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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, 2000 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
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(Address of Principal Executive Offices) (Zip Code)
(718) 442-7000
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(Registrant's Telephone Number, Including Area Code)
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(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes No
----- -----
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
100 Shares of Common Stock, no par value.
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<PAGE>
TABLE OF CONTENTS
PART I. Financial Information
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1999 (audited) and March 31, 2000
(unaudited)..................................................................... 1
Consolidated Statements of Operations for the Three Month and Nine Month Periods
Ended March 31, 1999 (unaudited) and 2000 (unaudited)........................... 2
Consolidated Statements of Stockholder's Equity for the Nine Months Ended March 31,
2000............................................................................ 3
Consolidated Statements of Cash Flows for the Nine Month Periods Ended March 31,
1999 (unaudited) and 2000 (unaudited)........................................... 4
Notes to Consolidated Financial Statements (unaudited)............................... 5-9
ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations...................................................................... 10-12
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk................... 12
PART II. Other Information 13
Signatures................................................................................ 14
Index to Exhibits......................................................................... E-1
</TABLE>
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, March 31,
1999 2000
----------- ------------
(audited) (unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents ................................................. $ 855,983 $ 1,862,951
Current portion of marketable securities .................................. 3,842,000 1,780,000
Accounts receivable, net of allowance for doubtful accounts ............... 48,468,255 53,741,347
Inventories ............................................................... 15,215,018 10,136,398
Notes receivable .......................................................... 31,964 17,800
Prepaid expenses and other current assets ................................. 6,190,766 6,027,209
------------ ------------
Total current assets ............................................... 74,603,986 73,565,705
------------ ------------
Property, plant and equipment, less accumulated depreciation ................. 119,138,827 125,467,292
------------ ------------
Other assets:
Goodwill, net ............................................................. 12,143,514 11,899,083
Investments ............................................................... 35,000 35,000
Marketable securities ..................................................... 5,869,380 7,155,337
Deferred lease expense .................................................... 148,155 135,504
Transportation contract rights, net ....................................... 3,408,096 3,480,300
Deferred financing and organization costs, net ............................ 8,018,053 6,643,479
Due from affiliates ....................................................... 831,117 831,117
Notes receivable .......................................................... 11,494 3,216
Deposits and other noncurrent assets ...................................... 3,248,336 3,263,440
Deferred tax assets ....................................................... 3,935,981 6,374,050
Covenant not to compete, net .............................................. 120,000 90,000
------------ ------------
Total other assets ................................................. 37,769,126 39,910,526
------------ ------------
$231,511,939 $238,943,523
============ ============
Liabilities and Stockholder's Equity
Current:
Current portion of long-term debt ......................................... $ 21,411,180 $ 1,807,211
Accounts payable .......................................................... 2,453,411 2,258,468
Accrued compensation ...................................................... 7,392,071 11,772,487
Current portion of insurance reserve ...................................... 4,500,000 2,200,000
Accrued interest .......................................................... 6,890,810 2,919,366
Other accrued expenses and current liabilities ............................ 3,992,443 7,622,085
------------ ------------
Total current liabilities .......................................... 46,639,915 28,579,617
------------ ------------
Long-term debt, net of current portion ....................................... 159,921,440 182,778,069
------------ ------------
Premium on bond issuance ..................................................... 987,150 825,600
------------ ------------
Other long-term liabilities .................................................. 3,023,529 2,154,441
------------ ------------
Stockholder's equity:
Common stock, no par value - shares authorized 200; issued and
outstanding 100 ......................................................... 250,000 250,000
Additional paid-in capital ................................................ 15,898,517 22,048,517
Accumulated other comprehensive income .................................... 925,950 1,421,706
Retained earnings ......................................................... 3,865,438 885,573
------------ ------------
Total stockholder's equity ......................................... 20,939,905 24,605,796
------------ ------------
$231,511,939 $238,943,523
============ ============
</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,
----------------------------- ------------------------------
1999 2000 1999 2000
----------- ----------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Transportation Operations ........................... $68,527,274 $76,167,498 $172,625,173 $193,757,170
Bus Sales Operations ................................ 8,753,143 13,203,195 60,656,345 68,670,745
----------- ----------- ------------ ------------
Total revenues ......................................... 77,280,417 89,370,693 233,281,518 262,427,915
----------- ----------- ------------ ------------
Costs and expenses:
Cost of operations - Transportation Operations ...... 55,084,206 63,391,670 141,856,271 162,745,829
Cost of operations - Bus Sales Operations ........... 8,189,298 12,118,397 54,477,279 62,174,171
General and administrative .......................... 5,170,018 2,085,341 15,360,660 14,434,504
Depreciation and amortization ....................... 3,124,050 3,433,373 9,104,032 10,311,627
----------- ----------- ------------ ------------
71,567,572 81,028,781 220,798,242 249,666,131
----------- ----------- ------------ ------------
Income from operations ............................ 5,712,845 8,341,912 12,483,276 12,761,784
Interest expense (net) ................................. (5,167,778) (5,628,264) (15,307,642) (16,838,915)
Other income (expense) ................................. (49,750) (114,501) (122,748) (794,416)
----------- ----------- ------------ ------------
Income (loss) before other items and provision
(benefit) for income taxes ..................... 495,317 2,599,147 (2,947,114) (4,871,547)
Cumulative effect of a change in accounting principles . -- -- -- (546,388)
----------- ----------- ------------ ------------
Income (loss) before nonrecurring items and
provision (benefit) for income taxes .......... 495,317 2,599,147 (2,947,114) (5,417,935)
Nonrecurring item ...................................... -- -- (1,223,161) --
----------- ----------- ------------ ------------
Income (loss) before provision (benefit) for
income taxes .................................. 495,317 2,599,147 (4,170,275) (5,417,935)
Provision (benefit) for income taxes ................... 222,893 1,169,618 (1,876,624) (2,438,070)
----------- ----------- ------------ ------------
Net income (loss) ................................ $ 272,424 $ 1,429,529 $ (2,293,651) $ (2,979,865)
=========== =========== ============ ============
Unrealized gain (loss) on marketable securities ........ (245,154) 120,968 706,224 495,756
----------- ----------- ------------ ------------
Comprehensive income (loss) ...................... $ 27,270 $ 1,550,497 $ (1,587,427) $ (2,484,109)
=========== =========== ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Stockholder's Equity
Nine months ended March 31, 2000
<TABLE>
<CAPTION>
Accumulated
Retained other
Common stock Additional earnings comprehensive
No par value paid-in capital (deficit) 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
- --------------------------------------------------------------------------------------------------------------------
Additional paid-in capital -- 6,150,000 -- -- 6,150,000
Net income ................ -- -- 288,763 -- 288,763
Unrealized gain on
marketable securities -- -- -- 548,967 548,967
- --------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1999 $250,000 $22,048,517 $ (543,956) $1,300,738 $23,055,299
- --------------------------------------------------------------------------------------------------------------------
Net income ................ -- -- 1,429,529 -- 1,429,529
Unrealized gain on
marketable securities -- -- -- 120,968 120,968
- --------------------------------------------------------------------------------------------------------------------
Balance, March 31, 2000 $250,000 $22,048,517 $ 885,573 $1,421,706 $24,605,796
- --------------------------------------------------------------------------------------------------------------------
</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,
------------------------------
1999 2000
------------ -------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................................... $ (2,293,651) $ (2,979,865)
Adjustments to reconcile net loss to net cash provided by operating activities:
Gain on sale of marketable securities ......................................... (977,358) (666,735)
Deferred income taxes ......................................................... (1,876,624) (2,438,070)
Depreciation .................................................................. 8,201,044 9,566,714
Amortization .................................................................. 1,989,955 1,954,722
Reserve for doubtful accounts receivable ...................................... 90,000 90,000
Loss on sale of fixed assets .................................................. -- 29,552
Nonrecurring item ............................................................. 1,223,161 --
Decrease (increase) in:
Accounts receivable and retainage ........................................... (2,779,532) (5,363,092)
Inventories ................................................................. (1,202,564) 5,078,620
Prepaid expenses and other current assets ................................... (965,630) 163,557
Deferred lease expense ...................................................... 61,226 12,651
Deposits and other noncurrent assets ........................................ 221,904 (15,103)
Increase (decrease) in:
Accounts payable ............................................................ 614,337 (194,943)
Accrued expenses and other current liabilities .............................. 2,862,356 1,738,614
Other long-term liabilities ................................................. (851,283) (869,088)
------------ ------------
Net cash provided by operating activities ..................................... 4,317,341 6,107,534
------------ ------------
Cash flows from investing activities:
Acquisition of subsidiaries (net of cash acquired of $1,100,009) ................... (6,014,361) --
Proceeds from sale of fixed assets ................................................. 40,045 548,949
Additions to property, plant and equipment ......................................... (21,536,621) (15,248,527)
Purchase of transportation contract rights ......................................... (69,540) (49,092)
Due from affiliates ................................................................ (336,978) --
Notes receivable ................................................................... 1,593,274 22,442
Proceeds from sale of investment ................................................... 196,408 --
Marketable securities sold (purchased), net ........................................ 352,907 1,938,532
------------ ------------
Net cash used in investing activities ............................................ (25,774,866) (12,787,696)
------------ ------------
Cash flows from financing activities:
Additional paid-in capital ......................................................... -- 6,150,000
Proceeds of additional borrowings .................................................. 17,671,251 2,655,924
Principal payments on borrowings ................................................... (5,374,518) (1,043,736)
Deferred financing and organization costs .......................................... (993) (75,058)
Other .............................................................................. (229,049) --
------------ ------------
Net cash provided by financing activities ........................................ 12,066,691 7,687,130
------------ ------------
Net increase (decrease) in cash and cash equivalents ................................. (9,390,834) 1,006,968
Cash and cash equivalents, beginning of period ....................................... 13,772,537 855,983
------------ ------------
Cash and cash equivalents, end of period ............................................. $ 4,381,703 $ 1,862,951
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ......................................................................... $ 18,330,644 $ 19,214,274
Income taxes ..................................................................... 210,962 47,025
Supplemental schedule of noncash investing and financing activities:
Loans incurred for purchase of property, plant and equipment ....................... $ 5,823,824 $ 1,225,152
Liability incurred for acquisition of contract rights .............................. -- 415,320
Additional paid-in capital contributed for bondholder consent fees and expenses .... 2,709,591 --
</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, 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. 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:
June 30, March 31,
1999 2000
----------- -----------
Parts and fuel........................ $ 3,919,018 $ 5,157,483
Buses................................. 11,296,000 4,978,915
----------- -----------
$15,215,018 $10,136,398
=========== ===========
4. Additional Paid-In Capital
In December 1999, the Company received an additional capital contribution
of $6.2 million from Atlantic Express Transportation Group Inc. (the parent
company) ("AETG").
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., both wholly owned subsidiaries of the Company
(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 from fifteen to thirty 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.
6. Revolving Line of Credit Extension
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.
5
<PAGE>
7. Contract Renewal
In March 2000, the New York City Board of Education (the "Board") notified
the Company that all its contracts with the Board have been extended for an
additional five years. These contracts represented approximately 39.5% of the
Transportation Operation's revenue for the fiscal year ended June 30, 1999.
8. Subsequent Events
8a. In April 2000, AETG and the Company settled their litigation with
National Express Group, PLC. ("National"). In connection therewith, the Company
has recorded a credit of $4.4 million to general and administrative expenses at
March 31, 2000.
8b. Effective April 30, 2000, the Company and the Regional Transit
District of Denver (Colorado) (the "RTD") agreed to the early termination of the
Company's paratransit contract. This occurred primarily because of inaccurate
information received by the Company from the RTD, in its original Request for
Proposal ("RFP"), in connection with the expected number of trips to be
performed during the life of the contract. RTD reimbursed the Company the value
of capital expenditures incurred and assumed all leases in connection with the
Company's facilities. Additionally, on May 16, 2000, the Company was awarded
damages in the amount of $1.5 million by an arbitrator on its claim against RTD
for losses incurred in performing the contract. Revenues from this contract were
approximately $5.6 million for the nine months ended March 31, 2000.
9. 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 Company's 103/4%
Senior Secured Notes due 2004 as of and for the nine months ended March 31,
2000, and a consolidating balance sheet as of June 30, 1999 and consolidating
statements of operations for the three months ended March 31, 2000 and 1999 and
for the nine months ended March 31, 1999, and consolidating statement of cash
flows for the nine months ended March 31, 1999.
Condensed Consolidating Balance Sheet
March 31, 2000
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C>
Current assets ......... $ 5,791,236 $ 65,513,619 $ 2,260,850 $ -- $ 73,565,705
Investment in affiliates 55,426,285 -- -- (55,426,285) --
Total assets ........... 215,445,074 212,539,617 10,027,363 (199,068,531) 238,943,523
Current liabilities .... 3,708,483 22,371,172 2,499,962 -- 28,579,617
Total liabilities ...... 177,219,370 175,088,003 5,123,044 (143,092,690) 214,337,727
Stockholder's equity ... 38,225,704 37,451,614 4,904,319 (55,975,841) 24,605,796
</TABLE>
6
<PAGE>
Condensed Consolidating Statement of Operations
Three months ended March 31, 2000
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues .............. $ -- $88,895,376 $1,475,175 $(999,858) $89,370,693
Income from operations .... 4,400,000 3,522,377 419,535 -- 8,341,912
Income (loss) before income
taxes ................... 4,400,000 (2,220,388) 419,535 -- 2,599,147
Net loss of subsidiaries .. (990,471) -- -- 990,471 --
Net income (loss) ......... 1,429,529 (1,221,215) 230,744 990,471 1,429,529
</TABLE>
Condensed Consolidating Statement of Operations
Nine months ended March 31, 2000
<TABLE>
<CAPTION>
Atlantic
Express
Transportation Guarantor Non- Elimination
Corp. Subsidiaries Guarantors Entries Consolidated
-------------- ------------ ---------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues ................ $ -- $261,581,573 $1,846,200 $ (999,858) $262,427,915
Income from operations ...... 4,400,000 7,667,093 694,691 -- 12,761,784
Income (loss) before income
taxes ..................... 4,400,000 (9,966,238) 694,691 -- (4,871,547)
Cumulative effect of a change
in accounting principal ... -- (546,388) -- -- (546,388)
Net loss of subsidiaries .... (5,399,865) -- -- 5,399,865 --
Net income (loss) ........... (2,979,865) (5,781,945) 382,080 5,399,865 (2,979,865)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Nine months ended March 31, 2000
<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 ........ $(7,274,210) $ 15,558,276 $(2,176,532) $ -- $ 6,107,534
Net cash provided by (used in)
investing activities ........ (606,817) (14,119,411) 1,938,532 -- (12,787,696)
Net cash provided by (used in)
financing activities ........ 8,805,924 (1,118,794) -- -- 7,687,130
Increase (decrease) in cash and
cash equivalents ............ 924,897 320,071 (238,000) -- 1,006,968
Cash and cash equivalents,
beginning of period ......... (324,134) 522,117 658,000 -- 855,983
--------------------------------------------------------------------------------
Cash and cash equivalents,
end of period ............... $ 600,763 $ 842,188 $ 420,000 $ -- $ 1,862,951
</TABLE>
7
<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 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 ............. (399,218) 520,548 373,987 -- 495,317
Nonrecurring item ............... -- -- -- -- --
Net income of subsidiaries ...... 491,993 -- -- (491,993) --
Net income ...................... 272,424 286,300 205,693 (491,993) 272,424
</TABLE>
Condensed Consolidating Statement of Operations
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 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 ............. (778,415) (2,804,742) 636,043 -- (2,947,114)
Nonrecurring item ............... (1,223,161) -- -- -- (1,223,161)
Net loss of subsidiaries ........ (1,192,787) -- -- 1,192,787 --
Net income (loss) ............... (2,293,651) (1,542,611) 349,824 1,192,787 (2,293,651)
</TABLE>
8
<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>
9
<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, 2000 compared to three months ended March 31, 1999.
Revenues. Revenues from Transportation Operations were $76.2 million for
the three months ended March 31, 2000 compared to $68.5 million for the three
months ended March 31, 1999, an increase of $7.6 million or 11.1%. This increase
was due primarily to $3.4 million as a result of new contracts awarded and $6.8
million due to increases in contract rate and service requirements of existing
contracts, partially offset by $2.6 million decrease in revenues due to the sale
of subsidiaries to an affiliate effective April 1, 1999. Revenues from Bus Sales
Operations was $13.2 million for the three months ended March 31, 2000 compared
to $8.8 million for the three months ended March 31, 1999, an increase of $4.5
million or 50.8%. This increase was primarily due to a $4.9 million increase in
new vehicles sales partially offset by a $0.4 million decrease in other sales.
Gross Profit. Gross profit from Transportation Operations was $12.8
million for the three months ended March 31, 2000 compared to $13.4 million for
the three months ended March 31, 1999, a decrease of $0.7 million or 5.0%. As a
percentage of revenues, gross profit decreased to 16.8% for the three months
ended March 31, 2000 from 19.6% for the three months ended March 31, 1999. This
decrease was due primarily to an increase in salaries (1.6%) due to the tight
labor market and increased fuel costs (1.2%). Gross profit from Bus Sales
Operations was $1.1 million for the three months ended March 31, 2000 compared
to $0.6 million for the three months ended March 31, 1999, an increase of $0.5
million or 92.4%. As a percentage of revenues, gross profit increased to 8.2%
for the three months ended March 31, 2000 from 6.4% for the three months ended
March 31, 1999. This increase was primarily due to the type of vehicles sold.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $1.1 million for the three months ended
March 31, 2000 compared to $4.3 million for the three months ended March 31,
1999, a decrease of $3.2 million or 73.9%. This decrease was primarily due to a
$4.4 million credit in connection with the National lawsuit settlement (see Note
8a to Consolidated Financial Statements) partially offset by increases of (i)
$0.5 million in professional fees primarily in connection with the National
lawsuit settlement; (ii) $0.4 million in advertising in relation to employee
recruitment; and (iii) $0.3 million increase in administrative payroll and
fringe benefits due to expansion in new areas. General and administrative
expenses for the Bus Sales Operations for the three months ended March 31, 2000
were $1.0 million compared to $0.9 million for the three months ended March 31,
1999 an increase of $0.1 million or 7.9%. As a percentage of revenues general
and administrative expenses decreased to 7.4% for the three months ended March
31, 2000 from 10.3% for the three months ended March 31, 1999.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations was $3.2 million for the three months
ended March 31, 2000 compared to $2.9 million for the three months ended March
31, 1999, an increase of $0.3 million or 10%. This increase was due to
additional depreciation relating to the purchase of new vehicles. Depreciation
and amortization expenses for the Bus Sales Operations was $0.2 million for the
three months ended March 31, 2000 and 1999 respectively.
Income from operations. Income from operations was $8.3 million for the
three months ended March 31, 2000 compared to $5.7 million for the three months
ended March 31, 1999, an increase of $2.6 million. This increase was due to the
net effect of the items discussed above.
10
<PAGE>
Net interest expense. Net interest expense was $5.6 million for the three
months ended March 31, 2000 compared to $5.2 million for the three months ended
March 31, 1999, an increase of $0.5 million or 8.9%. This increase was due
primarily to higher average indebtedness outstanding during the three months
ended March 31, 2000.
Net income. The Company generated net income of $1.4 million for the three
months ended March 31, 2000 compared to net income of $0.3 million for the three
months ended March 31, 1999, an increase of $1.2 million. This increase was due
to the net effect of the items discussed above.
Nine months ended March 31, 2000 compared to nine months ended March 31, 1999
Revenues. Revenues from Transportation Operations were $193.8 million for
the nine months ended March 31, 2000 compared to $172.6 million for the nine
months ended March 31, 1999, an increase of $21.1 million or 12.2%. This
increase was due primarily to (i) $1.4 million in additional summer revenues;
(ii) $8.3 million as a result of new contracts awarded; and (iii) $17.1 million
due to increases in contract rates and service requirements of existing
contracts partially offset by $5.7 million decrease due to sale of subsidiaries
to an affiliate effective April 1, 1999. Revenues from Bus Sales Operations were
$68.7 million for the nine months ended March 31, 2000 compared to $60.7 million
for the nine months ended March 31, 1999, an increase of $8.0 million or 13.2%.
This increase was due primarily to a $9.3 million increase in new vehicles sales
partially offset by a $1.3 million decrease in other sales.
Gross Profit. Gross profit from Transportation Operations was $31.0
million for the nine months ended March 31, 2000 compared to $30.8 million for
the nine months ended March 31, 1999, an increase of $0.2 million or 0.8%. As a
percentage of revenues, gross profit decreased to 16.0% for the nine months
ended March 31, 2000 from 17.8% for the nine months ended March 31, 1999. The
decrease in gross profit percentage was due primarily to increased salaries due
to a tight labor market (1.3%) and increased fuel costs (0.6%). Gross profit
from the Bus Sales Operations was $6.5 million for the nine months ended March
31, 2000 compared to $6.2 million for the nine months ended March 31, 1999, an
increase of $0.3 million or 5.1%. This increase was primarily due to increased
revenues. As a percentage of revenues, gross profit decreased to 9.5% for the
nine months ended March 31, 2000 from 10.2% for the nine months ended March 31,
1999 due primarily to the increase in proportion of sales made in the New Jersey
market which has had historically lower gross profit margins than the New York
market and reduced gross profit on sales to a municipal customer.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $11.6 million for the nine months ended
March 31, 2000 compared to $12.5 million for the nine months ended March
31,1999, a decrease of $0.9 million or 0.8%. This decrease was primarily due to
a $4.4 million credit in connection with the National lawsuit settlement (see
Note 8a to Consolidated Financial Statements) partially offset by increases of
(i) $1.2 million in professional fees primarily in connection with the National
lawsuit settlement; (ii) $0.9 million in advertising in relation to employee
recruitment; and (iii) $1.0 million increase in administrative payroll and
benefits due to expansion in new areas. General and administrative expenses for
the Bus Sales Operations were $2.9 million for the nine months ended March 31,
2000 and 1999 respectively. As a percentage of revenues, general and
administrative expenses were 4.2% and 4.7% for the nine months ended March 31,
2000 and 1999 respectively.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $9.7 million for the nine months
ended March 31, 2000 compared to $8.5 million for the nine months ended March
31, 1999, an increase of $1.2 million or 13.7%. This increase was due to
additional depreciation relating to the purchase of new vehicles. Depreciation
and amortization of the Bus Sales Operations were $0.6 million for the nine
months ended March 31, 2000 and 1999 respectively.
Income from operations. Income from operations was $12.8 million for the
nine months ended March 31, 2000 compared to $12.5 million for the nine months
ended March 31, 1999, an increase of $0.3 million. This increase was due to the
net effect of the items discussed above.
11
<PAGE>
Net interest expense. Net interest expense was $16.8 million for the nine
months ended March 31, 2000 compared to $15.3 million for the nine months ended
March 31, 1999, an increase of $1.5 million or 10.0%. This increase was due
primarily to higher average indebtedness outstanding during the nine months
ended March 31, 2000.
Loss before nonrecurring item. Loss before nonrecurring item was $5.4
million for the nine months ended March 31, 2000 compared to $2.9 million for
the nine months ended March 31, 1999, an increase of $2.5 million.
Nonrecurring item. Nonrecurring item was $1.2 million for the nine months
ended March 31, 1999. This represented fees and expenses paid by the
shareholders of AETG for the benefit of the Company. There were no nonrecurring
items for the nine months ended March 31, 2000.
Net loss. The Company generated a net loss of $3.0 million for the nine
months ended March 31, 2000 compared to a net loss of $2.3 million for the nine
months ended March 31, 1999, an increase of $0.7 million due to the net effect
of the items discussed above.
Liquidity and Capital Resources
Management anticipates total capital expenditures of $18.9 million in
fiscal 2000 of which approximately $16.5 million were made by March 31, 2000.
This included approximately $12.4 million for purchase of new vehicles and $4.1
million for other property and equipment.
Net Cash Provided By Operating Activities. Net cash provided by operating
activities of $6.1 million for the nine months ended March 31, 2000 resulted
primarily from $1.4 million increases in source of funds for working capital
plus non-cash items of depreciation and amortization of $11.5 million offset by
(i) net loss of $3.0 million; (ii) $2.4 million increase in deferred income tax;
and (iii) $1.4 million decrease in other sources of funds.
Net Cash Used in Investing Activities. For the nine months ended March 31,
2000, the Company made $16.5 million of capital expenditures to acquire
additional vehicles, other property and equipment. Of these capital expenditures
$1.2 million were directly financed. In addition the Company received $1.9
million from net sales of marketable securities.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities totaled $7.7 million for the nine months ended March 31, 2000, due to
$6.2 million capital contribution by AETG plus $2.7 million of net borrowings
under the Company's revolving line of credit, partially offset by $1.0 million
principal payment on other debt. In addition, the Company incurred $1.2 million
of indebtedness to directly finance capital expenditures for the nine months
ended March 31, 2000.
The Company continues to experience higher labor costs due to a tight
labor market and higher fuel costs which are impacting profit margins.
The Company believes that its current operating cash flow, along with its
borrowing capacity under a $30 million revolving credit facility (of which $7.3
million was undrawn at March 31, 2000) will provide it with sufficient liquidity
to conduct its operations for the balance of the year.
At March 31, 2000, the Company's total debt and stockholder's equity were
$184.6 million and $24.6 million respectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
12
<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.
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 22, 2000
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
------ ------- ------
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, 2000 and is qualified in its entirety by reference to such financial
statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 1,862,951
<SECURITIES> 8,935,337
<RECEIVABLES> 56,323,480
<ALLOWANCES> 1,730,000
<INVENTORY> 10,136,398
<CURRENT-ASSETS> 73,565,705
<PP&E> 231,989,880
<DEPRECIATION> 106,522,588
<TOTAL-ASSETS> 238,943,523
<CURRENT-LIABILITIES> 28,579,617
<BONDS> 184,585,280
0
0
<COMMON> 250,000
<OTHER-SE> 24,355,796
<TOTAL-LIABILITY-AND-EQUITY> 238,943,523
<SALES> 68,670,745
<TOTAL-REVENUES> 262,427,915
<CGS> 62,174,171
<TOTAL-COSTS> 249,666,131
<OTHER-EXPENSES> 794,416
<LOSS-PROVISION> 90,000
<INTEREST-EXPENSE> 16,838,915
<INCOME-PRETAX> (4,871,547)
<INCOME-TAX> (2,438,070)
<INCOME-CONTINUING> (5,417,935)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (546,388)
<NET-INCOME> (2,979,865)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
