<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 September 30, 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 NOVEMBER 8, 1995
--------------------- -------------------------------
$.01 PAR VALUE 58,163,326 SHARES
<PAGE> 2
GREYHOUND LINES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Interim Consolidated Statements of Financial Position as of
September 30, 1995 (Unaudited) and December 31, 1994 . . . . . . . . . . 4
Interim Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1995 and 1994 (Unaudited) . . 5
Interim Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 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 . . . . . . . . . . . . . . . . . . . . . . . . . . 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Item 5. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 21
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
</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 PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
----------- -----------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 812 $ 9,454
Accounts receivable, less allowance for doubtful accounts
of $309 and $840 . . . . . . . . . . . . . . . . . . . . . . . . . 31,357 33,584
Stock subscription receivable . . . . . . . . . . . . . . . . . . . . --- 15,150
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,303 3,779
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 8,443 10,248
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . 5,554 9,526
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 12,967 12,859
-------- --------
Total current assets . . . . . . . . . . . . . . . . . . . . . . . 62,436 94,600
Prepaid Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 23,787 22,250
Property, Plant and Equipment, net of accumulated depreciation
of $77,892 and $68,388 . . . . . . . . . . . . . . . . . . . . . . . 279,940 288,250
Investments in Unconsolidated Affiliates . . . . . . . . . . . . . . . . 1,426 1,312
Insurance and Security Deposits . . . . . . . . . . . . . . . . . . . . . 85,007 84,548
Intangible Assets, net of accumulated amortization of $13,261 and
$9,644 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,304 20,489
-------- --------
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $471,900 $511,449
======== ========
Current Liabilities
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,425 $ 14,916
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 49,479 53,106
Unredeemed tickets . . . . . . . . . . . . . . . . . . . . . . . . . 5,898 10,259
Current portion of reserve for injuries and damages . . . . . . . . . 27,085 26,455
Current maturities of long-term debt . . . . . . . . . . . . . . . . 13,067 7,022
-------- --------
Total current liabilities . . . . . . . . . . . . . . . . . . . . 112,954 111,758
Reserve for Injuries and Damages . . . . . . . . . . . . . . . . . . . . 38,689 45,888
Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 175,924 197,125
Deferred Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,009 1,277
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,353 2,205
-------- --------
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 330,929 358,253
-------- --------
Commitments and Contingencies (Note 4)
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; 54,267,918 and
37,567,744 shares issued as of September 30, 1995 and December 31,
1994 respectively; par value $.01) . . . . . . . . . . . . . . . . 543 375
Common stock subscribed (16,279,070 shares as of December 31, 1994) . --- 163
Capital in excess of par value . . . . . . . . . . . . . . . . . . . 213,047 182,826
Capital in excess of par value, subscribed . . . . . . . . . . . . . --- 29,184
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (70,082) (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 . . . . . . . . . . . . . . . . . . . . 140,971 153,196
-------- --------
Total liabilities and stockholders' equity . . . . . . . . . . $471,900 $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 NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Transportation Services
Passenger services . . . . . . . . . . . . . $ 172,715 $ 159,359 $ 418,832 $ 396,536
Package express . . . . . . . . . . . . . 9,171 10,329 26,816 30,527
Food services . . . . . . . . . . . . . . . . 6,145 5,870 15,532 15,723
Other operating revenues . . . . . . . . . . 10,915 10,178 30,926 27,875
---------- --------- ---------- ----------
Total operating revenues . . . . . . . . 198,946 185,736 492,106 470,661
---------- --------- ---------- ----------
OPERATING EXPENSES
Maintenance . . . . . . . . . . . . . . . . . 17,517 17,338 51,205 54,664
Transportation . . . . . . . . . . . . . . . 44,958 37,232 117,670 99,763
Agents' commissions and station costs . . . . 35,311 32,661 92,875 89,485
Marketing, advertising and traffic . . . . . 6,378 8,339 18,821 31,634
Insurance and safety . . . . . . . . . . . . 15,796 14,086 39,990 45,955
General and administrative . . . . . . . . . 18,704 16,954 54,819 54,324
Depreciation and amortization . . . . . . . . 7,062 7,155 21,560 27,056
Operating taxes and licenses . . . . . . . . 13,044 13,080 37,772 36,663
Operating rents . . . . . . . . . . . . . . . 12,677 12,533 35,058 35,962
Cost of goods sold - food services . . . . . 3,518 3,082 9,447 10,248
Other operating expenses . . . . . . . . . . 2,017 2,612 5,616 10,061
Restructuring expense . . . . . . . . . . . --- 2,002 --- 2,002
---------- --------- ---------- ----------
Total operating expense . . . . . . . . . 176,982 167,074 484,833 497,817
---------- --------- ---------- ----------
OPERATING INCOME (LOSS) . . . . . . . . . . . . 21,964 18,662 7,273 (27,156)
Interest Expense . . . . . . . . . . . . . . . 6,606 9,033 20,487 24,594
---------- --------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM . . . . . . . . . . . . . 15,358 9,629 (13,214) (51,750)
Income Tax Provision . . . . . . . . . . . . . 25 17,039 53 17,056
---------- --------- ---------- ----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEM . . . . 15,333 (7,410) (13,267) (68,806)
Extraordinary Item . . . . . . . . . . . . . . --- 3,158 --- 3,158
---------- --------- ---------- ----------
NET INCOME (LOSS) . . . . . . . . . . . . . . $ 15,333 $ (10,568) $ (13,267) $ (71,964)
========== ========= ========== ==========
Income (Loss) Per Share of Common Stock:
Primary
Income (Loss) Before Extraordinary Item . . $ 0.27 $ (0.51) $ (0.25) $ (4.69)
Extraordinary Item . . . . . . . . . . . . --- (0.21) --- (0.22)
---------- --------- ---------- ----------
Net Income (Loss) . . . . . . . . . . . . . $ 0.27 $ (0.72) $ (0.25) $ (4.91)
========== ========= ========== ==========
Fully Diluted
Income (Loss) Before Extraordinary Item . . $ 0.27 $ (0.51) $ (0.25) $ (4.69)
Extraordinary Item . . . . . . . . . . . . . --- (0.21) --- (0.22)
---------- --------- ---------- ----------
Net Income (Loss) . . . . . . . . . . . . . $ 0.27 $ (0.72) $ (0.25) $ (4.91)
========== ========= ========== ==========
</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>
NINE MONTHS ENDED SEPTEMBER 30,
------------------------------
1995 1994
--------- --------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,267) $ (71,964)
Noncash expenses, gains and losses included in net loss
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 21,560 27,056
Amortization of deferred gain . . . . . . . . . . . . . . . . . . . . . . (268) (242)
Amortization of debt issuance costs . . . . . . . . . . . . . . . . . . . 733 1,268
Amortization of discount on Senior Notes . . . . . . . . . . . . . . . . . 2,239 1,966
Net loss on assets sold . . . . . . . . . . . . . . . . . . . . . . . . . 393 638
Unfunded net pension gain . . . . . . . . . . . . . . . . . . . . . . . . (1,757) (4,253)
Reserve for deferred income taxes . . . . . . . . . . . . . . . . . . . . --- 17,000
Write-down of assets held for sale . . . . . . . . . . . . . . . . . . . --- 2,817
Write-off of debt issue costs . . . . . . . . . . . . . . . . . . . . . . --- 3,158
Net changes in certain operating assets and liabilities
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,684 6,448
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 476 969
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,805 (543)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (108) (5,463)
Insurance and security deposits . . . . . . . . . . . . . . . . . . . . . (459) 13,752
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,965) (3,017)
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,397 (5,658)
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . 828 3,525
Reserve for injuries and damages . . . . . . . . . . . . . . . . . . . . . (6,569) 3,959
Unredeemed tickets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4,361) (1,896)
--------- ---------
Net cash provided by (used for) operating activities . . . . . . . . . 3,361 (10,480)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (12,411) (77,869)
Proceeds from assets sold . . . . . . . . . . . . . . . . . . . . . . . . . 6,157 28,641
Proceeds from termination of interest rate swap . . . . . . . . . . . . . . --- 1,609
Deposit to collateralize operating leases . . . . . . . . . . . . . . . . . --- (7,127)
Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . (114) 140
--------- ---------
Net cash provided by (used for) investing activities . . . . . . . . . (6,368) (54,606)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt and capital lease obligations . . . . . . . . . . . . . . (17,320) (5,450)
Proceeds from long-term borrowings . . . . . . . . . . . . . . . . . . . . --- 31,541
Net proceeds from Rights Offering . . . . . . . . . . . . . . . . . . . . . 11,685 ---
Proceeds from issuance of Common Stock . . . . . . . . . . . . . . . . . . --- 13
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . --- 89
Net change in revolving credit facility . . . . . . . . . . . . . . . . . . --- ---
--------- ---------
Net cash provided by (used for) financing activities . . . . . . . . . (5,635) 26,193
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . (8,642) (38,893)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . . 9,454 39,643
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . $ 812 $ 750
========= =========
</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
SEPTEMBER 30, 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 September 30, 1995, and
the results of its operations for the three and nine months ended September 30,
1995 and 1994. Due to the seasonality of the Company's operations, the results
of its operations for the interim period ended September 30, 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
EARNINGS (LOSS) PER SHARE
Primary earnings (loss) per common share is calculated by dividing net income
(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 earnings
(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. The weighted average shares
outstanding used in the calculation of primary and fully diluted earnings
(loss) per share of Common Stock for the three and nine months ended September
30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
WEIGHTED AVERAGE SHARES OUTSTANDING 1995 1994 1995 1994
- ----------------------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary . . . . . . . . . . . . . . . . . . . . . . . 56,041,151 14,667,004 53,422,096 14,656,962
Fully diluted . . . . . . . . . . . . . . . . . . . . 56,041,151 14,667,004 53,422,096 14,656,962
</TABLE>
CERTAIN RECLASSIFICATIONS
Certain reclassifications have been made to the prior period statements to
conform them to the September 30, 1995 classifications.
3. STOCKHOLDERS' EQUITY
On October 3, 1995, the Company completed a public offering of 10,004,144
shares of Common Stock of which 4,000,000 shares were issued and sold by the
Company and 6,004,144 were sold by Motor Coach Industries Limited, a selling
stockholder. The shares were sold at a price to the public of $4.125 per
share. The proceeds of the offering to the Company, after deducting all
associated costs including a fee to the selling agent of $700,000, were $15.4
million. The Company will use approximately $9.7 million of the net proceeds
to repurchase approximately $10.7 million aggregate principal of its 10% Senior
Notes due 2001 (the "Senior Notes"). The repurchased Senior Notes will be
applied toward future sinking fund obligations. The Company will use the
remaining proceeds for general corporate purposes.
7
<PAGE> 8
4. COMMITMENTS AND CONTINGENCIES
LABOR LITIGATION
The Amalgamated Transit Union (the "ATU") strike in March 1990 resulted in
litigation currently pending before the National Labor Relations Board
("NLRB"). In early 1995, a settlement among the ATU, NLRB and Company was
finalized. 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 experience-based seniority ("EBS") 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 EBS 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 the EBS litigation, after all appeals,
or if the Company were to change its policy relating to EBS credit, it may be
exposed to liability to drivers hired after March 1990 who would lose their EBS
credit. Liability to drivers hired before March 1990 who might lose EBS was
resolved in the aforementioned settlement.
In June 1995, the Company extended an offer to its post-March 1990 drivers with
EBS. Pursuant to the offer, approximately 80% of eligible drivers agreed to
relinquish their seniority rights in return for cash payments. This buyout has
reduced the Company's potential exposure should EBS later be discontinued.
Based on an assessment of the potential liability it could face from claims by
remaining drivers with EBS, the Company believes that any such
liability exposure would not materially exceed the amounts recorded.
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 involved 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. In April 1995, the Company resumed
publishing its schedules in the industry publication.
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 terminal license agreements
with bus carriers using the Company's terminals, violated Section 1 of the
Sherman Act.
In September 1995, the Company agreed with the DOJ to the entry of a consent
decree that would end the investigation. Under the provisions of the consent
decree, the Company has agreed not to enforce a provision in its bus terminal
lease agreements prohibiting a tenant bus carrier from selling its tickets
within 25 miles of the Company's terminal and has agreed not to adopt any
comparable provision. The Company rarely enforced this lease provision and
recently revised its lease agreements to eliminate the provision. The consent
decree is subject to the approval of a federal district court. Management of
the Company believes that the consent decree will have no 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 1990 Chapter 11
bankruptcy case. That claim related to sales taxes which the OTC
8
<PAGE> 9
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 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. In April 1995, the
United States Supreme Court upheld the constitutionality of a sales tax imposed
on interstate bus tickets by the State of Oklahoma in a case involving another
bus company.
Subsequent to the Supreme Court's decision, the Company's case has been
remanded to the Bankruptcy Court where additional proceedings concerning the
claim will be heard. Additionally, the OTC notified the Company that it
intends to conduct an audit for sales taxes due for the period from August 1992
to July 1995. 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.
In April 1995, the Company began collecting sales taxes from its customers for
interstate bus tickets sold in Oklahoma.
SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION
Between August and December 1994, seven purported class action lawsuits were
filed by purported owners of the Company's Common Stock, Convertible Debentures
and Senior Notes against the Company and certain of its former officers and
directors. The suits seek 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.
All the purported class action cases referred to above (with the exception of
one suit that was dismissed before being served on any defendants) have been
transferred to the United States District Court for the Northern District of
Texas, the Court in which the first purported class action suit was filed, and
are pending under a case styled In re Greyhound Securities Litigation, Civil
action 3-94-CV-1793-G. A joint pretrial order has been entered in the class
action litigation which consolidates for pretrial and discovery purposes all of
the stockholder actions and, separately, all of the debtholder actions. The
joint pretrial order required plaintiffs to file consolidated amended
complaints and excused answers to the original complaints. In July 1995, the
plaintiffs filed their consolidated amended complaints, naming Greyhound Lines,
Inc., Frank J. Schmieder, J. Michael Doyle, Phillip W. Taff, Robert R. Duty,
Don T. Seaquist, Charles J. Lee, Charles A. Lynch and Smith Barney Incorporated
as defendants. Messrs Lee and Lynch were subsequently dismissed from the case
by the plaintiffs. In September 1995, the defendants filed a Motion to Dismiss
plaintiffs' complaints. The motion remains pending before the Court. Also in
September 1995, plaintiffs filed a Motion seeking to certify the class of
plaintiffs.
In November 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.
In May 1995, a lawsuit was filed on behalf of two individuals, 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 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 Ohio, is styled James Illius and Teodore J. Krawec v.
Greyhound Bus Lines, Inc., Frank J. Schmieder and J. Michael Doyle, Civil
Action No. 1-95-CV-1140. The defendants have filed a Motion to Transfer Venue
seeking to have the case transferred to the court in Dallas where the class
action litigation is pending. In
9
<PAGE> 10
September 1995, the defendant's motion was granted and the case is in the
process of being transferred to the Dallas court.
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.
In January 1995, the Company received notice that the Securities and Exchange
Commission (the "SEC") 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 SEC Order of Investigation (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 has stated that it will investigate 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 of
Investigation that the Company is a target of the insider trading portion of
the investigation. In September 1995, the SEC served a document subpoena on
the Company requiring the production of documents, most of which the Company
voluntarily produced to the SEC in late 1994. The Company is fully cooperating
with the SEC's investigation of these matters. The probable outcome of this
investigation cannot be predicted at this early stage in the proceeding.
CHRISS STREET & COMPANY, INC., ET AL V. GREYHOUND LINES, INC., ET AL
On June 12, 1995, Chriss Street & Company, Inc. and James R. Moriarty, former
holders of Convertible Debentures, filed a lawsuit against the Company and
Stephen M. Peck and Ernest P. Werlin seeking to invalidate the appointment of
Messrs. Peck and Werlin to the Company's Board of Directors. On August 29,
1995 the parties to the litigation entered into a settlement agreement of all
claims and the litigation was dismissed by the Delaware Chancery Court. Under
the settlement agreement, the challenge to the appointment of Messrs. Peck and
Werlin was withdrawn and both will continue to serve on the Company's board for
the remainder of their respective terms.
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, 78 locations have been identified as
sites requiring potential clean-up and/or remediation as of September 30, 1995.
The Company has estimated the clean-up and/or remediation cost of these sites
to be $5.0 million of which approximately $0.8 million is indemnifiable by The
Dial Corp ("Dial") pursuant to indemnity obligations arising out of the 1987
acquisitions of the domestic bus operations of 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 three
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 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 September 30, 1995, including costs associated with
previously remediated sites. The Company has also recorded an environmental
reserve of $4.6 million, at September 30, 1995, for noncapitalizable expenses
related to the sites identified for potential clean-up and/or remediation. The
receivable and reserve amounts for these 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.
10
<PAGE> 11
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 materially exceed the amounts recorded.
11
<PAGE> 12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
Public Offering. On July 27, 1995, the Company filed a registration statement
on Form S-3 relating to the sale of up to 10,004,144 shares of Common Stock.
The registration statement was declared effective on September 28, 1995, and on
October 3, 1995, the sale of the stock was completed. Four million shares were
sold by the Company and 6,004,144 shares were sold by Motor Coach Industries
Limited, a selling stockholder. The Company did not receive any portion of the
proceeds from the sale of shares of Common Stock by the selling stockholder.
Net proceeds to the Company from the sale of the 4,000,000 shares of Common
Stock offered by the Company were $15.4 million. The Company intends to use
$9.7 million of the net proceeds received by it to repurchase (the "Senior Note
Repurchase") $10.7 million aggregate principal of its 10% Senior Notes due 2001
(the "Senior Notes") pursuant to a put/call agreement with one of the Company's
principal stockholders. The purchase price for the Senior Notes was based on
arm's-length negotiations. The Company will use the remaining net proceeds from
the sale of the Common Stock for general corporate purposes. Pending use, the
net proceeds to the Company from the Offering are invested in short-term,
interest-bearing securities.
Capital Structure and Leverage. The Company requires significant cash flows to
meet its debt and other continuing obligations. The Company had $175.9 million
in long-term debt outstanding (excluding $17.8 million of issued and undrawn
standby letters of credit) at September 30, 1995, which primarily consisted of
the Company's Senior Notes. The Company currently has semi-annual interest
payments (each January 31 and July 31) of $8.2 million due on the Senior Notes.
After giving effect to the Senior Note Repurchase, the Company's semi-annual
interest payments will be reduced to $7.6 million (each January 31 and July
31). The Senior Notes have sinking fund payments, initially in the amount of
$8.0 million and increasing annually thereafter, beginning in July 1996. The
1996 sinking fund payment of $8.0 million will be met through the Senior Note
Repurchase and the $1.7 million of Senior Notes which the Company currently
owns. The balance of the Senior Note Repurchase will be applied to the July
1997 sinking fund payment. As a result of the application of the remaining
Senior Note Repurchase, the July 1997 sinking fund payment will be reduced from
$10.0 million to approximately $5.6 million. The Company will also require
$2.4 million in the aggregate for other debt service and $9.2 million for bus,
real estate and other operating lease obligations during the remainder of 1995.
During February 1995, in connection with the Financial Restructuring (see -
"Financial Restructuring"), the Company pre-paid $12.9 million in bus
financing to Motor Coach Industries Acceptance Corporation ("MCIAC") and
aggregate amounts outstanding were $6.9 million as of September 30, 1995. The
pre-payment resulted in the release of liens on 64 buses, which the Company has
pledged as collateral under the New Credit Facility (defined herein). As part
of the Financial Restructuring, the Company agreed to use its best efforts to
refinance, on commercially reasonable terms, the remaining MCIAC debt.
In July 1995, the Company issued 415,044 shares of Common Stock to participants
in the Company sponsored 401(k) cash or deferred retirement plans that cover
substantially all of its ongoing salaried, hourly and represented employees.
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 and 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 nine months ended September 30, 1995, operating activities provided net
cash of $3.4 million. The net cash required for financing activities, as well
as cash required for investing activities, were funded by proceeds received
from the Rights Offerings (see - "Financial Restructuring"), the sale of
surplus assets, and cash provided by operating activities. At September 30,
1995, the Company had cash and cash equivalents of $0.8 million and $52.2
million in available borrowing capacity under the New Credit Facility (defined
herein) for general purposes.
12
<PAGE> 13
The Company is party to two floating rate interest rate swap agreements. In
October 1994, the agreements were amended to lock in 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 $5.8 million in total 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 Company-owned real property. On or prior to January 1, 1996, the
counterparty to the swap agreements has the right to evaluate its collateral
and may require the Company to post additional collateral or cash collateral in
lieu of real property.
During October 1994 as part of the Financial Restructuring (see - "Financial
Restructuring"), the Company entered into a revolving credit facility (the
"Credit Facility") with Foothill Capital Corporation ("Foothill"), which
replaced the Company's prior bank facility. At the time of the Financial
Restructuring, the Credit Facility provided for revolving loans and letters of
credit and/or letter of credit guarantees of up to $35.0 million.
In June 1995, the Company renegotiated its Credit Facility (the "New Credit
Facility"). The New Credit Facility provides for revolving loans, letters of
credit and letter of credit guarantees up to a maximum commitment of $73.5
million. Syndication commitments under the New Credit Facility, including
Foothill's commitment as the lead agent, total $70.0 million at November 8,
1995. Availability under the New Credit Facility is 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 up
to $44.5 million (the "Fixed Asset Advances") based on the value of certain
fixed asset collateral pledged to Foothill; and (3) a bus purchase facility of
up to $22.0 million (the "Bus Purchase Facility"). Borrowings under the New
Credit Facility mature on May 31, 1998, although availability under the Fixed
Asset Advances will be subject to quarterly reductions after April 1996. The
New Credit Facility is secured by liens on substantially all the assets of the
Company, excluding real estate purchases and new bus purchases unless those
buses are specifically pledged to support borrowing under the Bus Purchase
Facility. The New Credit Facility allows the Company to dispose of certain
non-core real estate properties. In addition, non-bus capital expenditures are
limited to $25.0 million annually with no spending limitations on bus purchases
as long as financed through debt, or operating or capital leases with
maturities of no less than five years. The New Credit Facility is subject to
financial covenants, including maintenance of a minimum net worth and an agreed
ratio of cash flow to interest expense. As of September 30, 1995, there were
approximately $17.8 million in issued and undrawn standby letters of credit
outstanding under the New Credit Facility, and no revolving borrowings
outstanding under the New Credit Facility.
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. Nevertheless,
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 has been made to the claimants. The ICC Trust Fund was
collateralized with a $2.0 million letter of credit which was released to the
Company during September 1995.
Capital Expenditures. The Company's operations also require significant annual
capital and maintenance expenditures related to the Company's bus fleet,
properties and systems software. For the nine months ended September 30, 1995,
the Company's capital expenditures totalled $12.4 million. During June and
July 1995, the Company took delivery of 102 new buses from Motor Coach
Industries International, Inc. ("MCII"). These buses are currently subject to
a month to month operating lease. Prior to January 1, 1996, the Company must
either purchase the buses, find refinancing for the buses or convert to a seven
year operating lease with MCII or its assignee. The Company took delivery of
and purchased 13 buses from MCII in September 1995, and currently plans to
purchase an additional 10 buses it will receive from MCII in the last quarter
of 1995. The Company has placed an order for another 50 buses for delivery in
November 1995. Financing for these buses has been offered by MCII.
13
<PAGE> 14
As of September 30, 1995, approximately 31% of the Company's bus fleet was more
than 10 years old. The Company's experience indicates that as the age of its
fleet increases, the dependability and quality of service declines, which may
make the Company less competitive. While the Company could continue to use
these older buses, the Company intends, over time, to replace these older, less
reliable vehicles with new buses. To replace these buses and to support the
planned increase in the size of the bus fleet, the Company expects to acquire
up to 300 new buses, including the 50 buses mentioned above, over the next 18
months at an aggregate cost of approximately $70 to $80 million. Management
believes that a delay in acquiring these new buses could adversely affect
future operations due to the higher operating costs associated with operating
older buses and the inability to implement fully the Company's plans to
increase total bus miles.
The Company's ability to finance these and other capital expenditures and to
meet its other financial obligations will depend on the Company's future
operating performance, which will be subject to financial, economic, legal and
other factors affecting the business and operations of the Company, many of
which are beyond its control. Although the New Credit Facility and cash flows
from operating activities will be sufficient to make a portion of the Company's
planned expenditures, the Company's operating strategy will depend on the
availability of additional sources of financing, such as operating and capital
lease financing or funds provided through sales of assets or sales of
securities. There can be no assurance that the Company will be able to obtain
financing on suitable terms for these purposes.
Certain Contingencies. The Company is subject to various contingencies that
could affect its liquidity position in the future. See ("ITEM 1. LEGAL
PROCEEDINGS.")
FINANCIAL RESTRUCTURING
During the fall of 1994, the Company initiated a comprehensive change to its
capital structure (the "Financial Restructuring"). The Financial Restructuring
was completed in January 1995 and consisted of (i) the execution of the Credit
Facility; (ii) an offer to convert the entire $98.9 million in aggregate
principal amount of the Convertible Debentures into shares of Common Stock and
(iii) a pro rata offering (the "Rights Offering") to the Company's stockholders
of the opportunity to subscribe for and purchase new shares of Common Stock.
Further information relating to the Financial Restructuring may be found under
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - Financial Restructuring" in the Company's Annual Report on Form
10-K for the year ended December 31, 1994.
THIRD 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 net loss period and the second quarter
generally reflecting a net loss or minimal net income. The third quarter,
which includes the summer peak travel season, generally provides the largest
contribution to the Company's annual operating income. However, in the third
quarter of 1994, the Company experienced a net loss.
14
<PAGE> 15
The following table presents certain of the Company's consolidated operating
statistics for the three and nine months ended September 30, 1995 and 1994:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------ -----------------
SEPTEMBER 30, SEPTEMBER 30,
------------- -------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Regular Service Miles (000) . . . . . . . . . . . . . 74,842 67,238 191,992 177,567
Total Bus Miles (000) . . . . . . . . . . . . . . . 75,390 67,780 194,408 179,734
Passenger Miles (000) . . . . . . . . . . . . . . . . 1,894,440 1,623,528 4,461,006 4,101,402
Available Seat Miles (000) . . . . . . . . . . . . . 3,442,732 3,092,948 8,831,632 8,128,616
Passengers Carried (000) (a) . . . . . . . . . . . . 5,179 4,692 12,839 11,943
Average Trip Length (miles) (a) . . . . . . . . . . . 366 346 347 343
Load Factor (% of available seats filled) . . . . . . 55.0 52.5 50.5 50.5
Yield (Revenue Per Passenger Mile) (cents) . . . . . 9.12 9.82 9.39 9.67
Passenger Revenue Per Regular Service Mile (dollars) 2.31 2.37 2.18 2.23
Total Operating Revenue per Total Bus Mile (dollars) 2.64 2.74 2.53 2.62
Total Operating Expense per Total Bus Mile (dollars) 2.35 2.46 2.49 2.77
Cost per Mile (cents):
Maintenance . . . . . . . . . . . . . . . . . . . 23.2 25.6 26.3 30.4
Transportation . . . . . . . . . . . . . . . . . . 59.6 54.9 60.5 55.5
Insurance and Safety . . . . . . . . . . . . . . . 21.0 20.8 20.6 25.6
Station Costs as a % of Total Revenue (%) . . . . . . 17.7 17.6 18.9 19.0
</TABLE>
(a) See Operating Revenues for discussion of 1994 restatements
Operating Income (Loss). Operating income for the three months ended September
30, 1995 was $22.0 million compared to $18.7 million for the same period in
1994. Operating income for the nine months ended September 30, 1995 was $7.3
million compared to an operating loss of $27.2 million for the same period in
1994. Operating revenues increased $13.2 million (or 7.1%) and $21.4 million
(or 4.6%) for the three and nine months ended September 30, 1995, while
operating expenses increased $9.9 million (or 5.9%) for the three months ended
September 30, 1995 and decreased $13.0 million (or 2.6%) for the nine months
ended September 30, 1995, compared to the same periods in 1994. Operating
income for the three months ended September 30, 1994 included $3.2 million of
certain operating charges which were primarily comprised of
restructuring-related severance costs. Operating loss for the nine months
ended September 30, 1994 included $24.2 million of certain operating charges
for a number of items including: claims from the Company's 1990 bankruptcy;
increased cost estimates for environmental remediation; an adjustment to
depreciation of $6.0 million to recognize impairment of certain operating
facilities which are less than fully utilized; and the above mentioned
restructuring-related severance costs.
Operating Revenues. Passenger service revenues increased $13.4 million (or
8.4%) and $22.3 million (or 5.6%) for the three and nine months ended September
30, 1995, compared to the same periods in 1994 due to increased ridership. The
number of passengers carried increased 10.4% for the third quarter of 1995
compared to 1994 and 7.5% for the nine months ended September 30, 1995,
compared to 1994. Management believes the increase in ridership resulted from
the introduction of everyday low pricing, improvements in handling customer
telephone calls and more convenient bus schedules. Although the short-haul
business has increased, average trip length increased 5.8% for the third
quarter of 1995 and 1.2% for the nine months ending September 30, 1995, due to
greater growth of the long-haul business versus last year as the every day low
pricing strategy had a more significant impact on long-distance travel. The
statistics for passengers carried and trip length, previously estimated from
the revenue accounting system, are now produced from 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. As a result, the statistical information for 1994 has been
changed from that previously published. Also contributing to higher passenger
revenues was an improvement in interline activity, which reflects an increase
in the number of tickets being sold by other carriers for all or a portion of
the travel occurring on Greyhound. The Company expects improvements in its
interline relationships to continue.
Package express delivery service revenues declined $1.2 million (or 11.2%) and
$3.7 million (or 12.2%) in the three and nine months ended September 30, 1995,
compared to the same periods in 1994. Package express revenues continued to
decline, reflecting reductions in routes and intense competition in the package
express delivery service
15
<PAGE> 16
from overnight carriers. This decline is likely to continue until the Company
develops and implements a turnaround strategy for package express.
Other operating revenues increased approximately $0.7 million (or 7.2%) and
$3.1 million (or 10.9%) for the three and nine months ended September 30, 1995
compared to the same periods in 1994 due primarily to an increase in interest
income. As a result of higher interest rates during 1995, interest earned on
the Company's deposits increased. Prepaid ticket order revenue has also
increased.
Operating Expenses. Total operating expenses increased $9.9 million (or 5.9%)
for the three months ended September 30, 1995, and decreased $13.0 million (or
2.6%) for the nine months ended September 30, 1995 compared to the same periods
in 1994. Regular service miles operated for the three and nine months ended
September 30, 1995 compared to 1994 increased by 7.6 million miles (or 11.3%)
and 14.4 million miles (or 8.1%). Operating expenses for the three and nine
months ended September 30, 1994 included a total of $3.2 million and $23.2
million, respectively, of the certain operating charges discussed above.
Maintenance costs for the three months ended September 30, 1995 compared to the
same period in 1994, increased by only $0.2 million to $17.5 million. However,
maintenance expenses for the nine months ended September 30, 1995 were well
below 1994 expenses for the same time period. In spite of increased miles
operated, maintenance labor costs, utilities and building repairs have
decreased due to the downsizing and closure of several facilities since the
first half of 1994, and closure of the New York City garage in January 1995.
However, due to seasonal demands that require high fleet utilization and low
down time, during the third quarter of 1995, fleet utilization (average miles
per bus) increased approximately 9% over the third quarter of 1994, and it was
necessary to defer some maintenance procedures from the third quarter of 1995
until late 1995 or early 1996, a lower demand, lower utilization period. As a
result, maintenance costs, on a per mile basis, during the next six months may
exceed current levels as the maintenance catch up is performed in addition to
normal maintenance during those periods. Such deferral and catch up is a
normal practice due to the seasonality of the business. In addition, included
in the second quarter of 1994 were certain operating charges of $1.7 million
which related primarily to the reserve for increased cost of environmental
remediation.
Transportation expenses increased $7.7 million (or 20.8%) and $17.9 million (or
17.9%) for the three and nine months ended September 30, 1995 compared to the
same periods in 1994, primarily due to an increase of 7.6 million miles
operated and 14.7 million miles operated, respectively. The added miles
produced cost increases for drivers' wages, drivers' expenses and fuel costs of
$3.6 million and $6.9 million for the three and nine months ended September 30,
1995 compared to the same periods in 1994. In addition, transportation expense
increased due to a contractual wage increase, higher drivers' expenses due to
increased extra section activity (which are generally more expensive miles to
operate), the delayed availability of the New York Dormitory and increased
driver hiring and training. Driver hiring and training contributed $0.6 and
$3.8 million to the variance for the three and nine months ended September 30,
1995 compared to the same periods in 1994.
Agents' commissions and station costs increased $2.7 million (or 8.1%) and $3.4
million (or 3.8%) for the three and nine months ended September 30, 1995
compared to the same periods in 1994. The Company handled 1.9 million (or
37.8%) and 3.4 million (or 23.7%) more calls for the three and nine month
periods ended September 30, 1995 compared to the same periods in 1994. The
Company achieved the improved call handling by opening a new telephone center
and improving staffing and compensation in its other center. As a result,
telephone information salaries and communication costs are the primary cause
for increases in this expense category. Ticket commission expenses have
increased due to higher sales through commission agencies compared to 1994.
Interline commissions paid have also risen due to an increase in the number of
interline tickets honored by Greyhound in 1995.
Marketing, advertising and traffic costs decreased $2.0 million (or 23.5%) and
$12.8 million (or 40.5%) for the three and nine months ended September 30, 1995
compared to the same periods in 1994, due primarily to a planned spending
reduction of $11.7 million in the first three quarters of 1995 in direct
advertising expenditures. This year's advertising focus has targeted customers
or potential customers with disposable income to spend on incremental trips.
Insurance and safety costs increased $1.7 million (or 12.1%) for the three
months ended September 30, 1995 and decreased $6.0 million (or 13.0%) for the
nine months ended September 30, 1995 compared to the same periods in 1994. The
automobile and general liability expense increased in the third quarter of 1995
due to the additional
16
<PAGE> 17
claims exposure related to the increased miles operated, as well as the impact
of a change in the Company's claims management strategy. A significant
component of the claims management strategy is to settle claims more quickly
which is reflected in the reduction of $6.6 million in the Reserve for Injuries
and Damages of $65.8 million at September 30, 1995 from $72.3 million at
December 31, 1994. This strategy is expected to reduce insurance claims
expense for automobile and general liability over the longer term. However,
management continues to monitor trends in exposure and to review the adequacy
of related reserves. Baggage claims expense decreased by $0.3 million and $1.8
million for the three and nine months ended September 30, 1995 compared to the
same periods in 1994, due to a new baggage handling policy put into place in
October 1994 which has reduced the number of baggage claims and also the payout
on baggage claims. Included in the second quarter of 1994 were certain
operating charges of $6.4 million which related primarily to charges recorded
to increase reserve levels for bankruptcy claims previously considered barred.
General and administrative expenses increased $1.8 million (or 10.3%) and $0.5
million (or 0.9%) for the three and nine months ended September 30, 1995
compared to the same periods in 1994, due in part, to approximately $0.8
million and $2.3 million recorded in the three and nine months ended September
30, 1995, respectively, to accrue for expense under the Company's management
incentive plan. There was no similar expense recorded during 1994. Also,
pension income was $0.7 million (or 48.6%) and $1.6 million (or 48.6%) lower
for the three and nine month period ended September 30, 1995 compared to the
same periods in 1994. Further, accounting salaries increased for the three
month period ended September 30, 1995 compared to the same period in 1994 due
to the increased use of temporaries and increased headcounts. Offsetting these
increases was a decrease for the nine months ended September 30, 1995 as
compared to 1994, in group insurance expenses and a decrease in legal expenses
for the three and nine months ended September 30, 1995 compared to the same
periods in 1994.
Depreciation and amortization decreased by $0.1 million (or 1.3%) and $5.5
million (or 20.3%) for the three and nine months ended September 30, 1995
compared to the same periods in 1994, primarily due to an operating charge of
$6.0 million taken in the second quarter of 1994 to recognize impairment of
certain operating facilities which were less than fully utilized.
Operating taxes and licenses increased $1.1 million (or 3.0%) for the nine
months ended September 30, 1995 compared to the same period in 1994, primarily
as a result of a reserve recorded in the first quarter of 1995 for past sales
taxes potentially owed on interstate bus tickets sold in Oklahoma. Fuel and
oil taxes have increased for the three and nine months ended September 30, 1995
compared to the same periods in 1994 due to the increase in miles run by the
Company, but these increases were partially 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 increased by $0.1 million (or 1.1%) for the three
months ended September 30, 1995 and decreased $0.9 million (or 2.5%) for the
nine months ended September 30, 1995 compared to the same periods in 1994,
primarily due to the closing of several maintenance facilities. Operating
rental expense for leased buses for the three month periods ended September 30,
1995 and 1994 was $6.2 million and $6.1 million, respectively, and for the nine
month periods ended September 30, 1995 and 1994 was $17.6 million and $16.8
million, respectively.
Other operating expenses decreased $0.6 million (or 22.8%) and $4.4 million (or
44.2%) for the three and nine months ended September 30, 1995 compared to the
same periods in 1994. Included in the three and nine months ended September
30, 1994 are certain operating charges of $0.9 million and $5.7 million,
respectively, which relate primarily to a $2.8 million write-down in the second
quarter of 1994 taken to reflect the expected market value of real estate
properties which were not being utilized by the Company and were expected to be
sold.
Expenses of $2.0 million were recorded during the third quarter of 1994
relating to the Company's restructuring. This amount was made up primarily of
severance costs related to management overhead reductions.
Interest Expense. For the three and nine months ended September 30, 1995,
interest expense was $6.6 million and $20.5 million, including net expense of
$0.3 million and $0.5 million, respectively, resulting from the interest rate
swap agreements entered into during 1993 (see - "Capital Resources and
Liquidity"). Interest expense decreased $2.4 million (or 26.9%) and $4.1
million (or 16.7%) for the three and nine months ending September 30, 1995
compared to 1994, due to a $1.9 million and $5.7 million interest reduction
related to the conversion of the Convertible Debentures (see - "Financial
Restructuring"). This reduction was offset by increased expense paid on an
installment
17
<PAGE> 18
note relating to bus purchase financing entered into during mid 1994. Also
offsetting the reduction is the interest component of a settlement with the
Internal Revenue Service for adjustments to the 1987, 1988 and 1989 federal tax
returns. The Company's weighted average interest rate on long-term debt
outstanding as of September 30, 1995 was 9.9%.
Income Taxes. The Company did not provide an income tax benefit on the loss
for the three months ended September 30, 1994. In addition, during the third
quarter of 1994, the valuation allowance for the deferred tax asset was
increased to reserve for the remaining $17.0 million deferred tax asset. Due
to the uncertainty as a result of the restructuring, the Company believed it no
longer met the "more likely than not" realization criteria of SFAS No. 109. In
1995, the Company will not record a profit and has not recorded any tax benefit
for the nine months ended September 30, 1995.
Extraordinary Item. The Company recorded an extraordinary loss of $3.2 million
during the third quarter of 1994, for the write-off of debt issue costs related
to the prior credit facility.
18
<PAGE> 19
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LABOR LITIGATION
The ATU strike resulted in certain litigation before the NLRB relating to
experience-based seniority. See Note 4 to the Interim Consolidated Financial
Statements for the three and nine months ended September 30, 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 4 to
the Interim Consolidated Financial Statements for the three and nine months
ended September 30, 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 were
due and owing by the Company on interstate bus tickets sold in Oklahoma. See
Note 4 to the Interim Consolidated Financial Statements for the three and nine
months ended September 30, 1995, included elsewhere in this filing.
SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION
Between August 1994 to May 1995, seven purported class action lawsuits and one
other lawsuit were filed by purported owners of the Company's Common Stock,
Convertible Debentures and Senior Notes against the Company and certain of its
former officers and directors. 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, in January 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
4 to the Interim Consolidated Financial Statements for the three and nine
months ended September 30, 1995, included elsewhere in this filing.
CHRISS STREET & COMPANY, INC., ET AL V. GREYHOUND LINES, INC., ET AL
On June 12, 1995, Chriss Street & Company, Inc. and James R. Moriarty, former
holders of Convertible Debentures, filed a lawsuit against the Company and
Stephen M. Peck and Ernest P. Werlin seeking to invalidate the appointment of
Messrs. Peck and Werlin to the Company's Board of Directors. On August 29,
1995, the parties to the litigation entered into a settlement agreement of all
claims, and the litigation was dismissed by the Delaware Chancery Court. Under
the settlement agreement, the challenge to the appointment of Messrs. Peck and
Werlin was withdrawn, and both will continue to serve on the Company's board for
the remainder of their respective terms.
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
19
<PAGE> 20
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
materially exceed the amounts recorded.
ITEM 5. OTHER INFORMATION
PUBLIC OFFERING
On July 27, 1995, the Company filed a registration statement relating to the
sale of up to 10,004,144 shares of Common Stock. On September 28, 1995, the
registration statement was declared effective, and on October 3, 1995, the sale
was completed. See "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - Registration Statement."
ABRAMSON RESIGNATION
On November 9, 1995, the Company announced that Herbert Abramson had resigned
as a director of the Company. Mr. Abramson joined the Board of Directors in
August 1994 after being nominated by the Company's largest shareholder, Connor,
Clark & Company, Ltd., which sought board representation after the Company's
poor financial performance during the first half of 1994. Mr. Abramson advised
the Company that it was no longer necessary for him to serve as a director to
protect the interest of Connor, Clark & Company, Ltd. or its clients.
20
<PAGE> 21
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. (7)
4.5 - Rights Agreement, dated as of March 22, 1994, between the
Registrant and Mellon Securities Trust Company, as Rights Agent.
(4)
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. (6)
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. (8)
4.9 - Second Amended and Restated Loan and Security Agreement dated as of
June 5, 1995 by and between Greyhound Lines, Inc. and Foothill
Capital Corporation. (9)
10.1 - Employment Agreement dated September 18, 1995 between Registrant
and John Werner Haugsland. (10)
11.1 - Computation of Registrant's earnings per share for the three and
nine months ended September 30, 1994. (5)
11.2 - Computation of Registrant's earnings per share for the three and
nine months ended September 30, 1995. (10)
27 - Financial Data Schedule as of and for the nine months ended
September 30, 1995. (10)
- --------------------------------------------------------------------------------
(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 Registrant's Quarterly Report on
Form 8-K regarding the Rights Agreement dated March 22, 1994.
(5) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1994.
(6) Incorporated by reference from the Registration Statement on Form S-1
(File No. 33-56131) regarding the Registrant's Common Stock.
(7) Incorporated herein by reference from the Registrant's Issuer Tender
Offer Statement on Schedule 13E-4 (File No. 5-41800).
(8) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the year ended December 31, 1994.
(9) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.
(10) Filed herewith.
(b) REPORTS ON FORM 8-K
During the quarter ended September 30, 1995, the Company filed no current
reports on Form 8-K with the Securities and Exchange Commission, nor was
it required to do so.
21
<PAGE> 22
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: November 9, 1995
GREYHOUND LINES, INC.
By: /s/ Steven L. Korby
-------------------------
Steven L. Korby
Executive Vice President,
Chief Financial Officer
and Treasurer
(Duly Authorized Officer
and Principal Financial
and Accounting Officer)
22
<PAGE> 23
INDEX TO EXHIBITS
Exhibit
Number
- ------ Exhibits
--------
10.1 - Employment Agreement dated September 18, 1995 between
Registrant and John Werner Haugsland.
11.2 - Computation of Registrant's earnings per share for the three
and nine months ended September 30, 1995.
27 - Financial Data Schedule as of and for the nine months ended
September 30, 1995.
<PAGE> 1
EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and entered
into as of the 18 day of September, 1995, to be effective May 15, 1995 (the
"Effective Date"), by and between GREYHOUND LINES, INC. (together with its
successors, the "Company") and JOHN WERNER HAUGSLAND (the "Executive").
WHEREAS, the Executive has considerable experience, expertise and
training in management related to the types of services offered by the Company;
and
WHEREAS, the Company desires and intends to employ the Executive as
the Executive Vice President and Chief Operating Officer of the Company
pursuant to the terms and conditions set forth in this Agreement; and
WHEREAS, both the Company and the Executive have read and understood
the terms and provisions set forth in this Agreement, and have been afforded a
reasonable opportunity to review this Agreement with their respective legal
counsel.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth in this Employment Agreement, the Executive and the Company agree as
follows:
1. COMPENSATION: During his employment pursuant to this Agreement, the
Company agrees to provide the Executive the following compensation:
a. BASE SALARY: From the Effective Date until changed as
provided in this section, the Company agrees to pay the Executive an annual
salary of $225,000 (the "Base Salary"), payable in at least equal monthly
installments in accordance with the Company's ordinary payroll policies and
procedures for executive compensation. The Company and the Executive
acknowledge that during the employment of the Executive pursuant to this
Agreement, the Executive's Base Salary will be subject to an annual review and
adjustment by the Board of Directors of the Company (the "Board of Directors")
but, in no event, will the Executive's annual Base Salary be less than the
amount set forth in this section.
b. BUSINESS EXPENSES: The Company agrees that the Executive
shall be entitled to reimbursement by the Company for all reasonable expenses
that the Executive may incur in the performance of his duties and obligations
under this Agreement, consistent with the Company's policies for documentation,
reimbursement and payment.
c. FIRST TRANSITION BONUS: The Company agrees that, upon the
date of execution of this Agreement, the Executive shall be paid a lump sum
bonus of $125,000.00.
d. SECOND TRANSITION BONUS: On or before February 1, 1996 the
Executive will be paid an additional lump sum transition bonus of $64,000.00.
This amount will reduce any Management Incentive Plan ("MIP") Award payment
earned for calendar year 1995, as set forth below at subsection 1(e)(1).
e. INCENTIVE BONUS:
(1) Commencing on the first day of the Executive's
employment he will be entitled to participate in the 1995 MIP. The MIP Target
Award will be 45% of the Base Salary paid during 1995. However, any MIP Award
for 1995 will be reduced by the $64,000.00 Second Transition Bonus, and the
Executive shall receive only the difference between the applicable 1995 MIP
Award and the $64,000.00 Second Transition Bonus, if any.
(2) During each subsequent year of his employment
pursuant to this Agreement, the Executive will be entitled to participate in
the MIP for the respective year, with a Target Award of at least 45% of Base
Salary for each such respective year.
<PAGE> 2
f. EMPLOYEE BENEFITS: The parties acknowledge and agree that
certain employee benefits will be provided to the Executive incident to his
employment as Chief Operating Officer of the Company. Except as specifically
modified by this section, these employee benefits shall be governed by the
applicable plan documents. The Company agrees, however, that the following
provisions shall, to the extent not prohibited by law, apply to any employee
benefits provided by the Company:
(1) 401K PLAN: For purposes of the Greyhound Lines, Inc.
and Affiliated Companies Master Salaried Employees' Cash or Deferred Profit
Sharing Plan (the "401k Plan") (whether qualified or unqualified), the
Executive's prior service with Greyhound Lines, Inc. shall be deemed to be
service with the Company such that, upon execution of this Agreement, the
Executive shall be immediately eligible to participate in the 401k Plan and
shall be immediately 100% vested with respect to all employer contributions
made by the Company in accordance with the terms of the 401k Plan.
(2) MEDICAL PLAN: For purposes of the Greyhound Lines,
Inc. Medical Plan (the "Medical Plan"), the following shall apply:
(a) The Executive and his dependents, as defined
in the Medical Plan ("Dependents"), shall immediately be provided coverage
under the Medical Plan under the option elected by the Executive, with all
monthly contributions by the Executive waived.
(3) SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN: For purposes
of the Greyhound Lines, Inc. Supplemental Employee Retirement Plan (the
"SERP"), all of the Executive's prior service with Greyhound Lines, Inc. will
be credited for all purposes under the SERP, and the Executive shall be a
designated person eligible for coverage and benefits under the SERP as of the
Effective Date.
(4) AUTOMOBILE ALLOWANCE: During the term of his
employment with the Company, the Executive shall be entitled to an automobile
allowance, of not less than $1,000.00 per month, commencing on the Effective
Date of this Agreement.
(5) LIFE INSURANCE: At all times during his employment
with the Company, the Executive will be provided with Company-paid life
insurance which will provide death benefits in the event of his death in an
amount of at least $1,500,000.00 payable to the beneficiary or beneficiaries
named by the Executive. The Company shall have the right to purchase insurance
to fund its obligations to the Executive under this section; provided, however,
that any insurance company or companies selected by the Company to fund its
obligations under this section must be the company or companies that underwrite
life insurance benefits covering other officers of the Company.
(6) PHYSICAL EXAMINATIONS: At least once a year, the
Executive will be entitled to a Company-paid physical examination at a clinic
or doctor mutually acceptable to the Executive and the Company.
(7) COUNTRY CLUB DUES: The Company agrees to pay all
monthly membership dues on behalf of the Executive at a country club mutually
selected by the Executive and the Company.
(8) ESTATE, TAX AND FINANCIAL PLANNING: During the term
of his employment with the Company, the Executive shall be entitled to a
maximum of $10,000.00 per year for estate, tax and financial planning as of the
Effective Date of this Agreement. Such reimbursement payments shall be paid by
the Company within a reasonable time after such expenses are incurred by the
Executive.
(9) OTHER BENEFITS: For purposes of any and all other
benefits provided by the Company to its Chief Operating Officer, the Executive
shall be eligible for such benefits immediately on the Effective Date.
Additionally, for purposes of determining eligibility, funding or vesting with
respect to any other benefits, the Executive's prior service with Greyhound
Lines, Inc. shall be deemed to be prior service with the Company.
2
<PAGE> 3
g. LEGAL FEES AND EXPENSES: The Company agrees that the
Executive shall be entitled to reimbursement from the Company for those
reasonable legal expenses incurred by the Executive in preparing, drafting and
negotiating this Agreement, not to exceed $10,000.00.
2. DURATION: The duration of this Agreement shall be defined and
determined as follows:
a. INITIAL TERM: This Agreement shall continue in full force and
effect for two (2) years (the "Initial Term"), commencing on the Effective Date
and expiring on May 14, 1997 (the "Expiration Date"), unless terminated prior
to the Expiration Date in accordance with Section 2(c).
b. RENEWAL: Notwithstanding Section 2(a), this Agreement shall
automatically renew for a period of two (2) years (the "Renewal Term") on the
Expiration Date unless either party gives effective written notice to the other
party of the party's intention not to renew this Agreement ("Notice of
Non-Renewal"), with or without Good Cause, at least ninety (90) days prior to
the Expiration Date. Thereafter, this Agreement shall automatically renew for
additional one (1) year extensions (the "Extensions"), unless and until either
party terminates the Agreement in accordance with Section 2(c).
c. TERMINATION AND NON-RENEWAL: This Agreement may be terminated
as follows:
(1) DEATH: The Company shall be entitled to terminate
this Agreement in the event of the Executive's death, provided, however, that
the Executive's estate shall be paid the Base Salary that the Executive would
have earned for the then current calendar month and the Incentive Bonus that
the Executive would have earned for the remainder of the then current calendar
year, in the time and manner in which the Executive would have been paid such
compensation. In addition, the Executive's designated beneficiaries shall be
entitled to receive any life insurance benefits provided to the Executive in
accordance with the applicable plan documents and/or insurance policies
governing such benefits, including but not limited to, the Life Insurance
benefits set forth in Section 1(f)(5) of this Agreement.
(2) DISABILITY: The Company shall be entitled to
terminate this Agreement in the event the Executive becomes "disabled," as that
term is defined in the Greyhound Lines, Inc. Employee Long Term Disability Plan
("the LTD Plan"), and is unable to perform the essential functions of his
position, with reasonable accommodation, for a period of one hundred eighty
(180) consecutive days.
(3) GOOD CAUSE:
(a) The Company shall be entitled to terminate
this Agreement by providing the Executive with written notice that the Company
is terminating the Agreement for Good Cause, as defined herein ("Notice of
Termination for Good Cause") at any time during his employment.
(b) The Company shall be entitled to terminate
this Agreement by communicating Notice of Non-Renewal for Good Cause, as
defined herein, at least ninety (90) days prior to the Expiration Date, or at
least ninety (90) days prior to the expiration of any Renewal Term or
Extension.
(c) For purposes of this Agreement, "Good Cause"
shall be defined as follows:
i) Any act or omission constituting
fraud under the law of the State of Texas; or
ii) Conviction of, or a plea of nolo
contendere to, a felony; or
iii) Use of illegal drugs; or
3
<PAGE> 4
iv) Embezzlement of Company property or funds; or
v) The material breach of any provision of this
Agreement; or continued gross neglect of his duties under
this Agreement; or unauthorized competition with the Company
during his employment pursuant to this Agreement; or
unauthorized use of Confidential Information (as defined in
Section 9);which is materially detrimental to the Company;
(d) In the event the Company believes "Good Cause" exists
for terminating this Agreement pursuant to subsection (c)(v), the Company
shall be required to give the Executive written Notice of the acts or
omissions constituting "Good Cause" ("Cause Notice").
(e) No Notice of Termination for Good Cause or Notice of
Non-Renewal for Good Cause pursuant to subsection (c)(v) shall be communicated
by the Company unless and until the Executive fails to cure such acts or
omissions within thirty (30) days after receipt of the Cause Notice.
(f) In the event the Company communicates a Notice of
Termination For Good Cause or Notice of Non-Renewal for Good Cause pursuant to
this section, the Executive shall have the right to a hearing before the
President/Chief Executive Officer, on a date determined by the President/Chief
Executive Officer not later than thirty (30) days after the date such Notice is
received, to contest the alleged "Good Cause" for the Notice of Termination or
Notice of Non-Renewal. The President/Chief Executive Officer shall provide the
Executive with written notice of his decision resolving any contest under this
section, and no termination or non-renewal of this Agreement shall be deemed to
be effective until such written notice is received by the Executive. In the
event that the President/Chief Executive Officer affirms the "Good Cause" for
termination or non-renewal, the Executive shall have the right to give
Arbitration Notice under Section 10(a) within fifteen (15) days after such
termination or non-renewal becomes effective.
(4) WITHOUT GOOD CAUSE:
(a) The Company shall be entitled to terminate this
Agreement by providing a written Notice of Termination "Without Good Cause" at
any time during his employment, or by providing a written Notice of Non-
Renewal "Without Good Cause," as defined herein, at least ninety (90) days
prior to the Expiration Date or at least ninety (90) days prior to the
expiration of any Renewal Term or Extension. Provided, however, that in the
event of any Notice of Termination Without Good Cause or Notice of Non-Renewal
Without Good Cause, the Company shall be required to pay Severance Pay in
accordance with the SEVERANCE provisions in Section 5.
(b) Any termination or non-renewal of this Agreement which
is not for "Good Cause," as defined above in Section 2(c)(3), or which does not
result from the death of the Executive, or the disability of the Executive,
shall be deemed to be a termination or non-renewal "Without Good Cause."
Furthermore, in the event that the Company communicates a Notice of Termination
for Good Cause or a Notice of Non-Renewal for Good Cause, and either the
President/Chief Executive Officer [under Section 2(c)(3)(f)] or the arbitrators
[under Section 10(c)] determine that no Good Cause exists or existed for the
Notice of Termination or Notice of Non-Renewal that was originally
communicated, then such Notice of Termination or Notice of Non-Renewal shall be
deemed to have been communication of a Notice of Termination Without Good Cause
or Notice of Non-Renewal Without Good Cause, as appropriate, for all purposes
under this Agreement.
(5) RESIGNATION: The Executive shall be entitled to terminate
this Agreement by providing the Company with a written Notice of Resignation at
least ninety (90) days prior to his intended resignation date, subject to the
following provisions:
4
<PAGE> 5
(a) RESIGNATION FOR GOOD REASON: The Executive shall have
the right to resign for any "Good Reason," as defined herein, and such
resignation shall be deemed to be a termination "Without Good Cause" as defined
in Section 2(c)(4) for all purposes under this Agreement, including the CHANGE
OF CONTROL provisions set forth in Section 4 and the SEVERANCE provisions set
forth in Section 5. For purposes of this Section, the term "Good Reason" shall
be defined as:
i) The Company's failure to perform any material
provision of this Agreement; or
ii) Any material changes by the Company or the
Board of Directors in the duties and responsibilities
of the Executive under this Agreement, without the
written consent of the Executive, other than a
termination or non-renewal for "Good Cause," as defined
herein; or
iii) Any request by the Board of Directors that the
Executive perform, assist, abet or approve any act which is
or could be construed to be illegal under any federal, state
or local law; or
iv) Any requirement by the Board of Directors that
the Executive relocate from the Dallas, Texas, metropolitan
area without his consent.
v) In the event the Company fails to maintain
adequate liability insurance coverage in accordance with
Section 8 of this Agreement, without the written consent of
the Executive.
(b) OPPORTUNITY TO CURE: In the event he believes "Good
Reason" exists for his resignation, the Executive shall be required to give the
President/Chief Executive Officer of the Company written notice of the acts or
omissions constituting Good Reason, and no Notice of Resignation with Good
Reason shall be communicated to the Company unless and until the Company fails
to cure such acts or omissions within thirty (30) days after receipt of the
notice described in this sentence. Any Notice of Resignation with Good Reason
shall be deemed to be effective immediately, and no other notice or opportunity
to cure shall be required.
(c) RESIGNATION WITHOUT GOOD REASON: Any
resignation by the Executive for any reason other than "Good Reason," as
defined above, shall be deemed to be a resignation "Without Good Reason." In
the event of a Resignation Without Good Reason, the CHANGE OF CONTROL
provisions in Section 4 and the SEVERANCE provisions in Section 5 shall be
inapplicable.
3. RESPONSIBILITIES: The Executive acknowledges and agrees that he shall
be employed as Executive Vice President and Chief Operating Officer of the
Company. The Executive covenants and agrees that he will faithfully devote his
best efforts and full time, attention and skill to the business of the Company
as is necessary to perform his obligations under this Agreement. The Executive
shall have or perform no other business responsibilities or obligations during
the term of this Agreement without the prior written approval of the President
of the Company.
4. CHANGE OF CONTROL: The parties acknowledge that the Executive has
agreed to assume the position of Executive Vice President and Chief Operating
Officer and to enter into this Agreement based upon his confidence in the
current shareholders of the Company and the support of the Board of Directors
for the development of a new strategy for the Company. Accordingly, if the
Company should undergo a "Change of Control" while the Executive is employed by
the Company or any parent or subsidiary corporation of the Company, the parties
agree as follows:
a. VESTING OF STOCK OPTIONS: In the event of a Change of
Control, as defined in this section, all Stock Options provided in Section 6 of
this Agreement shall immediately become vested and exercisable, effective on
the date of the Change of Control.
5
<PAGE> 6
b. COMPENSATION: In the event of any termination, non-renewal or
resignation at any time within twenty four (24) months after the date of a
Change of Control, as defined in this section, except for a Termination For
Good Cause, the Company agrees to pay the Executive as follows:
(1) If such Change of Control occurs on or prior to the
end of the Initial Term or Renewal Term of this Agreement, as defined
in Section 2(a) and (b), the Executive will receive a lump sum payment
equal to two (2) times the sum of: (x) an amount equal to the
Executive's then current, annualized Base Salary, and (y) an amount
equal to the sum of all of the Incentive Bonus payments received by
the Executive in the twelve (12) calendar months preceding and, in the
calendar month of, the date of the termination, non-renewal or
resignation, which payment shall be paid within thirty (30) days after
the effective date of termination, non- renewal or resignation. In
addition, the Company agrees to continue any and all Employee Benefits
received by the Executive during his employment with the Company, as
modified pursuant to the terms of Section 1(f), for twenty-four (24)
months after the effective date of termination, non-renewal or
resignation; or
(2) If such Change of Control occurs during any Extension
of this Agreement, the Executive will receive an additional lump sum
payment equal to one and one-half (1.5) times the sum of: (x) an
amount equal to the Executive's then current, annualized Base Salary,
and (y) an amount equal to the sum of all of the Incentive Bonus
payments received by the Executive in the twelve (12) calendar months
preceding and, in the calendar month of, the date of the termination,
non-renewal or resignation, which payment shall be paid within thirty
(30) days after the effective date of termination, non-renewal or
resignation. In addition, the Company agrees to continue any and all
Employee Benefits received by the Executive during his employment with
the Company, as modified pursuant to the terms of Section 1(f), for
twenty-four (24) months after the effective date of termination,
non-renewal or resignation.
c. DEFINITIONS: For purposes of this Agreement, a "Change of
Control" shall be deemed to exist in the event that any of the following
occurs:
(1) the acquisition, directly or indirectly, by a person
(other than the Company or an employee benefit plan established by the
Board of Directors) of beneficial ownership of 30% or more of the
Company's securities with voting power in the next meeting to elect
the directors;
(2) a majority of the directors elected at any meeting of
the holders of the Company's voting securities who are persons who
were not nominated by the Company's then current Board of Directors or
an authorized committee thereof;
(3) the approval by the stockholders of the Company of a
merger or consolidation with another person, other than a merger or
consolidation in which the holders of the Company's voting securities
issued and outstanding immediately before such merger or consolidation
continue to hold voting securities in the surviving or resulting
corporation (in the same relative proportions to each other as existed
before such event) comprising 80% or more of the voting power for all
purposes of the surviving or resulting corporation; or
(4) the approval by the stockholders of the Company of a
transfer of substantially all of the assets of the Company to another
person other than a transfer to a transferee, 80% or more of the
voting power of which is owned or controlled by the Company or by the
holders of the Company's voting securities issued and outstanding
immediately before such transfer in the same relative proportions to
each other as existed before such event.
A Change of Control shall include any other transactions or series of related
transactions occurring which have substantially the same effect as the
transactions specified in any of the preceding clauses of Section 4(c).
d. In the event a definition of CHANGE OF CONTROL is adopted
which is more favorable to the Executive than the definition set forth in
Subsection 4(c), in any stock option plan or in employment agreements applying
to
6
<PAGE> 7
any Company executives, other than the President and Chief Executive Officer,
at the option of the Executive, such language will immediately supersede and
replace the language set forth in Section 4(c).
e. TAX LIABILITY: In the event that any compensation payable
under this section (the "Payment") is determined to be an "excess parachute
payment" under section 280G of the Internal Revenue Code of 1986, as amended
(the "Code") or any successor provision, subject to the excise tax imposed by
section 4999 of the Code or any successor provision (the "Excise Tax"), the
Company agrees to pay to the Executive an additional sum (the "Gross Up") in an
amount such that the net amount retained by the Executive, after receiving both
the Payment and the Gross Up and after paying: (i) any Excise Tax on the
Payment and the Gross Up, and (ii) any Federal, state and local income taxes on
the Gross Up, is equal to the amount of the Payment.
For purposes of determining the Gross Up, the Executive shall be
deemed to pay state and local income taxes at the highest marginal rate of
taxation in his filing status for the calendar year in which the Payment is to
be made based upon the Executive's domicile on the date of the Change of
Control. The determination of whether such Excise Tax is payable and the
amount of such Excise Tax shall be based upon the opinion of tax counsel
selected by the Company subject to the approval of the Executive. If such
opinion is not finally accepted by the Internal Revenue Service, then
appropriate adjustments shall be calculated (with Gross Up, if applicable) by
such tax counsel based upon the final amount of Excise Tax so determined. The
final amount shall be paid, if applicable, within thirty (30) days after such
calculations are completed.
5. SEVERANCE: Severance shall be paid as follows:
a. NON-RENEWAL WITHOUT GOOD CAUSE. In the event that this
Agreement is not renewed by the Company (except where the nonrenewal is for
Good Cause):
(1) At the end of the Initial Term or Renewal Term, as
defined at Section 2(a) and (b), the Company agrees to pay the Executive a lump
sum severance payment equal to two (2) times the sum of: (i) an amount equal to
his then current, annualized Base Salary, and (ii) the greater of: (x) the
applicable Incentive Bonus set forth in Section 1(e), or (y) $51,000.00.
(2) At the end of any subsequent Extension, as defined in
Section 2(b), the Company agrees to pay the Executive a lump sum severance
payment equal to one and one-half (1.5) times the sum of (i) an amount equal to
his then current, annualized Base Salary, and (ii) the greater of: (x) the
applicable Incentive Bonus set forth in Section 1(e), or (y) $51,000.00.
b. RESIGNATION FOR GOOD REASON OR TERMINATION WITHOUT GOOD CAUSE.
In the event the Company terminates this Agreement without "Good Cause," as
defined in Section 2(c)(3), or the Executive resigns for "Good Reason," the
Executive shall be entitled to receive the following severance payments:
(1) In the event such Termination Without Good Cause or
Resignation for Good Reason occurs on or prior to the end of the Initial Term
or Renewal Term of this Agreement, as defined in Section 2(a) and (b), the
Executive shall also receive a lump sum payment equal to two (2) times the sum
of: (i) an amount equal to his then current, annualized Base Salary, and (ii)
the greater of: (x) the applicable Incentive Bonus for the then current bonus
year, as provided in Section 1(e), or (y) $51,000.00; or
(2) In the event a Termination Without Good Cause or
Resignation Without Good Reason occurs during any Extension of this Agreement,
the Executive shall also receive a lump sum payment equal to one and one-half
(1.5) times the sum of: (i) an amount equal to his then current, annualized
Base Salary, and (ii) the greater of: (x) the applicable Incentive Bonus for
the then current bonus year, as provided in Section 1(e), or (y) $51,000.00.
c. TERMS OF PAYMENT: Severance Pay required pursuant to this
section shall be payable in cash in full within thirty (30) days after the
termination date, non-renewal date or resignation date of the Executive's
employment; provided, however, that with respect to any severance payment under
Section 5(a) or Section 5(b) which is required
7
<PAGE> 8
to be calculated based upon the amount of any Incentive Bonus under Section
1(e), the Company agrees to pay to the Executive an initial lump sum severance
payment equal to two (2) times [or where applicable, one and one-half (1.5)
times] the sum of: (i) an amount equal to his then current, annualized Base
Salary, and (ii) $51,000.00, within thirty (30) days of the termination date,
non-renewal date or resignation date of the Executive's employment; and an
additional lump sum payment equal to two (2) times [or where applicable, one
and one-half (1.5) times] the difference between (x) the applicable Incentive
Bonus, and (y) $51,000.00, payable within thirty (30) days after the applicable
Incentive Bonus is calculated.
d. CONTINUATION OF BENEFITS: In the event of a
Non-Renewal Without Good Cause or a Termination Without Good Cause or a
Resignation For Good Reason, the Company agrees to continue any and all
Employee Benefits received by the Executive during his employment with the
Company, as modified pursuant to the terms of Section 1(f), for twenty-four
(24) months after the effective date of termination, non-renewal or
resignation.
e. EXCEPTIONS: Severance Pay shall not be payable under this
section in any of the following circumstances:
(1) In the event that this Agreement is terminated as a
result of the death or disability of the Executive, as provided in Sections
2(c)(1)-(2); or
(2) In the event that this Agreement is terminated
pursuant to a Notice of Termination For Good Cause or a Notice of Non-Renewal
for Good Cause communicated by the Company, as provided in Section 2(c)(3), and
such termination or non-renewal is affirmed by both the President/Chief
Executive Officer (if applicable), and by the arbitrators after an arbitration
proceeding under Section 10(c), if either party requests arbitration in
accordance with the Arbitration procedures set forth in Section 10 of this
Agreement; or
(3) In the event the provisions of Section 4 are
applicable as a result of a "Change of Control" having occurred, and the
payments provided for in Section 4 are paid by the Company; or
(4) In the event that the Executive communicates Notice
of Resignation Without Good Reason as defined in Section 2(c)(5).
f. EXCLUSIVITY: The Company and the Executive acknowledge and
agree that the Severance Payments required under this section are intended to
be exclusive and to supersede any severance pay plans or policies adopted by
the Company and that the Executive shall not be entitled to any additional
severance compensation under any other severance plan or policy adopted by the
Company.
6. STOCK OPTIONS: In addition to the other compensation set forth in
this Agreement, the Company agrees to grant the Executive a non-qualified
option (as used in the Greyhound Lines, Inc. 1993 Management Stock Option Plan)
under the Greyhound Lines, Inc. 1993 Management Stock Option Plan, using the
form attached to this Agreement as Exhibit A, to purchase the Company's common
stock (the "Option") under the following terms:
a. GRANT OF OPTIONS: Subject to the terms and provisions of this
Agreement, the Company agrees to grant the Executive an Option to purchase from
the Company an aggregate of three hundred thousand (300,000) shares of the
Company's common stock (the "Option Stock") at a price per share equal to "2
3/8" (the "Option Price"). The Grant Date for purposes of this Option shall be
March 31, 1995.
b. VESTING AND EXERCISE OF OPTIONS: The Executive shall have the
right to exercise the Option with respect to all or part of any portion of the
Option Stock that has vested in accordance with the following vesting schedule,
immediately upon its vesting:
(1) On May 14, 1996, the Executive's Option to purchase
one hundred twenty thousand (120,000) shares of the Option Stock, at the Option
Price, shall vest.
8
<PAGE> 9
(2) On May 14, 1997, the Executive's Option to purchase
an additional one hundred twenty thousand (120,000) shares of the Option Stock,
at the Option Price, shall vest.
(3) On May 14, 1998, the Executive's Option to purchase
an additional sixty thousand (60,000) shares of the Option Stock, at the Option
Price, shall vest.
(4) In the event that a Change of Control (as defined in
Section 4(c) of this Agreement) occurs at any time during the Executive's
employment, or in the event of a termination or non-renewal Without Good Cause
or a valid Notice of Resignation for Good Reason prior to May 14, 1998, the
Executive's Option to purchase all three hundred thousand (300,000) shares of
the Option Stock, at the Option Price, shall, to the extent not already fully
vested, immediately become fully vested and exercisable on the date the Change
of Control occurs, or on the effective date of his termination or resignation.
c. EXERCISE OF OPTIONS:
(1) The Executive shall have the right to exercise his
Option to purchase all or part of the Option Stock after such Option has vested
in accordance with the vesting provisions set forth in Section 6(b). Any
exercise by the Executive of his Option to purchase all or part of the Option
Stock shall be in writing addressed to the Corporate Secretary of the Company
at its principal place of business (a copy of the form of exercise to be used
will be available upon written request to the Secretary), and shall be
accompanied by a certified or bank check to the order of the Company in the
full amount of the Option Price of the whole number of Option Stock so
purchased. In no event shall the Executive exercise the Option for a fraction
of a share of Option Stock.
(2) The Option may not be exercised after the tenth (10th)
anniversary of the Grant Date. The unexercised portion of the Option, if any,
will automatically, and without notice, terminate and become null and void upon
the expiration of ten (10) years from the Grant Date. If, however, the
Executive's employment with the Company terminates before the expiration of ten
(10) years from the Grant Date, the Option will terminate on the applicable
date as described in Section 6(c)(3) below.
(3) Upon the termination of the Executive's employment with
the Company, the Option shall automatically terminate and become null and void
as to shares of Option Stock not vested either immediately prior to the date of
the Executive's termination or as a result of his termination, and as to shares
of Option Stock vested for any reason on the date of his termination, shall to
the extent not previously exercised, be exercisable and then terminate only as
follows:
(a) if the Executive dies while in the employ of the
Company, the Executive's estate may, until the earlier of: (x) six (6)
months after the date of death, or (y) the expiration of ten (10)
years from the Grant Date, exercise the Option with respect to all or
any part of the Option Stock which the Executive was entitled to
purchase immediately prior to the date of his death;
(b) in the case of termination of the Executive's
employment due to Disability, the Executive may, until the earlier of:
(x) six (6) months after the date his employment terminates, or (y)
the expiration of ten (10) years from the Grant Date, exercise the
Option with respect to all or any part of the Option Stock which the
Executive was entitled to purchase immediately prior to the date of
his termination;
(c) in the case of a Termination Without Good Cause
or a Non-Renewal Without Good Cause, or the event the Executive
communicates Notice of Resignation for Good Reason, as that term is
defined in Section 2(c)(5), the Executive may, until the earlier of:
(x) one (1) year after the date the Executive's employment terminates,
or (y) the expiration of ten (10) years from the Grant Date, exercise
the Option with respect to all or any part of the Option Stock which
the Executive was entitled to purchase immediately prior to the time
of such termination, non-renewal or resignation; and
(d) in the case of termination or resignation for
any reason other than those specified in (a), (b) or (c) above, the
Executive may, until the earlier of: (x) thirty (30) days after the
date of his termination from employment or (y) the expiration of ten
(10) years from the Grant Date, exercise his
9
<PAGE> 10
Option with respect to all or any part of the Option Stock which the
Executive was entitled to purchase immediately prior to the time of
such termination or resignation; provided, however, that if the
Executive is terminated for Good Cause, as defined in Section 2(c)(3),
the Executive shall forfeit his rights under the Option, except as to
those shares of Option Stock already purchased.
d. REGISTRATION: The Option shall specifically provide: (i) an
agreement from the Company to at all times maintain an effective registration
on Form S-8 covering the registration of the Option Stock under the Securities
Act of 1933, as amended ("the Act"); (ii) the Option Stock shall be issued free
of all restrictions (except those imposed by law), legends and stop transfer
instructions; and, (iii) the Option Stock shall not constitute "restricted
securities" within the meaning of Rule 144 of the Securities and Exchange
Commission. Concurrently with the execution of this Agreement, the Company
shall enter into a Registration Rights Agreement with the Executive, in the
form attached hereto as Exhibit "B," pursuant to which the Company shall grant
certain rights to the Executive to include the Option Stock on any registration
statement filed by the Company under the Act relating to a public offering of
any equity or debt securities by the Company.
e. STATUS OF THE EXECUTIVE: The Executive shall not be
considered a stockholder of the Company with respect to any shares of Option
Stock subject to the Option, except to the extent that the shares of Option
Stock have been purchased by and transferred to the Executive.
7. SUCCESSORS AND ASSIGNS: The parties acknowledge and agree that this
Agreement may not be assigned by either party without the written consent of
the other party. In the event of a "Change of Control" as defined in Section
4(c), the Company shall be entitled to assign this Agreement to any successor
or assignee; provided, however, that such assignment shall not or be construed
to, in any way whatsoever, release, limit or excuse the Company from the
performance of its obligations and the payment of its liabilities under this
Agreement, regardless of whether such obligations or liabilities accrued or
accrue before, after or as a result of such assignment, and regardless of
whether such obligations or liabilities are or were assumed by any successor or
assignee. In the event of the Executive's death, this Agreement shall be
enforceable by the Executive's estate, executors or legal representatives, but
only to the extent that such persons may collect any compensation (including
stock options) due to the Executive under this Agreement.
8. INDEMNIFICATION: During and after the employment of the Executive
pursuant to this Agreement, the Company shall indemnify the Executive against
all judgments, penalties, fines, assessments, losses, amounts paid in
settlement and reasonable expenses (including, but not limited to, attorneys'
fees) for which the Executive may become liable as a result of his performance
of his duties and responsibilities pursuant to this Agreement, to the fullest
extent permissible under the laws of the State of Delaware. In addition, the
Company agrees to purchase liability insurance for any such judgments,
penalties, fines, assessments, losses, amounts paid in settlement and
reasonable expenses (including, but not limited to, attorneys' fees) for which
the Executive may become liable as a result of his performance of his duties
and responsibilities pursuant to this Agreement in an amount not less than the
amount of director and officer liability insurance in effect on the Effective
Date of this Agreement, and consistent with coverage provided to other officers
of the Company.
9. NON-COMPETITION AND NON-DISCLOSURE: The Company and the Executive
agree as follows:
a. During and after his employment by the Company, the Executive
agrees that he shall not directly or indirectly disclose any Confidential
Information, as defined in this section, unless such disclosure is: (i) to an
employee of the Company or its subsidiaries; or (ii) to a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance of his duties as an executive of the Company; or (iii) authorized
in writing by the Board of Directors; or (iv) required by any Court or
administrative agency.
b. In the event that this Agreement is terminated for any reason,
the Executive agrees that he shall promptly return all records, files,
documents, materials and copies relating to the business of the Company or its
subsidiaries which came into the possession of the Executive during his
employment pursuant to this Agreement; provided, however, that nothing in this
section shall be construed as any limitation on the Executive's right to retain
any documents or other information which was in the possession of the Executive
prior to the Effective Date of this Agreement.
10
<PAGE> 11
c. For purposes of this Agreement, the term "Confidential
Information" shall be defined as any information relating to the business of
the Company or its subsidiaries which is not generally available to the public
and which the Company takes affirmative steps to maintain as confidential. The
term shall not include any information that the Executive was aware of prior to
the Effective Date of this Agreement, information that is a matter of any
public record, information contained in any document filed or submitted to any
governmental entity, any information that is common knowledge in any industry
in which the Company does business, any information that has previously been
made available to persons who are not employees of the Company or any
information that is known to the Company's competitors.
d. Both the Company and the Executive recognize that in his
employment at the Company, the Executive will be provided with Confidential
Information, as defined above. Both the Company and the Executive recognize
that the disclosure of such Confidential Information to a competitor of the
Company could place the Company at a competitive disadvantage. Accordingly, in
consideration of the Company agreeing to provide Confidential Information to
him, and to prevent the disclosure or use of such information to the
competitive disadvantage of the Company, the parties agree that in the event
that the Executive's employment with the Company is terminated as a result of
either: (i) Notice of Termination for Good Cause or Notice of Non-Renewal for
Good Cause, as defined in Section 2(c)(3); or (ii) the resignation of the
Executive "Without Good Reason," as defined by Section 2(c)(5), the Executive
covenants and agrees not to compete with the Company for twelve (12) calendar
months subsequent to such termination, non-renewal or resignation from
employment, in the business of providing inter-city transport of passengers or
cargo by automobile or motorbus in any city in which the Company engaged in
such business during the twelve (12) calendar months prior to such termination,
non-renewal or resignation. This provision shall not apply in the event that
the employment of the Executive is terminated for any reason other than "Good
Cause" or in the event of a "Resignation for Good Reason."
e. Unless the Board of Directors provides prior written approval,
for one (1) year following the termination of the Executive's employment by the
Company, the Executive shall not, directly or indirectly:
(1) solicit, entice, persuade or induce any employee of
the Company, or its subsidiaries, to terminate his/her employment with the
Company, or its subsidiaries, or to become employed by any Person other than
the Company, or its subsidiaries; or
(2) approach any such employee for any of the foregoing
purposes; or
(3) authorize or assist in the taking of such actions by
any third party.
10. ARBITRATION: The Company and the Executive agree as follows:
a. Any claim or controversy arising out of or relating to this
Agreement, or any breach of this Agreement, shall be settled by final and
binding arbitration in the city of Dallas, Texas in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in effect
on the date the claim or controversy arises. The Executive and the Company
agree that either party must request arbitration of any claim or controversy on
or before the earlier of: (i) the fifteenth (15th) business day after the
termination or non-renewal of this Agreement becomes effective; or (ii) the
sixtieth (60th) business day after the date the claim or controversy first
arises, by giving written notice of the party's request for arbitration
("Arbitration Notice"). Failure to effectively communicate the Arbitration
Notice within the time limitation set forth in this section shall constitute a
waiver of the claim or controversy.
b. In the event that any dispute arising under this Agreement
concerns any payment required to be made under any provision of this Agreement,
either party agrees to deposit the amount of the disputed payment in an
interest bearing account with a financial institution acceptable to the other
party within five (5) days after either party effectively communicates its
Arbitration Notice. In the event that any dispute arising under this Agreement
concerns the amount of any payment required to be made under any provision of
this Agreement, either party agrees to pay the undisputed portion of the
payment to the other party and deposit the disputed portion of the payment in
11
<PAGE> 12
an interest bearing account with a financial institution acceptable to the
other party within five (5) days after either party effectively communicates
its Arbitration Notice.
c. All claims or controversies subject to arbitration under this
Agreement shall be submitted to an arbitration hearing within thirty (30) days
after the Arbitration Notice is communicated. All claims or controversies
shall be resolved by a panel of three (3) arbitrators selected in accordance
with the applicable Commercial Arbitration Rules. Either party may request
that the arbitration proceeding be stenographically recorded by a Certified
Shorthand Reporter. The arbitrators shall issue a written decision with
respect to all claims or controversies submitted under this section within
thirty (30) days after the completion of the arbitration hearing. The parties
are entitled to be represented by legal counsel at any arbitration hearing and
each party shall be responsible for its own attorneys' fees. The Company shall
be responsible for paying for all of the arbitrators' fees and expenses in the
event of any arbitration under this section, except that in the event an
arbitration panel finds against the Executive, he may be required to reimburse
the Company for up to one-half (1/2) of the arbitrators' fees and expenses.
d. The parties agree that this section may be specifically
enforced by either party, and submission to arbitration compelled, by any court
of competent jurisdiction. The parties further acknowledge and agree that the
decision of the arbitrators may be specifically enforced by either party in any
court of competent jurisdiction.
11. RULES OF CONSTRUCTION: The following provisions shall govern the
interpretation and enforcement of this Agreement:
a. SEVERABILITY: The parties acknowledge and agree that each
provision of this Agreement shall be enforceable independently of every other
provision. Furthermore, the parties acknowledge and agree that, in the event
any provision of this Agreement is determined to be unenforceable for any
reason, the remaining covenants and/or provisions will remain effective,
binding and enforceable.
b. WAIVER: The parties acknowledge and agree that the failure of
either to enforce any provision of this Agreement shall not constitute a waiver
of that particular provision, or of any other provisions, of this Agreement,
except as otherwise stated in this Agreement.
c. CHOICE OF LAW: The parties acknowledge and agree that except
as specifically provided otherwise in this Agreement, the law of Texas will
govern the validity, interpretation and effect of this Agreement and any other
dispute relating to, or arising out of, the employment relationship between the
Company and the Executive.
d. MODIFICATION: The parties acknowledge and agree that this
Agreement constitutes the complete and entire agreement between the parties;
that the parties have executed this Agreement based upon the express terms and
provisions set forth herein; that the parties have not relied on any
representations, oral or written, which are not set forth in this Agreement;
that no previous agreement, either oral or written, shall have any effect on
the terms or provisions of this Agreement; and that all previous agreements,
either oral or written, are expressly superseded and revoked by this Agreement.
In addition, the parties acknowledge and agree that the provisions of this
Agreement may not be modified by any subsequent agreement unless the modifying
agreement (i) is in writing (ii) contains an express provision referencing this
Agreement (iii) is signed by the Executive and (iv) is approved by the Board of
Directors.
e. EXECUTION: The parties agree that this Agreement may be
executed in multiple counterparts, each of which shall be deemed an Original
for all purposes.
f. HEADINGS: The parties agree that the subject headings set
forth at the beginning of each section in this Agreement are provided for ease
of reference only, and shall not be utilized for any purpose in connection with
the construction, interpretation or enforcement of this Agreement.
12. LEGAL CONSULTATION: The parties acknowledge and agree that both
parties have been accorded a reasonable opportunity to review this Agreement
with legal counsel prior to executing the agreement.
12
<PAGE> 13
13. NOTICES: The parties acknowledge and agree that any and all Notices
required to be delivered under the terms of this Agreement shall be forwarded
by personal delivery or certified U.S. mail. Either party may change their
respective address for the purpose of receiving notices only by providing
written notification via certified mail, five (5) days in advance of such
change. Notices shall be deemed to be communicated and effective on the day of
receipt. Such Notices shall be addressed to each party as follows:
John Werner Haugsland Greyhound Lines, Inc.
17824 Cedar Creek Canyon 15110 No. Dallas Parkway
Dallas, Texas 75252 Dallas, Texas 75248
With a copy to:
Robert E. Sheeder, Esq. Craig Lentzsch
1445 Ross Avenue, Suite 3200 President and Chief Executive Officer
Dallas, Texas 75202 Greyhound Lines, Inc.
15110 North Dallas Parkway
Dallas, Texas 75248
Mark Southerst
General Counsel
Greyhound Lines, Inc.
15110 North Dallas Parkway
Dallas, Texas 75248
EXECUTED on this 18th day of September, 1995.
---- ---------
JOHN WERNER HAUGSLAND
/s/ John Werner Haugsland
--------------------------
GREYHOUND LINES, INC.
By: /s/ Craig Lentzsch
-----------------------
Title: President
-------------------
13
<PAGE> 14
EXHIBIT A
TO
EMPLOYMENT AGREEMENT
BETWEEN GREYHOUND LINES, INC. AND JOHN W. HAUGSLAND
OPTION AGREEMENT
October 11, 1995
Mr. John W. Haugsland
17824 Cedar Creek Canyon
Dallas, Texas 75252
RE: GRANT OF NON-QUALIFIED STOCK OPTION
Dear Mr. Haugsland:
On March 26, 1993, the Board of Directors of Greyhound Lines,
Inc. (the "Company") adopted the Company's 1993 Management Stock Option Plan
(the "Plan"). A copy of the Plan is annexed to this Option Agreement and shall
be deemed a part of this Option Agreement as if fully set forth herein. Unless
the context otherwise requires, all terms defined in the Plan shall have the
same meaning when used herein.
I. THE GRANT
The Company hereby grants to you, effective as of March 31,
1995 (the "Grant Date"), as a matter of separate inducement and not in lieu of
any salary or other compensation for your services, the right and option to
purchase (the "Option") an aggregate of 300,000 shares of Common Stock of the
Company (the "Option Shares") at a price per share equal to $2.3125 (the "Option
Price"), in accordance with the terms of, and subject to the limitations set
forth in, this Option Agreement, your Executive Employment Agreement (the
"Employment Agreement") and the Plan. This Option is not intended to be an
incentive stock option within the meaning of section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"). It is intended to be a
non-qualified stock option, within the purview of section 83 of the Code,
granted under Paragraph 6 of the Plan.
II. VESTING AND EXERCISE
(a) The Option shall vest as to the right to purchase,
and simultaneously become immediately exercisable, as follows:
(i) 40% of the Option Shares (120,000 shares) on
May 14, 1996 pursuant to your Employment
Agreement;
(ii) 40% of the Option Shares (120,000 shares) on
May 14, 1997 pursuant to your Employment
Agreement; and
(iii) 20% of the Option Shares (60,000 shares) on
May 14, 1998, pursuant to your Employment
Agreement.
No further vesting of the Option shall occur following termination of your
employment; provided, however, that in the event of: (i) a "Change of
Control," as defined in Section 4(c) of your Employment Agreement, at any time
during your employment; or (ii) in the event that your employment is terminated
or not renewed by the Company without "Good Cause," as defined in Section
2(c)(3) of your Employment Agreement, prior to May 14, 1998; or, (iii)
<PAGE> 15
you communicate a valid Notice of Resignation for "Good Reason," as defined in
Section 2(c)(5)(a) of your Employment Agreement, prior to May 14, 1998, then
your Option to purchase all three hundred thousand (300,000) shares of the
Option Stock at the Option Price shall, to the extent not already fully vested,
immediately become fully vested and exercisable on the date the Change of
Control occurs, or on the effective date of your termination or resignation.
(b) The Option may not be exercised after the tenth
(10th) anniversary of the Grant Date. The unexercised portion of the Option,
if any, will automatically, and without notice, terminate and become null and
void upon the expiration of ten (10) years from the Grant Date. If, however,
your employment with the Company terminates before the expiration of ten (10)
years from the Grant Date, the Option will terminate on the applicable date as
described in Paragraph IV below.
(c) Any exercise by you of the Option shall be in writing
addressed to the Corporate Secretary of the Company at its principal place of
business (a copy of the form of exercise to be used will be available upon
written request to the Secretary), and shall be accompanied by a certified or
bank check to the order of the Company in the full amount of the Option Price
of the whole number of Option Shares so purchased, or in such other manner as
described in the Plan. In no event shall you exercise the Option for a
fraction of an Option Share.
III. DEFINITIONS
(a) For purposes of this Option Agreement, the term
"Change of Control" shall mean that one of the events set forth at Section 4(c)
of your Employment Agreement occurs, or any other transaction or series of
related transactions occur which have substantially the same effect as any one
of the events set forth at Section 4(c) of your Employment Agreement.
(b) For purposes of this Option Agreement, the term
"Without Good Cause" shall mean that your Employment Agreement is terminated or
not renewed by the Company without "Good Cause," as defined in Section
2(c)(3)(c) of your Employment Agreement, or your employment is terminated by
the Company by communicating a Notice of Termination for Good Cause or Notice
of Non-Renewal for Good Cause, and either the President/Chief Executive Officer
[under Section 2(c)(3)(f) of your Employment Agreement] or the arbitrators
[under Section 10(c) of your Employment Agreement] thereafter determine that
no Good Cause exists or existed for the termination or non-renewal.
(c) For purposes of this Option Agreement, the term "Notice
of Resignation for Good Reason" shall mean that you communicate at least ninety
(90) days notice of your intention to resign from your position with the
Company, for any reason constituting "Good Reason" under Section 2(c)(5)(a) of
your Employment Agreement.
IV. TERMINATION OF EMPLOYMENT
Upon the termination of your employment with the Company, this
Option shall automatically terminate and become null and void as to Option
Shares not vested as to the right to purchase and not then exercisable either
immediately prior to the date of your termination or as a result of your
termination. With respect to any and all Option Shares vested as to the right
to purchase and exercisable for any reason on the date of your termination,
shall to the extent not previously exercised, be exercisable and then terminate
only as follows:
(a) DEATH: If you die while in the employ of the Company,
your estate may, until the earlier of: (x) six (6) months after the
date of death or (y) the expiration of ten (10) years from the Grant
Date, exercise the Option with respect to all or any part of the
Option Shares which you were entitled to purchase immediately prior to
the date of your death;
(b) DISABILITY: In the case of termination of your
employment due to Disability (as defined in Section 2(c)(2) of your
Employment Agreement), you may, until the earlier of: (x) six (6)
months after the date your employment terminates, or (y) the
expiration of ten (10) years from the Grant Date, exercise the Option
with respect to all or any part of the Option Shares which you were
entitled to purchase immediately prior to the date of your
termination;
2
<PAGE> 16
(c) TERMINATION WITHOUT GOOD CAUSE: In the event that your
employment is terminated by the Company without "Good Cause," as
defined in Section 2(c)(3) of your Employment Agreement, you may,
until the earlier of: (x) one (1) year after the date your employment
terminates; or (y) the expiration of ten (10) years from the Grant
Date, exercise the option with respect to all or any part of the
Option Shares which you were entitled to purchase immediately prior to
or as a result of such termination;
(d) NON-RENEWAL WITHOUT GOOD CAUSE: In the event that your
Employment Agreement is not renewed by the Company, without "Good
Cause," as defined in Section 2(c)(3) of your Employment Agreement,
you may, until the earlier of: (x) one (1) year after your employment
terminates as a result of the Company's non-renewal; or (y) ten (10)
years from the Grant Date, exercise the Option with respect to all or
any part of the Option Shares you were entitled to purchase at the
time your employment terminated as a result of the Company's
non-renewal;
(e) RESIGNATION FOR GOOD REASON: In the event you resign
from employment for "Good Reason," as that term is defined in Section
2(c)(5)(a) of your Employment Agreement, you may, until the earlier
of: (x) one (1) year after the date your employment terminates; or (y)
the expiration of ten (10) years from the Grant Date, exercise the
Option with respect to all or any part of the Option Shares which you
were entitled to purchase immediately prior to or as a result of such
resignation; and
(f) RESIGNATION WITHOUT GOOD REASON: In the case of a
resignation for any reason other than "Good Reason," as that term is
defined in Section 2(c)(5)(a) of your Employment Agreement, you may,
until the earlier of (x) thirty (30) days after the date of your
resignation from employment or (y) the expiration of ten (10) years
from the Grant Date, exercise your Option with respect to all or any
part of the Option Shares which you were entitled to purchase at the
time of such resignation.
(g) GOOD CAUSE: If you were terminated for Good Cause (as
defined in Section 2(c)(3) of your Employment Agreement), you shall
forfeit your rights under the Option, except as to those Option Shares
already purchased.
V. CHANGE OF CONTROL
Upon the occurrence of an event constituting a Change of
Control (as that term is defined in Section 4(c) of your Employment Agreement)
while you are employed by the Company or any parent corporation or subsidiary
corporation of the Company, the Option will become immediately fully vested, to
the extent not already fully vested, and immediately exercisable in full,
effective on the date of the Change of Control.
VI. TRANSFERABILITY
The Option is not transferable by you otherwise than by will
or the laws of descent and distribution and is exercisable, during your
lifetime, only by you. The Option may not be assigned, transferred (except by
will or the laws of descent and distribution), pledged or hypothecated in any
way (whether by operation of law or otherwise) and shall not be subject to
execution, attachment or similar proceeding. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof or of the Plan, and the levy of any attachment or similar
proceeding upon the Option, shall be null and void and without effect. The
continuing validity of the Option shall not be impaired by this provision, by
the attempted assignment, transfer, pledge, hypothecation or other disposition
or by the voided levy or similar proceeding.
By your acceptance of this Option Agreement, you agree that
you will not sell or otherwise dispose of the Option, any common stock acquired
pursuant to the Option or any other "derivative security" (as defined by Rule
16a- 1(c) under the Securities Exchange Act of 1934, as amended) during the
period ending six months from the date hereof.
3
<PAGE> 17
VII. REGISTRATION
(a) REGISTRATION OF OPTIONS SHARES: The Company
represents and warrants to you that the Plan is covered by an effective
registration statement on Form S-8 filed with the Securities and Exchange
Commission relating to the Option Shares issuable upon exercise of this Option,
and the Option Shares issuable upon exercise of this Option are and shall
continue at all times to be registered under the Securities Act of 1933, as
amended (the "Act") and the Option Shares issuable upon exercise of this Option
shall be issued free of any and all restrictive legends and stop transfer
instructions. Without limitation upon the generality of the foregoing, the
Option Shares issuable upon exercise of this Option shall not constitute
"restricted securities" with the meaning of Rule 144 under the Act, and shall
be freely transferable by you in the open market and otherwise. The Company
agrees that so long as this Option is outstanding, it shall at all times
maintain an effective registration statement under the Act covering the
issuance of the Option Shares to you.
(b) OBLIGATIONS OF THE COMPANY: Concurrently with the
execution of this Agreement, the Company shall enter into a Registration Rights
Agreement with the Executive, in the form attached hereto as Exhibit "B,"
pursuant to which the Company shall grant certain rights to the Executive to
include the Option Shares on any registration statement filed by the Company
under the Act relating to a public offering of any equity or debt securities by
the Company.
VIII. WITHHOLDING TAXES
By your acceptance hereof, and in accordance with Section
10(d) of the Plan, you agree that in the case of issuance of Option Shares
hereunder, the Company, as a condition of such issuance, may require the
payment (through withholding from any payment otherwise due you from the
Company or any parent corporation or subsidiary corporation of the Company,
reduction of the number of Option Shares to be issued hereunder, or otherwise)
of any federal, state, local or foreign taxes required by law to be withheld
with respect to such issuance.
IX. MISCELLANEOUS
(a) This Option Agreement is subject to all the terms,
conditions, limitations and restrictions contained in the Plan, except as
specifically modified by this Option Agreement and your Employment Agreement.
In the event of any conflict between this Option Agreement, your Employment
Agreement and/or the Plan, the terms of this Option Agreement shall be
controlling.
(b) This Option Agreement is not a contract of employment
and the terms of your employment shall not be affected hereby or by any
agreement referred to herein except to the extent specifically so provided
herein or therein. Nothing herein shall be construed to impose any obligation
on the Company or on any parent corporation or subsidiary corporation of the
Company to continue your employment, and it shall not impose any obligation on
your part to remain in the employ of the Company or of any parent corporation
or subsidiary corporation of the Company.
(c) SUCCESSORS: The obligations of this Option Agreement
shall bind the corporate successors of the Company, and the corporate
successors of such successors.
(d) NO IMPAIRMENT: The Company will not, by amendment
of its certificate of incorporation or through reorganization, consolidation,
merger, dissolution, issue or sale of securities, sale of assets or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms of this Option, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such actions as may be
necessary or appropriate in order to protect the rights of the holders of the
Options against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not increase the par value of any shares
of stock receivable upon the exercise of the Option above the amount payable
therefore upon such exercise and (b) will take all such action as may be
necessary or appropriate in order that the Company may validly and legally
issue fully paid and non-assessable stock. The Company agrees that the shares
issuable upon exercise of this Option shall be duly authorized, fully paid and
non-assessable shares, free of pre-emption rights.
4
<PAGE> 18
(e) RESERVATION OF STOCK ISSUABLE ON EXERCISE OF OPTIONS:
The Company covenants and agrees that during the period within which the rights
represented by this Option may be exercised, the Company will at all times have
authorized, and in reserve, solely for issuance and delivery upon the exercise
of this Option, all such shares of Common Stock and other stock, securities and
property as from time to time shall be receivable upon the exercise of this
Option.
X. ARBITRATION
(a) Any claim or controversy arising out of or relating to
this Option Agreement, or any breach of this Option Agreement, shall be settled
by final and binding arbitration in the city of Dallas, Texas in accordance
with the Commercial Arbitration Rules of the American Arbitration Association
in effect on the date the claim or controversy arises. The Executive and the
Company agree that either party must request arbitration of any claim or
controversy within sixty (60) days of the date the claim or controversy first
arises, by giving written notice of the party's request for arbitration
("Arbitration Notice"). Failure to effectively communicate the Arbitration
Notice within the time limitation set forth in this section shall constitute a
waiver of the claim or controversy.
(b) In the event that any dispute arising under this
Option Agreement concerns any payment required to be made under any provision
of this Option Agreement, either party agrees to deposit the amount of the
disputed payment in an interest bearing account with a financial institution
acceptable to the other party within five (5) days after either party
effectively communicates its Arbitration Notice. In the event that any dispute
arising under this Option Agreement concerns the amount of any payment required
to be made under any provision of this Option Agreement, either party agrees to
pay the undisputed portion of the payment to the other party and deposit the
disputed portion of the payment in an interest bearing account with a financial
institution acceptable to the other party within five (5) days after either
party effectively communicates its Arbitration Notice.
(c) All claims or controversies subject to arbitration
under this Option Agreement shall be submitted to an arbitration hearing within
thirty (30) days after the Arbitration Notice is communicated. All claims or
controversies shall be resolved by a panel of three (3) arbitrators selected in
accordance with the applicable Commercial Arbitration Rules. Either party may
request that the arbitration proceeding be stenographically recorded by a
Certified Shorthand Reporter. The arbitrators shall issue a written decision
with respect to all claims or controversies submitted under this section within
thirty (30) days after the completion of the arbitration hearing. The parties
are entitled to be represented by legal counsel at any arbitration hearing and
each party shall be responsible for its own attorneys' fees. The Company shall
be responsible for paying for all expenses in the event of any arbitration
under this section.
(d) The parties agree that this section may be
specifically enforced by either party, and submission to arbitration compelled,
by any court of competent jurisdiction. The parties further acknowledge and
agree that the decision of the arbitrators may be specifically enforced by
either party in any court of competent jurisdiction.
Please indicate your acceptance of all the terms and
conditions of the Option and the Plan by signing and returning a copy of this
Option Agreement.
Very truly yours,
GREYHOUND LINES, INC.
By: /s/ Craig Lentzsch
--------------------------------
CRAIG R. LENTZSCH, PRESIDENT AND CEO
ACCEPTED:
JOHN W. HAUGSLAND
/s/ J. W. Haugsland
- -----------------------------
Date: November 1, 1995
-----------------------
5
<PAGE> 1
EXHIBIT 11.2
PAGE 1 OF 2
GREYHOUND LINES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30, 1995
-----------------------
PRIMARY EARNINGS PER SHARE
<S> <C>
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,333,000
==============
Shares
Weighted average number of common shares issued . . . . . . . . . . . . . . . . 54,240,857
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 . . 1,909,486
--------------
Weighted average number of common shares outstanding, as adjusted . . . . . . . 56,041,151
--------------
Net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.27
==============
FULLY DILUTED EARNINGS PER SHARE
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,333,000
Plus interest expense on Convertible Debentures . . . . . . . . . . . . . . . . . . --- **
--------------
Adjusted net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,333,000
==============
Shares
Weighted average number of common shares issued . . . . . . . . . . . . . . . . 54,240,857
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 . . 1,909,486
Assuming conversion of Convertible Debentures into shares of Common Stock . . . --- **
--------------
Weighted average number of common shares outstanding, as adjusted . . . . . . . 56,041,151
--------------
Net income per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.27
==============
</TABLE>
** Not used in calculation of weighted average number of common shares due to
the antidilutive effect of the assumed conversion of the Convertible
Debentures.
<PAGE> 2
EXHIBIT 11.2
PAGE 2 OF 2
GREYHOUND LINES, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30, 1995
---------------------
PRIMARY LOSS PER SHARE
<S> <C>
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,267,000)
==============
Shares
Weighted average number of common shares issued . . . . . . . . . . . . . . . . 53,531,288
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 . . . . . . . 53,422,096
--------------
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.25)
==============
FULLY DILUTED LOSS PER SHARE
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,267,000)
Plus interest expense on Convertible Debentures . . . . . . . . . . . . . . . . . . --- **
--------------
Adjusted net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (13,267,000)
==============
Shares
Weighted average number of common shares issued . . . . . . . . . . . . . . . . 53,531,288
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 shares of Common Stock . . . --- **
--------------
Weighted average number of common shares outstanding, as adjusted . . . . . . . 53,422,096
--------------
Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.25)
==============
</TABLE>
* Option exercises not considered in calculation as exercise would not have a
dilutive effect.
** Not used in calculation of 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 3RD QUARTER 10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 812
<SECURITIES> 0
<RECEIVABLES> 31,666
<ALLOWANCES> 309
<INVENTORY> 3,303
<CURRENT-ASSETS> 62,436
<PP&E> 357,832
<DEPRECIATION> 77,892
<TOTAL-ASSETS> 471,900
<CURRENT-LIABILITIES> 112,954
<BONDS> 175,924
<COMMON> 543
0
0
<OTHER-SE> 140,428
<TOTAL-LIABILITY-AND-EQUITY> 471,900
<SALES> 0
<TOTAL-REVENUES> 492,106
<CGS> 0
<TOTAL-COSTS> 344,027
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,487
<INCOME-PRETAX> (13,214)
<INCOME-TAX> 53
<INCOME-CONTINUING> (13,267)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (13,267)
<EPS-PRIMARY> (0.25)
<EPS-DILUTED> (0.25)
</TABLE>
