and amortization) offset by net loss of $3.9 million and $3.4 million increase
in deferred income taxes.
NET CASH USED IN INVESTING ACTIVITIES. In July 1997 the Company
acquired Central for $21.5 million (net of $0.2 million cash acquired), which
was funded from the proceeds of the Additional Notes and the Company's agreement
to issue $2.2 million in mortgage notes relating to certain real property. For
the nine months ended March 31, 1998 the Company made $24.0 million of capital
expenditures to acquire additional vehicles, property and equipment and to
purchase assets previously leased. Of these capital expenditures $6.4 million
were directly financed and $9.3 million were financed from the proceeds of the
Additional Notes. In addition, the Company purchased $2.7 million of marketable
securities.
NET CASH PROVIDED BY FINANCING ACTIVITIES. Net cash provided by
financing activities totaled $24.9 million due primarily to the net proceeds of
the offering of the Additional Notes and $0.9 million transferred from
restricted cash, offset by principal payments on borrowings primarily in
connection with the acquisition of Central and $3.6 million in deferred
financing costs. In addition, the Company incurred $6.4 million of indebtedness
to directly finance capital expenditures for the period.
At March 31, 1998 the Company's total debt and stockholder's equity
were $156.6 million and $23.6 million, respectively.
9
<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
None.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange Act of
1934, the Company has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Atlantic Express Transportation Corp.
By: /s/ Nathan Schlenker
--------------------------------
Nathan Schlenker
Chief Financial Officer
May 15, 1998
11
<PAGE>
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT PAGE
27.1 Financial Data Schedule E-2
E-1
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q AT
MARCH 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 9,546,450
<SECURITIES> 8,743,872
<RECEIVABLES> 38,789,163
<ALLOWANCES> 2,000,000
<INVENTORY> 7,310,034
<CURRENT-ASSETS> 62,335,578
<PP&E> 184,644,438
<DEPRECIATION> 85,947,196
<TOTAL-ASSETS> 204,408,717
<CURRENT-LIABILITIES> 19,151,426
<BONDS> 156,622,862
0
0
<COMMON> 250,000
<OTHER-SE> 23,353,353
<TOTAL-LIABILITY-AND-EQUITY> 204,408,717
<SALES> 50,538,869
<TOTAL-REVENUES> 194,794,115
<CGS> 43,638,457
<TOTAL-COSTS> 180,076,437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,750,000
<INTEREST-EXPENSE> 13,400,641
<INCOME-PRETAX> (7,142,534)
<INCOME-TAX> (3,214,140)
<INCOME-CONTINUING> (7,142,534)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,928,394)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
