================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 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
(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.
================================================================================
<PAGE>
TABLE OF CONTENTS
PART I. Financial Information
Page
----
ITEM 1. Financial Statements:
Consolidated Balance Sheets at June 30, 2000 (audited) and
September 30, 2000 (unaudited)................................... 1
Consolidated Statements of Operations for the Three Month
Periods Ended September 30,1999 (unaudited) and 2000
(unaudited)...................................................... 2
Consolidated Statements of Stockholder's Equity for the Three
Months Ended September 30, 2000 (unaudited)...................... 3
Consolidated Statements of Cash Flows for the Three Month Periods
Ended September 30, 1999 (unaudited) and 2000 (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
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
2000 2000
------------ -------------
(audited) (unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents .................................... $ 2,502,575 $ 1,805,052
Current portion of marketable securities ..................... 1,461,000 3,090,000
Accounts receivable, net of allowance for doubtful accounts .. 50,962,057 48,449,167
Inventories .................................................. 10,279,483 9,873,251
Notes receivable ............................................. 15,901 --
Prepaid expenses and other current assets .................... 6,165,109 6,014,972
------------ ------------
Total current assets ............................... 71,386,125 69,232,442
------------ ------------
Property, plant and equipment, less accumulated depreciation ...... 124,934,071 133,091,360
------------ ------------
Other assets:
Goodwill, net ................................................ 11,817,606 11,736,129
Investments .................................................. 35,000 35,000
Marketable securities ........................................ 6,691,661 5,518,686
Transportation contract rights, net .......................... 3,329,311 3,238,284
Deferred financing and organization costs, net ............... 6,248,073 5,896,305
Due from parent company ...................................... 816,117 785,838
Deposits and other noncurrent assets ......................... 3,205,594 3,127,850
Deferred tax assets .......................................... 5,268,606 9,065,521
Covenant not to compete, net ................................. 80,000 70,000
------------ ------------
Total other assets ................................. 37,491,968 39,473,613
------------ ------------
$233,812,164 $241,797,415
============ ============
Liabilities and Stockholder's Equity
Current:
Current portion of long-term debt ............................ $ 1,907,563 $ 2,990,270
Accounts payable ............................................. 1,952,700 3,452,806
Accrued compensation ......................................... 6,516,830 7,241,948
Current portion of insurance reserve ......................... 3,200,000 3,950,000
Accrued interest ............................................. 7,017,741 3,213,381
Other accrued expenses and current liabilities ............... 9,254,623 14,482,708
------------ ------------
Total current liabilities .......................... 29,849,457 35,331,113
------------ ------------
Long-term debt, net of current portion ............................ 178,270,878 186,718,345
------------ ------------
Premium on bond issuance .......................................... 771,750 717,900
------------ ------------
Other long-term liabilities ....................................... 1,802,517 1,061,361
------------ ------------
Commitments and contingencies
Stockholder's equity:
Common stock, no par value - shares authorized 200; issued and
outstanding 100 ......................................... 250,000 250,000
Additional paid-in capital ................................... 22,048,517 22,048,517
Accumulated earnings (deficit) ............................... (29,254) (4,669,930)
Accumulated other comprehensive income........................ 848,299 340,109
------------ ------------
Total stockholder's equity ......................... 23,117,562 17,968,696
------------ ------------
$233,812,164 $241,797,415
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Three Months Ended
September 30,
----------------------------
1999 2000
----------- -----------
(unaudited)
<S> <C> <C>
Revenues:
Transportation Operations...................................................... $43,785,012 $50,479,581
Bus Sales Operations .......................................................... 38,599,199 39,062,804
----------- -----------
Total revenues ..................................................................... 82,384,211 89,542,385
----------- -----------
Costs and expenses:
Cost of Operations - Transportation Operations ................................ 40,468,547 46,310,958
Cost of Operations - Bus Sales Operations ..................................... 34,628,461 35,716,353
General and administrative .................................................... 5,910,604 5,704,989
Depreciation and amortization ................................................. 3,440,581 4,167,761
----------- -----------
Total operating costs and expenses ................................................. 84,448,193 91,900,061
----------- -----------
Loss from operations ..................................................... (2,063,982) (2,357,676)
Interest expense (net) ............................................................. (5,617,233) (5,968,414)
Other expense ...................................................................... (314,501) (111,501)
----------- -----------
Loss before other items and benefit from income taxes .................... (7,995,716) (8,437,591)
Cumulative effect of a change in accounting principle, net of benefit from
income taxes of $245,875 ................................................. (300,511) --
----------- -----------
Loss before benefit from income taxes .................................... (8,296,227) (8,437,591)
Benefit from income
taxes .............................................................................. 3,598,070 3,796,915
----------- -----------
Net loss ........................................................................... $(4,698,157) $(4,640,676)
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Stockholder's Equity
Three months ended September 30, 2000
<TABLE>
<CAPTION>
Accumulated
Additional Accumulated other
Common stock paid-in earnings comprehensive Comprehensive
No par value capital (deficit) Income income (loss) Total
------------ ----------- ----------- ------------- ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 2000 .... 250,000 22,048,517 (29,254) 848,299 23,117,562
Net loss .................. -- -- (4,640,676) -- (4,640,676) (4,640,676)
Unrealized loss on
marketable securities.... -- -- -- (508,190) (508,190) (508,190)
------------
Comprehensive loss ........ -- -- -- -- $ (5,148,866) --
--------- ------------ ------------ ------------ ============ ------------
Balance, September 30, 2000 $ 250,000 $ 22,048,517 $ (4,669,930) $ 340,109 $ 17,968,696
========= ============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
September 30,
-----------------------------
1999 2000
------------- -------------
(unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net loss .................................................................. $ (4,698,157) $ (4,640,676)
Adjustments to reconcile net loss to net cash provided by operating activities:
Loss (gain) on sale of marketable securities ......................... (4,493) (86,560)
Deferred income taxes ................................................ (3,843,947) (3,796,915)
Depreciation ......................................................... 3,200,376 3,962,655
Amortization ......................................................... 641,390 597,314
Reserve for doubtful accounts receivable ............................. 30,000 30,000
Decrease (increase) in:
Accounts receivable ............................................. (262,585) 2,482,890
Inventories ..................................................... 5,381,113 406,232
Prepaid expenses and other current assets ....................... 690,585 150,137
Deferred lease expense .......................................... 4,117 --
Deposits and other noncurrent assets ............................ 6,456 77,744
Increase (decrease) in:
Accounts payable ................................................ 1,261,767 1,500,106
Accrued expenses and other current liabilities .................. (1,517,685) 2,898,843
Other long-term liabilities ..................................... (527,676) (741,156)
------------ ------------
Net cash provided by operating activities ............................ 361,261 2,840,614
------------ ------------
Cash flows from investing activities:
Proceeds from sale of fixed assets ........................................ -- 845,762
Additions to property, plant and equipment ................................ (7,428,749) (12,877,205)
Purchase of transportation contract rights ................................ -- (11,782)
Due from parent company ................................................... -- 30,279
Notes receivable .......................................................... 1,672 15,901
Marketable securities sold (purchased), net ............................... 243,909 (877,655)
------------ ------------
Net cash used in investing activities ................................ (7,183,168) (12,874,700)
------------ ------------
Cash flows from financing activities:
Proceeds of additional borrowings ......................................... 6,469,809 9,753,000
Principal payments on borrowings .......................................... (165,574) (311,326)
Deferred financing and organization costs ................................. -- (105,111)
------------ ------------
Net cash provided by financing activities ............................ 6,304,235 9,336,563
------------ ------------
Net increase (decrease) in cash and cash equivalents ........................... (517,672) (697,523)
Cash and cash equivalents, beginning of period ................................. 855,983 2,502,575
------------ ------------
Cash and cash equivalents, end of period ....................................... $ 338,311 $ 1,805,052
============ ============
Supplemental disclosures of cash flow information:
Cash paid during the period
for:
Interest ............................................................. $ 8,651,538 $ 9,231,690
Income taxes ......................................................... 45,625 126,256
Supplemental schedule of noncash investing and financing activities:
Loans incurred for purchase of property, plant and equipment .............. $ 340,000 $ 88,500
Liability incurred for acquisition of contract rights ..................... 415,320 --
</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, 2000 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. Inventories
Inventories comprised the following:
June 30, September 30,
2000 2000
----------- ------------
Parts and fuel ..................... $ 5,339,198 $5,033,687
Buses .............................. 4,839,564 4,940,285
----------- ----------
$10,279,483 $9,873,251
=========== ==========
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 Atlantic Express
Transportation Group, Inc. ("AETG") (the parent company), 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 purchase of any such vehicles. During the quarter ended September 30, 2000,
total payments made by Central were $28,041,324. In addition, as of September
30, 2000, Central was obligated to purchase $10,188,835 of vehicles from ABD.
As of September 30, 2000, $1,029,887 of deposits is classified as prepaid
expenses.
3. Related Party Transactions
In August 2000, AETG purchased $5.5 million of buses which it is leasing
to the Company. These operating leases, with terms ranging from 3 to 5 years,
provide for annual lease payments of approximately $0.7 million.
4. Subsequent Event
Effective October 31, 2000, after receiving a fairness opinion issued by
an investment bank of national standing, the Company sold four subsidiaries to
an affiliate, Atlantic Transit, Corp. (ATC) for a purchase price of $4.3
million. The proceeds were used to reduce borrowings under the Company's
revolving line of credit. Subject to compliance with the revolving credit
agreement, the Company may re-borrow such amounts to provide the Company with
additional working capital. In accordance with the Indenture for the Company's
10 3/4% Senior Secured Notes due 2004 (the "Notes"), the four subsidiaries were
terminated as guarantors of the Notes, and all of the capital stock and the
assets of the four subsidiaries were released as collateral for the Notes. For
the quarter ended December 31, 2000, the Company will reflect a loss from sale
of subsidiaries of approximately $3.6 million. The following tables reflect the
effect such sales would have had on the statements of operations for the year
ended June 30, 2000 and the three
5
<PAGE>
months ended September 30, 2000 had such sales been made as of July 1, 1999, and
the effect on the balance sheet as of September 30, 2000 had such sales been
made as of that date:
Condensed Consolidated Statement of Operations
Year ended June 30, 2000
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
------------- -------------- --------------
<S> <C> <C> <C>
Revenues ................................. $ 353,481,004 $ (9,586,748) $ 343,894,256
------------- ------------- -------------
Gross profit ............................. 52,467,506 (2,294,189) 50,173,317
------------- ------------- -------------
Income (loss) before nonrecurring items,
benefit from (provision for) income
taxes and cumulative effect of a
change in accounting principle ........ (4,565,170) 1,295,493 (5,860,663)
------------- ------------- -------------
Net income (loss) ........................ $ (3,778,929) $ 712,521 $ (4,491,450)
============= ============= =============
</TABLE>
Condensed Consolidated Statement of Operations
Three months ended September 30, 2000
<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
------------ ------------- ------------
<S> <C> <C> <C>
Revenues ................................. $ 89,542,385 $ (1,314,251) $ 88,228,134
------------ ------------ ------------
Gross profit ............................. 7,515,074 (54,426) 7,460,648
------------ ------------ ------------
Income (loss) before nonrecurring items,
benefit from (provision for) income
taxes and cumulative effect of a
change in accounting principle ........ (8,437,591) (259,309) (8,178,282)
------------ ------------ ------------
Net income (loss) ........................ $ (4,640,676) (142,620) $ (4,498,056)
============ ============ ============
</TABLE>
Condensed Consolidated Balance Sheet
September 30, 2000
<TABLE>
<CAPTION>
Adjustments
and
Historical Eliminations Pro Forma
------------ ------------- -------------
<S> <C> <C> <C>
Current assets ............................. $ 69,232,442 $ 2,857,485 $ 72,089,927
Contract rights and other non current assets 172,564,973 (5,766,965) 166,798,008
------------ ------------ ------------
Total assets .......................... $241,797,415 $ (2,909,480) $238,887,935
============ ============ ============
Current liabilities ........................ $ 35,331,113 $ (356,566) $ 34,974,547
Inter-company .............................. 954,747 954,747
Non current liabilities .................... 188,497,606 -- 188,497,606
------------ ------------ ------------
Total liabilities ..................... $223,828,719 $ 598,181 $224,426,900
============ ============ ============
Shareholder's equity ....................... 17,968,696 (3,507,661) 14,461,035
------------ ------------ ------------
Total liabilities and shareholder's equity $241,797,415 $ (2,909,480) $238,887,935
============ ============ ============
</TABLE>
6
<PAGE>
Supplemental Financial Information
The following are unaudited condensed consolidating financial statements
regarding the Company (on a stand-alone basis and on a consolidated basis) and
its subsidiaries which are guarantors and non-guarantors of the Company's 10
3/4% Senior Secured Notes due 2004 as of and for the three months ended
September 30, 2000, and a consolidating balance sheet as of June 30, 2000 and
consolidating statements of operations and cash flows for the three months ended
September 30, 1999. The following information does not give effect to the
subsequent event described in Note 4.
Condensed Consolidating Balance Sheet
September 30, 2000
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets ......... $ 614,577 $ 64,578,398 $ 4,039,467 $ -- $ 69,232,442
Investment in affiliates 50,963,486 -- -- (50,963,486) --
Total assets ........... 221,603,587 218,034,267 10,083,264 (207,923,703) 241,797,415
Current liabilities .... 3,020,536 28,068,324 4,242,253 -- 35,331,113
Total liabilities ...... 179,049,832 184,587,696 6,147,413 (145,956,222) 223,828,719
Stockholder's equity ... 42,553,755 33,446,571 3,935,851 (61,967,481) 17,968,696
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended September 30, 2000
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
Net revenues .............. $ -- $ 89,392,164 $ 1,150,079 $ (999,858) $ 89,542,385
Income (loss) from
operations ................ -- (2,456,901) 99,225 -- (2,357,676)
Income (loss) before income
taxes ................ -- (8,536,816) 99,225 -- (8,437,591)
Net loss of subsidiaries .. (4,640,676) -- -- 4,640,676 --
Net income (loss) ......... (4,640,676) (4,695,250) 54,574 4,640,676 (4,640,676)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 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 ........ $ (9,514,939) $ 12,356,898 $ (1,345) $ -- $ 2,840,614
Net cash provided by (used in)
investing activities ........ (342,061) (11,654,984) (877,655) -- (12,874,700)
Net cash provided by (used in)
financing activities ........ 9,753,000 (416,437) -- -- 9,336,563
------------ ------------ ------------ -------- ------------
Increase (decrease) in cash and
cash equivalents ............ $ (104,000) $ 285,477 $ (879,000) $ -- $ (697,523)
Cash and cash equivalents,
beginning of period ......... 150,000 613,575 1,739,000 -- 2,502,575
------------ ------------ ------------ -------- ------------
Cash and cash equivalents,
end of period ............... $ 46,000 $ 899,052 $ 860,000 $ -- $ 1,805,052
============ ============ ============ ======== ============
</TABLE>
7
<PAGE>
Condensed Consolidating Balance Sheet
June 30, 2000
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Current assets ......... $ 5,460,699 $ 62,668,334 $ 3,257,092 $ -- $ 71,386,125
Investment in affiliates 55,601,639 -- -- (55,601,639) --
Total assets ........... 216,113,405 206,708,073 10,209,264 (199,218,578) 233,812,164
Current liabilities .... 6,949,572 19,691,884 3,208,001 -- 29,849,457
Total liabilities ...... 182,396,073 168,566,252 5,819,797 (146,087,520) 210,694,602
Stockholder's equity ... 33,717,332 38,141,821 4,389,467 (53,131,058) 23,117,562
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended September 30, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C>
Net revenues ...................... $ -- $ 82,319,712 $ 64,499 $ -- $ 82,384,211
Income (loss) from operations ..... -- (2,079,720) 15,738 -- (2,063,982)
Income (loss) before benefit from
income taxes and cumulative
effect of a change in accounting
principle ...................... -- (8,011,454) 15,738 -- (7,995,716)
Cumulative effect of a change
in accounting principle, net of
benefit from income taxes ...... -- (300,511) -- -- (300,511)
Net loss of
subsidiaries ...................... (4,698,157) -- -- -- 4,698,157
Net income (loss) ................. (4,698,157) (4,706,813) 8,656 4,698,157 (4,698,157)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 1999
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities ....... $(5,548,384) $ 6,388,054 $ (478,409) $ -- $ 361,261
Net cash provided by (used in)
investing activities ....... (63,269) (7,363,808) 243,909 -- (7,183,168)
Net cash provided by
financing activities ....... 6,129,809 174,426 -- -- 6,304,235
----------- ----------- ----------- -------- -----------
Increase (decrease) in cash and
cash equivalents ........... $ 518,156 $ (801,328) $ (234,500) $ -- $ (517,672)
Cash and cash equivalents,
beginning of period ...... (324,134) 522,117 658,000 -- 855,983
----------- ----------- ----------- -------- -----------
Cash and cash equivalents,
end of period ............ $ 194,022 $ (279,211) $ 423,500 $ -- $ 338,311
=========== =========== =========== ======== ===========
</TABLE>
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company believes that this report contains forward-looking statements
within the meaning of the federal securities laws and as such involve known and
unknown risks and uncertainties. These statements may use forward-looking words
such as "anticipate", "estimate", "expect", "will" or other similar words. These
statements discuss future expectations or contain projections of future events.
Actual results may differ materially from those expressed or implied by the
forward-looking statements for various reasons, including general economic
conditions, reliance on suppliers, labor relations and other factors, many of
which are beyond the Company's control. Readers are cautioned not to place undue
reliance on such forward-looking statements.
Three months ended September 30, 2000 compared to three months ended September
30, 1999.
Revenues. Revenues from Transportation Operations were $50.5 million for
the three months ended September 30, 2000 compared to $43.8 million for the
three months ended September 30, 1999, an increase of $6.7 million or 15.3%.
This increase was due primarily to (i) $2.3 million additional summer revenues;
(ii) $1.0 million as a result of new contracts awarded; and (iii) $3.4 million
due to contract rate increases and service requirements of existing contracts
(including one additional revenue day in New York City in September 2000 as
compared to September 1999 which increased revenues by approximately $0.5
million). Revenues from Bus Sales Operations was $39.1 million for the three
months ended September 30, 2000 compared to $38.6 million for the three months
ended September 30, 1999, an increase of $0.5 million or 1.2%. This increase was
primarily due to increases in parts and repair sales.
Gross Profit. Gross profit from Transportation Operations was $4.2 million
for the three months ended September 30, 2000 compared to $3.3 million for the
three months ended September 30, 1999, an increase of $0.9 million or 25.7%. As
a percentage of revenues, gross profit increased to 8.3% for the three months
ended September 30, 2000 from 7.6% for the three months ended September 30,
1999. This increase was primarily due to a decrease in costs associated with a
terminated contract partially offset by higher fuel costs. Gross profit from Bus
Sales Operations was $3.3 million for the three months ended September 30, 2000
compared to $4.0 million for the three months ended September 30, 1999, a
decrease of $0.6 million or 15.7%. As a percentage of revenues, gross profit
decreased to 8.6% for the three months ended September 30, 2000 from 10.3% for
the three months ended September 30, 1999. This decrease was primarily due to an
increase in the proportion of sales of commercial vehicles made in the current
quarter, which have lower gross profit margins than sales of school bus
vehicles.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $4.7 million for the three months ended
September 30, 2000 compared to $5.0 million for the three months ended September
30, 1999, a decrease of $0.3 million or 5.1%. This decrease was principally
related to decreases in professional fees of $0.6 million partially offset by
increases in advertising and recruitment expenses. As a percentage of revenues,
general and administrative expenses decreased to 9.3% for the three months ended
September 30, 2000 from 12.3% for the three months ended September 30, 1999.
General and administrative expenses for the Bus Sales Operations for the three
months ended September 30, 2000 were $1.0 million compared to $0.9 million for
the three months ended September 30, 1999. As a percentage of revenues general
and administrative expenses increased to 2.5% for the three months ended
September 30, 2000 from 2.4% for the three months ended September 30, 1999.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations was $4.0 million for the three months
ended September 30, 2000 compared to $3.2 million for the three months ended
September 30, 1999, an increase of $0.7 million or 22.4%. This increase was due
to additional depreciation due to the purchase of new vehicles. Depreciation and
amortization expenses for the Bus Sales Operations was $0.2 million for the
three months ended September 30, 2000 and 1999 respectively.
Loss from operations. Loss from operations was $2.4 million for the three
months ended September 30, 2000 compared to $2.1 million for the three months
ended September 30, 1999, an increase of $0.3 million. This increase was due to
the net effect of the items discussed above.
9
<PAGE>
Net interest expense. Net interest expense was $6.0 million for the three
months ended September 30, 2000 compared to $5.6 million for the three months
ended September 30, 1999, an increase of $0.4 million or 6.3%. This increase was
due primarily to higher average indebtedness outstanding during the three months
ended September 30, 2000.
Net loss. The Company generated a net loss of $4.6 million for the three
months ended September 30, 2000 compared to a net loss of $4.7 million for the
three months ended September 30, 1999, a decrease of $0.1 million. This decrease
was due to the net effect of the items discussed above and the cumulative effect
of a change in accounting principle.
Liquidity and Capital Resources
Management anticipates total capital expenditures of $22.6 million in
fiscal 2001 of which approximately $13.0 million were made by September 30,
2000. This included approximately $10.9 million for purchase of new vehicles and
$2.1 million for other property and equipment.
Net Cash Provided By Operating Activities. Net cash provided by operating
activities of $2.8 million for the three months ended September 30, 2000
resulted primarily from $7.4 million increases in source of funds for working
capital plus non-cash items of depreciation and amortization of $4.6 million
offset by (i) net loss of $4.6 million; (ii) $3.8 million increase in deferred
income tax asset; and (iii) $0.7 million decrease in other sources of funds.
Net Cash Used in Investing Activities. For the three months ended
September 30, 2000, the Company made $13.0 million of capital expenditures to
acquire additional vehicles, other property and equipment. Of these capital
expenditures $0.1 million were directly financed. In addition the Company made
$0.9 million net purchases of marketable securities.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities totaled $9.3 million for the three months ended September 30, 2000,
due primarily to $9.8 million net borrowings under the Company's revolving line
of credit, partially offset by principal payments of $0.3 million on other
borrowings.
The Company continues to experience higher fuel costs which are impacting
profit margins and increased advertising and recruitment costs due to a tight
labor market.
Effective October 31, 2000 after receiving a fairness opinion issued by an
investment bank of national standing, the Company sold four subsidiaries to an
affiliate for a purchase price $4.3 million (see Note 4 to Consolidated
Financial Statements). The proceeds of the sale were used to reduce borrowings
under the Company's revolving line of credit. Subject to compliance with the
revolving credit agreement, the Company may re-borrow such amounts to provide
the Company with additional working capital.
The first quarter is historically the period of the Company's greatest use
of its revolving line of credit due to the purchase of vehicles for the upcoming
school year and seasonal lower revenues in this quarter. The Company believes
that its current operating cash flow and its borrowing capacity under its $30
million revolving credit facility (of which $1.5 million was undrawn at
September 30, 2000), will provide it with sufficient liquidity to conduct its
operations for the balance of the year.
Management has considered a variety of options to enhance the Company's
liquidity and has formulated a proposal intended to provide the Company with
greater financial flexibility and the ability to capitalize on additional
business opportunities. The principal elements of the proposal include (i)
establishing a $125 million revolving credit facility and modifying various
provisions of the Indenture; (ii) receiving a capital contribution of $10
million from AETG; (iii) AETG contributing all of the stock of ATC and its
subsidiaries to the Company; and (iv) offering to repurchase at par $30 million
of its outstanding 10 3/4% Senior Secured Notes due February 1, 2004.
10
<PAGE>
The Company is in the process of preparing an Offer to Purchase and
Consent Solicitation Statement to present to its bondholders. There can be no
assurance that the Company will be able to establish a larger credit facility or
that its bondholders will provide the necessary consent to consummate the
proposal. The foregoing statements do not constitute an offer to buy, or the
solicitation of an offer to sell any securities. Such offer, if made, would only
be made pursuant to a definitive offer to purchase and related documentation.
At September 30, 2000, the Company's total debt and stockholder's equity
were $189.7 million and $18.0 million respectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable.
11
<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.
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
November 20, 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.
Exhibit Sequential Page
Number Exhibit Number
------ ------- ------
27.1 Financial Data Schedule
E-1
