<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, 1997
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.
AND ITS SUBSIDIARIES IDENTIFIED IN FOOTNOTE (1) BELOW
(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)
(972) 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 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 10, 1997
--------------------- --------------------------------
$.01 PAR VALUE 59,325,022 SHARES
(1) This Form 10-Q is also being filed by the co-registrants specified under
the caption "Co-Registrants", each of which is a wholly-owned subsidiary of
Greyhound Lines, Inc. and each of which has met the conditions set forth in
General Instructions H(1)(a) and (b) of Form 10-Q for filing Form 10-Q in a
reduced disclosure format.
<PAGE> 2
CO-REGISTRANTS
This Form 10-Q is also being filed by the following entities. Except as set
forth below, each entity has the same principal executive offices, zip code and
telephone number as that set forth for Greyhound Lines, Inc. on the cover of
this report:
<TABLE>
<CAPTION>
I.R.S. EMPLOYER
COMMISSION IDENTIFICATION STATE OF
NAME FILE NO. NO. INCORP.
- ---- ---------- --------------- ----------
<S> <C> <C> <C>
Atlantic Greyhound Lines of Virginia, Inc. 333-27267-01 58-0869571 Virginia
Eagle Bus Manufacturing, Inc. 333-27267-02 74-2472777 Delaware
FCA Insurance Limited 333-27267-03 None Islands of Bermuda
GLI Holding Company 333-27267-04 75-2146309 Delaware
Greyhound de Mexico S.A. de C.V. 333-27267-05 None Republic of Mexico
Grupo Centro, Inc. 333-27267-06 75-2692522 Delaware
Los Buenos Leasing Co., Inc. 333-27267-07 85-0434715 New Mexico
Sistema Internacional de Transporte de Autobuses, Inc. 333-27267-08 75-2548617 Delaware
T & V Holding Company 333-27267-09 75-2238995 Delaware
Texas, New Mexico & Oklahoma Coaches, Inc. 333-27267-10 75-0605295 Texas
1313 13th Street
Lubbock, Texas 79408
(806) 763-5389
T.N.M. & O. Tours, Inc. 333-27267-11 75-1188694 Texas
(Same as Texas, New Mexico & Oklahoma Coaches, Inc.)
Vermont Transit Co., Inc. 333-27267-12 03-0164980 Vermont
106 Main Street
Burlington, Vermont 05401
(802) 862-9671
</TABLE>
As of October 31, 1997, Atlantic Greyhound Lines of Virginia, Inc. had 150
shares of common stock outstanding (at a par value of $50.00 per share); Eagle
Bus Manufacturing, Inc. had 1,000 shares of common stock outstanding (at a par
value of $0.01 per share); FCA Insurance Limited had 120,000 shares of common
stock outstanding (at a par value of $1.00 per share); GLI Holding Company had
1,000 shares of common stock outstanding (at a par value of $0.01 per share);
Greyhound de Mexico S.A. de C.V. had 10,000 shares of common stock outstanding
(at a par value of $0.10 Mexican currency per share); Grupo Centro, Inc. had
1,000 shares of common stock outstanding (at a par value of $0.01 per share);
Los Buenos Leasing Co., Inc. had 1,000 shares of common stock outstanding (at a
par value of $1.00 per share); Sistema Internacional de Transporte de Autobuses,
Inc. had 1,000 shares of common stock outstanding (at a par value of $0.01 per
share); T & V Holding Company had 3,000 shares of common stock outstanding (at a
2
<PAGE> 3
par value of $0.01 per share); Texas, New Mexico & Oklahoma Coaches, Inc. had
1,000 shares of common stock outstanding (at a par value of $0.01 per share);
T.N.M. & O. Tours, Inc. had 1,000 shares of common stock outstanding (at a par
value of $1.00 per share); and Vermont Transit Co., Inc. had 505 shares of
common stock outstanding (no par value). Each of the above named co-registrants
(1) have 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 such co-registrant was required to file such reports), and
(2) have been subject to such filing requirements for the past 90 days.
3
<PAGE> 4
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
December 31, 1996 and September 30, 1997 (Unaudited)......................... 6
Interim Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1996 and 1997 (Unaudited).......... 7
Condensed Interim Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1996 and 1997 (Unaudited).................... 8
Notes to Interim Consolidated Financial Statements (Unaudited)................. 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations...................................................... 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings................................................................ 21
Item 2. Changes in Securities............................................................ 22
Item 6. Exhibits and Reports on Form 8-K................................................. 23
SIGNATURES .................................................................................. 24
</TABLE>
4
<PAGE> 5
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
5
<PAGE> 6
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents ....................................................... $ 898 $ 1,852
Accounts receivable, less allowance for doubtful accounts
of $241 and $298 ............................................................. 32,844 40,560
Inventories ..................................................................... 3,840 4,494
Prepaid expenses ................................................................ 8,179 8,908
Assets held for sale, including buses held for sale/leaseback ................... 4,224 15,033
Other current assets ............................................................ 11,329 10,507
------------ ------------
Total current assets ......................................................... 61,314 81,354
Prepaid Pension Plans ............................................................... 24,927 25,203
Property, Plant and Equipment, net of accumulated depreciation
of $101,901 and $117,849 ........................................................ 314,454 334,852
Investments in Unconsolidated Affiliates ............................................ 2,437 5,336
Insurance and Security Deposits ..................................................... 76,180 79,710
Goodwill, net of accumulated amortization of $0 and $240 ............................ -- 30,393
Intangible Assets, net of accumulated amortization of $19,105 and $20,788 ........... 20,970 29,670
------------ ------------
Total assets ................................................................. $ 500,282 $ 586,518
============ ============
Current Liabilities
Accounts payable ................................................................ $ 23,900 $ 25,294
Accrued liabilities ............................................................. 53,500 55,609
Unredeemed tickets .............................................................. 9,523 8,831
Current portion of reserve for injuries and damages ............................. 19,864 19,864
Current maturities of long-term debt ............................................ 11,662 7,649
------------ ------------
Total current liabilities .................................................... 118,449 117,247
Reserve for Injuries and Damages .................................................... 40,099 40,252
Long-Term Debt ...................................................................... 192,581 240,990
Deferred Gains ...................................................................... 562 294
Other Liabilities ................................................................... 7,710 9,921
------------ ------------
Total liabilities ............................................................ 359,401 408,704
------------ ------------
Commitments and Contingencies (Note 6)
Stockholders' Equity
Preferred stock (10,000,000 shares authorized; par value $.01)
8 1/2% Convertible Exchangeable Preferred Stock (2,400,000 shares
authorized and issued as of September 30, 1997; aggregate liquidation
preference $60,000) ........................................................ -- 60,000
Series A Junior Preferred Stock (500,000 and 1,500,000 shares authorized
as of December 31, 1996 and September 30, 1997, respectively;
par value $.01; none issued) ............................................. -- --
Common stock (100,000,000 shares authorized; 58,469,469 and 59,395,814
shares issued as of December 31, 1996 and September 30, 1997
respectively; par value $.01) ................................................ 585 594
Capital in excess of par value .................................................. 229,104 229,117
Retained deficit ................................................................ (81,237) (104,326)
Less: Unfunded accumulated pension obligation .................................. (6,533) (6,533)
Less: Treasury stock, at cost (109,192 shares) .................................. (1,038) (1,038)
------------ ------------
Total stockholders' equity ................................................... 140,881 177,814
------------ ------------
Total liabilities and stockholders' equity ............................... $ 500,282 $ 586,518
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
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,
1996 1997 1996 1997
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Transportation Services
Passenger services ................................................... $ 180,329 $ 196,737 $ 445,229 $ 488,138
Package express ...................................................... 8,394 11,412 25,055 26,895
Food services............................................................. 6,169 5,995 16,154 16,306
Other operating revenues ................................................. 13,154 14,380 35,507 39,863
--------- --------- --------- ---------
Total operating revenues ......................................... 208,046 228,524 521,945 571,202
--------- --------- --------- ---------
OPERATING EXPENSES
Maintenance .............................................................. 18,538 20,175 54,852 57,994
Transportation ........................................................... 46,790 50,577 127,509 140,059
Agents' commissions and station costs .................................... 36,666 38,832 98,351 104,672
Marketing, advertising and traffic ....................................... 6,771 6,684 18,599 20,202
Insurance and safety ..................................................... 10,323 12,327 32,274 32,566
General and administrative ............................................... 21,323 24,630 62,745 68,105
Depreciation and amortization ............................................ 7,696 7,941 22,624 22,908
Operating taxes and licenses ............................................. 13,381 13,672 37,407 38,923
Operating rents .......................................................... 13,911 15,950 38,448 43,735
Cost of goods sold - Food services ....................................... 3,863 3,587 10,350 10,073
Other operating expenses ................................................. 2,397 2,660 6,103 7,215
--------- --------- --------- ---------
Total operating expense .......................................... 181,659 197,035 509,262 546,452
--------- --------- --------- ---------
OPERATING INCOME ............................................................ 26,387 31,489 12,683 24,750
Interest Expense ............................................................ 6,955 6,618 20,218 20,730
--------- --------- --------- ---------
INCOME (LOSS) BEFORE INCOME TAXES ........................................... 19,432 24,871 (7,535) 4,020
Income Tax Provision ........................................................ 34 83 145 248
--------- --------- --------- ---------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ................................. 19,398 24,788 (7,680) 3,772
Extraordinary Item .......................................................... -- -- -- 25,323
--------- --------- --------- ---------
NET INCOME (LOSS) ........................................................... 19,398 24,788 (7,680) (21,551)
Preferred Dividends ......................................................... -- 1,275 -- 2,338
--------- --------- --------- ---------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS .................................................. $ 19,398 $ 23,513 $ (7,680) $ (23,889)
========= ========= ========= =========
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS BEFORE
EXTRAORDINARY ITEM ................................................... $ 19,398 $ 23,513 $ (7,680) $ 1,434
========= ========= ========= =========
Income (Loss) Per Share of Common Stock:
Primary
Net Income (Loss) Attributable to Common Stock-
holders Before Extraordinary Item ................................ $ 0.33 $ 0.39 $ (0.13) $ 0.02
Extraordinary Item ................................................... -- -- -- (0.43)
--------- --------- --------- ---------
Net Income (Loss) Attributable to Common
Stockholders ..................................................... $ 0.33 $ 0.39 $ (0.13) $ (0.41)
========= ========= ========= =========
Fully Diluted
Net Income (Loss) Attributable to Common Stock-
holders Before Extraordinary Item ................................ $ 0.33 $ 0.34 $ (0.13) $ 0.02
Extraordinary Item ................................................... -- -- -- (0.43)
--------- --------- --------- ---------
Net Income (Loss) Attributable to Common
Stockholders ..................................................... $ 0.33 $ 0.34 $ (0.13) $ (0.41)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
GREYHOUND LINES, INC. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1996 1997
------------ ------------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss ..................................................... (7,680) (21,551)
Extraordinary Item ........................................... -- 25,323
Non-cash expenses and gains included in net loss ............. 24,683 24,456
Net change in certain operating assets and liabilities ....... (26,785) (18,095)
------------ ------------
Net cash (used for) provided by operating activities ..... (9,782) 10,133
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ......................................... (28,997) (26,587)
Buses purchased for sale/leaseback ........................... -- (15,712)
Proceeds from assets sold including sale/leasebacks........... 13,752 5,693
Payments for business acquisitions, net of cash acquired ..... -- (40,070)
Other investing activities ................................... (1,713) (1,654)
------------ ------------
Net cash used for investing activities ................... (16,958) (78,330)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt and capital lease obligations ............... (3,249) (16,319)
Proceeds from long-term borrowings ........................... 3,600 --
Proceeds from 11 1/2% Senior Notes and 8 1/2% Convertible
Exchangeable Preferred Stock issuance .................... -- 203,205
Redemption of 10% Senior Notes ............................... -- (161,022)
Payment of 8 1/2% Convertible Exchangeable Preferred Stock
dividends ................................................ -- (1,488)
Retirement of interest rate swap ............................. -- (3,010)
Proceeds from options exercised .............................. 125 839
Net change in revolving credit facility ...................... 24,224 46,946
------------ ------------
Net cash provided by financing activities ................ 24,700 69,151
------------ ------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ............ (2,040) 954
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .................. 3,494 898
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................ $ 1,454 $ 1,852
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
8
<PAGE> 9
GREYHOUND LINES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
(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, 1997, the
results of its operations for the three and nine months ended September 30, 1996
and 1997 and cash flows for the nine months ended September 30, 1996 and 1997.
Due to the seasonality of the Company's operations, the results of its
operations for the interim period ended September 30, 1997 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, 1996.
2. SIGNIFICANT ACCOUNTING POLICIES
EARNINGS (LOSS) PER SHARE OF COMMON STOCK
Primary earnings (loss) per common share is calculated by dividing net income
(loss) attributable to common stockholders 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 considers
the effect of conversion of the Company's 8.5% Convertible Subordinated
Debentures due 2007 (the "Convertible Debentures") and 8.5% Convertible
Exchangeable Preferred Stock (the "Preferred Stock"). For the three months ended
September 30, 1996 and the nine months ended September 30, 1996 and 1997,
however, the assumed exercise of outstanding in-the-money stock options and
conversion of Convertible Debentures and Preferred Stock have an antidilutive
effect. As a result, these shares are excluded from the final determination of
the weighted average shares outstanding for those periods. For the three months
ended September 30, 1997, the assumed exercise of outstanding in-the-money stock
options and conversion of Convertible Debentures and Preferred Stock is dilutive
and thus the shares have been included in the weighted average shares below. 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, 1996 and 1997 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Primary ............ 59,444,196 60,861,540 58,239,881 58,844,971
Fully Diluted ...... 59,444,196 73,961,475 58,239,881 58,844,971
</TABLE>
During the three and nine months ended September 30, 1997, the earnings per
share calculation reflects the pro rata impact of dividends which will accrue to
the holders of the Preferred Stock over the period outstanding. The Company
intends to adopt SFAS No. 128 "Earnings Per Share" (SFAS No. 128) effective
December 15, 1997. This statement requires the replacement of primary and fully
diluted earnings per share with basic and diluted earnings per share. The
calculation of earnings per share under SFAS 128 will have a favorable impact on
earnings per share as it excludes potentially dilutive options from the
calculation of basic earnings per share. Additionally, the calculation of
diluted earnings per share uses the average share price for the period rather
than the more dilutive greater of average share price or end of the period price
required by APB Opinion 15. The Company does not expect its adoption of SFAS 128
to have a material impact on the earnings per share calculation.
9
<PAGE> 10
3. ACQUISITIONS
During the quarter, the Company completed two acquisitions involving regional
bus carriers. These purchases were accounted for using the purchase method of
accounting; accordingly, the acquired companies results of operations are
included in the consolidated financials from the dates of acquisition. On July
9, 1997, the Company purchased Carolina Trailways, a Mid-Atlantic bus carrier,
for the purchase price of approximately $25.3 million comprised of $20.4 million
in cash, the assumption of $4.1 million of indebtedness and the issuance of
$0.75 million in Common Stock of the Company (167,597 shares based on average
market prices of the Company's Common Stock prior to closing). Additionally, on
August 25, 1997, the Company purchased Valley Transit, a South Texas bus
carrier, for $19.0 million in cash. The allocation of the purchase price among
assets and liabilities resulted in liabilities in excess of assets of $29.9
million, which has been recorded as Goodwill and is being amortized over a 30
year period.
4. SECURITIES OFFERINGS
On April 16, 1997, the Company completed the sale of two private offerings of
its securities. The Company issued $150.0 million aggregate principal amount of
11.5% Senior Notes due 2007 ("Senior Notes") and Preferred Stock with a
liquidation preference of $60.0 million. The net proceeds to the Company from
the aforementioned Senior Note and Preferred Stock offerings were approximately
$203.4 million. In connection with the offerings, the Company retired its 10%
Senior Notes due 2001 (the "Old Senior Notes"). As a result of the retirement of
the Old Senior Notes and renegotiation of the Revolving Credit Facility, the
Company recorded an extraordinary loss of $25.3 million. The loss includes $21.3
million to reflect the acceleration of the discount and prepayment premiums on
the Old Senior Notes, the acceleration of payments, net of amounts accrued,
under the interest rate swap agreements of $2.5 million and the write off of
$1.5 million of debt issuance costs related to the prior revolving credit
facility.
Senior Notes
The Company's Senior Notes bear interest at the rate of 11.5% per annum, payable
each April 15 and October 15 commencing on October 15, 1997. The Senior Notes
are redeemable at the option of the Company in whole or in part, at any time on
or after April 15, 2002, at redemption prices of 105.750% in 2002, 103.834% in
2003, 101.917% in 2004 and 100% in 2005 and thereafter plus any accrued but
unpaid interest. Upon a change of control of the Company, as defined in the
indenture, the Company will be required to make an offer to repurchase all or
any part of each holder's Senior Notes at a price equal to 101% of the principal
amount thereof plus interest. The Senior Note indenture contains certain
covenants that, among other things, limit the ability of the Company to incur
additional indebtedness, pay dividends or make other distributions, repurchase
equity interests or subordinated indebtedness, create certain liens, sell assets
or enter into certain mergers or consolidations.
Preferred Stock
The Preferred Stock carries a liquidation preference of $25.00 per share plus
accumulated and unpaid dividends. Dividends accrue at a rate per annum equal to
8.5% of the liquidation preference per share of Preferred Stock and are payable
quarterly in arrears on February 1, May 1, August 1 and November 1 of each year
commencing August 1, 1997. The Preferred Stock is convertible at any time after
July 15, 1997, at the option of the holder thereof, into common stock of the
Company at a conversion price of $4.875 per share. The Preferred Stock will be
redeemable at the option of the Company in whole or in part, at any time on or
after May 3, 2000, at redemption prices of 104.86% in 2000, 103.64% in 2001,
102.43% in 2002, 101.21% in 2003 and 100% in 2004 and thereafter plus
accumulated and unpaid dividends. Upon a change of control of the Company (as
defined), the Company will be required to make an offer to repurchase all or any
part of each holder's Preferred Stock at a price equal to 100% of the
liquidation preference plus accumulated and unpaid dividends.
5. LONG TERM DEBT
During the second quarter, the Company renegotiated the terms of its Revolving
Credit Facility. The amended facility increased the borrowing availability to
$125.0 ($113.3 million activated as of September 30, 1997) and
10
<PAGE> 11
provided a LIBOR-based interest rate option. Borrowings under the Revolving
Credit Facility mature on May 21, 2002. The Revolving Credit Facility is secured
by liens on substantially all of the assets of the Company. The Revolving Credit
Facility is subject to certain operating and financial covenants. As of
September 30, 1997, the Company was in compliance with all such covenants.
6. COMMITMENTS AND CONTINGENCIES
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 Old Senior Notes against the Company and certain of its former officers and
directors. The suits sought unspecified damages for securities laws violations
as a result of statements made in public reports and press releases and to
securities analysts during 1993 and 1994 that were 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) were
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
were pending under a case styled In re Greyhound Securities Litigation, Civil
Action 3-94-CV-1793-G. A joint pretrial order was entered in the litigation
which consolidated 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 the Company, 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, Lynch
and Taff were subsequently dismissed from the case by the plaintiffs. In
September 1995, the various defendants filed motions to dismiss plaintiffs'
complaints. In October 1995, plaintiffs filed a motion seeking to certify the
class of plaintiffs.
On October 3, 1996, the Court ruled in favor of the Company and all other
defendants, granting defendants' motions to dismiss. Pursuant to the Court's
order, the complaints were dismissed, with leave granted to the plaintiffs to
refile amended complaints within 20 days thereafter. On October 23, 1996, an
amended complaint was tendered to the Court. All seven class representatives
involved in the prior complaints were dropped from the case. A new purported
class plaintiff, John Clarkson, was named. A motion was filed seeking leave to
permit Mr. Clarkson to intervene as the new class representative. The amended
complaint alleges a class period of May 4, 1993 to October 26, 1993 and has been
brought only on behalf of holders of Common Stock. The amended complaint names
the same defendants involved in the dismissed cases (the Company, Messrs.
Schmieder, Doyle, Duty and Seaquist and Smith Barney Incorporated); no new
defendants were added and none were dropped. The Court advised the parties that
no responsive pleading needed to be filed to the amended complaint until such
time as the Court ruled on the motion for intervention filed by Mr. Clarkson. In
December 1996, the defendants filed responses to plaintiff's motion for
intervention. In January 1997, the plaintiff filed a reply brief.
On August 15, 1997, the Court denied Mr. Clarkson leave to intervene and
dismissed the litigation, noting that all claims asserted had been adjudicated.
On September 12, 1997, a notice of appeal was filed by counsel for the original
seven plaintiffs, seeking a review of the Court's ruling of October 3, 1996.
According to the appeals court schedule, briefing is to be completed by late
January 1998. No date has been set for oral argument.
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 time 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 sought unspecified damages for securities laws
violations as a result of statements made in public reports and press releases
and to securities analysts
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<PAGE> 12
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, was
styled James Illius and Theodore J. Krawec v. Greyhound Bus Lines, Inc., Frank
J. Schmieder and J. Michael Doyle, Civil Action No. 1-95-CV-1140. The defendants
filed a motion to transfer venue seeking to have the case transferred to the
United States District Court for the Northern District of Texas where the class
action litigation described above was pending. In September 1995, the
defendants' motion was granted, and the matter was transferred and was
consolidated into the class action litigation described above.
On October 29, 1996, a purported class action lawsuit was brought by a purported
holder of Common Stock against the Company, certain of its former officers and
directors and Smith Barney and Morgan Stanley & Company, Inc. The suit seeks
unspecified damages for alleged federal and Texas state securities laws
violations in connection with a Common Stock offering made by the Company in May
1993. The suit, filed in the 44th Judicial District Court of Dallas County,
Texas, is styled John Clarkson v. Greyhound Lines, Inc., Frank Schmieder, J.
Michael Doyle, Robert R. Duty, Don T. Seaquist, Smith Barney, Inc. and Morgan
Stanley & Company, Inc., Case No. 96-11329-B. Plaintiff, John Clarkson, is the
same individual who sought to intervene in the Federal Court class action
litigation described above, and the same law firms have appeared for the
plaintiff in both cases. On December 20, 1996, the defendants filed their
answers to the lawsuit and pleas in abatement asking the Court to stay all
proceedings pending resolution of the intervention motion and Federal Court
class action lawsuit. On February 28, 1997, the suit was transferred to a
different judge in the 68th Judicial District Court in Dallas. On March 28,
1997, the Court denied the defendants' pleas in abatement requesting the stay.
In addition, on September 12, 1997, plaintiff filed a motion seeking to certify
the class of plaintiffs. This motion, which will be contested by the defendants,
is presently scheduled to be heard by the Court on December 15, 1997. The Court
has presently set a trial date for this case of June 1998.
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, financial condition, results of operations and liquidity. 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 is conducting a formal, non-public investigation into possible
securities laws violations allegedly involving the Company and certain of its
former officers, directors and employees and other persons. The Commission's
Order of Investigation (the "Order of Investigation") states that the Commission
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
Commission 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 Commission 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 Commission served a document subpoena on the Company
requiring the production of documents, most of which the Company had voluntarily
produced to the Commission in late 1994. The Company has fully cooperated with
the Commission's investigation of these matters. The Company has had no
substantive contact with the Commission in connection with the investigation
since January 1996. The probable outcome of this investigation cannot be
predicted at this stage in the proceeding.
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 solely by Company personnel or its experts, 48 locations have
been identified as sites requiring potential clean-up and/or remediation as of
September 30, 1997. The Company has estimated the clean-up and/or remediation
costs of these sites to be $4.0 million, of which approximately $0.7 million is
indemnifiable by the predecessor owner of Greyhound's domestic bus operations
now known as Viad Corp. The Company has no
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<PAGE> 13
reason to believe that Viad Corp will not fulfill its indemnification
obligations to the Company. However, if Viad Corp does not fulfill such
obligations, the Company could have liability with respect to those matters.
Additionally, the Company has a potential liability with respect to two
locations which the EPA has designated Superfund sites. The Company as well as
other parties designated by the EPA as potentially responsible parties face
exposure for costs related to the clean-up of those sites. Based on the EPA's
enforcement activities to date, the Company believes its liability at these
sites will not be material because its involvement was as a de minimis generator
of wastes disposed of at the sites. In light of its 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 total
environmental reserve of $3.0 million at September 30, 1997, a portion of which
has also been recorded as a receivable from Viad Corp for indemnification. The
environmental reserve relates to sites identified for potential clean-up and/or
remediation and represents the present value of estimated cash flows discounted
at 8.0%. As of the date of this filing, the Company is not aware of any
additional sites to be identified, and management believes that adequate
accruals have been made related to all known environmental matters.
OTHER LEGAL PROCEEDINGS
In addition to the litigation discussed above, the Company is a defendant in
various lawsuits arising in the ordinary course of business, primarily cases
involving personal injury and property damage claims and employment-related
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 the personal injury and property
damage 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 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.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
Greyhound is the only nationwide provider of scheduled intercity bus
transportation services in the United States. The Company's primary business
consists of scheduled passenger service, package express service and food
services at certain terminals, which accounted for 86.1%, 5.0% and 2.6%,
respectively, of the Company's total operating revenues for the three months
ended September 30, 1997 and 85.4%, 4.7% and 2.9%, respectively, for the nine
months ended September 30, 1997. The Company's operations include a nationwide
network of terminal and maintenance facilities, a fleet of approximately 2,350
buses and approximately 1,650 sales outlets.
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations as a
percentage of total operating revenues for the three and nine months ended
September 30, 1996 and 1997:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1996 1997 1996 1997
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Revenues
Transportation services
Passenger services ............................. 86.7% 86.1% 85.3% 85.4%
Package express ................................ 4.0 5.0 4.8 4.7
Food services ....................................... 3.0 2.6 3.1 2.9
Other operating revenues ............................ 6.3 6.3 6.8 7.0
-------- -------- -------- --------
Total operating revenues ................... 100.0 100.0 100.0 100.0
Operating Expenses
Maintenance ......................................... 8.9 8.8 10.5 10.2
Transportation ...................................... 22.5 22.1 24.4 24.5
Agents' commissions and station costs ............... 17.6 17.0 18.8 18.3
Marketing, advertising and traffic .................. 3.3 2.9 3.6 3.5
Insurance and safety ................................ 5.0 5.4 6.2 5.7
General and administrative .......................... 10.2 10.8 12.0 11.9
Depreciation and amortization ....................... 3.7 3.5 4.3 4.0
Operating taxes and licenses ........................ 6.4 6.0 7.2 6.8
Operating rents ..................................... 6.7 7.0 7.4 7.7
Cost of goods sold - food services ................... 1.9 1.5 2.0 1.8
Other operating expenses ............................ 1.1 1.2 1.2 1.3
-------- -------- -------- --------
Total operating expenses ................... 87.3 86.2 97.6 95.7
-------- -------- -------- --------
Operating Income ...................................... 12.7 13.8 2.4 4.3
Interest Expense ...................................... 3.4 2.9 3.9 3.7
-------- -------- -------- --------
Net Income (Loss) Before Extraordinary Item ........... 9.3 10.9 (1.5) 0.6
Extraordinary Item .................................... 0.0 0.0 0.0 4.4
-------- -------- -------- --------
Net Income (Loss) ..................................... 9.3 10.9 (1.5) (3.8)
Preferred Dividends ................................... 0.0 0.6 0.0 0.4
-------- -------- -------- --------
Net Income (Loss) Attributable to
Common Stockholders ............................... 9.3 10.3 (1.5) (4.2)
======== ======== ======== ========
</TABLE>
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<PAGE> 15
The following table sets forth certain operating data for the Company for the
three and nine months ended September 30, 1996 and 1997. Certain statistics have
been adjusted and restated from that previously published to provide consistent
comparisons.
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
PERCENTAGE PERCENTAGE
1996 1997 CHANGE 1996 1997 CHANGE
------------ --------------- ------ ------------- ------------- ------
<S> <C> <C> <C> <C> <C> <C>
Regular Service Miles (000's) .......... 75,892 81,509 7.4 196,850 212,308 7.9
Total Bus Miles (000's) ................ 76,721 82,527 7.6 200,710 216,686 8.0
Passenger Miles (000's) ................ 1,894,668 2,073,198 9.4 4,650,896 5,207,472 12.0
Passengers Carried (000's) ............. 5,320 6,078 14.2 13,630 15,261 12.0
Average Trip Length (passenger
miles/ passengers carried) .......... 356 341 (4.2) 341 341 0.0
Load (avg. number of passengers per
regular service mile) ............... 25.0 25.4 1.6 23.6 24.5 3.8
Load Factor (% of available seats
filled) ............................. 54.3 55.3 1.8 51.4 53.3 3.7
Yield (regular route
revenue/passenger miles) ............ $ 0.0952 $ 0.0949 (0.3) $ 0.0957 $ 0.0937 (2.1)
Total Revenue Per Total Bus Mile ....... 2.71 2.77 2.2 2.60 2.64 1.5
Operating Income Per Total Bus Mile .... 0.34 0.38 11.8 0.06 0.11 83.3
Cost Per Total Bus Mile:
Maintenance ......................... $ 0.242 $ 0.244 0.8 $ 0.273 $ 0.268 (1.8)
Transportation ...................... 0.610 0.613 0.5 0.635 0.646 1.7
Total Operating Costs ............... 2.368 2.388 0.8 2.537 2.522 (0.6)
</TABLE>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997, AND 1996 RESULTS OF OPERATIONS
Operating Revenues. Total operating revenues increased $20.5 million (or 9.8%)
and $49.3 million (or 9.4%) for the three and nine months ended September 30,
1997, compared to the same periods in 1996. Transportation service revenues
increased $19.4 million (or 10.3%) and $44.7 million (or 9.5%) for the third
quarter and first nine months of 1997 compared to the same periods in 1996. The
increased transportation revenues are primarily due to regular route revenue
increases of $16.4 million and $42.9 million for the three and nine months ended
September 30, 1997. A portion of this increase, $6.2 million for the three and
nine months ended September 30, 1997, is attributable to the inclusion of
Carolina Trailways and Valley Transit. The remaining increase in transportation
service revenue is attributable to an increase of $3.0 million (or 36.0%) and
$1.8 million (or 7.3%) in package express revenue for the three and nine months
ended September 30, 1997, compared to the same periods in 1996. Package express
revenues increased significantly during the third quarter due to an increase in
shipments handled as a result of the United Parcel Service strike in August and
the retention of a portion of those customers subsequent to the strike.
The increases in regular route revenues reflect an increase in the number of
passengers carried (14.2% and 12.0% respectively) for the three and nine months
ended September 30, 1997, compared to the same periods in 1996. The growth in
passengers is driven by core growth in all trip lengths, as well as, incremental
growth from promotional fares, increased advertising and the inclusion of
Carolina Trailways and Valley Transit. The 0.3% and 2.1% decrease in yield for
the three and nine months ended September 30, 1997, compared to the same periods
in 1996 reflects the impact of more extensive promotional fare offerings in
1997. The decrease in trip length for the three months ended September 30, 1997,
reflects the impact of Carolina Trailways and Valley Transit, both of whom have
shorter trip lengths.
Food Service revenues decreased $0.2 million (or 2.8%) and increased $0.2
million (or 0.9%) for the three and nine months ended September 30, 1997,
compared to the same periods in 1996. The increase for the year is due to
increased passenger traffic, which was completely offset for the quarter by the
conversion of many locations to a convenience store concept which resulted in
increases in sales of retail products (including food products) which is
reported as other operating revenues.
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<PAGE> 16
Other operating revenues, consisting primarily of revenue from charter and
in-terminal sales and services, increased $1.2 million (or 9.3%) and $4.4
million (or 12.3%) for the three and nine months ended September 30, 1997,
compared to the same periods in 1996 due primarily to an increase in charter
service revenues as well as an increase in revenues from other in-terminal
services, such as calling card sales, prepaid ticket orders and increased sales
of other retail products (including "convenience store" type food products
mentioned above).
Operating Expenses. Total operating expenses increased $15.4 million (or 8.5%)
and $37.2 million (or 7.3%) for the three and nine months ended September 30,
1997, compared to the same periods in 1996. The increase is due primarily to an
increase in bus miles operated (7.6% and 8.0%, respectively), higher driver
wages, increased terminal salaries, increased ticket and express commissions due
to higher sales, and increased operating and casual bus rentals. Additionally,
expenses attributable to the operations of Carolina Trailways and Valley Transit
($4.9 million for the three and nine months ended September 30, 1997) are
included as of their acquisition dates, both of which occurred during the third
quarter of 1997. Despite these increases, total operating expenses decreased as
a percentage of total operating revenues.
Maintenance costs increased $1.6 million (or 8.8%) and $3.1 million (or 5.7%)
for the three and nine months ended September 30, 1997, compared to the same
periods in 1996 due to increased bus miles and the inclusion of Carolina
Trailways and Valley Transit. Despite these increases, maintenance costs
decreased as a percentage of total operating revenues. The Company intends to
continue to manage the average age of its fleet in order to increase the
reliability of its service while reducing overall costs.
Transportation expenses increased $3.8 million (or 8.1%) and $12.6 million (or
9.8%) for the three months and nine months ended September 30, 1997, compared to
the same periods in 1996 due to increased bus miles, a contractual driver wage
increase and the inclusion of Carolina Trailways and Valley Transit. The
additional miles resulted in higher fuel expense, higher driver wages and
related driver expenses. Transportation expenses increased as a percentage of
total operating revenues primarily due to the impact of the contractual wage
increase which was partially offset by lower fuel prices.
Agents' commissions and station costs increased $2.2 million (or 5.9%) and $6.3
million (or 6.4%) for the three and nine months ended September 30, 1997,
compared to the same periods in 1996 primarily due to commissions associated
with increased ticket and express sales, addition of terminal staff since the
first quarter of 1996, pay increases for terminal staff and the inclusion of
Carolina Trailways and Valley Transit. Despite these increases, agents'
commissions and station costs decreased as a percentage of total operating
revenues.
Marketing, advertising and traffic expenses decreased $0.1 million (or 1.3%) and
increased $1.6 million (or 8.6%) for the three and nine months ended September
30, 1997, compared to the same periods in 1996. For the quarter, gross
advertising expenses increased ($1.1 million) over the prior year; however, this
increase was partially offset by bus wrap trade discounts ($0.8 million).
Additionally, cost savings were recognized for the quarter related to bringing
in-house certain computing services. Marketing, advertising and traffic costs
decreased as a percentage of total operating revenues.
Insurance and safety costs increased $2.0 million (or 19.4%) and $0.3 million
(or 0.9%) for the three and nine months ended September 30, 1997, compared to
the same periods in 1996 due to increased bus miles and the inclusion of
Carolina Trailways and Valley Transit. On a per-mile basis, insurance and claims
expenses were higher for the three months ended September 30, 1997 versus the
same period in 1996; however, they are lower for the nine months ended September
30, 1997, versus the same period in 1996. The Company may occasionally reflect
fluctuations in its per-mile insurance costs during an interim period; however,
over the longer term, the Company expects these costs to remain near current
cost per-mile levels.
General and administrative expenses increased $3.3 million (or 15.5%) and $5.4
million (or 8.5%) for the three and nine months ended September 30, 1997
compared to the same periods in 1996 due to additions to administrative
personnel during late 1996, increased benefit costs Company-wide, officer
severance, a higher management incentive plan expense related to improved
company performance, and the inclusion of Carolina Trailways and Valley Transit.
Despite these increases, general and administrative expenses as a percentage of
total operating revenues have decreased slightly for the nine months ended
September 30, 1997, compared to the same period in 1996.
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<PAGE> 17
Depreciation and amortization increased by $0.2 million (or 3.2%) and $0.3
million (or 1.3%) for the three and nine months ended September 30, 1997,
compared to the same periods in 1996 due to depreciation on the buses acquired
in the fourth quarter of 1996 and the depreciation and amortization attributable
to Carolina Trailways and Valley Transit.
Operating taxes and licenses costs increased $0.3 million (or 2.2%) and $1.5
million (or 4.1%) for the three and nine months ended September 30, 1997,
compared to the same periods in 1996 due to increased fuel and oil taxes
resulting from an increase in total bus miles, an increase in payroll taxes due
to increased salaries and headcounts related to higher business volume, and the
inclusion of Carolina Trailways and Valley Transit. Operating taxes and licenses
costs decreased as a percentage of total operating revenues.
Operating rents increased $2.0 million (or 14.7%) and $5.3 million (or 13.8%)
for the three and nine months ended September 30, 1997, compared to the same
periods in 1996 due to an increase in the number of buses leased under operating
leases in 1997, an increase in casual bus rentals related to the strong 1996
Christmas and 1997 New Year's holiday travel which caused increased rentals in
early 1997 compared to 1996 and the inclusion of Carolina Trailways and Valley
Transit. Operating rents increased as a percentage of total operating revenues.
Other operating expenses increased $0.3 million (or 11.0%) and $1.1 million (or
18.2%) for the three and nine months ended September 30, 1997, compared to the
same periods in 1996 due, in part, to an increase in food service costs related
to higher retail sales (reflected in other operating revenues). Other operating
expenses increased as a percentage of total operating revenues.
Interest expense decreased $0.3 million (or 4.8%) for the quarter and increased
$0.5 million (or 2.5%) for the year compared to the same periods in 1996. The
quarterly decrease is the result of the renegotiation of lower interest rates
under the Revolving Credit Facility, termination of the interest rate swap
agreements and the retirement of a bus obligation. This decrease is partially
offset by increased interest resulting from capital leases for 77 buses
initiated in December 1996 and an increase in amortization of debt issuance
costs. For the nine months ended September 30, 1997, however, increased
borrowings on the revolver, primarily due to the acquisition of Carolina
Trailways and Valley Transit, the five terminals purchased from Viad Corp and
the buses purchased for sale/leaseback, more than offset the reduced interest
expense resulting from the second quarter refinancing transactions.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are to provide working capital,
to finance capital expenditures, including bus acquisitions, to pay quarterly
dividends on the Preferred Stock and to meet debt service requirements. Debt
service requirements include the payment of principal and interest on the
borrowings under the Revolving Credit Facility and the payment of interest on
the Senior Notes. The Company's principal sources of liquidity are expected to
be cash flow from operations and borrowings under the Revolving Credit Facility.
The Company believes that its cash flow from operations, together with
borrowings under the Revolving Credit Facility, will be sufficient to meet its
liquidity needs for the foreseeable future.
Operating activities provided net cash of $10.1 million for 1997 compared to
net cash used of $9.8 million for 1996, an increase of $19.9 million. The
increase in net cash provided by operating activities is due primarily to
increased operating income due to improved company performance in 1997 compared
to 1996 and the acquisitions of Carolina Trailways and Valley Transit. Net cash
used for investing activities increased $61.3 million, to $78.3 million in 1997
from $17.0 million in 1996, principally due to the acquisition of Carolina
Trailways and Valley Transit, the purchase of five terminals from Viad Corp and
the purchase of buses the Company intends to sell and leaseback. Net cash
provided by financing activities increased $44.5 million to $69.2 million in
1997 from $24.7 million in 1996. This increase can be attributed to proceeds
from the securities offerings (discussed below) and the net change in the
revolver, offset by the redemption of the Old Senior Notes and the retirement
of a bus financing obligation.
As part of its operating strategy, the Company anticipates that it will continue
to make significant capital investments in order to maintain and, where
appropriate, make improvements and upgrades to its infrastructure, including its
bus fleet, terminals and computer systems. The Company's experience indicates
that as the age of its bus fleet increases (at September 30, 1997, the average
age of the Company's bus fleet was 6.5 years), the
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<PAGE> 18
dependability and quality of service declines and maintenance cost per mile
increases, which may make the Company less competitive. In addition, the Company
believes that acquiring new buses and improving the Company's terminals and
computer systems will permit the Company to continue to improve customer
service, which the Company believes has contributed significantly to its
improved operating results in 1995, 1996 and the first nine months of 1997. The
Company estimates that capital expenditures for 1997 will total approximately
$30.0 million, including the acquisition of five bus terminals the Company
purchased from Viad Corp (see further discussion in the Securities Offerings
section), and excluding bus acquisitions. The Company currently maintains a
fleet of approximately 2,350 buses comprised of approximately 1,450 leased and
900 owned buses. The Company took delivery of 171 buses at an aggregate cost of
$46.1 million through the nine months ended September 30, 1997. Sixty-eight of
these buses were purchased by the Company and the balance were received under
short-term operating leases. Of the buses purchased, 18 were sold and leased
back, and substantially all of the remaining purchased buses are expected to be
sold and leased back during the fourth quarter. Additionally, the Company is
arranging permanent financing for the buses currently carried under short-term
leases. During the fourth quarter of 1997 and the first half of 1998, the
Company expects to take additional deliveries of approximately 187 buses at an
aggregate cost of $54.6 million, the majority of which will be financed as
operating leases. The Company generally uses lease financing with fixed purchase
options as the principal source of bus financing in order to achieve the lowest
net cost of bus financing. Depending on the specific terms of a lease, such a
lease may be accounted for as either an operating or capital lease. The Company
also acquires buses outright and at times purchases buses and subsequently
engages in sale-leaseback transactions with respect to such buses.
The Company requires significant cash flows to meet its debt service and other
continuing obligations. As of September 30, 1997, the Company had $241.0 million
(excluding $7.6 million of current maturities), of long-term indebtedness
outstanding, including $57.6 million of borrowings under the Revolving Credit
Facility (but excluding $20.9 million of issued and undrawn standby letters of
credit. As of September 30, 1997, the Company had total availability of $34.8
million under the Revolving Credit Facility.
During the second quarter, the Company renegotiated the terms of its Revolving
Credit Facility. The amended facility increased the borrowing availability to
$125.0 million ($113.3 million activated at September 30, 1997) and provided a
LIBOR-based interest rate option which is expected to reduce annual interest
expense. Borrowings under the Revolving Credit Facility mature on May 21, 2002.
The Revolving Credit Facility is secured by liens on substantially all of the
assets of the Company. The Revolving Credit Facility is subject to certain
operating and financial covenants. As of September 30, 1997, the Company was in
compliance with all such covenants.
As of September 30, 1997, the Company had not entered into any new hedging
agreements regarding interest rate risk. From the proceeds of the Securities
Offerings detailed in the next paragraph, the Company retired its two existing
interest rate swap agreements effective April 30, 1997, for $3.0 million.
Management does not presently plan to enter into any additional interest rate
hedging instruments in the future.
The Company has entered into two advance purchase commitments for fuel. Under
these agreements the Company agrees to take delivery of fuel at a specific
location at a fixed price at a specific date in the future. The agreements have
been entered into with two suppliers for approximately 30% of projected bulk
fuel needs through August 1998, at an average price per gallon of $0.6155.
Management believes that this strategy is a conservative method to hedge against
fuel price fluctuations.
SECURITIES OFFERINGS
On April 16, 1997, the Company completed the sale of two private offerings of
its securities. The Company issued $150.0 million aggregate principal amount of
Senior Notes and a new class of Preferred Stock with a $60.0 million liquidation
preference. On May 16, 1997, the Company filed with the SEC a registration
statement on Form S-3, subsequently declared effective June 30, 1997, relating
to resale by certain purchasers of the Preferred Stock of their shares of
Preferred Stock acquired in the private offering. Further, on June 30, 1997, the
Company offered to exchange the series of Senior Notes issued in the private
offering (the "Series A Senior Notes") for an identical series of Senior Notes
registered with the SEC on Form S-4, (the "Series B Senior Notes"). On August 7,
1997, the Company accepted all $150 million aggregate principal amount of the
Series A Senior Notes outstanding in exchange for the issuance of a like
principal amount of the Series B Senior Notes.
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<PAGE> 19
The net proceeds to the Company from the aforementioned Senior Note and
Preferred Stock Offerings were approximately $203.4 million (after deducting
discounts, commissions and offering expenses). The net proceeds of both
offerings were used to (i) retire the Company's 10% Senior Notes due 2001, (ii)
fund the acquisition of Carolina Trailways for $24.5 million (including the
repayment of debt of Carolina Trailways); and (iii) retire certain interest rate
swap agreements entered into by the Company for $3.0 million. The remaining net
proceeds were used to repay borrowings under the Revolving Credit Facility and
other debt obligations. The original "use of proceeds" from these offerings
intended $6.7 million to be used to acquire four bus terminals. The terms of the
purchase were modified, and the Company purchased five terminals (the
aforementioned terminals plus an additional terminal) for $10.3 million from
Viad Corp.
During the second quarter, the company recorded an extraordinary loss of $25.3
million primarily related to the redemption of the 10% Senior Notes. The loss
includes $21.3 million to reflect the acceleration of the discount for the 10%
Senior Notes and prepayment premiums related to the redemption of the 10% Senior
Notes. Another component reflects the acceleration of payments less amounts
accrued under the interest rate swap agreements for $2.5 million. Lastly, as
part of the renegotiation of the Revolving Credit Facility, the Company
wrote-off $1.5 million in debt issuance costs related to the prior revolving
credit facility.
ACQUISITIONS
On July 9, 1997, the Company completed its acquisition of Carolina Trailways, a
Mid-Atlantic bus carrier, for the purchase price of approximately $25.3 million
comprised of $20.4 million in cash, the payment of $4.1 million of indebtedness
and the issuance of $0.75 million in Common Stock of the Company.
On August 25, 1997, the Company completed its acquisition of Valley Transit, a
South Texas bus carrier, for a purchase price of $19.0 million in cash.
On September 24, 1997, a subsidiary of the Company entered into an agreement to
purchase Golden State, a Southern California bus carrier, for a purchase price
of $6.1 million comprised of $3.1 million in cash and $1.0 million in cash per
year for the next three years. This transaction has not yet closed and is
subject to approval by the Surface Transportation Board of the U.S. Department
of Transportation ("STB").
SUBSTANTIAL LEVERAGE
The Company has consolidated indebtedness that is substantial in relation to its
stockholders' equity. As of September 30, 1997, the Company had outstanding
consolidated long-term indebtedness (including current portions) of $248.6
million and total stockholders' equity of 177.8 million.
HISTORY OF LOSSES
The Company has had a net loss in each of its last three fiscal years. Although
the Company has implemented strategic and operational initiatives intended to
enhance revenues and operating income, the Company's operations generally are
subject to economic, financial, competitive, seasonal and other factors, many of
which are beyond its control.
COMPETITION
The transportation industry is highly competitive. The Company's primary sources
of competition for passengers are automobile travel, low cost air travel from
both regional and national airlines, and in certain markets, regional bus
companies and trains.
SELF INSURANCE AND DEPOSITS
The Company maintains cash deposits held for insurance claims and bus lease
collateral, which as of September 30, 1997 aggregated approximately $86.5
million, including the following deposits. The Company maintains $15.0 million
on deposit in a trust fund to support its self-insurance program pursuant to the
STB's approval of such
19
<PAGE> 20
program. Additionally, as of September 30, 1997, the Company had pledged $36.5
million in cash to secure other liability insurance obligations. Depending on
the Company's future claims history and the policies of its insurance carriers,
such carriers could increase or decrease the amount of collateral that the
Company is obligated to pledge to secure its liability insurance obligations.
The Company also has deposits with a market value of $34.5 million pledged as
collateral in connection with the sale and leaseback of 490 buses in 1993 and
the first quarter of 1994.
The Company's self-insurance accruals, which are reflected on the balance sheet,
are based upon actuarial estimates. The continued availability of self-insurance
authority from the STB or 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 materially adverse effect on
the Company's financial condition.
PENSION PLAN FUNDING
The Company maintains six defined benefit pension plans, the most significant of
which (the "ATU Plan") covers approximately 16,500 current and former employees,
fewer than 1,300 of which are active employees of the Company. The ATU Plan was
closed to new participants in 1983 and, as a result, over 80% of its
participants are over the age of 50. For financial reporting and investment
planning purposes, the Company currently uses an actuarial table that closely
matches the actual experience related to the existing participant population. As
a result of legislation enacted in 1994 by the United States Congress, the
Company will be required to begin measuring its funding obligation under the ATU
Plan utilizing an actuarial table prescribed by such legislation. Without the
benefit of any additional relief, the application of the prescribed actuarial
table would require the Company, based on assumed rates of return on the ATU
Plan's investments, to begin making contributions to the ATU Plan beginning no
earlier than 1998 in an aggregate amount over the next five years estimated to
range from approximately $6 million to approximately $30 million. The
Company pursued various forms of relief from this requirement. In the summer of
1997, further legislation was passed which reduced the funding thresholds over
the next ten years for pension plans which meet particular criteria. The
Company believes that the ATU Plan meets these criteria. Using the reduced
funding thresholds and based upon the assumed rates of return for the ATU Plan's
investments, the aggregate contributions over the next five years are estimated
to range from approximately $4 million to $7 million. However, there is no
assurance, that the ATU Plan will be able to obtain the assumed rate of return
or that contributions to the ATU Plan will not be significant.
SEASONALITY
The Company's business is seasonal in nature and generally follows the pattern
of the travel industry as a whole, with peaks during the summer months and the
Thanksgiving and Christmas holiday periods. As a result, the Company's cash
flows are seasonal in nature with a disproportionate amount of the Company's
annual cash flows being generated during the peak travel periods. Therefore, an
event that adversely affects ridership during any of these peak periods could
have a material adverse effect on the Company's financial condition and results
of operations for that year. The day of the week on which certain holidays
occur, the length of certain holiday periods, and the date on which certain
holidays occur within a fiscal quarter, may also affect the Company's quarterly
results of operations.
LITIGATION
The Company is a party to various lawsuits the outcome of which, if adverse to
the Company, could have a material adverse effect on its business, financial
condition, results of operations and liquidity. See "Part II, Item 1 - Legal
Proceedings".
20
<PAGE> 21
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION
Between August 1994 to December 1994, seven purported class action lawsuits were
filed by purported owners of the Company's Common Stock, 8 1/2% Convertible
Subordinated Debentures and Old Senior Notes against the Company and certain of
its former officers and directors. The suits seek unspecified damages for
securities laws 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 October 1996, a purported
class action lawsuit was filed by a purported owner of the Company's Common
Stock in state court in Texas. 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 6 to the Interim
Consolidated Financial Statements for the three and nine months ended September
30, 1997, included elsewhere in this filing.
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 involving
personal injury and property damage claims and employment-related 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 the personal injury and property damage 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
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.
21
<PAGE> 22
ITEM 2. CHANGES IN SECURITIES
ISSUANCE OF SECURITIES IN CAROLINA TRAILWAYS ACQUISITION
On July 9, 1997, in connection with the Company's acquisition of Carolina
Trailways, the Company issued 167,597 shares of its Common Stock to one of the
selling shareholders in partial consideration of his sale to the Company of his
shares of capital stock in Carolina Trailways. Such shares were issued in a
transaction exempt under Section 4(2) and Rule 506 under the Securities Act of
1933. In connection with such transaction, the Company relied upon certain
representations from the selling shareholder, including among other things, as
to his status as an "accredited investor" within the meaning of Rule 501(a)
under the Securities Act of 1933.
22
<PAGE> 23
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
4.1 - Second Supplemental Indenture dated as of August 25, 1997, between
the Registrant and PNC Bank, N.A., as Trustee (2)
11.1 - Computation of Registrant's earnings per share for the three and
nine months ended September 30, 1996. (1)
11.2 - Computation of Registrant's earnings per share for the three and
nine months ended September 30, 1997. (2)
27 - Financial Data Schedule as of and for the nine months ended
September 30, 1997. (2)
- -------------------------------------------------------------------------------
(1) Incorporated by reference from the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1996.
(2) Filed herewith.
(b) REPORTS ON FORM 8-K
During the quarter ended September 30, 1997, the Company did not file any
current reports on Form 8-K with the Securities and Exchange Commission.
23
<PAGE> 24
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 months by the
undersigned thereunto duly authorized.
Date: November 13, 1997
GREYHOUND LINES, INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
(Duly Authorized Officer
and Chief Accounting Officer)
ATLANTIC GREYHOUND LINES OF VIRGINIA, INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
EAGLE BUS MANUFACTURING, INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
FCA INSURANCE LIMITED
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
GLI HOLDING COMPANY
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
GREYHOUND de MEXICO S.A. de C.V.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
GRUPO CENTRO, INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
24
<PAGE> 25
LOS BUENOS LEASING CO., INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Financial Officer
and Secretary
SISTEMA INTERNACIONAL de
TRANSPORTE de AUTOBUSES, INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
T & V HOLDING COMPANY
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
TEXAS, NEW MEXICO & OKLAHOMA
COACHES, INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
T.N.M. & O. TOURS, INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
VERMONT TRANSIT CO., INC.
By: /s/ T. Scott Kirksey
---------------------------------------
T. Scott Kirksey
Chief Accounting Officer
25
<PAGE> 26
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------- -----------
4.1 - Second Supplemental Indenture dated as of August 25, 1997, between
the Registrant and PNC Bank, N.A., as Trustee.
11.2 - Computation of Registrant's earnings per share for the three and
nine months ended September 30, 1997.
27 - Financial Data Schedule as of and for the nine months ended
September 30, 1997.
<PAGE> 1
EXHIBIT 4.1
- -------------------------------------------------------------------------------
GREYHOUND LINES, INC.
and
THE GUARANTORS NAMED HEREIN
----------------------------------------
SERIES A AND SERIES B
11 1/2% SENIOR NOTES DUE 2007
----------------------------------------
-------------------
SECOND SUPPLEMENTAL INDENTURE
DATED AS OF AUGUST 25, 1997
-------------------
PNC BANK, NATIONAL ASSOCIATION
Trustee
- -------------------------------------------------------------------------------
<PAGE> 2
This SECOND SUPPLEMENTAL INDENTURE, dated as of August [25], 1997,
among Greyhound Lines, Inc., a Delaware corporation (the "Company"), each of the
parties identified under the caption "Guarantors" on the signature pages hereto
(the "Guarantors") and PNC Bank, National Association, as Trustee.
RECITALS
WHEREAS, the Company and the Trustee entered into an Indenture, dated
as of April 16, 1997 (the "Indenture"), pursuant to which the Company issued
$150,000,000 in principal amount of 11 1/2% Senior Notes due 2007 (the "Notes");
and
WHEREAS, Section 9.01(e) of the Indenture provides that the Company and
the Trustee may amend or supplement the Indenture in order to execute a
guarantee (a "Subsidiary Guarantee") to comply with Section 10.02 thereof
without the consent of the Holders of the Notes; and
WHEREAS, all acts and things prescribed by the Indenture, by law and by
the Certificate of Incorporation and the Bylaws of the Company, of the
Guarantors and of the Trustee necessary to make this Second Supplemental
Indenture a valid instrument legally binding on the Company, the Guarantors and
the Trustee, in accordance with its terms, have been duly done and performed;
NOW, THEREFORE, to comply with the provisions of the Indenture and in
consideration of the above premises, the Company, the Guarantors and the Trustee
covenant and agree for the equal and proportionate benefit of the respective
Holders of the Notes as follows:
ARTICLE 1
SECTION 1.01. This Second Supplemental Indenture is supplemental to the
Indenture and does and shall be deemed to form a part of, and shall be construed
in connection with and as part of, the Indenture for any and all purposes.
SECTION 1.02. This Second Supplemental Indenture shall become effective
immediately upon its execution and delivery by each of the Company, the
Guarantors and the Trustee.
2
<PAGE> 3
ARTICLE 2
From this date, in accordance with Section 10.02 and by executing this
Second Supplemental Indenture and the accompanying Subsidiary Guarantee (a copy
of which is attached hereto), the Guarantors whose signatures appear below are
subject to the provisions of the Indenture to the extent provided for in Article
10 thereunder.
ARTICLE 3
SECTION 3.01. Except as specifically modified herein, the Indenture and
the Notes are in all respects ratified and confirmed (mutatis mutandis) and
shall remain in full force and effect in accordance with their terms with all
capitalized terms used herein without definition having the same respective
meanings ascribed to them as in the Indenture.
SECTION 3.02. Except as otherwise expressly provided herein, no duties,
responsibilities or liabilities are assumed, or shall be construed to be
assumed, by the Trustee by reason of this Second Supplemental Indenture. This
Second Supplemental Indenture is executed and accepted by the Trustee subject to
all the terms and conditions set forth in the Indenture with the same force and
effect as if those terms and conditions were repeated at length herein and made
applicable to the Trustee with respect hereto.
SECTION 3.03. THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN
AND BE USED TO CONSTRUE THIS SECOND Supplemental INDENTURE, THE NOTES AND THE
SUBSIDIARY GUARANTEES.
SECTION 3.04. The parties may sign any number of copies of this Second
Supplemental Indenture. Each signed copy shall be an original, but all of such
executed copies together shall represent the same agreement.
[NEXT PAGE IS SIGNATURE PAGE]
3
<PAGE> 4
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture to be duly executed, all as of the date first written
above.
GREYHOUND LINES, INC.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
GUARANTORS:
VALLEY TRANSIT CO., INC.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
VALLEY BUS CO., INC.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
4
<PAGE> 5
VALLEY EXPRESS COMPANY
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
VALLEY GMC TRUCK CO.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
VALLEY BUS SERVICE COMPANY
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
VALLEY GARAGE COMPANY, INC.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
5
<PAGE> 6
V.D.R. SERVICES, INC.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
FIRST BUS CORP.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
MOTOR COACH LEASING COMPANY, INC.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
FIRST TEXAS COMMERCIAL, INC.
By: /s/ Steven L. Korby
---------------------------------------
Steven L. Korby, Executive Vice
President and Chief Financial
Officer
6
<PAGE> 7
PNC BANK, NATIONAL ASSOCIATION,
as trustee
By:
---------------------------------------
Name:
Title:
7
<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, 1997
------------------
<S> <C>
PRIMARY EARNINGS PER SHARE
Net income ............................................................................... $ 23,513,000
============
Shares
Weighted average number of common shares issued ...................................... 59,377,968
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 ....... 1,592,764
------------
Weighted average number of common shares outstanding, as adjusted .................... 60,861,540
------------
Net income per share ..................................................................... $ 0.39
============
FULLY DILUTED EARNINGS PER SHARE
Net income ............................................................................... $ 23,513,000
Plus interest expense on 8 1/2% Convertible Subordinated Debentures ...................... 208,335
Plus dividends on the 8 1/2% Convertible Exchangeable Preferred Stock .................... 1,275,000
------------
Adjusted net income ...................................................................... $ 24,996,335
============
Shares
Weighted average number of common shares issued ...................................... 59,377,968
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 ....... 1,592,764
Assuming conversion of 8 1/2% Convertible Subordinated Debentures into shares
of Common Stock ................................................................. 792,243
Assuming conversion of the 8 1/2% Convertible Exchangeable Preferred Stock ........... 12,307,692
------------
Weighted average number of common shares outstanding, as adjusted .................... 73,961,475
------------
Net income per share ..................................................................... $ 0.34
============
</TABLE>
<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, 1997
------------------
<S> <C>
PRIMARY LOSS PER SHARE
Net loss.................................................................................. $(23,889,000)
============
Shares
Weighted average number of common shares issued....................................... 58,954,163
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 .................... 58,884,971
------------
Net loss per share ....................................................................... $ (0.41)
============
FULLY DILUTED LOSS PER SHARE
Net loss.................................................................................. $(23,889,000)
Plus interest expense on 8 1/2% Convertible Subordinated Debentures ...................... --- **
Plus dividends on the 8 1/2% Convertible Exchangeable Preferred Stock..................... --- **
------------
Adjusted net loss ........................................................................ $(23,889,000)
============
Shares
Weighted average number of common shares issued....................................... 58,954,163
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 8 1/2% Convertible Subordinated Debentures into shares of
Common Stock .................................................................... --- **
Assuming conversion of the 8 1/2% Convertible Exchangeable Preferred Stock ........... --- **
------------
Weighted average number of common shares outstanding, as adjusted .................... 58,884,971
------------
Net loss per share ....................................................................... $ (0.41)
============
</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 8 1/2% Convertible
Subordinated Debentures and the 8 1/2% Convertible Exchangeable Preferred
Stock.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813040
<NAME> Greyhound Lines, Inc.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,852
<SECURITIES> 0
<RECEIVABLES> 40,858
<ALLOWANCES> 298
<INVENTORY> 4,494
<CURRENT-ASSETS> 81,354
<PP&E> 452,701
<DEPRECIATION> 117,849
<TOTAL-ASSETS> 586,518
<CURRENT-LIABILITIES> 117,247
<BONDS> 240,990
0
60,000
<COMMON> 594
<OTHER-SE> 117,220
<TOTAL-LIABILITY-AND-EQUITY> 586,518
<SALES> 0
<TOTAL-REVENUES> 571,202
<CGS> 0
<TOTAL-COSTS> 395,456
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,730
<INCOME-PRETAX> 4,020
<INCOME-TAX> 248
<INCOME-CONTINUING> 3,772
<DISCONTINUED> 0
<EXTRAORDINARY> 25,323
<CHANGES> 0
<NET-INCOME> (23,889)
<EPS-PRIMARY> (0.41)
<EPS-DILUTED> (0.41)
</TABLE>
