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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 December 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
<TABLE>
<CAPTION>
Page
----
<S> <C>
ITEM 1. Financial Statements:
Consolidated Balance Sheets at June 30, 1999 (audited) and December 31, 1999
(unaudited)...................................................................... 1
Consolidated Statements of Operations for the Three Month and Six Month Periods
Ended December 31, 1998 (unaudited) and 1999 (unaudited)......................... 2
Consolidated Statements of Stockholder's Equity for the Three Months and
Six Months Ended December 31, 1999............................................... 3
Consolidated Statements of Cash Flows for the Six Month Periods Ended December 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...................................................................... 9-11
PART II. Other Information 12
Signatures................................................................................. 13
Index to Exhibits.......................................................................... E-1
</TABLE>
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
------------- --------------
(audited) (unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents ......................................... $ 855,983 $ 7,540,776
Current portion of marketable securities .......................... 3,842,000 1,264,000
Accounts receivable, net of allowance for doubtful accounts ....... 48,468,255 39,208,782
Inventories ....................................................... 15,215,018 11,585,283
Notes receivable .................................................. 31,964 17,200
Prepaid expenses and other current assets ......................... 6,190,766 5,721,463
------------- -------------
Total current assets .................................... 74,603,986 65,337,504
------------- -------------
Property, plant and equipment, less accumulated depreciation ........ 119,138,827 124,333,114
------------- -------------
Other assets:
Goodwill, net ..................................................... 12,143,514 11,980,560
Investments ....................................................... 35,000 35,000
Marketable securities ............................................. 5,869,380 7,145,336
Deferred lease expense ............................................ 148,155 140,093
Transportation contract rights, net ............................... 3,408,096 3,612,933
Deferred financing and organization costs, net .................... 8,018,053 7,057,954
Due from parent company ........................................... 831,117 831,117
Notes receivable .................................................. 11,494 5,653
Deposit and other noncurrent assets ............................... 3,248,336 3,379,054
Deferred tax assets ............................................... 3,935,981 7,543,669
Covenant not to compete, net ...................................... 120,000 100,000
------------- -------------
Total other assets ...................................... 37,769,126 41,831,369
------------- -------------
$ 231,511,939 $ 231,501,987
============= =============
Liabilities and Stockholder's Equity
Current:
Current portion of long-term debt ................................. $ 21,411,180 $ 1,773,169
Accounts payable .................................................. 2,453,411 2,656,067
Accrued compensation .............................................. 7,392,071 6,349,952
Current portion of insurance reserve .............................. 4,500,000 2,200,000
Accrued interest .................................................. 6,890,810 6,767,096
Other accrued expenses and current liabilities .................... 3,992,443 6,752,647
------------- -------------
Total current liabilities ............................... 46,639,915 26,498,931
------------- -------------
Long-term debt, net of current portion .............................. 159,921,440 178,578,570
------------- -------------
Premium on bond issuance ............................................ 987,150 879,450
------------- -------------
Other long-term liabilities ......................................... 3,023,529 2,489,737
------------- -------------
Commitments and contingencies
Stockholder's equity:
Common stock, no par value, authorized shares 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 1,300,738
Retained earnings (deficit) ....................................... 3,865,438 (543,956)
------------- -------------
Total stockholder's equity .............................. 20,939,905 23,055,299
------------- -------------
$ 231,511,939 $ 231,501,987
============= =============
</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 Six Months Ended
December 31, December 31,
------------------------------- -------------------------------
1998 1999 1998 1999
------------- ------------- ------------- -------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues:
Transportation Operations ....................... $ 68,505,309 $ 73,804,660 $ 104,097,900 $ 117,589,672
Bus Sales Operations ............................ 16,463,006 16,868,351 51,903,202 55,467,550
------------- ------------- ------------- -------------
Total revenues ....................................... 84,968,315 90,673,011 $ 156,001,102 173,057,222
------------- ------------- ------------- -------------
Costs and expenses:
Cost of operations - Transportation Operations .. 53,495,495 58,885,612 86,772,065 99,354,159
Cost of operations - Bus Sales Operations ....... 14,908,478 15,427,313 46,287,981 50,055,774
General and administrative ...................... 5,606,220 6,438,559 10,190,642 12,349,163
Depreciation and amortization ................... 3,123,996 3,437,673 5,979,982 6,878,254
------------- ------------- ------------- -------------
77,134,189 84,189,157 149,230,670 168,637,350
------------- ------------- ------------- -------------
Income (loss) from operations ................. 7,834,126 6,483,854 6,770,432 4,419,872
Interest expenses (net) .............................. (5,322,261) (5,593,418) (10,139,864) (11,210,651)
Other income (expense) ............................... (72,999) (365,414) (72,999) (679,915)
------------- ------------- ------------- -------------
Income (loss) before other items
and provision (benefit) for
income taxes ................................ 2,438,866 525,022 (3,442,431) (7,470,694)
Cumulative effect of a change in accounting principles -- -- -- (546,388)
------------- ------------- ------------- -------------
Income (loss) before nonrecurring items and
provision (benefit) for income taxes ........ 2,438,866 525,022 (3,442,431) (8,017,082)
Nonrecurring item .................................... (1,223,161) -- (1,223,161) --
------------- ------------- ------------- -------------
Income (loss) before provision (benefit) for
income taxes ................................ 1,215,705 525,022 (4,665,592) (8,017,082)
Provision (benefit) for income taxes ................. 547,068 236,259 (2,099,515) (3,607,688)
------------- ------------- ------------- -------------
Net income (loss) ............................. $ 668,637 $ 288,763 $ (2,566,077) $ (4,409,394)
============= ============= ============= =============
Unrealized gain (loss) on marketable securities ...... 1,561,228 (174,179) 951,378 374,788
------------- ------------- ------------- -------------
Comprehensive income (loss) ................... $ 2,229,865 $ 114,584 $ (1,614,699) $ (4,034,606)
============= ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Stockholder's Equity
Six months ended December 31, 1999
<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
====================================================================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Six Months Ended
December 31,
------------------------------
1998 1999
------------- -------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss ........................................................................ $ (2,566,077) $ (4,409,394)
Adjustments to reconcile net loss to net cash provided by (used in) operating
activities:
Gain on sale of marketable securities ...................................... (194,329) (243,408)
Deferred income taxes ...................................................... (2,099,515) (3,607,688)
Depreciation ............................................................... 5,401,850 6,385,695
Amortization ............................................................... 1,263,915 1,294,926
Reserve for doubtful accounts receivable ................................... 60,000 60,000
Loss on sale of fixed assets ............................................... -- 29,552
Nonrecurring item .......................................................... 1,223,161 --
Decrease (increase) in:
Accounts receivable ................................................... (3,092,168) 9,199,473
Inventories ........................................................... 1,014,617 3,629,735
Prepaid expenses and other current assets ............................. (1,209,744) 469,303
Deferred lease expense ................................................ 57,304 8,062
Deposits and other noncurrent assets .................................. 200,699 (130,717)
Increase (decrease) in:
Accounts payable ...................................................... 595,259 202,656
Accrued expenses and other current liabilities ........................ (1,975,650) (705,629)
Other long-term liabilities ........................................... 475,390 (533,793)
------------ ------------
Net cash provided by (used in) operating activities ................... (845,288) 11,648,773
------------ ------------
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 .............................................. 33,887 548,949
Additions to property, plant and equipment ...................................... (18,745,242) (10,933,329)
Purchase of transportation contract rights ...................................... (70,215) (49,092)
Due from parent ................................................................. (158,528) --
Notes receivable ................................................................ 1,570,247 20,605
Marketable securities sold (purchased), net ..................................... (1,127,191) 1,920,240
------------ ------------
Net cash used in investing activities ................................. (24,511,403) (8,492,627)
------------ ------------
Cash flows from financing activities:
Additional paid-in capital ...................................................... -- 6,150,000
Proceeds of additional borrowings ............................................... 19,355,307 --
Principal payments on borrowings ................................................ (5,000,991) (2,621,353)
Deferred financing and organization costs ....................................... (49,995) --
Other ........................................................................... (229,049) --
------------ ------------
Net cash provided by financing activities .................................. 14,075,272 3,528,647
------------ ------------
Net increase (decrease) in cash and cash equivalents ................................. (11,281,419) 6,684,793
Cash and cash equivalents, beginning of period ....................................... 13,772,537 855,983
------------ ------------
Cash and cash equivalents, end of period ............................................. $ 2,491,118 7,540,776
============ ============
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest ................................................................... $ 9,521,069 $ 10,019,393
Income taxes ............................................................... 182,068 47,025
Supplemental schedule of noncash investing and financing activities:
Loans incurred for purchase of property, plant and equipment .................... $ 5,686,617 $ 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.
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, December 31,
1999 1999
------------- -------------
<S> <C> <C>
Parts and fuel................................... $ 3,919,018 $ 4,173,844
Buses held for sale.............................. 11,296,000 7,411,439
------------ ------------
$ 15,215,018 $ 11,585,283
============ ============
</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 $1.5 million of litigation expenses have been incurred since
the inception of the lawsuit, including $0.9 million incurred in the first six
months of the current fiscal year.
5. Additional Paid-In Capital
In December 1999, the Company received an additional capital contribution
of $6.2 million from AETG.
5
<PAGE>
6. 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.
7. 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.
8. 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 six months ended December 31, 1999, and a consolidating balance sheet as
of June 30, 1999 and consolidating statements of operations for the three months
ended December 31, 1999 and 1998 and for the six months ended December 31, 1999,
and consolidating statement of cash flows for the six months ended December 31,
1998.
Condensed Consolidating Balance Sheet
December 31, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------- --------------- ---------------- --------------
<S> <C> <C> <C> <C> <C>
Current assets ......... $ 6,713,936 $ 56,565,082 $ 2,058,486 $ -- $ 65,337,504
Investment in affiliates 56,295,788 -- -- (56,295,788) --
Total assets ........... 212,893,698 203,108,712 10,423,115 (194,923,538) 231,501,987
Current liabilities .... 7,343,025 16,054,982 3,100,924 -- 26,498,931
Total liabilities ...... 176,218,491 164,435,883 5,870,508 (138,078,194) 208,446,688
Stockholder's equity ... 36,675,207 38,672,829 4,552,607 (56,845,344) 23,055,299
</TABLE>
<TABLE>
<CAPTION>
Condensed Consolidating Statement of Operations
Three months ended December 31, 1999
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ------------- ---------------
<S> <C> <C> <C> <C> <C>
Net revenues ............. $ -- $90,366,485 $ 306,526 $ -- $90,673,011
Income from operations ... -- 6,224,436 259,418 -- 6,483,854
Income before income taxes -- 265,604 259,418 -- 525,022
Net income of subsidiaries 288,763 -- -- (288,763) --
Net income ............... 288,763 146,083 142,680 (288,763) 288,763
</TABLE>
6
<PAGE>
Condensed Consolidating Statement of Operations
Six months ended December 31, 1999
<TABLE>
<CAPTION>
Atlantic
Express
Transportation Guarantor Non- Elimination
Corp. Subsidiaries Guarantors Entries Consolidated
---------------- -------------- ------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Net revenues .................... $ -- $ 172,686,197 $ 371,025 $ -- $ 173,057,222
Income from operations .......... -- 4,144,716 275,156 -- 4,419,872
Income (loss) before income taxes -- (7,745,850) 275,156 -- (7,470,694)
Cumulative effect of a change in
accounting principle ....... -- (546,388) -- -- (546,388)
Net loss of subsidiaries ........ (4,409,394) -- -- 4,409,394 --
Net income (loss) ............... (4,409,394) (4,560,730) 151,336 4,409,394 (4,409,394)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Six months ended December 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 .... $ 1,609,507 $ 11,881,506 $ (1,842,240) $ -- $ 11,648,773
Net cash used in investing
activities .............. (300,258) (10,112,609) 1,920,240 -- (8,492,627)
Net cash provided by (used in)
financing activities .... 4,116,654 (588,007) -- -- 3,528,647
Increase in cash and cash
equivalents ............. 5,425,903 1,180,890 78,000 -- 6,684,793
Cash and cash equivalents,
beginning of period ..... (324,134) 522,117 658,000 -- 855,983
Cash and cash equivalents, -------------------------------------------------------------------------------------------
end of period ........... 5,101,769 1,703,007 736,000 -- 7,540,776
</TABLE>
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>
7
<PAGE>
Condensed Consolidating Statement of Operations
Three months ended December 31, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
---------------- -------------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C>
Net revenues ....................... $ -- $ 84,667,851 $ 2,273,552 $ (1,973,088) $ 84,968,315
Income (loss) from operations ...... (267,415) 7,853,713 247,828 -- 7,834,126
Income (loss) before nonrecurring
item, (provision for) benefit from
income taxes ..................... (325,706) 2,516,744 247,828 -- 2,438,866
Nonrecurring item .................. (1,223,161) -- -- -- (1,223,161)
Net income of subsidiaries ......... 1,520,514 -- -- (1,520,514) --
Net income ......................... 668,637 1,382,786 137,728 (1,520,514) 668,637
</TABLE>
Condensed Consolidating Statement of Operations
Six months ended December 31, 1998
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
--------------- -------------- -------------- --------------- --------------
<S> <C> <C> <C> <C> <C>
Net revenues ....................... $ -- $ 155,644,406 $ 3,442,232 $ (3,085,536) $ 156,001,102
Income (loss) from operations ...... (320,906) 6,829,282 262,056 -- 6,770,432
Income (loss) before nonrecurring
item, (provision for) benefit from
income taxes ..................... (379,197) (3,325,290) 262,056 -- (3,442,431)
Nonrecurring item .................. (1,223,161) -- -- -- (1,223,161)
Net loss of subsidiaries ........... (1,684,780) -- -- 1,684,780 --
Net income (loss) .................. (2,566,077) (1,828,911) 144,131 1,684,780 (2,566,077)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Six months ended December 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 ..... $(18,865,166) $ 15,950,730 $ 2,069,148 $ -- $ (845,288)
Net cash used in investing
activities ............... (5,842,005) (17,542,207) (1,127,191) -- (24,511,403)
Net cash provided by (used in)
financing activities ..... 19,076,263 (5,000,991) -- -- 14,075,272
Increase (decrease) in cash and
cash equivalents ......... (5,630,908) (6,592,468) 941,957 -- (11,281,419)
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 ............ $ 1,302,002 $ (2,577,884) $ 3,767,000 $ -- $ 2,491,118
</TABLE>
8
<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 December 31, 1999 compared to three months ended December 31,
1998.
Revenues. Revenues from Transportation Operations were $73.8 million for
the three months ended December 31, 1999 compared to $68.5 million for the three
months ended December 31, 1998, an increase of $5.3 million or 7.7%. This
increase was due primarily to $3.3 million as a result of new contracts awarded
and $5.2 million due to contract rate increases and service requirements of
existing contracts partially offset by $3.1 million decrease in revenues due to
the sale of subsidiaries to an affiliate effective April 1, 1999.
Gross Profit. Gross profit from Transportation Operations was $14.9
million for the three months ended December 31, 1999 compared to $15.0 million
for the three months ended December 31, 1998, a decrease of $0.1 million or 1%.
As a percentage of revenues, gross profit decreased to 20.2% in the second
quarter of 1999 from 21.9% in the second quarter of 1998. The decrease in gross
profit was due primarily to an increase in salaries due to the tight labor
market partially offset by increased revenues. Gross profit from Bus Sales
Operations was $1.4 million for the three months ended December 31, 1999
compared to $1.6 million for the three months ended December 31, 1998, a
decrease of $0.1 million or 7.3%. As a percentage of revenues, gross profit
decreased to 8.5% for the three months ended December 31, 1999 from 9.4% for the
three months ended December 31, 1998. The reduction in gross profit percentage
was due primarily to reduced gross profit on a sale to a municipal customer.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $5.5 million for the three months ended
December 31, 1999 compared to $4.6 million for the three months ended December
31, 1998, an increase of $0.9 million or 19.3%. This increase was primarily due
to increases in advertising and promotion of $0.4 million in relation to
employee recruitment and $0.5 million increase in administrative payroll,
benefits and other general and administrative expenses due to the expansion in
new areas. As a percentage of revenues, general and administrative expenses
increased to 7.4% for the three months ended December 31, 1999 from 6.7% for the
three months ended December 31, 1998. General and administrative expenses for
the Bus Sales Operations were $1.0 million for the three months ended December
31, 1999 and 1998, respectively. As a percentage of revenues, general and
administrative expenses decreased to 5.7% for the three months ended December
31, 1999 from 6.2% for the three months ended December 31, 1998
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $3.2 million for the three
months ended December 31, 1999 compared to $2.9 million for the three months
ended December 31, 1998, an increase of $0.3 million. This increase was due to
additional depreciation relating to the purchase of new vehicles.
Income (loss) from operations. Income from operations was $6.5 million for
the three months ended December 31, 1999 compared to $7.8 million for the three
months ended December 31, 1998, a decrease of $1.4 million.
Net interest expense. Net interest expense was $5.6 million for the three
months ended December 31, 1999 compared to $5.3 million for the three months
ended December 31, 1998, an increase of $0.3 million or 5.1%. This increase was
due primarily to higher average indebtedness outstanding during the period.
9
<PAGE>
Income (loss) before nonrecurring item and taxes. Income before
nonrecurring item and taxes was $0.5 for the three months ended December 31,
1999 compared to $2.4 million for the three months ended December 31, 1998.
Net income. The Company generated net income of $0.3 million for the three
months ended December 31, 1999 compared to a net income of $0.7 million for the
three months ended December 31, 1998, a decrease of $0.4 million due to the net
effect of the items discussed above.
Six months ended December 31, 1999 compared to six months ended December 31,
1998
Revenues. Revenues from Transportation Operations were $117.6 million for
the six months ended December 31, 1999 compared to $104.1 million for the six
months ended December 31, 1998, an increase of $13.5 million or 13.0%. This
increase was due primarily to (i) $1.4 million in additional summer revenue;
(ii) $4.9 million as a result of new contracts awarded; and (iii) $10.3 million
due to increase in contract rates and service requirements of existing contracts
partially offset by a $3.1 million decrease due to the sale of subsidiaries to
an affiliate effective April 1, 1999. Revenues from Bus Sales Operations were
$55.5 million for the six months ended December 31, 1999 compared to $51.9
million for the six months ended December 31, 1998, an increase of $3.6 million
or 6.9%. This increase was due primarily to a $4.4 million increase in new
vehicle sales partially offset by a $0.8 decrease in other sales.
Gross Profit. Gross profit from Transportation Operations was $18.2
million for the six months ended December 31, 1999 compared to $17.3 million for
the six months ended December 31, 1998, an increase of $0.9 million or 5.3%. As
a percentage of revenues, gross profit decreased to 15.5% for the six months
ended December 31, 1999 from 16.6% for the six months ended December 31, 1998.
The decrease in gross profit percentage was due primarily to increased salaries
due to the tight labor market. Gross profit from Bus Sales Operations was $5.4
million for the six months ended December 31, 1999 compared to $5.6 million for
the six months ended December 31, 1998, a decrease of $0.2 million or 3.6%. This
reduction was due primarily to an increase in the six months of the 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 a sale to a
municipal customer.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $10.4 million for the six months ended
December 31, 1999 compared to $8.2 million for the six months ended December 31,
1998, an increase of $2.2 million or 26.9%. This increase was primarily due to
(i) $1.0 million increase in administrative payroll, benefits and other general
and administrative expenses due to expansion in new areas (ii) $0.7 million
increase in professional fees primarily in connection with the Company's
litigation with National Express Group, PLC and (iii) $0.5 million increase in
advertising and promotion in relation to employee recruitment. As a percentage
of revenues, general and administrative expenses increased to 8.9% for the six
months ended December 31, 1999 from 7.9% for the six months ended December 31,
1998. General and administrative expenses for the Bus Sales Operations was $1.9
million for the six months ended December 31, 1999 as compared to $2.0 million
for the six months ended December 31, 1998, a decrease of $0.1 million or 2.9%.
As a percentage of revenues, general and administrative expenses were 3.4% and
3.8% for the six months ended December 31, 1999 and 1998, respectively.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $6.5 million for the six months
ended December 31, 1999 compared to $5.6 million for the six months ended
December 31, 1998, an increase of $0.9 million. This increase was due to
additional depreciation relating to the purchase of new vehicles. Depreciation
and amortization expenses of Bus Sales Operations were $0.4 million for the six
months ended December 31, 1999 and 1998, respectively.
Income (loss) from operations. Income from operations was $4.4 million for
the six months ended December 31, 1999 compared to $6.8 million for the six
months ended December 31, 1998, a decrease of $2.4 million. This decrease was
due to the net effect of the items discussed above.
10
<PAGE>
Net interest expense. Net interest expense was $11.2 million for the six
months ended December 31, 1999 compared to $10.1 million for the six months
ended December 31, 1998, an increase of $1.1 million. This increase was due
primarily to higher average indebtedness outstanding during the period.
Loss before nonrecurring item and taxes. Loss before nonrecurring item and
taxes was $7.3 million for the six months ended December 31, 1999 compared to
$3.4 million for the six months ended December 31, 1998.
Net loss. The Company generated a net loss of $4.4 million for the six
months ended December 31, 1999 compared to a net loss of $2.6 million for the
six months ended December 31, 1998, an increase of $1.8 million due to the net
effect of the items discussed above.
Liquidity and Capital Resources
Management anticipates total capital expenditures of $16.0 million in
fiscal 2000 of which approximately $12.2 million were made by December 31, 1999.
This included approximately $9.6 million for purchase of new vehicles and $2.6
million for other property and equipment.
Net Cash Provided By Operating Activities. Net cash provided by operating
activities of $11.6 million for the six months ended December 31, 1999 resulted
primarily from $12.8 million increases in source of funds for working capital
plus non-cash items of depreciation and amortization of $7.7 million offset by
(i) net loss of $4.4 million; (ii) $3.6 million increase in deferred income
taxes; and (iii) $0.9 million decrease in other sources of funds.
Net Cash Used in Investing Activities. For the six months ended December
31, 1999, the Company made $12.2 million of capital expenditures to acquire
additional vehicles and equipment. Of these capital expenditures $1.2 million
were directly financed.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities totaled $3.5 million for the six months ended December 31, 1999, due
to $6.2 million capital contribution by AETG, partially offset by $2.6 million
principal payment on borrowings. In addition, the Company incurred $1.2 million
of indebtedness to directly finance capital expenditures for the six months
ended December 31, 1999.
The Company continues to experience higher labor costs due to a tight
labor market which is impacting margins.
The Company's revolving credit facility (the "Facility") and Receivable
Agreement were renewed through February 3, 2002. The Company believes that this
Facility of $30.0 million (of which approximately $12 million was undrawn at
December 31, 1999) will provide it with sufficient liquidity to conduct its
operations for the balance of the year.
At December 31, 1999, the Company's total debt and stockholder's equity
were $180.4 million and $23.1 million respectively.
11
<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.
12
<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
February 11, 2000
13
<PAGE>
Index to Exhibits
The following documents are exhibits to this Quarterly Report on Form
10-Q. For convenient reference, each exhibit is listed according to the Exhibit
Table of Regulation S-K. The page number, if any, listed opposite an exhibit
indicates the page number in the sequential numbering system on the manually
signed original of this Quarterly Report on Form 10-Q where such exhibit can be
found.
<TABLE>
<CAPTION>
Exhibit Sequential Page
Number Exhibit Number
------ ------- ------
<S> <C> <C>
10.1 Third Amendment dated as of January 25, 2000 to Loan and
Security Agreement by and among Congress Financial
Corporation, certain subsidiaries of the Company as borrowers
and the Company as Guarantor.................................
10.2 First Amendment dated as of January 25, 2000 to Accounts
Purchase and Sale Agreement among Congress Financial
Corporation, the Company and certain subsidiaries of the
Company as Sellers...........................................
27.1 Financial Data Schedule
</TABLE>
E-1
EXHIBIT 10.1
January 25, 2000
Congress Financial Corporation
1133 Avenue of the Americas
New York, NY 10036
Re: Third Amendment to Loan and Security Agreement
Ladies and Gentlemen:
We refer to the Loan and Security Agreement, dated February 4, 1997 (as
amended to date, the "Loan Agreement"), by and between CONGRESS FINANCIAL
CORPORATION ("Lender"), AMBOY BUS CO., INC., a New York corporation,
ATLANTIC-CONN. TRANSIT, INC., a Connecticut corporation, ATLANTIC-HUDSON, INC.,
a New York corporation, ATLANTIC PARATRANS, INC., a New York corporation,
ATLANTIC PARATRANS OF KENTUCKY INC., a Kentucky corporation, ATLANTIC EXPRESS
COACHWAYS, INC., a New Jersey corporation, ATLANTIC EXPRESS OF MISSOURI INC., a
Missouri corporation, ATLANTIC EXPRESS OF PENNSYLVANIA, INC., a Delaware
corporation, BROOKFIELD TRANSIT INC., a New York corporation, COURTESY BUS CO.,
INC., a New York corporation, K. CORR, INC., a New York corporation, MERIT
TRANSPORTATION CORP., a New York corporation, METROPOLITAN ESCORT SERVICE, INC.,
a New York corporation, RAYBERN BUS SERVICE, INC., a New York corporation,
RAYBERN CAPITAL CORP., a New York corporation, RAYBERN EQUITY CORP., a New York
corporation, and STATEN ISLAND BUS, INC., a New York corporation, ATLANTIC
EXPRESS OF L.A. INC., a California corporation, CENTRAL NEW YORK COACH SALES &
SERVICE INC., a New York corporation, JERSEY BUS SALES, INC., a New Jersey
corporation, ATLANTIC PARATRANS OF COLORADO, INC., a Colorado corporation,
ATLANTIC PARATRANS OF PENNSYLVANIA, INC., a Pennsylvania corporation, and
ATLANTIC EXPRESS OF NEW JERSEY, INC., a New Jersey corporation (collectively
referred to as "Borrowers"), ATLANTIC EXPRESS TRANSPORTATION CORP., a New York
corporation ("Parent"), BLOCK 7932, INC., a New York corporation, G.V.D. LEASING
CO., INC., a New York corporation, 180 JAMAICA CORP., a New York corporation,
METRO AFFILIATES, INC., a New York corporation, MIDWAY LEASING, INC., a New York
corporation, and TEMPORARY TRANSIT SERVICE, INC., a New York corporation,
ATLANTIC-CHITTENANGO REAL PROPERTY CORP., a New York corporation, 201 WEST
SOTELLO REALTY, INC., a California Corporation, JERSEY BUSINESS LAND CO. INC., a
New Jersey corporation, and ATLANTIC MEDFORD, INC., a New York corporation
(collectively, with Parent, "Guarantors").
We have requested that you amend the Loan Agreement by extending the
term of the Loan Agreement and decreasing the interest rates thereunder. The
purpose of this letter (the "Third Amendment") is to set forth our agreements in
connection with such amendment. We hereby agree as follows:
<PAGE>
1. Defined Terms. Unless otherwise indicated, all capitalized terms used
herein but not defined herein shall have the respective meanings assigned
thereto in the Loan Agreement, as amended hereby.
2. Amendments to Loan Agreement. The Loan Agreement is hereby amended as
follows:
(a) The definition of Interest Rate in Section 1 is amended by
(i) deleting "three-quarters of one (3/4%)" on the first line
thereof regarding the Interest Rate on Prime Rate Loans and
replacing it with "one-half of one (1/2%)";
(ii) deleting "two and three-quarter (2-3/4%)" on the second
and third lines thereof regarding the Interest Rate on Eurodollar
Rate Loans and replacing it with "two and one-half of one (2-1/2%)";
(iii) deleting "two and three-quarters of one (2-3/4%)" on the
seventh line thereof regarding the Interest Rate on Prime Rate Loans
and replacing it with "two and one-half of one (2-1/2%)"; and
(iv) deleting "four and three-quarter (4-3/4%)" on the ninth
line thereof regarding the Interest Rate on Eurodollar Rate Loans
and replacing it with "four and one-half of one (4-1/2%)";
(b) Section 1 is amended by inserting the following definitions in
the appropriate alphabetical order:
"Accounts Purchase Agreement" means the Accounts Purchase and
Sale Agreement, dated as of July 8, 1999, among Lender, certain
subsidiaries of Parent and Parent, as it now exists or may hereafter
be amended, modified, supplemented, extended, renewed, restated or
replaced.
"Inventory Financing Agreement" means the Inventory Financing
Agreement (Security Agreement), dated August 11, 1999, by and
between Lender, Atlantic Bus Distributors, Inc., and AETG, as it now
exists or may hereafter be amended, modified, supplemented,
extended, renewed, restated or replaced.
(c) Section 12.1(a) of the Loan Agreement is amended by deleting
"three (3)" on the third line thereof and replacing it with "five (5)".
(d) Section 12.1(c) of the Loan Agreement is deleted in its entirety
and replaced with the following:
(c) If for any reason this Agreement is terminated prior to
the Expiration Date, in view of the impracticality and extreme
difficulty of ascertaining actual damages and by mutual agreement of
the parties as to a reasonable calculation of Lender's lost profits
as a result thereof,
2
<PAGE>
Borrowers shall jointly and severally pay to Lender, upon the
effective date of such termination, an early termination fee in the
aggregate amount set forth below if such termination is effective in
the period indicated:
Amount Period
------ ------
(i) 2% of Maximum Credit January 25, 2000, to and including
February 3, 2001
(ii) 1% of Maximum Credit February 4, 2001, to and including
February 3, 2002;
provided, however, that if (A) Borrowers terminate this Agreement on
or after February 4, 2000 in connection with (x) an initial Public
Equity Offering (as defined herein or in the Inventory Financing
Agreement), (y) the refinancing of all of the outstanding Senior
Notes, or (z) a Change in Control (as defined herein or in the
Inventory Financing Agreement), and, if, in connection with a
termination on the basis of clauses (x) or (y), the Borrower repays
the Obligations solely with net cash proceeds of such initial Public
Equity Offering or refinancing, and (B) prior to or concurrently
with the termination of this Agreement, the Inventory Financing
Agreement and the Accounts Purchase Agreement have been or are, as
the case may be, terminated and all Obligations (as defined in and
owing under the Inventory Financing Agreement) and payments owing by
the Servicer and/or any Seller (as each such term is defined in the
Accounts Purchase Agreement) under the Accounts Purchase Agreement
have been or are, as the case may be, repaid or provided for with
net cash proceeds of such initial Public Equity Offering or
refinancing, then no such early termination fee shall be payable.
Such early termination fee, if any, shall be presumed to be the
amount of damages sustained by Lender as a result of such early
termination and each Borrower agrees that it is reasonable under the
circumstances currently existing. The early termination fee provided
for in this Section 12.1 shall be deemed included in the
Obligations.
3. Conditions Precedent. Each of the following is a condition precedent to
the amendments set forth in Section 2 hereof becoming effective and Lender shall
be satisfied that such conditions precedent have been satisfied before such
amendments become effective:
(a) Lender shall have received an original copy of (i) this Third
Amendment, (ii) the First Amendment to the Accounts Purchase Agreement,
dated as of the date hereof, and (iii) the First Amendment to the
Inventory Financing Agreement, dated as of the date hereof, each duly
authorized, executed and delivered by us, and acknowledged, agreed and
consented to by the Obligors;
(b) each of the representations and warranties made by us as set
forth in the Financing Agreements is true and correct in all respects as
of the date hereof; and
3
<PAGE>
(c) immediately prior, and immediately after giving effect, to the
amendments set forth in Sections 2 hereof there shall exist no Event of
Default or event or condition which, with the giving of notice, passage of
time, or both, would constitute an Event of Default.
4. Representations and Warranties. We hereby represent, warrant and agree,
for your benefit, on and as of the date hereof, both before and after giving
effect to the amendments set forth in Section 2 hereof, that:
(a) each of us is a corporation duly organized and in existence and
good standing under the laws of its respective State of incorporation, and
is duly qualified or registered as a foreign corporation and in good
standing in all other jurisdictions where the nature and extent of the
business transacted by us or its ownership of property makes such
qualification or registration necessary;
(b) the execution, delivery and performance of this Third Amendment
and the other Financing Agreements and all borrowings contemplated
thereby, both before and after giving effect to all amendments and
agreements contained herein, are within our power, have been duly
authorized by all necessary corporate or other action and are not in
contravention of the terms of any of our articles of incorporation,
by-laws or other organizational documentation or any law, regulation,
decree, order, judgment, indenture, agreement or undertaking to which we
are a party or by which we or any of our property are bound;
(c) this Third Amendment and the other Financing Agreements, both
before and after giving effect to all amendments and agreements contained
herein, constitute our legal, valid and binding obligations, enforceable
against us in accordance with their respective terms;
(d) each of our representations and warranties set forth in the
Financing Agreements is true and correct in all respects, and we hereby
remake and reaffirm each such representation and warranty with the same
force and effect as if each such representation and warranty was being
made originally on and as of the date hereof;
(e) we have no defense, set-off or counterclaim to or with respect
to the full payment and performance of any of our obligations under the
Financing Agreements or any Obligations; and
(f) there exists no Event of Default or event or condition which,
with the passage of time, giving of notice or both, would constitute an
Event of Default.
5. Ratification. Except for the amendments expressly provided herein, the
Loan Agreement and the other Financing Agreements are not amended, modified or
changed hereby and each such document shall remain in full force and effect in
accordance with its existing provisions. We hereby ratify and affirm, in all
respects, both before and after giving effect to the amendments and agreements
contained herein, all of the terms and provisions of the Financing Agreements
and all of our obligations thereunder. All loans, extensions of credit and any
other Obligations made or incurred pursuant to or in connection with the Loan
Agreement or any of the Financing Agreements, as amended hereby, shall have the
full benefit of and be secured by the Collateral.
4
<PAGE>
6. Further Assurances. We will take or cause to be taken such actions, and
shall execute and deliver such additional documents as may be necessary or
desirable to effectuate the provisions of this Third Amendment.
7. References to Agreements to include Amendments. All notices,
communications, agreements, certificates, documents or other instruments
executed and delivered after the execution and delivery of this Third Amendment
may refer to the Loan Agreement, without making specific reference to this Third
Amendment, but nevertheless all such references shall include the amendments and
agreements contained in this Third Amendment unless the context clearly requires
otherwise.
8. Counterparts. This Third Amendment may be executed in several
counterparts and by each party on a separate counterpart, each of which, when so
executed and delivered, shall be an original, but all of which together shall
constitute but one and the same instrument.
9. Amendment, Etc. None of the terms of this Third Amendment may be
modified, amended or waived in any manner other than by a writing executed by
the party against whom such modification, amendment or waiver is charged.
10. Entire Understanding. This Third Amendment represents our and your
entire agreement and understanding concerning the subject matter hereof and
supersedes all other prior or contemporaneous agreements, understandings,
negotiations, discussions, representations, term sheets, commitments, offers and
contracts, whether oral or written.
11. Governing Law. This Third Amendment shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
principles regarding conflict of laws that would require application of another
state's laws.
5
<PAGE>
Very Truly Yours,
BORROWERS
---------
AMBOY BUS CO., INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC-CONN. TRANSIT, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC-HUDSON, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
6
<PAGE>
ATLANTIC PARATRANS, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC PARATRANS OF
KENTUCKY INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC EXPRESS COACHWAYS, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC EXPRESS OF MISSOURI, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
7
<PAGE>
ATLANTIC EXPRESS OF
PENNSYLVANIA, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
BROOKFIELD TRANSIT INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
COURTESY BUS CO., INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
K. CORR, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
8
<PAGE>
MERIT TRANSPORTATION CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
METROPOLITAN ESCORT SERVICE, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
RAYBERN BUS SERVICE, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
RAYBERN CAPITAL CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
9
<PAGE>
RAYBERN EQUITY CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
STATEN ISLAND BUS, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
CENTRAL NEW YORK COACH SALES & SERVICE,
INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
JERSEY BUS SALES, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
10
<PAGE>
ATLANTIC EXPRESS OF L.A. INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC PARATRANS OF COLORADO, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC PARATRANS OF PENNSYLVANIA, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC EXPRESS OF NEW JERSEY, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
11
<PAGE>
PARENT
------
ATLANTIC EXPRESS TRANSPORTATION CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
GUARANTORS
----------
ATLANTIC EXPRESS TRANSPORTATION CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
BLOCK 7932, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
12
<PAGE>
G.V.D. LEASING CO., INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
180 JAMAICA CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
METRO AFFILIATES, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
MIDWAY LEASING INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
13
<PAGE>
TEMPORARY TRANSIT SERVICE, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
ATLANTIC-CHITTENANGO REAL PROPERTY CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
JERSEY BUSINESS LAND CO. INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
201 WEST SOTELLO REALTY, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
14
<PAGE>
ATLANTIC MEDFORD, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
Chief Executive Office:
7 North Street
Staten Island, New York 10302
Agreed to and Accepted:
CONGRESS FINANCIAL CORPORATION
By: /s/ HERB KORN
-------------------------------------
Title: Assistant Vice President
----------------------------------
Address:
1133 Avenue of the Americas
New York, New York 10036
15
<PAGE>
Each of the undersigned, in its capacity as a guarantor under a Guaranty,
dated February 4, 1997(the "Guaranty"), made in favor of Lender with respect to
the obligations of the Borrowers (as defined in the foregoing Amendment), hereby
(i) confirms that it has reviewed the foregoing Third Amendment and is familiar
with its contents, and (ii) represents, warrants and agrees that after giving
effect to the Third Amendment and the transactions contemplated thereby, (a) the
Guaranty continues to be in full force and effect, is enforceable in accordance
with its respective terms, and is not subject to any defense, setoff or
counterclaim, (b) the Guaranteed Obligations (as defined in the Guaranty)
include, without limitation, all indebtedness, liabilities, obligations, and
agreements of any kind, now existing or hereafter arising, which arise under, in
connection with or as a result of the Third Amendment or any transaction
thereunder, and (c) and each of the Guaranteed Obligations is secured by any
property in which it has granted or may hereafter grant Lender a security
interest or lien as security for the Guaranteed Obligations.
ATLANTIC EXPRESS
TRANSPORTATION CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
BLOCK 7932, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
G.V.D. LEASING CO., INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
180 JAMAICA CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
METRO AFFILIATES, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
16
<PAGE>
MIDWAY LEASING INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
TEMPORARY TRANSIT SERVICE, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
ATLANTIC-CHITTENANGO REAL
PROPERTY CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
JERSEY BUSINESS LAND CO. INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
201 WEST SOTELLO REALTY, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
ATLANTIC MEDFORD, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Title: Secretary
17
EXHIBIT 10.2
January 25, 2000
Congress Financial Corporation
1133 Avenue of the Americas
New York, NY 10036
Re: First Amendment to Accounts Purchase and Sale Agreement
Ladies and Gentlemen:
We refer to the ACCOUNTS PURCHASE AND SALE AGREEMENT, dated as of July 8,
1999 (the "Agreement"), among CONGRESS FINANCIAL CORPORATION, a Delaware
corporation ("Purchaser"), and AMBOY BUS CO., INC., a New York corporation,
ATLANTIC PARATRANS, INC., a New York corporation, ATLANTIC PARATRANS OF KENTUCKY
INC., a Kentucky corporation, ATLANTIC EXPRESS OF L.A. INC., a California
corporation, ATLANTIC EXPRESS OF MISSOURI INC., a Missouri corporation, ATLANTIC
EXPRESS OF PENNSYLVANIA, INC., a Delaware corporation, COURTESY BUS CO., INC., a
New York corporation, CENTRAL NEW YORK COACH SALES & SERVICE INC., a New York
corporation, JERSEY BUS SALES, INC., a New Jersey corporation, STATEN ISLAND
BUS, INC., a New York corporation, ATLANTIC PARATRANS OF COLORADO, INC., a
Colorado corporation, ATLANTIC PARATRANS OF PENNSYLVANIA, INC., a Pennsylvania
corporation and ATLANTIC EXPRESS OF NEW JERSEY, INC., a New Jersey corporation
(collectively, "Sellers"), and ATLANTIC EXPRESS TRANSPORTATION CORP., a New York
corporation.
We have requested that you extend the term of the existing Agreement and
make certain changes in the terms thereof. The purpose of this letter (the
"First Amendment") is to set forth our agreements in connection with such
amendment. We hereby agree as follows:
1. Defined Terms. Unless otherwise indicated, all capitalized terms used
herein but not defined herein shall have the respective meanings assigned
thereto in the Agreement, as amended hereby. The following terms used herein
shall have the following meanings:
"Loan Agreement" means the Loan and Security Agreement, dated
February 4, 1997, by and between Purchaser, certain subsidiaries of Parent
and Parent.
2. Amendments to Agreement. The Agreement is hereby amended as follows:
(a) Section 2.1 is amended by deleting "$12,750,000" on the seventh
line thereof and replacing it with "the Maximum Investment".
(b) Appendix A of the Agreement is amended by inserting the
following definitions in the appropriate alphabetical order:
"ABD" means Atlantic Bus Distributors, Inc., a New York
corporation.
<PAGE>
"Inventory Agreement" means the Inventory Financing Agreement
(Security Agreement), dated August 11, 1999, between Purchaser, ABD
and Atlantic Express Transportation Group, Inc., as it now exists or
may hereafter be amended, modified, supplemented, extended, renewed,
restated or replaced.
"Inventory Loans" means the revolving loans made by Purchaser
to ABD pursuant to the Inventory Agreement.
"Maximum Investment" means, at any Purchase Date, an amount
equal to $20,000,000 minus the aggregate outstanding amount of all
Inventory Loans on such Purchase Date.
(c) The definition of "Termination Date" in Appendix A of the
Agreement is deleted in its entirety and replaced with the following:
"Termination Date" means the earliest of (a) October 1, 2001,
(b) the date on which the Termination Date shall occur pursuant to
Section 10.1 hereof, or (c) ninety (90) days prior to the first to
occur of the expiration or termination of (x) the Inventory
Agreement or (y) the Working Capital Facility.
3. Conditions Precedent. Each of the following is a condition precedent to
the amendments set forth in Section 2 hereof becoming effective and Lender shall
be satisfied that such conditions precedent have been satisfied before such
amendments become effective:
(a) Lender shall have received an original copy of (i) this First
Amendment, (ii) the Third Amendment to the Loan Agreement, dated as of the
date hereof, and (iii) the First Amendment to the Inventory Agreement,
each duly authorized, executed and delivered by us, and acknowledged,
agreed and consented to by the respective guarantors thereto;
(b) Lender shall have received an opinion of counsel, in form and
substance satisfactory to you, that the Agreement, as amended hereby, does
not violate the terms of the Indenture, and such other matters as you may
request.
(c) each of the representations and warranties made by us as set
forth in the Transaction Documents is true and correct in all respects as
of the date hereof; and
(d) immediately prior, and immediately after giving effect, to the
amendments set forth in Section 2 hereof there shall exist no Event of
Termination or event or condition which, with the giving of notice,
passage of time, or both, would constitute an Event of Termination.
4. Representations and Warranties. We hereby represent, warrant and agree,
for your benefit, on and as of the date hereof, both before and after giving
effect to the amendments set forth in Section 2 hereof, that:
2
<PAGE>
(a) each of us is a corporation duly organized and in existence and
good standing under the laws of its respective state of incorporation, and
is duly qualified or registered as a foreign corporation and in good
standing in all other jurisdictions where the nature and extent of the
business transacted by us or its ownership of property makes such
qualification or registration necessary;
(b) the execution, delivery and performance of this First Amendment
and the other Transaction Documents and all transactions contemplated
thereby, both before and after giving effect to all amendments and
agreements contained herein, are within our power, have been duly
authorized by all necessary corporate or other action and are not in
contravention of the terms of any of our articles of incorporation,
by-laws or other organizational documentation or any law, regulation,
decree, order, judgment, indenture, agreement or undertaking to which we
are a party or by which we or any of our property are bound;
(c) this First Amendment and the other Transaction Documents, both
before and after giving effect to all amendments and agreements contained
herein, constitute our legal, valid and binding obligations, enforceable
against us in accordance with their respective terms;
(d) each of our representations and warranties set forth in the
Transaction Documents is true and correct in all respects, and we hereby
remake and reaffirm each such representation and warranty with the same
force and effect as if each such representation and warranty was being
made originally on and as of the date hereof;
(e) we have no defense, set-off or counterclaim to or with respect
to the full performance of any of our obligations under the Transaction
Documents; and
(f) there exists no Event of Default or event or condition which,
with the passage of time, giving of notice or both, would constitute an
Event of Termination.
5. Ratification. Except for the amendments expressly provided herein, the
Agreement and the other Transaction Documents are not amended, modified or
changed hereby and each such document shall remain in full force and effect in
accordance with its existing provisions. We hereby ratify and affirm, in all
respects, both before and after giving effect to the amendments and agreements
contained herein, all of the terms and provisions of the Transaction Documents
and all of our obligations thereunder.
6. Further Assurances. We will take or cause to be taken such actions, and
shall execute and deliver such additional documents as may be necessary or
desirable to effectuate the provisions of this First Amendment.
7. References to Agreements to include Amendments. All notices,
communications, agreements, certificates, documents or other instruments
executed and delivered after the execution and delivery of this First Amendment
may refer to the Agreement, without making specific reference to this First
Amendment, but nevertheless all such references shall include the amendments and
agreements contained in this First Amendment unless the context clearly requires
otherwise.
3
<PAGE>
8. Counterparts. This First Amendment may be executed in several
counterparts and by each party on a separate counterpart, each of which, when so
executed and delivered, shall be an original, but all of which together shall
constitute but one and the same instrument.
9. Amendment, Etc. None of the terms of this First Amendment may be
modified, amended or waived in any manner other than by a writing executed by
the party against whom such modification, amendment or waiver is charged.
10. Entire Understanding. This First Amendment represents our and your
entire agreement and understanding concerning the subject matter hereof and
supersedes all other prior or contemporaneous agreements, understandings,
negotiations, discussions, representations, term sheets, commitments, offers and
contracts, whether oral or written.
11. Governing Law. This First Amendment shall be governed by and construed
in accordance with the laws of the State of New York, without regard to the
principles regarding conflict of laws that would require the application of
another state's laws.
[This Space Intentionally Left Blank]
4
<PAGE>
Very truly yours,
SELLERS
-------
AMBOY BUS CO., INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
ATLANTIC PARATRANS, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
ATLANTIC PARATRANS OF
KENTUCKY INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
ATLANTIC EXPRESS OF L.A. INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
ATLANTIC EXPRESS OF MISSOURI, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
5
<PAGE>
COURTESY BUS CO., INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
ATLANTIC EXPRESS OF
PENNSYLVANIA, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
CENTRAL NEW YORK COACH
SALES & SERVICE, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
JERSEY BUS SALES, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
STATEN ISLAND BUS, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
ATLANTIC PARATRANS OF
COLORADO, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
6
<PAGE>
ATLANTIC PARATRANS OF PENNSYLVANIA, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
ATLANTIC EXPRESS OF NEW
JERSEY, INC.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
PARENT, SELLERS' REPRESENTATIVE,
AND INITIAL SERVICER
--------------------------------
ATLANTIC EXPRESS
TRANSPORTATION CORP.
By: /s/ NATHAN SCHLENKER
------------------------------------
Name: Nathan Schlenker
Title: Secretary
Agreed to and accepted:
CONGRESS FINANCIAL
CORPORATION
By: /s/ HERB KORN
---------------------------
Name: Herb Korn
Title: Assistant Vice President
7
<PAGE>
The undersigned, in his capacity as guarantor under that certain Amended
and Restated Limited Guaranty, dated August 11, 1999 (the "Guaranty"), made in
favor of Congress Financial Corporation with respect to the obligations of the
Sellers (as defined in the foregoing Amendment), hereby (i) confirms that he has
reviewed the foregoing First Amendment and is familiar with its contents, and
(ii) represents, warrants and agrees that after giving effect to the First
Amendment and the transactions contemplated thereby, (a) the Guaranty continues
to be in full force and effect, is enforceable in accordance with its terms, and
is not subject to any defense, setoff or counterclaim, and (b) the Guaranteed
Obligations (as defined in the Guaranty) include, without limitation, all
indebtedness, liabilities, obligations, and agreements of any kind, now existing
or hereafter arising, which arise under, in connection with or as a result of
the First Amendment or any transaction thereunder.
/s/ DOMENIC GATTO
-----------------------------------
Domenic Gatto
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-Q at
December 31, 1999 and is qualified in its entirety by reference to such
financial statements
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 7,540,776
<SECURITIES> 8,409,336
<RECEIVABLES> 41,762,752
<ALLOWANCES> 1,700,000
<INVENTORY> 11,585,283
<CURRENT-ASSETS> 65,337,504
<PP&E> 227,674,683
<DEPRECIATION> 103,341,569
<TOTAL-ASSETS> 231,501,987
<CURRENT-LIABILITIES> 26,498,931
<BONDS> 180,351,739
0
0
<COMMON> 250,000
<OTHER-SE> 22,805,299
<TOTAL-LIABILITY-AND-EQUITY> 231,501,987
<SALES> 55,467,550
<TOTAL-REVENUES> 173,057,222
<CGS> 50,055,774
<TOTAL-COSTS> 161,759,096
<OTHER-EXPENSES> 679,915
<LOSS-PROVISION> 60,000
<INTEREST-EXPENSE> 11,210,651
<INCOME-PRETAX> (7,470,694)
<INCOME-TAX> (3,607,688)
<INCOME-CONTINUING> (8,017,082)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (546,388)
<NET-INCOME> (4,409,394)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
