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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1999 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
--------------------------------------------------
ATLANTIC EXPRESS TRANSPORTATION CORP.
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 13-392-3467
- --------------------------------------- --------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7 North Street, Staten Island, New York, 10302-1205
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(718) 442-7000
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(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
Page
----
ITEM 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1998 (audited) and
March 31, 1999 (unaudited) ..................................... 1
Consolidated Statements of Operations for the Three Month
and Nine Month Periods Ended March 31, 1998 (unaudited)
and 1999 (unaudited) ........................................... 2
Consolidated Statements of Comprehensive Income (Loss) for
the Three Months and Nine Months Ended March 31, 1998
(unaudited) and 1999 (unaudited) ............................... 3
Consolidated Statements of Cash Flows for the Nine Month
Periods Ended March 31, 1998 (unaudited) and 1999
(unaudited) .................................................... 4
Notes to Consolidated Financial Statements (unaudited) ........... 5-8
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................ 9-12
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk .................................................... 13
PART II. Other Information 13
Signatures ........................................................... 14
Index to Exhibits .................................................... E-1
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, March 31,
1998 1999
------------ ------------
(audited) (unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents .................................... $ 13,772,537 $ 4,381,703
Current portion of marketable securities ..................... 850,000 2,860,200
Accounts receivable, net of allowance for doubtful accounts .. 37,310,006 40,619,548
Inventories .................................................. 10,762,839 12,130,276
Notes receivable ............................................. 1,182,425 106,994
Prepaid expenses and other current assets .................... 5,692,610 6,746,360
------------ ------------
Total current assets ............................... 69,570,417 66,845,081
------------ ------------
Property, plant and equipment, less accumulated depreciation ...... 99,887,054 125,469,447
------------ ------------
Other assets:
Goodwill, net ................................................ 12,469,422 12,224,991
Notes receivable from affiliates ............................. 510,000 --
Investments .................................................. 229,000 75,000
Marketable securities ........................................ 7,027,937 6,306,004
Deferred lease expense ....................................... 334,115 272,889
Transportation contract rights, net .......................... 3,807,743 8,772,872
Deferred financing and organization costs, net ............... 8,310,723 7,146,279
Due from affiliates .......................................... 672,589 883,117
Notes receivable ............................................. 25,000 17,157
Deposits and other noncurrent assets ......................... 1,394,301 1,822,120
Deferred tax assets .......................................... 2,087,000 4,202,568
Covenant not to compete, net ................................. 160,000 229,750
------------ ------------
Total other assets ................................. 37,027,830 41,952,747
============ ============
.................................................................. $206,485,301 $234,267,275
============ ============
Liabilities and Stockholder's Equity
Current:
Current portion of long-term debt ............................ $ 641,574 $ 20,456,128
Accounts payable ............................................. 2,250,615 2,943,138
Accrued compensation ......................................... 4,703,334 10,788,150
Current portion of insurance reserve ......................... 3,657,442 4,058,200
Accrued interest ............................................. 6,776,630 2,878,885
Other accrued expenses and current liabilities ............... 4,158,333 5,842,730
------------ ------------
Total current liabilities .......................... 22,187,928 46,967,231
------------ ------------
Long-term debt, net of current portion ............................ 157,284,116 160,142,723
------------ ------------
Premium on bond issuance .......................................... 1,202,550 1,041,000
------------ ------------
Other long-term liabilities ....................................... 5,641,135 5,789,853
------------ ------------
Stockholder's equity:
Common stock, no par value - shares authorized 200; issued
and outstanding 100 ..................................... 250,000 250,000
Additional paid-in capital ................................... 13,188,926 15,898,517
Retained earnings ............................................ 6,354,353 3,095,434
Accumulated other comprehensive income:
Unrealized gain on marketable securities, net ........... 376,293 1,082,517
------------ ------------
Total stockholder's equity ......................... 20,169,572 20,326,468
------------ ------------
$206,485,301 $234,267,275
============ ============
</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,
------------------------------ ------------------------------
1998 1999 1998 1999
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues ....................................... $ 67,502,640 $ 77,280,417 $ 194,794,115 $ 233,281,518
------------- ------------- ------------- -------------
Costs and expenses:
Cost of operations ........................ 55,264,597 63,273,504 164,433,718 196,333,550
General and administrative ................ 4,869,509 5,170,018 15,642,719 15,360,660
Depreciation and amortization ............. 2,277,073 3,124,050 8,988,413 9,104,032
------------- ------------- ------------- -------------
62,411,179 71,567,572 189,064,850 220,798,242
------------- ------------- ------------- -------------
Income (loss) from operations ........ 5,091,461 5,712,845 5,729,265 12,483,276
Interest ....................................... (4,343,472) (5,080,341) (13,400,641) (15,161,914)
Other income (expense) ......................... 295,940 (49,750) 528,842 (122,748)
------------- ------------- ------------- -------------
Income (loss) before nonrecurring
item and benefit for income
taxes ............................. 1,043,929 582,754 (7,142,534) (2,801,386)
Nonrecurring item .............................. -- -- -- (2,709,591)
------------- ------------- ------------- -------------
Income (loss) before provision
(benefit) for income taxes ........ 1,043,929 582,754 (7,142,534) (5,510,977)
Provision (benefit) for income taxes ........... 469,770 262,241 (3,214,140) (2,479,937)
------------- ------------- ------------- -------------
Net income (loss) ................... $ 574,159 $ 320,513 $ (3,928,394) $ (3,031,040)
============= ============= ============= =============
</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 Nine Months Ended
March 31, March 31,
------------------------- --------------------------
1998 1999 1998 1999
----------- ----------- ----------- -----------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Net income (loss) .......................... $ 574,159 $ 320,513 $(3,928,394) $(3,031,040)
Other comprehensive income (loss):
Unrealized gain (loss) on marketable
securities ....................... 300,049 (245,154) 386,406 706,224
----------- ----------- ----------- -----------
Comprehensive income (loss) ............... $ 874,208 $ 75,359 $(3,541,988) $(2,324,816)
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------------
1998 1999
------------ ------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss .......................................................... $ (3,928,394) $ (3,031,040)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Gain on sale of marketable securities ........................ (527,817) (977,358)
Deferred income taxes ........................................ (3,418,438) (2,479,937)
Depreciation ................................................. 7,916,119 8,201,044
Amortization ................................................. 2,299,465 1,844,227
Write-off of accounts receivable ............................. 480,000 --
Reserve for doubtful accounts receivable ..................... 1,270,000 90,000
Interest accrued on notes receivable ......................... (239,346) --
Transfer from restricted cash ................................ 914,408 --
Nonrecurring item ............................................ -- 2,709,591
Decrease (increase) in:
Accounts receivable and retainage ....................... (1,146,944) (2,779,532)
Inventories ............................................. 3,320,241 (1,202,564)
Prepaid expenses and other current assets ............... (399,776) (965,630)
Deferred lease expense .................................. 114,177 61,226
Deposits and other noncurrent assets .................... (220,891) 221,904
Increase (decrease) in:
Accounts payable ........................................ (376,571) 614,337
Accrued expenses and other current liabilities .......... 3,783,272 2,862,356
Other long-term liabilities ............................. 1,405,345 (851,283)
------------ ------------
Net cash provided by operating activities ............... 11,244,850 4,317,341
------------ ------------
Cash flows from investing activities:
Acquisition of subsidiaries (net of cash acquired of $207,441
and $1,100,009 in 1998 and 1999 respectively) ................ (21,519,397) (6,014,361)
Proceeds from sale of fixed assets ................................ 453,550 40,045
Additions to property, plant and equipment ........................ (17,618,263) (21,536,621)
Purchase of transportation contract rights ........................ (57,139) (69,540)
Due from affiliates ............................................... (541,753) (336,978)
Notes receivable .................................................. (517,685) 1,593,274
Proceeds from sale of investment .................................. -- 196,408
Marketable securities sold (purchased), net ....................... (2,692,148) 352,907
------------ ------------
Net cash used in investing activities ................... (42,492,835) (25,774,866)
------------ ------------
Cash flows from financing activities:
Proceeds of additional borrowings ................................. 41,400,000 17,671,251
Principal payments on borrowings .................................. (13,366,493) (5,374,518)
Deferred financing and organization costs ......................... (3,589,107) (993)
Other ............................................................. (468,854) (229,049)
------------ ------------
Net cash provided by financing activities .................... 23,975,546 12,066,691
------------ ------------
Net decrease in cash and cash equivalents .............................. (7,272,439) (9,390,834)
Cash and cash equivalents, beginning of period ......................... 16,818,889 13,772,537
------------ ------------
Cash and cash equivalents, end of period ............................... $ 9,546,450 $ 4,381,703
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ..................................................... $ 15,029,925 $ 10,268,144
Income taxes ................................................. 362,809 210,962
Supplemental schedule of noncash investing and financing activities:
Loans incurred for purchase of property, plant and equipment ...... $ 6,368,900 $ 5,823,824
Liability incurred for acquisition of contract rights ............. -- 1,000,000
Additional paid-in capital contributed ............................ -- 2,709,591
Transfer of bus from inventory to fixed assets .................... 47,558 --
</TABLE>
See accompanying notes to 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) which includes 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. Inventories
Inventories comprised the following:
June 30, March 31,
1998 1999
----------- -----------
Parts and fuel ............... $ 3,921,237 $ 4,168,859
Buses ........................ 6,841,602 7,961,417
----------- -----------
$10,762,839 $12,130,276
=========== ===========
4. Subsequent Event
Effective April 1, 1999, the Company sold five subsidiaries, acquired
during the 2nd quarter of fiscal 1999, to an affiliate for a price equal to its
original investment in these subsidiaries plus their net earnings since the
dates of acquisition. In addition to the purchase price of $7.5 million, the
Company was repaid $2.8 million of inter-company advances made to these
subsidiaries. The gross proceeds ($10.3 million) were received on April 28, 1999
and used to reduce borrowings under the Company's Revolving Line of Credit.
5
<PAGE>
5. 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
its subsidiaries which are Guarantors and Non-Guarantors of the Notes as of and
for the nine months ended March 31, 1999, and a consolidating balance sheet as
of June 30, 1998 and consolidating statements of operations for the three months
ended March 31, 1999 and 1998 and for the nine months ended March 31, 1998, and
consolidating statement of cash flows for the nine months ended March 31, 1998.
Condensed Consolidating Balance Sheet
March 31, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets ......................... $ 2,082,418 $ 60,629,266 $ 4,133,397 $ -- $ 66,845,081
Investment in affiliates ............... 70,036,491 -- -- (70,036,491) --
Total assets ........................... 207,695,909 209,156,586 13,730,964 (196,316,184) 234,267,275
Current liabilities .................... 19,465,761 22,537,692 4,963,778 -- 46,967,231
Total liabilities ...................... 170,506,761 163,322,150 9,713,631 (129,601,735) 213,940,807
Stockholder's equity ................... 37,189,148 45,834,436 4,017,333 (66,714,449) 20,326,468
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended March 31, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues ........................... $ -- $ 76,467,602 $ 812,815 $ -- $ 77,280,417
Income (loss) from operations .......... (311,781) 5,650,639 373,987 -- 5,712,845
Income (loss) before nonrecurring
item, (provision for) benefit
from income taxes ................. (311,781) 520,548 373,987 -- 582,754
Nonrecurring item ...................... -- -- -- -- --
Net income of subsidiaries ............. 491,993 -- -- (491,993) --
Net income ............................. 320,513 286,300 205,693 (491,993) 320,513
</TABLE>
Condensed Consolidating Statement of Operations
Nine months ended March 31, 1999
<TABLE>
<CAPTION>
Atlantic
Express
Transportation Guarantor Non- Elimination
Corp. Subsidiaries Guarantor Entries Consolidated
-------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues ........................... $ -- $ 232,112,007 $ 4,255,047 $ (3,085,536) $ 233,281,518
Income (loss) from operations .......... (632,687) 12,479,920 636,043 -- 12,483,276
Income (loss) before nonrecurring
item, (provision for) benefit
from income taxes ................. (632,687) (2,804,742) 636,043 -- (2,801,386)
Nonrecurring item ...................... (2,709,591) -- -- -- (2,709,591)
Net loss of subsidiaries ............... (1,192,787) -- -- 1,192,787 --
Net income (loss) ..................... (3,031,040) (1,542,611) 349,824 1,192,787 (3,031,040)
</TABLE>
6
<PAGE>
Condensed Consolidating Statement of Cash Flows
Nine months ended March 31, 1999
<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 .............. $ (17,934,338) $ 24,231,629 $ (1,979,950) $ -- $ 4,317,341
Net cash provided by (used in)
investing activities .............. (6,177,592) (19,950,181) 352,907 -- (25,774,866)
Net cash provided by (used in)
financing activities .............. 17,441,209 (5,374,518) -- -- 12,066,691
Decrease in cash and cash
equivalents ....................... (6,670,721) (1,093,070) (1,627,043) -- (9,390,834)
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 ..................... $ 262,189 $ 2,921,514 $ 1,198,000 $ -- $ 4,381,703
</TABLE>
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 March 31, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries 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>
7
<PAGE>
Condensed Consolidating Statement of Operations
Nine months ended March 31, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries 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>
Condensed Consolidating Statement of Cash Flows
Nine months ended March 31, 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 .............. $ (22,684,533) $ 31,791,341 $ 2,138,042 $ -- $ 11,244,850
Net cash used in investing
activities ........................ (21,942,765) (17,632,876) (2,917,194) -- (42,492,835)
Net cash provided by (used in
financing activities .............. 37,342,039 (13,366,493) -- -- 23,975,546
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>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company believes that this report 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 March 31, 1999 compared to three months ended March 31, 1998.
Revenues. Revenues from Transportation Operations were $68.5 million for
the three months ended March 31, 1999 compared to $57.3 million for the three
months ended March 31, 1998, an increase of $11.3 million or 19.7%. This
increase was due primarily to (i) an increase in billings on existing operations
of $5.1 million; (ii) the award of new contracts which added $3.6 million of
revenues; and (iii) $2.6 million from operations of five newly acquired
subsidiaries. These subsidiaries were sold to an affiliate effective April 1,
1999 (see Note 4 to Consolidated Financial Statements). Revenues from Bus Sales
Operations were $8.8 million for the three months ended March 31, 1999 compared
to $10.2 million for the three months ended March 31, 1998, a decrease of $1.5
million or 14.4%. This decrease was due primarily to timing differences in the
delivery of vehicles.
Gross Profit. Gross profit from Transportation Operations was $13.4
million for the three months ended March 31, 1999 compared to $10.9 million for
the three months ended March 31, 1998, an increase of $2.6 million or 23.8%.
This increase was primarily due to increased revenues and $0.9 million of gross
profit generated from operations of newly acquired subsidiaries. As a percentage
of revenues, gross profit increased to 19.6% for the three months ended March
31, 1999 from 19.0 % for the three months ended March 31, 1998. The increase in
gross profit percentage of 0.6% was primarily due to higher gross profit margins
of newly acquired subsidiaries. Gross profit for the Bus Sales Operations was
$0.6 million for the three months ended March 31, 1999 compared to $1.4 million
for the three months ended March 31, 1998, a decrease of $0.8 million or 59.2%.
As a percentage of revenues gross profit decreased to 6.4% for the three months
ended March 31, 1999 from 13.5% for the three months ended March 31, 1998. The
reduction in gross profit percentage was primarily due to (i) lower margins
generated on sales of commercial vehicles due to increased competition and (ii)
increase in the current quarter of the proportion of sales in the New Jersey
market which has had historically lower gross margins than the New York market.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $4.3 million for the three months ended
March 31, 1999 compared to $4.1 million for the three months ended March 31,
1998, an increase of $0.2 million or 4.4%. This increase was primarily due to
general and administrative expenses of newly acquired subsidiaries. As a
percentage of revenues, general and administrative expenses decreased to 6.2%
for the three months ended March 31, 1999 from 7.1% for the three months ended
March 31, 1998. General and administrative expenses for the Bus Sales Operations
were $0.9 million for the three months ended March 31, 1999 compared to $0.8
million for the three months ended March 31, 1998, an increase of $0.1 million
or 15.4%. As a percentage of revenues, general and administrative expenses
increased to 10.3% for the three months ended March 31, 1999 from 7.6% for the
three months ended March 31, 1998.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $2.9 million for the three
months ended March 31, 1999 compared to $2.1 million for the three months ended
March 31, 1998, an increase of $0.9 million. This increase was primarily due to
depreciation in connection with the purchase of new vehicles and depreciation
and amortization of assets of newly acquired subsidiaries. Depreciation and
amortization of Bus Sales Operations was $0.2 million for the three months ended
March 31, 1999 and 1998.
9
<PAGE>
Income from operations. Income from operations was $5.7 million for the
three months ended March 31, 1999 compared to $5.1 million for the three months
ended March 31, 1998, an increase of $0.6 million. This increase was due to the
net effect of the items discussed above.
Net interest expense. Net interest expense was $5.1 million for the three
months ended March 31, 1999 compared to $4.3 million for the three months ended
March 31, 1998, an increase of $0.7 million or 17.0%. This increase was
primarily due to increased interest in connection with the Company's Revolving
Credit Facility.
Net income. The Company generated net income of $0.3 million for the three
months ended March 31, 1999 compared to $0.6 million for the three months ended
March 31, 1998, a decrease of $0.3 million due to the net effect of the items
discussed above.
Nine months ended March 31, 1999 compared to nine months ended March 31, 1998
Revenues. Revenues from Transportation Operations were $172.6 million for
the nine months ended March 31, 1999 compared to $144.6 million for the nine
months ended March 31, 1998, an increase of $28.0 million or 19.4%. This
increase was due primarily to (i) the award of new contracts which added $11.9
million of revenues; (ii) an increase in billings of existing operations of $9.3
million; (iii) $1.1 million of additional summer revenues and (iv) $5.7 million
from operations of five newly acquired subsidiaries. These subsidiaries were
sold to an affiliate effective April 1, 1999 (see Note 4 to Consolidated
Financial Statements). Revenues from Bus Sales Operations were $60.7 million for
the nine months ended March 31, 1999 compared to $50.2 million for the nine
months ended March 31, 1998, an increase of $10.5 million or 20.8%. This
increase was primarily due to increased volume.
Gross Profit. Gross profit from Transportation Operations was $30.8
million for the nine months ended March 31, 1999 compared to $23.8 million for
the nine months ended March 31, 1998, an increase of $7.0 million or 29.2%. As a
percentage of revenues, gross profit increased to 17.8% for the nine months
ended March 31, 1999 from 16.5% for the nine months ended March 31, 1998. In the
second quarter of fiscal 1998, there was a one time bonus which reduced gross
profit for the nine months ended March 31, 1998 by $1.7 million or 1.2%. The
increase in gross profit (exclusive of the one time bonus) of $5.3 million was
due primarily to (i) increased revenues and (ii) $2.1 million of gross profit
generated from newly acquired subsidiaries. Gross profit from Bus Sales
Operations was $6.2 million for the nine months ended March 31, 1999 compared to
$6.6 million for the nine months ended March 31, 1998, a decrease of $0.4
million or 5.7%. As a percentage of revenues, gross profit decreased to 10.2%
for the nine months ended March 31, 1999 from 13.1% for the nine months ended
March 31, 1998. This decrease was due primarily to an increase in the current
nine months of the proportion of sales in the New Jersey market which has had
historically lower gross margins then the New York market and lower margins
generated by sales of commercial vehicles.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $12.5 million for the nine months ended
March 31, 1999 compared to $13.1 million for the nine months ended March
31,1998, a decrease of $0.6 million or 4.7%. This decrease was primarily due to
a $1.8 million provision for doubtful accounts taken in the second quarter of
fiscal 1998 partially offset by increases in professional fees of $0.8 million
and $0.6 million of general and administrative expenses incurred by newly
acquired subsidiaries. As a percentage of revenues, general and administrative
expenses decreased to 7.2% for the nine months ended March 31, 1999 from 9.1%
for the nine months ended March 31, 1998. General and administrative expenses
for the Bus Sales Operations was $2.9 million for the nine months ended March
31, 1999 compared to $2.5 million for the nine months ended March 31, 1998, an
increase of $0.3 million or 13.2%. As a percentage of revenues, general and
administrative expenses decreased to 4.7% for the nine months ended March 31,
1999 from 5.0% for the nine months ended March 31, 1998.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $8.5 million for the nine months
ended March 31, 1999 compared to $8.1 million for the nine months ended March
31, 1998, an increase of $0.4 million. This increase was due primarily to
depreciation and amortization incurred by newly acquired subsidiaries ($0.8
million) and
10
<PAGE>
increases in depreciation in connection with the purchase of new vehicles
partially offset due to the Company reassessing (on January 1, 1998) and
extending the useful life of certain fixed assets which reduced depreciation by
approximately $1.8 million for the six months ended December 31, 1998.
Depreciation and amortization of the Bus Sales Operations were $0.6 million for
the nine months ended March 31, 1999 compared to $0.9 million for the nine
months ended March 31, 1998, a decrease of $0.3 million.
Income from operations. Income from operations was $12.5 million for the
nine months ended March 31, 1999 compared to $5.7 million for the nine months
ended March 31, 1998, an increase of $6.8 million. This increase was due to the
net effect of the items discussed above.
Net interest expense. Net interest expense was $15.2 million for the nine
months ended March 31, 1999 compared to $13.4 million for the nine months ended
March 31, 1998, an increase of $1.8 million. This increase was primarily due to
increased interest in connection with the Company's revolving line of credit.
Loss before nonrecurring item and taxes. Loss before nonrecurring item and
taxes was $2.8 million for the nine months ended March 31, 1999 compared to $7.1
million for the nine months ended March 31, 1998, a decrease of $4.3 million.
Nonrecurring item. Nonrecurring item was $2.7 million for the nine months
ended March 31, 1999. This represented fees and expenses paid by the
shareholders of Atlantic Express Transportation Group, Inc. (the parent of AETC)
for the benefit of the Company. There were no nonrecurring items for the nine
months ended March 31, 1998.
Net loss. The Company generated a net loss of $3.0 million for the nine
months ended March 31, 1999 compared to a net loss of $3.9 million for the nine
months ended March 31, 1998, a decrease of $0.9 million due to the net effect of
the items discussed above.
Liquidity and Capital Resources
Management anticipates total capital expenditures of $28.9 million in
fiscal 1999 of which approximately $27.4 million were made by March 31, 1999.
This included approximately $22.3 million for purchase of new vehicles and $5.1
million for other property and equipment.
Net Cash Provided By Operating Activities. Net cash provided by operating
activities of $4.3 million for the nine months ended March 31, 1999 resulted
primarily from non-cash items of depreciation and amortization of $10.0 million
and a nonrecurring item of $2.7 million offset by (i) a net loss of $3.0
million; (ii) $2.5 million increase in deferred income taxes; (iii) $1.5 million
use of cash for working capital and (iv) $1.4 million decrease in other sources
of funds.
Net Cash Used in Investing Activities. For the nine months ended March 31,
1999, the Company made $27.4 million of capital expenditures to acquire
additional vehicles and equipment. Of these capital expenditures $5.8 million
were directly financed. Effective October 1, 1998, the Company acquired five new
subsidiaries for $6.0 million (net of $1.1 million cash acquired). These
acquisitions were funded from the Company's revolving line of credit.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities totaled $12.1 million due primarily to $17.9 million net borrowings
under the Company's revolving line of credit, partially offset by principal
payments of $5.4 million on other borrowings.
Effective April 1, 1999 the Company sold its five newly acquired
subsidiaries to an affiliate (see Note 4 to Consolidated Financial Statements).
The gross proceeds received from this transaction ($10.3 million) were used to
reduce borrowings under the Company's $30.0 million Revolving Credit Facility
(the "Facility"). At March 31, 1999, $10.6 million of the Facility was undrawn.
The extension of the Facility, which expires February 4, 2000, is currently
being negotiated with its existing lender and the Company expects that an
identical facility will be in place prior to the first quarter of the Company's
2000 fiscal year.
11
<PAGE>
The Company believes that its current operating cash flow, along with its
borrowing capacity under a revolving credit facility will provide it with
sufficient liquidity to conduct its operations and pay interest under the
Facility and Senior Notes for the fiscal year ended June 30, 2000.
At March 31, 1999, the Company's total debt and stockholder's equity were
$180.6 million and $20.3 million respectively.
Impact of Year 2000 on the Company's Systems
The Company has completed its assessment of all of its computerized
systems and has determined what changes, if any, need to be made so that such
systems, which include information and non-information technology systems, will
function properly with respect to dates in the year 2000 and thereafter to
ensure that the Company's financial, information and operational systems are
year 2000 compliant. The Company has developed a program to implement these
changes, which consists of the following phases: (i) developing solutions for
affected technology and systems; (ii) modifying or replacing affected technology
and systems; (iii) testing and verifying solutions; (iv) implementing solutions
and (v) developing contingency plans. The Company has completed its year 2000
compliance at 6 of its locations, including its corporate office, which is its
most important and most computer-reliant location. The Company intends to
complete its compliance of its remaining 27 locations according to the following
schedule: 3 locations to become compliant by June 30,1999, 22 locations to
become compliant by September 30, 1999 and 2 locations to become compliant by
October 31, 1999.
Costs incurred to date directly related to the year 2000 issue have not
been material to the Company. Having completed its assessment of the changes
required to become year 2000 compliant, the Company expects that the total cost
of meeting the goals of its year 2000 program will not be material and will be
expensed or capitalized as incurred.
Management continues to assess the potential impact of any year 2000
non-compliant systems of its vendors or customers and has begun communicating
with those vendors and customers with whom the Company does significant
business. The Company has received assurances from its two largest customers,
which represented approximately 32% of the Company's net sales for fiscal 1998,
its two major fuel suppliers, which provided approximately 69% of the Company's
fuel requirements in fiscal 1998, and its three largest suppliers of parts and
tires, which provided approximately 26% of the Company's requirements for parts
and tires in fiscal 1998, that they are or will be year 2000 compliant by the
end of 1999. A third-party's failure to become year 2000 compliant or the
Company's inability to become compatible with third parties with which the
Company has a material relationship may have an adverse effect on the Company.
Although initial responses from the Company's major customers and suppliers of
fuel, parts and tires have assured the Company that they will be year 2000
compliant before the end of 1999, there can be no assurance that the Company's
operations will not be materially adversely impacted by any potential systems
problems incurred by such vendors or customers.
The Company is in the process of developing its contingency plan for its
facilities to provide for the most reasonable likely worst case scenarios
regarding year 2000 compliance. This contingency plan is expected to be
completed in 1999.
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-in capital) and distributions to owners (dividends). This
statement did not change the current accounting treatment for components of
comprehensive income.
12
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
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.
13
<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
May 13, 1999
14
<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.
Exhibit Sequential Page
Number Exhibit Number
------ ------- ------
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
E-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-Q at
March 31, 1999 and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 4,381,703
<SECURITIES> 9,166,204
<RECEIVABLES> 43,236,816
<ALLOWANCES> 1,610,000
<INVENTORY> 12,130,276
<CURRENT-ASSETS> 66,845,081
<PP&E> 227,734,505
<DEPRECIATION> 102,265,058
<TOTAL-ASSETS> 234,267,275
<CURRENT-LIABILITIES> 46,967,231
<BONDS> 180,598,851
0
0
<COMMON> 250,000
<OTHER-SE> 20,076,468
<TOTAL-LIABILITY-AND-EQUITY> 234,267,275
<SALES> 60,656,345
<TOTAL-REVENUES> 233,281,518
<CGS> 54,477,279
<TOTAL-COSTS> 211,694,210
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 90,000
<INTEREST-EXPENSE> 15,161,914
<INCOME-PRETAX> (2,801,386)
<INCOME-TAX> (2,479,937)
<INCOME-CONTINUING> (5,510,977)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,031,040)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
