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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 September 30, 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
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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, 1999 (audited) and
September 30, 1999 (unaudited)............................ 1
Consolidated Statements of Operations for the Three Month
Periods Ended September 30, 1998 (unaudited) and 1999
(unaudited)................................................ 2
Consolidated Statements of Stockholder's Equity for the Three
Months Ended September 30, 1999 (unaudited)................ 3
Consolidated Statements of Cash Flows for the Three Month
Periods Ended September 30, 1998 (unaudited) and 1999
(unaudited)................................................ 4
Notes to Consolidated Financial Statements (unaudited).......... 5-7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................ 8-11
PART II. Other Information 12
Signatures........................................................... 13
Index to Exhibits.................................................... E-1
<PAGE>
<TABLE>
<CAPTION>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Balance Sheets
June 30, September 30,
1999 1999
------------- -------------
(audited) (unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents ................................. $ 855,983 $ 338,311
Current portion of marketable securities .................. 3,842,000 3,165,000
Accounts receivable, net of allowance for doubtful accounts 48,468,255 48,700,840
Inventories ............................................... 15,215,018 9,833,905
Notes receivable .......................................... 31,964 32,564
Prepaid expenses and other current assets ................. 6,190,766 5,500,181
------------- -------------
Total current assets ............................ 74,603,986 67,570,801
------------- -------------
Property, plant and equipment, less accumulated depreciation ... 119,138,827 123,707,200
------------- -------------
Other assets:
Goodwill, net ............................................. 12,143,514 12,062,037
Investments ............................................... 35,000 35,000
Marketable securities ..................................... 5,869,380 6,132,785
Deferred lease expense .................................... 148,155 144,038
Transportation contract rights, net ....................... 3,408,096 3,696,474
Deferred financing and organization costs, net ............ 8,018,053 7,541,231
Due from parent company ................................... 831,117 831,117
Notes receivable .......................................... 11,494 9,222
Deposit and other noncurrent assets ....................... 3,248,336 3,241,881
Deferred tax assets ....................................... 3,935,981 7,779,928
Covenant not to compete, net .............................. 120,000 110,000
------------- -------------
Total other assets .............................. 37,769,126 41,583,713
============= =============
$ 231,511,939 $ 232,861,714
============= =============
Liabilities and Stockholder's Equity
Current:
Current portion of long-term debt ......................... $ 21,411,180 28,112,254
Accounts payable .......................................... 2,453,411 3,715,178
Accrued compensation ...................................... 7,392,071 8,206,425
Current portion of insurance reserve ...................... 4,500,000 3,587,728
Accrued interest .......................................... 6,890,810 3,184,170
Other accrued expenses and current liabilities ............ 3,992,443 6,279,316
------------- -------------
Total current liabilities ...................... 46,639,915 53,085,071
------------- -------------
Long-term debt, net of current portion ......................... 159,921,440 160,279,921
------------- -------------
Premium on bond issuance ....................................... 987,150 933,300
------------- -------------
Other long-term liabilities .................................... 3,023,529 2,495,853
------------- -------------
Commitments and contingencies:
Stockholder's equity:
Common Stock, no par value, authorized shares 200;
issued and outstanding 100 shares ....................... 250,000 250,000
Additional paid-in capital ............................... 15,898,517 15,898,517
Accumulated other comprehensive income .................... 925,950 751,771
Retained earnings (deficit) ............................... 3,865,438 (832,719)
------------- -------------
Total stockholder's equity ...................... 20,939,905 16,067,569
------------- -------------
$ 231,511,939 $ 232,861,714
============= =============
</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,
------------------------------
1998 1999
------------ ------------
(unaudited)
<S> <C> <C>
Revenues:
Transportation Operations .................................................... $ 35,592,591 $ 43,785,012
Bus Sales Operations.......................................................... 35,440,196 38,599,199
------------ ------------
Total revenues.................................................................. 71,032,787 82,384,211
------------ ------------
Costs and expenses:
Cost of Operations - Transportation Operations................................ 33,276,570 40,468,547
Cost of Operations - Bus SalesOperations...................................... 31,379,503 34,628,461
General and administrative................................................... 4,584,422 5,910,604
Depreciation and amortization................................................ 2,855,986 3,440,581
------------ ------------
Total operating costs and expenses............................................. 72,096,481 84,448,193
------------ ------------
Loss from operations.......................................................... (1,063,694) (2,063,982)
Interest expense (net).......................................................... (4,817,603) (5,617,233)
Other expense .................................................................. -- (314,501)
------------ ------------
Loss before other items and benefit from income taxes ........................ (5,881,297) (7,995,716)
Cumulative effect of a change in accounting principle .......................... -- (546,388)
------------ ------------
Loss before benefit from income taxes......................................... (5,881,297) (8,542,104)
Benefit from income taxes....................................................... 2,646,583 3,843,947
------------ ------------
Net loss........................................................................ $ (3,234,714) $ (4,698,157)
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Stockholder's Equity
Three months ended September 30, 1999
<TABLE>
<CAPTION>
Accumulated
other
Common stock Additional Retained comprehensive
No par value paid-in capital earnings income Total
----------------- ------------------ -------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C>
Balance, June 30, 1999 $ 250,000 $ 15,898,517 $ 3,865,438 $ 925,950 $ 20,939,905
Net loss.................. -- -- (4,698,157) -- (4,698,157)
Unrealized loss on
marketable securities. -- -- -- (174,179) (174,179)
- ----------------------------------------------------------------------------------------------------------------------------------
Balance, September 30, 1999 $ 250,000 $ 15,898,517 $ (832,719) $ 751,771 $ 16,067,569
==================================================================================================================================
</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,
-----------------------------
1998 1999
------------ -------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ...................................................... $ (3,234,714) $ (4,698,157)
Adjustments to reconcile net loss to net cash (used in) provided by
operating activities:
Loss (gain) on sale of marketable securities ............. 23,940 (4,493)
Deferred income taxes .................................... (2,646,583) (3,843,947)
Depreciation ............................................. 2,494,083 3,200,376
Amortization ............................................. 676,326 641,390
Reserve for doubtful accounts receivable ................. 30,000 30,000
Interest accrued on note receivable ...................... (8,670) --
Decrease (increase) in:
Accounts receivable ................................. (3,811,569) (262,585)
Inventories ......................................... (1,222,070) 5,381,113
Prepaid expenses and other current assets ........... (381,416) 690,585
Deferred lease expense .............................. 30,661 4,117
Deposits and other noncurrent assets ................ (326,222) 6,456
Increase (decrease) in:
Accounts payable .................................... 191,927 1,261,767
Accrued expenses and other current liabilities ...... (2,268,096) (1,517,685)
Other long-term liabilities ......................... 102,410 (527,676)
------------ ------------
Net cash (used in) provided by operating activities . (10,349,993) 361,261
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment .................... (14,845,029) (7,428,749)
Notes receivable .............................................. 931,292 1,672
Marketable securities (purchased) sold, net ................... (2,293,126) 243,909
------------ ------------
Net cash used in investing activities ............... (16,206,863) (7,183,168)
------------ ------------
Cash flows from financing activities:
Proceeds of additional borrowings ............................. 18,760,246 6,469,809
Principal payments on borrowings .............................. (101,570) (165,574)
Deferred financing and organization costs ..................... (75,529) --
Other ......................................................... (89,099) --
------------ ------------
Net cash provided by financing activities ................ 18,494,048 6,304,235
------------ ------------
Net decrease in cash and cash equivalents .......................... (8,062,808) (517,672)
Cash and cash equivalents, beginning of period ..................... 13,772,537 855,983
------------ ------------
Cash and cash equivalents, end of period ........................... $ 5,709,729 338,311
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ................................................. $ 8,467,803 $ 8,651,538
Income taxes ............................................. 132,122 45,625
Supplemental schedule of noncash investing and financing activities:
Loans incurred for purchase of property, plant and equipment .. $ 5,686,617 $ 340,000
Liability incurred for acquisition of contract rights ......... -- 415,320
</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, 1999 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 1999 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
On July 1, 1999, the Company adopted the American Institute of
Certified Public Accountants Statement of Position 98-5 ("SOP 98-5") "Reporting
on the Costs of Start-Up Activities". In connection therewith, the Company
recorded a charge of $0.5 million described as the cumulative effect of a change
in accounting principle, which represented unamortized start-up costs as of June
30, 1999.
3. Inventories
Inventories comprised the following:
<TABLE>
<CAPTION>
June 30, September 30,
1999 1999
------------------ -------------------
<S> <C> <C>
Parts and fuel..................... $ 3,919,018 $ 3,537,420
Buses held for sale................ 11,296,000 6,296,485
------------------ -------------------
$ 15,215,018 $ 9,833,905
================== ===================
</TABLE>
4. Litigation
In June 1998, Atlantic Express Transportation Group, Inc. ("AETG") (the
"parent company") commenced litigation against National Express Group, PLC,
("National") asserting claims of "tortuous interference with business relations,
unfair competition and breach of contract".
Approximately $1.2 million of litigation expenses have been incurred
since the inception of the lawsuit, including $0.6 million incurred in the first
quarter of the current fiscal year.
5. Inter-Company Transactions
On August 11, 1999, after receiving a fairness opinion issued by an
investment bank of national standing, Central New York Coach Sales and Service,
Inc. and Jersey Bus Sales, Inc. (collectively "Central") entered into an
agreement with Atlantic Bus Distributors, Inc. ("ABD"), a wholly owned
subsidiary of AETG, to order certain buses through ABD. Central is required to
deposit fifteen percent of the cost of these vehicles simultaneously with ABD's
receipt of these vehicles from the manufacturers and pay the balance to ABD upon
Central's delivery of these vehicles to its customers or within one hundred and
twenty days, whichever comes first. The purchase price of each bus equals the
price at which ABD purchased such bus together with any costs incurred by ABD in
connection with the purchases of any such vehicles.
5
<PAGE>
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 of the Company's 103/4% Senior Secured
Notes as of and for the three months ended September 30, 1999, and a
consolidating balance sheet as of June 30, 1999 and consolidating statements of
operations and cash flows for the three months ended September 30, 1998.
Condensed Consolidating Balance Sheet
September 30, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
---------------- -------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Current assets .................... $ 3,561,964 $ 60,333,588 $ 3,675,249 $ -- $ 67,570,801
Investment in affiliates .......... 55,458,058 (55,458,058)
Total assets ...................... 211,251,114 206,081,513 11,027,326 (195,498,239) 232,861,714
Current liabilities ............... 30,630,337 17,947,332 4,507,402 -- 53,085,071
Total liabilities ................. 185,671,866 167,553,193 6,744,556 (143,175,470) 216,794,145
Stockholder's equity .............. 25,579,248 38,528,320 4,282,770 (52,322,769) 16,067,569
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended September 30, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
---------------- -------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Net revenues ............................... $ -- $ 82,319,712 $ 64,499 $ -- $ 82,384,211
Income (loss) from operations ............. -- (2,079,720) 15,738 -- (2,063,982)
Income (loss) before income taxes .......... -- (8,011,454) 15,738 -- (7,995,716)
Cumulative effect of a change in
accounting principle ..................... -- (546,388) -- -- (546,388)
Net loss of ................................ -- -- -- -- --
subsidiaries ............................... (4,698,157) 4,698,157
Net income (loss) .......................... (4,698,157) (4,706,813) 8,656 4,698,157 (4,698,157)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 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 ................. $(5,548,384) $ 6,388,054 $ (478,409) $ -- $ 361,261
Net cash provided by (used in)
investing activities ................. (63,269) (7,363,808) 243,909 -- (7,183,168)
Net cash provided by
financing activities ................. 6,129,809 174,426 -- 6,304,235
Increase (decrease) in cash and
cash equivalents ..................... 518,156 (801,328) (234,500) -- (517,672)
Cash and cash equivalents,
beginning of period .................. 324,134) 522,117 658,000 -- 855,983
Cash and cash equivalents,
end of period ........................ $ 194,022 $ (279,211) $ 423,500 $ -- $ 338,311
</TABLE>
6
<PAGE>
Condensed Consolidating Balance Sheet
June 30, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
---------------- -------------- ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
Current assets ............... $ 1,220,437 $ 68,829,160 $ 4,554,389 $ -- $ 74,603,986
Investment in affiliates...... 60,330,394 -- -- 60,330,394) --
Total assets ................. 208,820,247 204,637,409 12,596,989 (194,542,706) 231,511,939
Current liabilities .......... 22,655,804 18,583,172 5,400,939 46,639,915
Total liabilities ............ 171,016,512 161,403,850 8,570,505 (130,418,833) 210,572,034
Stockholder's equity ......... 37,803,735 43,233,559 4,026,484 (64,123,873) 20,939,905
</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>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 1998
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>
7. Subsequent Event
In November 1999, Congress Financial Corporation ("Congress") renewed
the Company's $30.0 million revolving credit facility (the "Facility") and the
Company's Accounts Purchase and Sale Agreement (the "Receivable Agreement") for
an additional two years commencing February 4, 2000.
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, 1999 compared to three months ended September
30, 1998.
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 $43.8 million
for the three months ended September 30, 1999 compared to $35.6 million for the
three months ended September 30, 1998, an increase of $8.2 million or 23.0%.
This increase was due primarily to (i) $1.4 million additional summer revenues;
(ii) $1.6 million as a result of new contracts awarded; and (iii) $5.2 million
due to contract rate increases and service requirements of existing contracts,
(including two additional revenue days in New York City in September 1999 as
compared to September 1998 which increased revenues by approximately $1
million). Revenues for the Bus Sales Operations were $38.6 million for the three
months ended September 30, 1999 compared to $35.4 million for the three months
ended September 30, 1998, an increase of $3.2 million or 8.9%. This increase was
primarily due to a $4.3 million increase in new vehicles sales partially offset
by a $1.1 million decrease in used bus sales.
Gross Profit. Gross profit from Transportation Operations was $3.3
million for the three months ended September 30, 1999 compared to $2.3 million
for the three months ended September 30, 1998, an increase of $1.0 million or
43.2%. As a percentage of revenues, gross profit increased to 7.6% for the three
months ended September 30, 1999 from 6.5% for the three months ended September
30, 1998. This increase was due primarily to increased revenues and gross profit
generated due to the increase in revenue days mentioned above (with no increase
in payroll days), partially offset by increases in labor costs due to the tight
labor market. Gross profit for the Bus Sales Operations was $4.0 million for the
three months ended September 30, 1999 compared to $4.1 million for the three
months ended September 30, 1998, a decrease of $0.1 million or 2.2%. As a
percentage of revenues, gross profit decreased to 10.3 % for the three months
ended September 30, 1999 from 11.5% for the three months ended September 30,
1998. 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 $5.0 million for the three
months ended September 30, 1999 compared to $3.6 million for the three months
ended September 30, 1998, an increase of $1.3 million or 36.5%. This increase
was principally related to increases in professional fees of $0.7 million
primarily in connection with the Company's litigation with National (see Note 4
to Consolidated Financial Statements) and additional administrative payroll,
benefits, and other general and administrative expenses due to expansion in new
areas. As a percentage of revenues, general and administrative expenses
increased to 11.3% for the three months ended September 30, 1999 from 10.2% for
the three months ended September 30, 1998. General and administrative expenses
for the Bus Sales Operations were $0.9 million for the three months ended
September 30, 1999 and 1998. As a percentage of revenues, general and
administrative expenses were 2.4% and 2.7% for the three months ended September
30, 1999 and 1998.
8
<PAGE>
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $3.2 million for the three
months ended September 30, 1999 compared to $2.7 million for the three months
ended September 30, 1998, an increase of $0.6 million. This increase was due to
additional 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, 1999 and 1998.
Income (loss) from operations. Loss from operations was $2.1 million
for the three months ended September 30, 1999 compared to a loss of $1.1 million
for the three months ended September 30, 1998 an increase of $1.0 million. This
increase was due to the net effect of the items discussed above.
Net interest expense. Net interest expense was $5.6 million for the
three months ended September 30, 1999 compared to $4.8 million for the three
months ended September 30, 1998, an increase of $0.8 million. This increase was
due primarily to an increase in the amount of interest paid to Congress.
Net loss. The Company generated a net loss of $4.7 million for the
three months ended September 30, 1999 compared to a net loss of $3.2 million for
the three months ended September 30, 1998 an increase of $1.5 million due to the
net effect of the items discussed above.
Liquidity and Capital Resources
Management anticipates total capital expenditures of approximately $16
million in fiscal 2000 of which $7.8 million were made by September 30, 1999.
Net Cash Provided By Operating Activities. Net cash provided by
operating activities of $0.4 million for the three months ended in September 30,
1999 resulted primarily from a $5.6 million increase in source of funds for
working capital plus non cash items of depreciation and amortization of $3.8
million offset by (i) a net loss of $4.7 million; (ii) $3.8 million increase in
deferred income taxes; and (iii) $0.5 million decrease in other sources of
funds.
Net Cash Used In Investing Activities. For the three months ended
September 30, 1999, the Company made $7.8 million of capital expenditures to
acquire additional vehicles and equipment. Of these capital expenditures $0.3
million were directly financed.
Net Cash Provided By Financing Activities. Net cash provided by
financing activities totaled $6.3 million for the three months ended September
30, 1999, due to $6.5 million net borrowing under the Company's revolving line
of credit, partially offset by principal payments of $0.2 on borrowings. In
addition, the Company incurred $0.3 million of indebtedness to directly finance
capital expenditures for the three months ended September 30, 1999.
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
believes that its Facility (of which $3.5 million was undrawn at September 30,
1999) and its Receivable Agreement will provide it with sufficient liquidity to
conduct its operations.
At September 30, 1999, the Company's total debt and stockholder's
equity were $188.4 million and $16.1 million respectively.
Impact of Year 2000 on the Company's Systems
The Company has completed its assessment at its 34 locations that have
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
9
<PAGE>
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 29 of these 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 5
locations by December 15, 1999. Total costs of approximately $800,000 are
expected to be incurred for the year 2000 issues of which approximately $600,000
had been incurred through September 30, 1999.
The Company has communicated with those vendors and customers with whom
the Company does significant business. The Company has received assurances from
its five largest customers, which represented approximately 58% of the Company's
transportation sales for fiscal 1999, its two major fuel suppliers, which
provided approximately 69% of the Company's fuel requirements in fiscal 1999,
and its three largest suppliers of parts and tires, which provided approximately
20% of the Company's requirements for parts and tires in fiscal 1999, 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 has developed its contingency plan for its facilities to
provide for the most likely worst case scenarios regarding year 2000 compliance.
10
<PAGE>
PART II OTHER INFORMATION
Item 1. Legal Proceedings
See Note 4 to Consolidated Financial Statements.
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.
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 12, 1999
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.
Exhibit Sequential Page
Number Exhibit Number
27.1 Financial Data Schedule
B-1
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-Q at
September 30, 1999 and is qualified in its entirety by reference to such
financial statements
</LEGEND>
<CIK> 0001035423
<NAME> ATLANTIC EXPRESS TRANSPORTATION CORP.
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 338,311
<SECURITIES> 9,297,785
<RECEIVABLES> 51,243,743
<ALLOWANCES> 1,670,000
<INVENTORY> 9,833,905
<CURRENT-ASSETS> 67,570,801
<PP&E> 224,908,398
<DEPRECIATION> 101,201,198
<TOTAL-ASSETS> 232,861,713
<CURRENT-LIABILITIES> 53,085,071
<BONDS> 188,392,175
0
0
<COMMON> 250,000
<OTHER-SE> 15,817,569
<TOTAL-LIABILITY-AND-EQUITY> 232,861,714
<SALES> 38,599,199
<TOTAL-REVENUES> 82,384,211
<CGS> 34,628,461
<TOTAL-COSTS> 81,007,612
<OTHER-EXPENSES> 314,501
<LOSS-PROVISION> 30,000
<INTEREST-EXPENSE> 5,617,233
<INCOME-PRETAX> (7,995,716)
<INCOME-TAX> (3,843,947)
<INCOME-CONTINUING> (8,542,104)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (546,388)
<NET-INCOME> (4,698,157)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
