<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
______________________
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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 1-10841
GREYHOUND LINES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 86-0572343
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
15110 N. DALLAS PARKWAY, SUITE 600
DALLAS, TEXAS 75248
(Address of principal executive offices) (Zip code)
(214) 789-7000
(Registrant's telephone number, including area code)
NONE
(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 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 ISSUERS 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 Sections 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 X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OF COMMON STOCK OUTSTANDING AT MAY 10, 1995
--------------------- ---------------------------
$.01 PAR VALUE 53,743,682 SHARES
<PAGE> 2
GREYHOUND LINES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Interim Consolidated Statements of Financial Position as of
March 31, 1995 (Unaudited) and December 31, 1994 . . . . . . . . . . . 4
Interim Consolidated Statements of Operations for the
Three Months Ended March 31, 1995 and 1994 (Unaudited) . . . . . . . . 5
Interim Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1995 and 1994 (Unaudited). . . . . . . . . 6
Notes to Interim Consolidated Financial Statements (Unaudited) . . . . . . 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 20
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>
2
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
3
<PAGE> 4
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
----------- ------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 906 $ 9,454
Accounts receivable, less allowance for doubtful accounts
of $794 and $840 . . . . . . . . . . . . . . . . . . . . . . . . . 26,013 33,584
Stock subscription receivable . . . . . . . . . . . . . . . . . . . . --- 15,150
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,151 3,779
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 8,485 10,248
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . 8,709 9,526
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 14,936 12,859
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 62,200 94,600
Prepaid Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 22,248 22,250
Property, Plant and Equipment, net of accumulated depreciation
of $68,448 and $68,388 . . . . . . . . . . . . . . . . . . . . . . . 281,970 288,250
Investments in Unconsolidated Affiliates . . . . . . . . . . . . . . . . 1,308 1,312
Insurance and Security Deposits . . . . . . . . . . . . . . . . . . . . . 87,496 84,548
Intangible Assets, net of accumulated amortization of $11,036 and $9,644 19,481 20,489
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $474,703 $511,449
======== ========
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 13,997 $ 14,916
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 48,183 53,106
Unredeemed tickets . . . . . . . . . . . . . . . . . . . . . . . . . 7,240 10,259
Current portion of reserve for injuries and damages . . . . . . . . . 26,455 26,455
Current maturities of long-term debt . . . . . . . . . . . . . . . . 5,251 7,022
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 101,126 111,758
Reserve for Injuries and Damages . . . . . . . . . . . . . . . . . . . . 43,679 45,888
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191,968 197,125
Deferred Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,188 1,277
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,188 2,205
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 340,149 358,253
-------- --------
Commitments and Contingencies (Note 3)
Stockholders' Equity
Preferred stock (10,000,000 shares authorized; par value $.01; none issued)
Series A junior preferred stock (500,000 shares authorized; par value $.01;
none issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . --- ---
Common stock (100,000,000 shares authorized; 53,852,874 and 37,567,744
shares issued as of March 31, 1995 and December 31, 1994 respectively;
par value $.01) . . . . . . . . . . . . . . . . . . . . . . . . . 538 375
Common stock subscribed (16,279,070 shares as of December 31, 1994) . --- 163
Capital in excess of par value . . . . . . . . . . . . . . . . . . . 212,085 182,826
Capital in excess of par value, subscribed . . . . . . . . . . . . . --- 29,184
Retained earnings (deficit) . . . . . . . . . . . . . . . . . . . . . (75,532) (56,815)
Less: Unfunded accumulated pension obligation . . . . . . . . . . . (1,499) (1,499)
Less: Treasury stock, at cost (109,192 shares) . . . . . . . . . . . (1,038) (1,038)
-------- --------
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 134,554 153,196
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . $474,703 $511,449
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
--------- ----------
(UNAUDITED)
<S> <C> <C>
OPERATING REVENUES
Transportation Services
Passenger service . . . . . . . . . . . . . . . . . . . . . . . . . . . $109,454 $ 110,841
Package express . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,643 9,931
Food services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,403 4,583
Other operating revenues . . . . . . . . . . . . . . . . . . . . . . . . . 9,293 8,497
-------- ---------
Total operating revenues . . . . . . . . . . . . . . . . . . . . . . . 131,793 133,852
-------- ---------
OPERATING EXPENSES
Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,690 19,148
Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32,540 30,166
Agents' commissions and station costs . . . . . . . . . . . . . . . . . . . 27,222 28,013
Marketing, advertising and traffic . . . . . . . . . . . . . . . . . . . . 3,129 9,989
Insurance and safety . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,660 11,985
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . 17,960 18,449
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . 7,424 7,291
Operating taxes and licenses . . . . . . . . . . . . . . . . . . . . . . . 12,640 11,725
Operating rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,997 11,126
Cost of goods sold - food services . . . . . . . . . . . . . . . . . . . . 2,991 3,230
Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . 1,387 1,476
-------- ---------
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . 143,640 152,598
-------- ---------
OPERATING LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11,847) (18,746)
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,868 7,904
-------- ---------
LOSS BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . (18,715) (26,650)
Income Tax Provision (Benefit) . . . . . . . . . . . . . . . . . . . . . . . 2 (10,639)
-------- ---------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(18,717) $ (16,011)
======== =========
Loss Per Share of Common Stock:
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.36) $ (1.09)
======== =========
Fully Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.36) $ (1.09)
======== =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
--------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,717) $ (16,011)
Noncash expenses, gains and losses included in net loss
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 7,424 7,291
Amortization of deferred gain . . . . . . . . . . . . . . . . . . . . . . (89) (64)
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . 272 190
Amortization of discount on Senior Notes . . . . . . . . . . . . . . . . . 725 637
Net loss on assets sold . . . . . . . . . . . . . . . . . . . . . . . . . 1 62
Unfunded net pension (gain) loss . . . . . . . . . . . . . . . . . . . . . 39 (646)
Benefit from deferred income taxes . . . . . . . . . . . . . . . . . . . . --- (10,647)
Net changes in certain operating assets and liabilities
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,028 (864)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 628 448
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,763 (1,000)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,077) (1,724)
Insurance and security deposits . . . . . . . . . . . . . . . . . . . . . (2,948) (2,367)
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (384) (1,245)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (956) 2,657
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,932) (7,462)
Reserve for injuries and damages . . . . . . . . . . . . . . . . . . . . . (2,209) (106)
Unredeemed tickets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,019) (2,585)
--------- ---------
Net cash used for operating activities . . . . . . . . . . . . . . . . (13,451) (33,436)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (809) (33,262)
Proceeds from assets sold . . . . . . . . . . . . . . . . . . . . . . . . . 1,601 28,092
Proceeds from termination of interest rate swap . . . . . . . . . . . . . . --- 1,609
Deposit to collateralize operating leases . . . . . . . . . . . . . . . . . --- (7,127)
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . 4 (13)
--------- ---------
Net cash provided by (used for) investing activities . . . . . . . . . 796 (10,701)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt and capital lease obligations . . . . . . . . . . . . . . (14,788) (1,927)
Net proceeds from Rights Offering . . . . . . . . . . . . . . . . . . . . . 11,685 ---
Proceeds from issuance of Common Stock . . . . . . . . . . . . . . . . . . --- 7
Net change in revolving credit facility . . . . . . . . . . . . . . . . . . 7,210 8,500
--------- ---------
Net cash provided by financing activities . . . . . . . . . . . . . . . 4,107 6,580
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . (8,548) (37,557)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . . 9,454 39,643
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . $ 906 $ 2,086
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
GREYHOUND LINES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(Unaudited)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Consolidated Financial
Statements of Greyhound Lines, Inc. and Subsidiaries (the "Company") include
all adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Company's financial position as of March 31, 1995, and the
results of its operations for the three months ended March 31, 1995 and 1994.
Due to the seasonality of the Company's operations, the results of its
operations for the interim period ended March 31, 1995, may not be indicative
of total results for the full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations promulgated by the Securities and
Exchange Commission. The unaudited Interim Consolidated Financial Statements
should be read in conjunction with the audited Consolidated Financial
Statements of Greyhound Lines, Inc. and Subsidiaries and accompanying notes for
the year ended December 31, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
LOSS PER SHARE
Primary loss per common share is calculated by dividing net loss by the
weighted average shares of common stock of the Company ("Common Stock") and
Common Stock equivalents outstanding during the period. Common Stock
equivalents represent the dilutive effect of the assumed exercise of certain
outstanding stock options. The calculation of fully diluted loss per share of
Common Stock assumes the dilutive effect of the Company's 8.5% Convertible
Subordinated Debentures due 2007 (the "Convertible Debentures") converted into
Common Stock. For the three months ended March 31, 1995 and 1994, the assumed
exercise of outstanding in-the-money stock options and conversion of
Convertible Debentures have an antidilutive effect. As a result, these shares
are not included in the weighted average shares outstanding at March 31, 1995
and 1994. The weighted average shares outstanding used in the calculation of
primary and fully diluted loss per share of Common Stock for the three months
ended March 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994
--------- ---------
<S> <C> <C>
Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52,371,106 14,651,839
Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . 52,371,106 14,651,839
</TABLE>
CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made to the prior period statements to
conform them to the March 31, 1995 classifications.
3. COMMITMENTS AND CONTINGENCIES
LABOR LITIGATION
The Amalgamated Transit Union (the "ATU") strike in March 1990 resulted in two
related proceedings, one before the National Labor Relations Board ("NLRB") and
the other related to the Company's 1990 Chapter 11 reorganization. In April
1993, the Company, the ATU and the General Counsel of the NLRB jointly
announced a proposed settlement of the strike and certain related litigation.
The proposed settlement was approved by an Administrative Law Judge of the NLRB
in September 1994, the full NLRB in February 1995 and by the United States
Bankruptcy Court for the Southern District of Texas, Brownsville Division (the
"Bankruptcy Court") in March 1995.
7
<PAGE> 8
The settlement resulted in the dismissal of all litigation between the ATU,
NLRB and the Company, with the exception of one issue related to the Company's
granting in 1990 of experienced-based seniority to drivers hired with previous
commercial driving experience, which issue will be resolved in litigation
before the NLRB and appeals, if any. In September 1994, an Administrative Law
Judge of the NLRB issued a ruling finding that the granting of seniority to
drivers with previous commercial driving experience constituted an unfair labor
practice by the Company. The Company has appealed this ruling.
If the Company were to ultimately lose this litigation, after all appeals, or
if the Company were to change its policy of relating to experience-based
seniority, it may be exposed to liability to drivers hired after March 1990
that would lose their experience-based seniority credit. Liability to drivers
hired before March 1990 who might lose their experience-based seniority was
resolved in the aforementioned settlement. Based on an assessment of the
liability exposure it could face from these claims, the Company does not
believe that this liability, even if determined to be adverse to the Company,
would have a material adverse effect on its business, results of operations or
financial condition.
DEPARTMENT OF JUSTICE INVESTIGATION
In March 1994, the Antitrust Division of the U.S. Department of Justice (the
"DOJ") initiated an antitrust investigation to determine whether there is, has
been, or may be a violation by the Company of Sections 1 and 2 of the Sherman
Act by conduct or activities constituting a restraint of trade, monopolization
or an attempt to monopolize. This investigation principally involves the
competitive impact of (i) the Company's computerized reservation system,
including the provision of fare and scheduling information via telephone, (ii)
the Company's decision to discontinue publishing its bus schedules in an
industry publication and (iii) various provisions contained in agreements with
bus carriers using the Company's terminals. Under DOJ procedures, this
investigation is preliminary in nature and seeks to determine whether the DOJ
should file a complaint against the Company.
Pursuant to this investigation, the DOJ served a civil investigative demand
("CID") on the Company in March 1994. The CID required the Company to answer
various interrogatories and to produce certain documents. In July 1994, the
Company completed the production of documents and answered the interrogatories
required by the CID. In November 1994, the DOJ's staff contacted counsel for
the Company and indicated that they believed that one of the several business
practices investigated, a provision contained in agreements with bus carriers
using the Company's terminals, violated Section 1 of the Sherman Act. The
Company believes that the subject provision does not violate that antitrust
law. The DOJ has requested that the Company enter into a consent decree
enjoining the Company from enforcing the subject provision in its terminal
license agreements. To date, the Company has not agreed to enter into a
consent decree and the DOJ's investigation continues.
In 1993, the Interstate Commerce Commission's (the "ICC") Office of Economics
conducted an assessment of essentially the same issues involved in the DOJ
investigation. In July 1993, the ICC issued a report concluding that, although
the Company had initiated many business and technological practices that
affected the bus industry, the Company had not intentionally mistreated other
carriers or engaged in any anti-competitive practices. In September 1994, the
ICC voted to discontinue any further potential rulemaking action with respect
to the issues it investigated in 1993.
Given the preliminary nature of the DOJ investigation, the Company cannot
assess the impact, if any, on its business or financial condition or results of
operations. If the DOJ's investigation is in fact limited to the single
provision in the terminal license agreements, the Company believes that the
investigation will not have a material impact on the Company's business,
financial condition or results of operations.
OKLAHOMA SALES TAX CLAIM
In January 1991, the Oklahoma Tax Commission ("OTC") filed a proof of claim
with the Bankruptcy Court in connection with the Company's Chapter 11
bankruptcy case. That claim related to sales taxes which the OTC alleged were
due and owing by the Company on interstate bus tickets sold in Oklahoma. The
OTC claim involved a proposed tax assessment of approximately $908,000 plus
additional interest. The Company objected to the claim on the basis that the
tax the OTC proposed to assess was an improper burden on interstate commerce in
violation of the Commerce Clause of the United States Constitution. In
February 1993, the Bankruptcy Court denied the
8
<PAGE> 9
OTC's claim in its entirety, finding that the Oklahoma sales tax on interstate
travel was unconstitutional. The OTC subsequently appealed the Bankruptcy
Court's decision to the U.S. District Court for the Southern District of Texas,
Brownsville Division (the "District Court"), which affirmed the Bankruptcy
Court's ruling in October 1993. In November 1993, the OTC appealed the case to
the United States Circuit Court of Appeals for the Fifth Circuit (the "Fifth
Circuit"). The decision of the Fifth Circuit was being held in abeyance
pending the United States Supreme Court's decision in another case brought by
the OTC against another bus carrier involving the same issues. On April 3,
1995, the United States Supreme Court ruled against the other bus carrier and
upheld the constitutionality of a sales tax imposed on interstate bus tickets
by the State of Oklahoma. The Company's case has been remanded to the
Bankruptcy Court where additional proceedings concerning the claim will be
heard. Additionally, the OTC could file another tax assessment covering the
tax due for all or a portion of the period subsequent to the original claim
filed with the Bankruptcy Court. To date, no such additional assessment has
been made by the OTC. In view of the Supreme Court's decision, the Company
established a reserve, during the first quarter of 1995, for its estimate of
the liability.
SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION
On August 23, 1994, a purported class action lawsuit was filed by Joseph
Sonnenberg, a purported owner of the Company's Common Stock, against the
Company and certain of its former officers and directors. The suit seeks
unspecified damages for securities law violations as a result of statements
made in public reports and press releases and to securities analysts during
1993 and 1994 that are alleged to have been false and misleading. The suit,
filed in the United States District Court for the Northern District of Texas,
is styled Sonnenberg v. Greyhound Bus Lines, Inc., Frank J. Schmieder and
Michael Doyle, Civil Action No. 3-94CV-1793G.
On October 5, 1994, a purported class action lawsuit was filed by Bruce
Doniger, a purported owner of the Company's Convertible Debentures, against the
Company and certain of its former officers and directors. The suit seeks
unspecified damages for securities law violations as a result of statements
made in public reports and press releases and to securities analysts in 1993
and 1994 that are alleged to have been false and misleading. The suit, filed
in the United States District Court for the Northern District of Texas, is
styled Bruce Doniger v. Greyhound Bus Lines, Inc., Frank J. Schmieder and J.
Michael Doyle, Civil Action No. 3-94CV-2135X.
On October 20, 1994, a purported class action lawsuit was filed by M. Murray
Van De Velde, a purported owner of the Company's Convertible Debentures,
against the Company and certain of its former officers and directors. The suit
seeks unspecified damages for securities law violations as a result of
statements made in public reports and press releases and to securities analysts
during 1993 and 1994 that are alleged to have been false and misleading. The
suit, filed in the United States District Court for the Northern District of
Texas, is styled M. Murray Van De Velde v. Greyhound Bus Lines, Inc., Frank J.
Schmieder and J. Michael Doyle, Civil Action No. 3-94CV-2240R.
On October 21, 1994, a purported class action lawsuit was filed by Emile
Gladstone, a purported owner of the Company's 10% Senior Notes due 2001 (the
"Senior Notes"), against the Company, certain of its former officers and
directors and Smith Barney Inc. The suit seeks unspecified damages for
securities law violations as a result of statements made in public reports and
press releases and to securities analysts during 1993 and 1994 that are alleged
to have been false and misleading. The suit, filed in the United States
District Court for the Northern District of Texas, is styled Emile Gladstone v.
Greyhound Lines, Inc., Smith Barney Inc., Charles J. Lee, Charles A. Lynch,
Frank J. Schmieder and J. Michael Doyle, Civil Action No. 3-94CV-2258J.
On October 25, 1994, a purported class action lawsuit was filed by Lawrence
Robbins, a purported owner of the Company's Common Stock, against the Company,
a present officer, certain former officers and directors, and Smith Barney
Shearson. The suit seeks unspecified damages for securities law violations as
a result of statements made in public reports and press releases and to
securities analysts during 1993 and 1994 that are alleged to have been false
and misleading. The suit, filed in the United States District Court for the
Northern District of Texas, is styled Lawrence Robbins v. Greyhound Bus Lines,
Inc., Frank J. Schmieder, J. Michael Doyle, Charles Lynch, Phillip W. Taff,
Robert R. Duty, Ralph Borland, Don T. Seaquist, Charles Lee and Smith Barney
Shearson, Civil Action No. 3-94CV-2270H.
On November 2, 1994, a purported class action lawsuit was filed by The Witness
Organization Pension Plan & Trust Dated 5-30-86, Philip H. deRoulet, Trustee, a
purported owner of the Company's Convertible Debentures, against
9
<PAGE> 10
the Company and certain of its former officers and directors. The suit seeks
unspecified damages for securities law violations as a result of statements
made in public reports and press releases and to securities analysts during
1993 and 1994 that are alleged to have been misleading. The suit, filed in the
United States District Court for the Northern District of Texas, is styled The
Witness Organization Pension Plan & Trust Dated 5-30-86, Philip H. deRoulet,
Trustee v. Greyhound Bus Lines, Inc., Frank J. Schmieder and J. Michael Doyle,
Civil Action No. 3-94CV-2332G.
On December 12, 1994, a purported class action lawsuit was filed by the State
Board of Administration of Florida and Louisiana State Employees Retirement
System, purported owners of the Company's Common Stock, against the Company and
certain of its former officers and directors. The suit seeks unspecified
damages for securities law violations and common law fraud and deceit as a
result of statements made in public reports and press releases and to
securities analysts during 1993 and 1994 that are alleged to have been
misleading. The suit, filed in the United States District Court for the
Northern District of Texas, is styled State Board of Administration of Florida
and Louisiana State Employees Retirement System v. Greyhound Lines, Inc., J.
Michael Doyle, Charles A. Lynch, Frank J. Schmieder, and "John Doe" and
"Richard Roe," Civil Action No. 3-94-CV-2694-R. Although this case has been
filed, it has not yet been served on any defendants.
All the purported class action cases above (with the exception of State Board
of Administration of Florida and Louisiana State Employees Retirement System v.
Greyhound Lines, Inc., J. Michael Doyle, Charles A. Lynch, Frank J. Schmieder,
and "John Doe" and "Richard Roe," Civil Action No. 3-94-CV-2694-R, which has
not yet been served on any defendants) have been transferred to the Court in
which the first purported class action suit is pending. A joint pretrial order
has been entered in the class action litigation which consolidates for pretrial
and discovery purposes all of the stockholders actions and, separately, all of
the debtholders actions. The joint pretrial order requires plaintiffs to file
consolidated amended complaints and excuses answers to the original complaints.
Plaintiffs' amended complaints are not yet due. When filed, the Company will
have forty-five days to answer or otherwise respond, unless the time is
extended.
With respect to State Board of Administration of Florida and Louisiana State
Employees Retirement System v. Greyhound Lines, Inc., J. Michael Doyle, Charles
A. Lynch, Frank J. Schmieder, and "John Doe" and "Richard Roe," Civil Action
No. 3-94-CV-2694-R, this suit has not yet been served on any defendants, and
thus no answer or other response by the defendants is required. It is expected
that, if served, one of the parties will seek to transfer this case to the
Court where the other purported class actions are pending for consolidation
under the joint pretrial order.
On November 2, 1994, a shareholder derivative lawsuit was filed by Harvey R.
Rice, a purported owner of the Company's Common Stock, against present
directors and former officers and directors of the Company and the Company as a
nominal defendant. The suit seeks to recover monies obtained by certain
defendants by allegedly trading in the Company's securities on the basis of
nonpublic information and to recover monies for certain defendants' alleged
fraudulent dissemination of false and misleading information concerning the
Company's financial condition and future business prospects. The suit, filed
in the Delaware Court of Chancery, New Castle County, is styled Harvey R. Rice
v. Frank J. Schmieder, J. Michael Doyle, Charles A. Lynch, Richard J. Caley,
Thomas F. Meagher, Thomas G. Plaskett, Kenneth R. Norton, Robert B. Gill,
Alfred E. Osborne, Jr., J. Patrick Foley, Charles J. Lee and Greyhound Lines,
Inc., Civil Action No. 13854.
Pursuant to a stipulation, the current deadline for all defendants to answer,
move or otherwise plead with respect to the derivative complaint is not yet
due.
The above cases have been on file for only a short period of time, and no
discovery has been conducted with respect to the claims. Based on a review of
the litigation, a limited investigation of the underlying facts and discussions
with legal and outside counsel, the Company does not believe that the outcome
of this litigation would have a material adverse effect on its business and
financial condition. The Company intends to defend against the actions
vigorously. To the extent permitted by Delaware law, the Company is obligated
to indemnify and bear the cost of defense with respect to lawsuits brought
against its officers and directors. The Company maintains directors' and
officers' liability insurance that provides certain coverage for itself and its
officers and directors against claims of the type asserted in the subject
litigation. The Company has notified its insurance carriers of the asserted
claims.
10
<PAGE> 11
On January 23, 1995, the Company received notice that the Securities and
Exchange Commission is conducting a formal, non-public investigation into
possible securities laws violations allegedly involving the Company and certain
of its present and former officers, directors and employees and other persons.
The order of investigation states that the SEC is exploring possible insider
trading activities, as well as possible violations of the federal securities
laws relating to the adequacy of the Company's public disclosures with respect
to problems with its passenger reservation system implemented in 1993 and
lower-than-expected earnings for 1993. In addition, the SEC investigation will
examine the adequacy of the Company's record keeping with respect to the
passenger reservation system and its internal auditing controls. Although the
SEC has not announced the targets of the investigation, it does not appear from
the order that the Company is a target of the insider trading portion of the
investigation. The Company is fully cooperating with the SEC. The probable
outcome of this investigation cannot be predicted at this early stage in the
proceeding.
INTERNAL REVENUE SERVICE EXAMINATION
The Internal Revenue Service (the "IRS") has conducted an examination of the
Company's consolidated federal tax returns for the years 1987, 1988 and 1989.
The IRS and the Company entered into Closing Agreements As To The Determination
Of Specific Matters, dated February 13, 1992, and October 7, 1992, wherein the
Company agreed to certain income adjustments resulting in additional tax
assessments which were paid. In April 1995, the Company and the IRS settled in
principle the remaining contested issues. Pursuant to the settlement, still to
be finalized, the Company will be obligated to pay additional taxes and
interest of $1.1 million, half of which will be paid when the settlement is
finalized, and the remainder will be paid with interest over a two and one-half
year period. The Company previously established a reserve which covers
substantially all of its liability under the settlement.
INSURANCE COVERAGE
The ICC has granted the Company authority to self-insure its automobile
liability exposure for interstate passenger service up to a maximum level of
$5.0 million per occurrence. To maintain self-insurance authority, the ICC
requires the Company to maintain a tangible net worth of $10.0 million and to
maintain a $15.0 million trust fund (currently fully funded) to provide
security for payment of claims. At March 31, 1995, the Company's tangible net
worth was $115.1 million. Subsequent to the ICC grant, thirty-eight states
and the District of Columbia also granted the Company the right to self-insure
its intrastate automobile liability exposure.
In November 1994, United Bus Owners of America ("UBOA") filed a petition with
the ICC requesting that the ICC review the Company's self-insurance authority.
The Company filed a response to the petition, and in April 1995, the ICC
dismissed UBOA's petition and reaffirmed the Company's self-insurance
authority.
ENVIRONMENTAL MATTERS
The Company may be liable for certain environmental liabilities and clean-up
costs relating to underground fuel storage tanks and systems in the various
facilities presently or formerly owned or leased by the Company. Based upon
surveys conducted by Company personnel, 75 locations have been identified as
sites requiring potential clean-up and/or remediation as of March 31, 1995. Of
this number, eight locations are surplus properties currently held for sale.
The Company has estimated the cost of the clean-up of these eight sites to be
$1.6 million of which $400,000 is indemnifiable by Dial pursuant to indemnity
obligations arising out of the 1987 acquisitions of the domestic bus operations
of Dial. The Company has estimated the clean-up and/or remediation costs for
the remaining sites to be $4.7 million, of which $600,000 is indemnifiable by
Dial. The Company has no reason to believe that Dial will not fulfill its
indemnification obligations to the Company. However, if Dial does not fulfill
such obligations, the Company could have liability with respect to those
matters. Additionally, the Company has been designated as a potentially
responsible party by the EPA at four Superfund sites where the Company and
other parties face exposure for costs related to the clean-up of those sites.
The Company believes its liability at these sites will be settled for an
immaterial amount because its involvement at the sites was as a de minimis
generator of wastes disposed of at the
11
<PAGE> 12
sites. In light of the minimal involvement, the Company has been negotiating
to be released from liability in return for the payment of immaterial
settlement amounts. The Company has recorded a $1.1 million receivable from
Dial for indemnification at March 31, 1995, including costs associated with
previously remediated sites. The Company has also recorded an environmental
reserve of $5.7 million, including the $1.6 million for the surplus properties,
at March 31, 1995, for noncapitalizable expenses related to the sites
identified for potential clean-up and/or remediation. The receivable and
reserve amounts for non-surplus sites are based on discounted cash flows at
a discount rate of 8%. Management believes that adequate accruals have been
made related to all known environmental matters.
OTHER LEGAL PROCEEDINGS
In addition to the litigation discussed above, the Company is a defendant in
various lawsuits arising in the ordinary course of business, primarily cases
involving personal injury and property damage claims. Although these lawsuits
involve a variety of different facts and theories of recovery, the majority
arise from traffic accidents involving buses operated by the Company. The vast
majority of these claims are covered by insurance for amounts in excess of the
self-retention or deductible portion of the policies. Therefore, based on the
Company's assessment of known claims and its historical claims payout pattern
and discussion with legal and outside counsel and risk management personnel,
management believes that there is no proceeding either threatened or pending
against the Company or its subsidiaries relating to such personal injury and/or
property damage claims arising out of the ordinary course of business that, if
resolved against the Company, would be likely to have a material adverse effect
on its business, financial condition or results of operations.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
Capital Structure and Leverage. The Company is highly leveraged and requires
significant cash flows to meet its debt and other continuing obligations. The
Company had $192.0 million in long-term debt outstanding (excluding $16.8
million of issued and undrawn standby letters of credit) at March 31, 1995,
consisting primarily of the Company's 10% Senior Notes due 2001 (the "Senior
Notes"). The Company has semiannual interest payments (each January 31 and
July 31) of $8.25 million due on the Senior Notes. The Company will also
require $15.8 million in the aggregate for other debt service and $28.4 million
for operating lease obligations during the remainder of 1995. Additionally,
the Company will have annual sinking fund payments on the Senior Notes,
initially in the amount of $8.0 million and increasing annually thereafter,
beginning July 31, 1996.
During February 1995, in connection with the Financial Restructuring (see -
"Financial Restructuring"), the Company pre-paid $12.9 million in bus
financing, in addition to paying scheduled debt service amounts, to Motor Coach
Industries Acceptance Corporation ("MCIAC") and as of March 31, 1995,
aggregate amounts outstanding were $7.2 million. The pre-payment resulted in
the release of liens on 64 buses, which collateral is available for
refinancing.
Capital Expenditures. The Company's network of 543 properties and operating
fleet of approximately 1,900 buses require significant annual capital and
maintenance expenditures. In addition, the Company makes annual expenditures
related to environmental compliance and remediation and the development of
operating systems software. For the quarter ended March 31, 1995, the
Company's capital expenditures totalled $809,000. Due to the Company's current
limited borrowing capacity and restrictions in its New Credit Facility (defined
herein), the Company must limit its capital expenditures to items that
management considers to be essential. Elimination or deferral of the Company's
essential capital expenditures over an extended period of time could have a
material adverse effect on its results of operations. However, the Company
anticipates sufficient liquidity and financing sources to provide for an
acceptable level of capital expenditures in the foreseeable future. Moreover,
the Company is currently pursuing financing alternatives, including the New
Credit Facility, as revised (defined herein), that would allow the Company to
undertake discretionary capital spending.
Liquidity. Operating cash flows, together with cash from financing activities,
seasonal revolving credit borrowings and sales of assets, historically have
been sufficient to fund the Company's operations, as well as, investing
activities which consist primarily of capital expenditures for new bus
acquisitions, systems development costs and, to a lesser extent, facilities
replacements or upgrades. For the quarter ended March 31, 1995, however,
operating activities required net cash of $13.5 million. The net cash required
by operating activities, as well as cash required for investing activities,
were funded by revolving borrowings under the New Credit Facility (defined
herein), proceeds received from the Rights Offerings (see - "Financial
Restructuring") and, to a lesser extent, sale of surplus assets. At March 31,
1995, the Company had cash and cash equivalents of $906,000 and $8.7 million in
available borrowing capacity under the New Credit Facility (defined herein).
The Company is party to two floating rate interest rate swap agreements. In
October 1994, the agreements were amended to lock in the future payments under
the agreements until maturity in July 1998. The net result of the amendments
is that these swaps will not be subject to interest rate risk. Under the
amendments, the Company will be required to pay and recognize incremental
interest expense of $6.2 million over the remaining term of the five-year
agreements. The Company has collateralized its payment obligations under the
amended agreements with a $1.1 million letter of credit and liens on six pieces
of real property.
During October 1994 as part of the Financial Restructuring (see - "Financial
Restructuring"), the Company entered into a new revolving credit facility (the
"New Credit Facility") with Foothill Capital Corporation ("Foothill"), which
replaced the Company's prior bank facility. The New Credit Facility provides
for revolving loans and letters of credit and/or letter of credit guarantees of
up to $35.0 million. A portion of availability under the New Credit Facility
is limited by a formula applied to certain accounts receivable balances. The
New Credit Facility matures on January 1, 1996, although the Company, at its
sole option, may extend the term of the New Credit Facility to
13
<PAGE> 14
January 1, 1998. As of March 31, 1995, there were approximately $16.8 million
in issued and undrawn standby letters of credit outstanding under the New
Credit Facility, and $7.2 million in revolving borrowings outstanding under the
New Credit Facility.
On February 17, 1995, the Company completed negotiations and received a signed
commitment term sheet, subject to documentation, regarding revised terms for
the New Credit Facility, (the "New Credit Facility, as revised") for which
Foothill will continue to be the lead agent. The new terms provide for
revolving loans and letter of credit and/or letter of credit guarantees up to a
maximum commitment of $73.5 million, subject to syndication. Foothill's
commitment remains at $25.0 million. Availability under the New Credit
Facility, as revised, would be limited to the aggregate of the following: (1)
revolving advances of up to $3.5 million based on a formula of certain eligible
accounts receivable, (2) revolving advances of $35.0 million based on the value
of certain fixed asset collateral pledged to Foothill, which amount may be
increased to $45.0 million by the pledge of additional collateral acceptable to
Foothill ("Fixed Asset Advances"); availability under Fixed Asset Advances
would be subject to quarterly reductions in availability beginning in April
1996 and, (3) a Bus Purchase Facility of up to $25.0 million, activated solely
through the pledging of new bus collateral. The New Credit Facility, as
revised, would mature on March 31, 1998 and would be secured by liens on
substantially all the assets of the Company, excluding real estate purchases
and new bus purchases unless specifically pledged to support borrowings under
the Bus Purchase Facility. The New Credit Facility, as revised, would provide
for an adjustable interest margin over prime borrowing rate, tied to the
Company's financial performance and achievement of its financial plan. The New
Credit Facility, as revised, would allow the Company to dispose of certain
non-core real estate properties. In addition, non-bus capital expenditures
would be limited to $25.0 million annually with no spending limitations on bus
purchases as long as financed through debt, operating or capital leases with
maturities of no less than five years. The New Credit Facility, as revised,
would also be subject to financial covenants, including maintenance of a
certain net worth and ratio of cash flow to interest expense. As of May 9,
1995, total syndication commitments under the New Credit Facility, as revised,
including Foothill's commitment as the lead agent, totaled $55.0 million. The
Company and Foothill have not yet closed on the New Credit Facility, as
revised.
The Company has embarked on an aggressive risk reduction and claims reduction
program. Due to a decrease in the pending inventory of claims, certain
insurance carriers have reduced their collateral and security requirements for
previous years' claims, which resulted in a return of collateral and security
to the Company of approximately $8.5 million during April 1995. A decision by
the Company's insurers to modify the Company's program substantially, by
either increasing cost, reducing availability or increasing collateral, could
have a material adverse effect on the future liquidity and operations of the
Company.
During the Company's bankruptcy in 1990, certain funds were set aside to cover
claims arising under the ICC Trust Fund. Those claims have been concluded and
a final distribution is anticipated. Accordingly, the Company expects that it
will receive the $1.5 million balance in the Trust Fund during the second half
of 1995.
The Company believes that borrowings under the New Credit Facility and cash
from operations will provide sufficient liquidity to meet the Company's
obligations for the remainder of 1995. Should the past revenue trends continue
and ridership decline substantially, even though recent ridership trends have
been positive, and should the New Credit Facility be insufficient to meet the
Company's liquidity and seasonal operating cash flow needs, the Company may
elect to postpone or reduce its capital spending program and reduce the level
of operations to continue to meet its financial obligations. Elimination or
deferral of the Company's essential capital expenditures over an extended
period of time could have a material adverse effect on its results of
operations. However, at this time, the Company anticipates sufficient
liquidity and financing sources to provide for an acceptable level of capital
expenditures in the foreseeable future.
FINANCIAL RESTRUCTURING
During the fall of 1994, management and the Board of Directors initiated a
comprehensive change to the Company's capital structure that led to the
formulation of a financial restructuring plan (the "Financial Restructuring")
consisting of (i) the execution of the New Credit Facility; (ii) an offer (the
"Tender Offer") to convert the entire $98.9 million in aggregate principal
amount of the Company's 8.5% Convertible Subordinated Debentures due 2007 (the
"Convertible Debentures") into shares of common stock of the Company ("Common
Stock") at a conversion rate of approximately 256 shares of Common Stock for
each $1,000 principal amount of bond and (iii) a pro rata offering (the
"Rights Offering") to the Company's stockholders of the opportunity to
subscribe for and purchase, for $35.0 million cash, 16.3 million new shares of
Common Stock.
14
<PAGE> 15
The Company announced the successful completion of the Tender Offer and that
its $35.0 million Rights Offering had been fully committed. As of December 31,
1994, $19.9 million of the proceeds from the Rights Offering had been received.
The Company received the balance of the proceeds of the Rights Offering in
January 1995. Additionally, as part of the Financial Restructuring, the
Company agreed to refinance approximately $20.6 million of bus financing
provided by MCIAC and prepaid MCIAC $12.9 million on the outstanding financing
in February 1995 (see - "Capital Resources and Liquidity"). The Financial
Restructuring reduced the Company's annual interest burden by $7.6 million.
Certain Contingencies. The Company is subject to various contingencies that
could affect its liquidity position in the future. See "ITEM 1. LEGAL
PROCEEDINGS."
FIRST QUARTER 1995 AND 1994 RESULTS OF OPERATIONS
The Company's business is seasonal in nature and generally follows the pattern
of the travel business as a whole, with peaks during the summer months and the
Thanksgiving and Christmas holiday periods. Historically, the Company has
experienced substantial seasonal variances in its results of operations with
the first quarter typically being a loss period.
The following table presents certain of the Company's operating statistics for
the periods ended March 31, 1995 and 1994:
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1994 % CHANGE
---------- ---------- --------
<S> <C> <C> <C>
Regular Service Miles (000) . . . . . . . . . 54,552 52,622 3.7
Passenger Miles (000) . . . . . . . . . . . . 1,144,348 1,122,528 1.9
Available Seat Miles (000) . . . . . . . . . 2,509,392 2,381,146 5.4
Passengers Carried (000) (a) . . . . . . . . 3,606 3,467 4.0
Average Trip Length (miles) (a) . . . . . . . 317 324 (2.2)
Load Factor (% of available seats filled) . . 45.6 47.1 (3.2)
Yield Per Passenger Mile (cents) . . . . . . 9.56 9.87 (3.1)
Yield Per Bus Mile (dollars) . . . . . . . . 2.01 2.11 (4.7)
</TABLE>
(a) See Operating Revenues for discussion of 1994 restatements
Operating Income (Loss). Operating loss was $11.8 million for the first
quarter of 1995 compared to an operating loss of $18.7 million for the same
period in 1994. Operating revenues declined $2.1 million (or 1.5%), while
operating expenses decreased $9.0 million (or 5.9%) for the first quarter of
1995 compared to 1994.
Operating Revenues. Passenger service revenues declined $1.4 million (or 1.3%)
for the first quarter 1995 compared to 1994 while passenger miles increased by
21.8 million miles (or 1.9%). The yield per passenger mile decreased by 3.1%
due to a new pricing strategy based on everyday low pricing. Load factor
declined by 3.2% in 1995, reflecting the 3.7% increase in regular service
miles. Despite the increase in the Company's passenger service miles overall,
the business in the smaller markets has been very weak. The Company has taken
action to provide more telephone support and better pricing and scheduling
support for these locations in an effort to rebuild the smaller market segment.
The number of passengers carried increased 4.0% for the first quarter of 1995
compared to 1994, which is attributable to the pricing strategies and
additional regular service miles. Average trip length declined 2.2% due to the
growth of the short haul business over last year. The statistics for
passengers carried and trip length, previously estimated from the revenue
accounting system, are now produced by the information captured by the
Transportation Reservation Itinerary Planning System ("TRIPS") for
electronically sold tickets, which represents an ever increasing portion of the
total business. Historical factors for estimating the statistical impact of
tickets sold in non-TRIPS locations have been updated and, in addition, the
impact of such sales has been reduced as the number of TRIPS locations has
increased. As a result, the statistical information for 1994 has been changed
accordingly, from that previously published. As the Company continues to
expand TRIPS to manual locations, the dependence on historical factors for
estimating manual ticket activity will be lessened.
15
<PAGE> 16
Package express delivery service revenues declined $1.3 million (or 13.0%) in
the first quarter of 1995 compared to 1994. Package express revenues continued
to decline due to 1994 reductions in routes that were weak in passenger service
revenue but strong in package express revenue combined with intense
competition in the package express delivery service from overnight carriers.
This decline is likely to continue until the Company has in place localized
package express marketing strategies.
Other operating revenues increased approximately $800,000 (or 9.4%) in the
first quarter of 1995 compared to 1994 due primarily to an increase in interest
income. As a result of higher interest rates during the first quarter of 1995
as compared to 1994, interest earned on the Company's insurance deposits and ICC
Trust Fund increased.
Operating Expenses. Total operating expenses decreased by $9.0 million (or
5.9%) for the first quarter of 1995 compared to 1994, despite a 1.9 million
mile (or 3.7%) increase in regular service miles operated.
Maintenance costs continue to decline from 1994 in absolute dollars and cost
per mile. Maintenance labor costs decreased due to a significant reduction in
garage personnel since the first quarter of 1994. Maintenance utilities and
building repairs have decreased due to the downsizing and closure of several
facilities. Also contributing to the decreased expenses was the closing of the
New York City garage in January 1995.
Transportation expenses increased $2.4 million (or 7.9%) for the first quarter
of 1995 compared to 1994, due to an increase in drivers' wages of $2.2 million
as a result of a wage increase which occurred in March of 1994 and increased
mileage in 1995 as compared to 1994. Also contributing to the change in
transportation expense was increased costs for training of drivers.
Agents' commission and station costs decreased approximately $800,000 (or 2.8%)
for the first quarter of 1995 compared to 1994 due to a decrease in customer
service salaries, the reduction in headcount year over year and better
management of hours worked. Also contributing to the lower wages was the
conversion of Company-owned terminals to agencies. Offsetting these reductions
was an increase in the telephone information centers' communication costs
relating to increased phone usage.
Marketing costs decreased $6.9 million (or 68.7%) for the first quarter 1995
compared to 1994 due primarily to a planned spending reduction in 1995 in
direct advertising expenditures.
Insurance and safety costs decreased $1.3 million (or 11.1%) for the first
quarter of 1995 as compared to 1994 due to an anticipated reduction in claims
from initiation of loss prevention programs and improved claims management.
This reduction in expense was partially offset by costs associated with
increased premiums for the current policy period.
General and administrative expenses decreased by approximately $500,000 (or
2.7%) for the first quarter of 1995 compared to 1994, due in part, to a
decrease in group insurance expense. During the first quarter of 1994, the
estimated expense recorded for health and welfare claims exceeded actual claims
subsequently reported. In addition, legal expenses decreased as a result of a
reduction in staff. These decreases were partially offset by approximately
$900,000 recorded in the first quarter of 1995 to accrue for expense under the
Company's management incentive plan. There was no similar expense recorded
for the first quarter of 1994.
Operating taxes and licenses increased approximately $900,000 (or 7.8%) for the
first quarter of 1995 as compared to 1994 as a result of a reserve recorded for
past sales taxes owed on interstate bus tickets sold in Oklahoma. This
increase is offset by a decrease in real estate taxes due to the closure of the
New York City garage in early January 1995.
Operating rental expense for leased buses for the periods ended March 31, 1995
and 1994 was $5.8 million and $5.0 million, respectively, excluding daily rents
and other short-term leases.
Interest Expense. For the three months ended March 31, 1995, interest expense
was $6.9 million, including net expense of $88,000 resulting from the interest
rate swap agreements entered into during 1993 (see - "Capital
16
<PAGE> 17
Resources and Liquidity"). Interest expense decreased $1.0 million (or 13.1%)
for the first quarter of 1995 compared to 1994 due to the conversion of the
Convertible Debentures (see - "Financial Restructuring"). This reduction was
offset by increased expense paid on an installment note relating to bus
purchase financing entered into during mid 1994.
Income Taxes. For the quarter ended March 31, 1994, the Company recorded an
income tax benefit of $10.6 million as a result of its pre-tax loss. At that
time, projections indicated that it was "more likely than not" that the income
tax benefit would be utilized to offset future period income tax expense. At
June 30, 1994, projections were revised, and the Company expected to have a net
loss for the year. As a result, there was less of a likelihood that the
Company would utilize the income tax benefit, and therefore, the income tax
benefit recorded for the quarter ended March 31, 1994, was reversed during the
second quarter of 1994. In 1995, the Company does not anticipate a profit and
has not recorded any tax benefit for the quarter.
17
<PAGE> 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LABOR LITIGATION
The ATU strike resulted in two related proceedings, one before the NLRB and the
other related to the Company's 1990 Chapter 11 reorganization. In April 1993,
the Company, the ATU and the General Counsel of the NLRB jointly announced a
proposed settlement of the strike and certain related litigation. The proposed
settlement was approved by an Administrative Law Judge of the NLRB in September
1994, the full NLRB in February 1995 and by the United States Bankruptcy Court
for the Southern District of Texas, Brownsville Division in March 1995.
Certain litigation relating to experience-based seniority remains pending
before the NLRB. See Note 3 to the Interim Consolidated Financial
Statements for the three months ended March 31, 1995, included elsewhere in
this filing.
DEPARTMENT OF JUSTICE INVESTIGATION
The Antitrust Division of the DOJ has initiated an antitrust investigation to
determine whether there is, has been, or may be a violation by the Company of
Sections 1 and 2 of the Sherman Act by conduct or activities constituting a
restraint of trade, monopolization or an attempt to monopolize. See Note 3 to
the Interim Consolidated Financial Statements for the three months ended
March 31, 1995, included elsewhere in this filing.
OKLAHOMA SALES TAX CLAIM
In January 1991, the Oklahoma Tax Commission ("OTC") filed a proof of claim
with the Bankruptcy Court in connection with the Company's Chapter 11
bankruptcy case. The claim related to sales taxes which the OTC alleged was
due and owing by the Company on interstate bus tickets sold in Oklahoma. On
April 3, 1995, the United States Supreme Court ruled against another bus
carrier and upheld the constitutionality of a sales tax imposed on interstate
bus tickets by the State of Oklahoma. See Note 3 to the Interim Consolidated
Financial Statements for the three months ended March 31, 1995, included
elsewhere in this filing.
SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION
From August 1994 to December 1994, seven purported class action lawsuits were
filed by various individuals and groups against the Company and certain other
parties. The suits seek unspecified damages for securities law violations. In
November 1994, a shareholder derivative lawsuit was filed against present
directors and former officers and directors of the Company and the Company
as a nominal defendant. In addition, on January 23, 1995, the Company
received notice that the Securities and Exchange Commission is conducting a
formal, non-public investigation into possible securities laws violations
allegedly involving the Company and certain other parties. See Note 3 to the
Interim Consolidated Financial Statements for the three months ended March 31,
1995, included elsewhere in this filing.
INTERNAL REVENUE SERVICE EXAMINATION
The IRS has conducted an examination of the Company's consolidated federal tax
returns for the years 1987, 1988 and 1989. In April 1995, the Company and the
IRS settled in principle certain remaining contested issues. See Note 3 to the
Interim Consolidated Financial Statements for the period ended March 31, 1995,
included elsewhere in this filing.
18
<PAGE> 19
OTHER LEGAL PROCEEDINGS
In addition to the litigation discussed above, the Company is a defendant in
various lawsuits arising in the ordinary course of business, primarily cases
involving personal injury and property damage claims. Although these lawsuits
involve a variety of different facts and theories of recovery, the majority
arise from traffic accidents involving buses operated by the Company. The vast
majority of these claims are covered by insurance for amounts in excess of the
self-retention or deductible portion of the policies. Therefore, based on the
Company's assessment of known claims and its historical claims payout pattern
and discussion with legal and outside counsel and risk management personnel,
management believes that there is no proceeding either threatened or pending
against the Company or its subsidiaries relating to such personal injury and/or
property damage claims arising out of the ordinary course of business that, if
resolved against the Company, would be likely to have a material adverse effect
on the business, financial condition or results of operations.
19
<PAGE> 20
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
4.1 - Indenture governing the 8 1/2 % Convertible Subordinated Debentures
due March 31, 2007, including the form of 8 1/2 % Convertible
Subordinated Debentures due March 31, 2007. (3)
4.2 - Indenture, dated October 31, 1991, between the Registrant and
LaSalle National Bank, as Trustee, with respect to $165,000,000
principal amount of 10% Senior Notes due 2001, including form of
10% Senior Notes Due 2001. (1)
4.3 - First Supplemental Indenture to the Indenture between the
Registrant and LaSalle National Bank, as Trustee. (3)
4.4 - Form of First Supplemental Indenture to the Indenture between the
Registrant and Shawmut Bank Connecticut, N.A., as Trustee. (12)
4.5 - Rights Agreement, dated as of March 22, 1994, between the
Registrant and Mellon Securities Trust Company, as Rights Agent.
(7)
4.6 - Form of Promissory Note issued to holders of priority tax claims
against the Registrant, including a schedule of holders of such
notes and principal amounts thereof. (2)
4.7 - Amended and Restated Loan and Security Agreement dated as of
October 13, 1994 by and between Greyhound Lines, Inc. and Foothill
Capital Corporation. (11)
4.8 - Amendment Number One to Amended and Restated Loan and Security
Agreement dated as of March 27, 1995 by and between Greyhound
Lines, Inc. and Foothill Capital Corporation. (13)
10.1 - Memorandum of Agreement, dated as of June 4, 1993, between
Greyhound Lines, Inc. and the International Association of
Machinists and Aerospace Workers. (5)
10.2 - Agreement dated as of June 30, 1993, between the Registrant and the
New York City Transit Authority. (5)
10.3 - Interest Rate Swap Transaction Confirmations dated as of July 12,
1993, between the Registrant and Bankers Trust Company. (5)
10.4 - Memorandum of Agreement, dated as of May 25, 1993, between the
Registrant and the Amalgamated Council of Greyhound Local Unions.
(6)
10.5 - Lease Agreement No. 1, dated as of December 29, 1993, between
Wilmington Trust Company and the Registrant. (6)
10.6 - Lease Agreement No. 2, dated as of December 29, 1993, between
Wilmington Trust Company and the Registrant. (6)
10.7 - Lease Agreement No. 3, dated as of December 29, 1993, between
Wilmington Trust Company and the Registrant. (6)
10.8 - Lease Supplement No. 1-1, dated as of December 30, 1993, between
Wilmington Trust Company and the Registrant. (6)
10.9 - Lease Supplement No. 2-1, dated as of December 30, 1993, between
Wilmington Trust Company and the Registrant. (6)
10.10 - Lease Supplement No. 3-1, dated as of December 30, 1993, between
Wilmington Trust Company and the Registrant. (6)
10.11 - Tax Indemnification Agreement, dated as of December 29, 1993,
between Nationsbanc Lease Investments, Inc. and the Registrant. (6)
20
<PAGE> 21
10.12 - Pledge Agreement, dated as of December 29, 1993, among the
Registrant, Wilmington Trust Company and Nationsbanc Lease
Investments, Inc. (6)
10.13 - Participation Agreement, dated as of December 29, 1993, between
Nationsbanc Lease Investments, Inc. and the Registrant. (6)
10.14 - Greyhound Lines, Inc. 1991 Management Incentive Stock Option Plan.
(2)
10.15 - Greyhound Lines, Inc. 1993 Management Incentive Stock Option Plan.
(4)
10.16 - Greyhound Lines, Inc. 1993 Non-Employee Director Stock Option Plan.
(6)
10.17 - Greyhound Lines, Inc. Supplemental Executive Retirement Plan. (6)
10.18 - Coach Purchase Agreement, dated as of December 31, 1993, between
the Registrant and Motor Coach Industries, Inc. (8)
10.19 - Conditional Sale Contract and Security Agreement, dated as of May
10, 1994, between the Registrant and Motor Coach Industries, Inc.
(9)
10.20 - Lease Agreement, dated as of March 28, 1994, between Wilmington
Trust Company and the Registrant. (8)
10.21 - Lease Supplement No. 1, dated as of March 28, 1994, between
Wilmington Trust Company and the Registrant. (8)
10.22 - Pledge Agreement, dated as of March 28, 1994, among the Registrant,
Wilmington Trust Company and Cargill Leasing Corporation. (8)
10.23 - Participation Agreement, dated as of March 28, 1994, between
Cargill Leasing Corporation and the Registrant. (8)
10.24 - Bill of Sale, dated as of March 28, 1994, between the Registrant
and Wilmington Trust Company. (8)
10.25 - Tax Indemnification Agreement, dated as of March 28, 1994, between
Cargill Leasing Corporation and the Registrant. (8)
10.26 - Lease Agreement, dated as of March 29, 1994, between Wilmington
Trust Company and the Registrant. (8)
10.27 - Lease Supplement No. 1, dated as of March 29, 1994, between
Wilmington Trust Company and the Registrant. (8)
10.28 - Pledge Agreement, dated as of March 29, 1994, among the Registrant,
Wilmington Trust Company and Cargill Leasing Corporation. (8)
10.29 - Participation Agreement, dated as of March 29, 1994, between
Cargill Leasing Corporation and the Registrant. (8)
10.30 - Bill of Sale, dated as of March 29, 1994, between the Registrant
and Wilmington Trust Company. (8)
10.31 - Tax Indemnification Agreement, dated as of March 29, 1994, between
Cargill Leasing Corporation and the Registrant. (8)
10.32 - Conditional Sale Contract and Security Agreement, dated as of June
28, 1994, between the Registrant and Motor Coach Industries, Inc.
(10)
10.33 - First Amendment to the Registrant 1993 Non-Employee Director Stock
Option Plan. (10)
10.34 - Amendments to Interest Rate Swap Agreement, dated as of October 6,
1994 between the Registrant and Bankers Trust Company. (10)
21
<PAGE> 22
10.35 - Form of Letter Agreements with various holders of Convertible
Debentures relating to, among other things, the Conversion. (12)
10.36 - Employment Agreement dated November 15, 1994, between the
Registrant and Craig R. Lentzsch. (13)
10.37 - Amendment Number Two to Bus Purchase Requirements Agreement dated
December 21, 1994, by and between Greyhound Lines, Inc. and Motor
Coach Industries. (13)
10.38 - Second Amendment to Greyhound Lines, Inc. 1993 Non-Employee
Director Stock Option Plan. (14)
11 - Computation of Registrant's earnings per share for the three months
ended March 31, 1994. (8)
11.1 - Computation of Registrant's earnings per share for the three months
ended March 31, 1995. (14)
27 - Financial Data Schedule as of and for the three months ended March
31, 1995. (14)
_______________
(1) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1991.
(2) Incorporated by reference from the Registration Statement on Form S-1
(File Nos. 33-45060-01 and 33-45060-02) regarding the Registrant's 8
1/2% Convertible Subordinated Debentures Due 2007.
(3) Incorporated by reference from the Company's Registration Statement on
Form S-1 (File No. 33-47908) regarding the Registrant's Common Stock
and 10% Senior Notes Due 2001 held by the Contested Claims Pool Trust.
(4) Incorporated by reference from the Company's Registrant Statement on
Form S-8 (File No. 33-63506) regarding the Registrant's 1991 and 1993
Management Stock Option Plans.
(5) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1993.
(6) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the year ended December 31, 1993.
(7) Incorporated by reference from the Registrant's Quarterly Report on
Form 8-K regarding the Rights Agreement dated March 22, 1994.
(8) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994.
(9) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994.
(10) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994.
(11) Incorporated by reference from the Registration Statement on Form S-1
(File No. 33-56131) regarding the Registrant's Common Stock.
(12) Incorporated herein by reference from the Registrant's Issuer Tender
Offer Statement on Schedule 13E-4 (File No. 5-41800).
(13) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994.
(14) Filed herewith.
(b) REPORTS ON FORM 8-K
During the quarter ended March 31, 1995, the Company filed no current
reports on Form 8-K with the Securities and Exchange Commission, nor was
it required to do so.
22
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 15, 1995
GREYHOUND LINES, INC.
By: /s/ Steven L. Korby
-----------------------------
Steven L. Korby
Executive Vice President and
Chief Financial Officer
(Duly Authorized Officer
and Principal Financial
and Accounting Officer)
23
<PAGE> 24
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
10.38 Second Amendment to Greyhound Lines, Inc. 1993
Non-Employee Director Stock Option Plan.
11.1 Computation of Registrant's earnings per share for
the three months ended March 31, 1995.
27 Financial Data Schedule as of and for the three
months ended March 31, 1995.
</TABLE>
<PAGE> 1
EXHIBIT 10.38
GREYHOUND LINES, INC.
SECOND AMENDMENT TO
1993 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
WHEREAS, effective as of September 28, 1993, the Board of Directors of
the Company adopted the Greyhound Lines, Inc. 1993 Non-Employee Director Stock
Option Plan, and amended the Plan effective May 10, 1994 (the "Plan"); and
WHEREAS, the Compensation Committee of the Board of Directors has
recommended, and the Board of Directors has approved, a second amendment to
Section 6 of the Plan to change the formulae stated therein to govern the grant
of options to Non-Employee Directors of the Company.
NOW, THEREFORE, this Second Amendment ("Amendment") to the Plan, when
inserted in the corporate records of the Company, shall evidence the amendments
to Section 6 of the Plan adopted by the Board of Directors, such amendments,
except as provided in Section 6 (d) below, to be effective as of April 18,
1995.
Section 6 of the Plan is hereby amended in its entirety to read as
follows:
6. Stock Option Grants to Non-Employee Directors.
(a) Subject to the terms and conditions of this Section 6, each
person who is serving as a Non-Employee Director on the date of this Amendment,
and who has served on the Company's Board of Directors for a minimum of six (6)
months prior to the date of this Amendment, shall automatically be granted,
effective as of April 18, 1995, an Option (as described below) to purchase
shares of Common Stock in an amount equal to the greater of: (i) 1.1 (one and
one tenth) shares multiplied by the number of option shares previously granted
to each person under all Company stock option plans; or (ii) 21,000 option
shares, if the Non-Employee Director would have, after giving effect to the
number of option shares calculated under (i), a total number of option shares
less than 21,000.
(b) The terms and conditions of the Options granted under this
Section 6 shall be determined by the Committee, provided, however, that all
such Options granted under this Section 6 shall be subject to the following:
A. Option Price. The option price of each share covered by an Option
shall be equal to the Fair Market Value per share of the Common Stock of the
Company on the date of grant. The option price will be subject to adjustment
in accordance with the provisions of Section 8 of the Plan.
1
<PAGE> 2
B. Payment. The price per share of Common Stock with respect to each
Option shall be payable at the time the Option is exercised. Such price shall
be payable (i) in cash or by an equivalent means acceptable to the Committee,
(ii) on the Committee's prior consent, by delivery to the Company of shares of
Common Stock owned by the optionee or by the delivery or withholding of shares
pursuant to procedures created pursuant to Section 5. b. of the Plan or (iii)
by any combination of clauses (i) and (ii). Shares delivered to or withheld by
the Company in payment of the option price shall be valued at the Fair Market
Value of the Common Stock on the day preceding the date of the exercise of the
Option.
C. Vesting and Exercisability of Options. The right to purchase
shares shall be cumulative so that when the right to purchase any shares has
vested, such shares or any part thereof may be purchased at any time thereafter
until the expiration or termination of the Option. No Option granted hereunder
by its terms shall be exercisable after the expiration of ten (10) years from
the date of grant of the Option. The Option shall become vested and shall
thereafter be exercisable, in three equal annual installments on April 18th of
each year commencing April 18, 1996, and continuing through April 18, 1998,
provided that on each such vesting date the optionee continues to serve as a
Non-Employee Director.
D. Death. In the event of the death of any optionee, the estate of
such optionee, or a person who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the optionee, shall have
the right, at any time and from time to time within six (6) months after the
date of death, or such other period, if any, as the Committee in its sole
discretion may determine (but not after the expiration date of the Option), to
exercise such optionee's Option with respect to all or any part of the shares
of Common Stock which such optionee was entitled to purchase immediately prior
to the time of the optionee's death.
E. Disability. If the optionee ceases to be a Non-Employee Director
because of Disability (as defined in Section 10), such optionee shall have the
right, at any time and from time to time within six (6) months after the date
on which service ceases, or such other period, if any, as the Committee in its
sole discretion may determine (but not after the expiration date of the
Option), to exercise such optionee's Option with respect to all or any part of
the shares of Common Stock which such optionee was entitled to purchase
immediately prior to the date on which service ceased.
F. Other Termination or For Cause. If the service of any optionee as
a Non-Employee Director ceases for any reason other than those specified in
subsections 6 (b) (D) and 6 (b) (E) above, such optionee shall have the right,
within thirty (30) days after the date on which such service ceases, or such
other period, if any, as the Committee in its sole discretion may determine
(but not after the expiration date of the Option), to exercise the Option with
respect to all or any part of the shares of Common Stock which such optionee
was entitled to purchase immediately prior to the time of such termination,
except that, if such optionee has served at least a three-year term, such
optionee shall have the right, at any time and from time to time within five
(5) years after the date on which service ceases, or such other period, if any,
as the Committee in its sole
2
<PAGE> 3
discretion may determine (but not after the expiration date of the Option), to
exercise such Option with respect to all or any part of the shares of Common
Stock which such optionee was entitled to purchase immediately prior to the
time of such termination. Notwithstanding the foregoing, unless the Committee
in its sole discretion provides otherwise, if the optionee is removed from
office as a director of the Company for cause by action of the stockholders of
the Company in accordance with the by-laws of the Company and the General
Corporation Law of the State of Delaware or if such optionee voluntarily
terminates service on the Board of Directors without the consent of the Company
(of which fact the Committee shall be the sole judge), then such optionee shall
immediately forfeit optionee's rights under the Option except as to shares of
Common Stock already purchased.
G. The Committee. The provisions of this Section 6 shall be
administered by the Committee solely in accordance with the terms hereof;
provided, however, that the Committee shall maintain the authority to interpret
this Section 6 and to make all determinations permitted by this Section 6 or
deemed necessary for its administration.
(c) Notwithstanding anything in this Section 6, as amended by this
Second Amendment, to the contrary, no such amendment shall modify or have any
effect on any Options granted to the Non-Employee Directors prior to the
effective date of this Second Amendment.
(d) Notwithstanding anything to the contrary in this Second
Amendment, Sections 6 (a) and (d) of the First Amendment, and all references
throughout Section 6 (c) to First Time Election Options, are hereby deleted in
their entirety effective February 26, 1995.
3
<PAGE> 1
EXHIBIT 11.1
GREYHOUND LINES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1995
--------------
<S> <C>
PRIMARY EARNINGS PER SHARE
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,717,000)
================
Shares
Weighted average number of common shares issued . . . . . . . . . . . . . 52,480,298
Less weighted average treasury stock . . . . . . . . . . . . . . . . . . . (109,192)
Assuming exercise of options reduced by the number of common
shares which could have been purchased with the proceeds
from exercise of such options . . . . . . . . . . . . . . . . . . . . . . . . --- *
----------------
Weighted average number of common shares outstanding, as adjusted . . . . 52,371,106
----------------
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.36)
================
FULLY DILUTED EARNINGS PER SHARE
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,717,000)
Plus interest expense on Convertible Debentures . . . . . . . . . . . . . . . --- **
----------------
Adjusted net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (18,717,000)
================
Shares
Weighted average number of common shares issued . . . . . . . . . . . . . 52,480,298
Less weighted average treasury stock . . . . . . . . . . . . . . . . . . . (109,192)
Assuming exercise of options reduced by the number of common shares
which could have been purchased with the proceeds from exercise of
such options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . --- *
Assuming conversion of Convertible Debentures into common shares . . . . . --- **
----------------
Weighted average number of common shares outstanding, as adjusted . . . . 52,371,106
----------------
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.36)
================
</TABLE>
* Option exercises not considered in calculation as exercise would not have a
dilutive effect.
** Not used in calculation of adjusted net loss and weighted average number
of common shares due to the antidilutive effect of the assumed conversion
of the Convertible Debentures.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
ART. 5 FDS FOR 1ST QUARTER 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 906
<SECURITIES> 0
<RECEIVABLES> 26,807
<ALLOWANCES> 794
<INVENTORY> 3,151
<CURRENT-ASSETS> 62,200
<PP&E> 350,418
<DEPRECIATION> 68,448
<TOTAL-ASSETS> 474,703
<CURRENT-LIABILITIES> 101,126
<BONDS> 191,968
<COMMON> 538
0
0
<OTHER-SE> 134,016
<TOTAL-LIABILITY-AND-EQUITY> 474,703
<SALES> 0
<TOTAL-REVENUES> 131,793
<CGS> 0
<TOTAL-COSTS> 103,080
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,868
<INCOME-PRETAX> (18,715)
<INCOME-TAX> 2
<INCOME-CONTINUING> (18,717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (18,717)
<EPS-PRIMARY> (0.36)
<EPS-DILUTED> (0.36)
</TABLE>
