<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 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
--- ---
As of May 13, 1999, the Registrant had 58,743,069 shares of Common Stock,
$0.01 par value, outstanding.
(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 JURISDICTION
COMMISSION IDENTIFICATION OF
NAME FILE NO. NO. INCORP.
- ---- ------------ --------------- ------------
<S> <C> <C> <C>
Atlantic Greyhound Lines of Virginia, Inc. 333-27267-01 58-0869571 Virginia
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
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 March 31, 1999, Atlantic Greyhound Lines of Virginia, Inc. had 150 shares
of common stock outstanding (at a par value of $50.00 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); 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.
2
<PAGE> 3
GREYHOUND LINES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Interim Consolidated Statements of Financial Position as of
March 31, 1999 (Unaudited) and December 31, 1998............................ 5
Interim Consolidated Statements of Operations for the
Three Months Ended March 31, 1999 and 1998 (Unaudited)...................... 6
Condensed Interim Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and 1998 (Unaudited)...................... 7
Notes to Interim Consolidated Financial Statements (Unaudited)................. 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations........................................................ 10
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.............................. 16
Item 6. Exhibits and Reports on Form 8-K................................................. 17
SIGNATURES ........................................................................................ 18
</TABLE>
3
<PAGE> 4
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
4
<PAGE> 5
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents ...................................................... $ 24,542 $ 4,736
Accounts receivable, less allowance for doubtful accounts of $158 and $198 .... 41,681 40,774
Inventories, less allowance for shrinkage of $206 and $205 ..................... 6,235 5,705
Prepaid expenses ............................................................... 7,852 5,170
Assets held for sale ........................................................... 3,060 3,029
Current portion of deferred tax assets ......................................... 35,638 24,053
Other current assets ........................................................... 2,715 9,907
--------- ---------
Total current assets ........................................................ 121,723 93,374
Prepaid Pension Plans .............................................................. 27,920 27,917
Property, Plant and Equipment, net of accumulated depreciation
of $158,759 and $151,468 ....................................................... 403,097 362,417
Investments in Unconsolidated Affiliates ........................................... 14,064 13,560
Deferred Income Taxes .............................................................. 16,030 8,988
Insurance and Security Deposits .................................................... 54,309 67,908
Goodwill, net of accumulated amortization of $2,108 and $1,755 ..................... 45,097 39,510
Intangible Assets, net of accumulated amortization of $28,423 and $28,503 .......... 27,184 29,704
--------- ---------
Total assets ................................................................ $ 709,424 $ 643,378
========= =========
Current Liabilities
Accounts payable ............................................................... $ 22,493 $ 27,724
Accrued liabilities ............................................................ 62,634 64,819
Unredeemed tickets ............................................................. 11,135 12,143
Current portion of reserve for injuries and damages ............................ 22,967 22,967
Current maturities of long-term debt ........................................... 10,567 7,970
--------- ---------
Total current liabilities ................................................... 129,796 135,623
Reserve for Injuries and Damages ................................................... 35,167 37,392
Long-Term Debt ..................................................................... 182,663 225,688
Minority Interests ................................................................. 2,827 3,058
Other Liabilities .................................................................. 23,449 23,604
--------- ---------
Total liabilities ........................................................... 373,902 425,365
--------- ---------
Redeemable Preferred Stock (2,400,000 shares authorized and
2,363,200 shares issued as of March 31, 1999; aggregate
liquidation preference $59,080) (Note 1)..................................... 59,080 --
Stockholders' Equity
Preferred stock (10,000,000 shares authorized; par value $.01)
8 1/2% Convertible Exchangeable Preferred Stock (2,760,000 shares
authorized and 2,400,000 shares issued as of December 31, 1998;
aggregate liquidation preference $60,000) (Note 1)....................... -- 60,000
Series A junior preferred stock (1,500,000 shares authorized as of
December 31, 1998; none issued) ......................................... -- --
Common stock (100,000,000 shares authorized; par value $.01; 58,743,069
and 60,255,117 shares issued as of March 31, 1999 and December 31,
1998 respectively) .......................................................... 587 603
Capital in excess of par value ................................................. 379,790 237,441
Retained deficit ............................................................... (95,983) (71,761)
Accumulated Other Comprehensive Income, net of tax benefit of $3,181 ........... (7,953) (7,232)
Less: Treasury stock, at cost (109,192 shares at December 31, 1998) ............ -- (1,038)
--------- ---------
Total stockholders' equity .................................................. 276,442 218,013
--------- ---------
Total liabilities and stockholders' equity .............................. $ 709,424 $ 643,378
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
OPERATING REVENUES
Transportation Services
Passenger services ........................................................ $ 163,688 $ 153,659
Package express ........................................................... 8,554 7,973
Food services ................................................................. 7,800 7,033
Other operating revenues ...................................................... 14,696 12,055
--------- ---------
Total Operating Revenues ............................................... 194,738 180,720
--------- ---------
OPERATING EXPENSES
Maintenance ................................................................... 21,448 19,880
Transportation ................................................................ 49,637 46,124
Agents' commissions and station costs ......................................... 39,981 35,174
Marketing, advertising and traffic ............................................ 6,991 7,041
Insurance and safety .......................................................... 11,730 11,643
General and administrative .................................................... 28,275 24,602
Depreciation and amortization ................................................. 9,757 8,439
Operating taxes and licenses .................................................. 14,368 13,502
Operating rents ............................................................... 18,688 15,764
Cost of goods sold - Food services ............................................ 5,355 4,769
Other operating expenses ...................................................... 920 685
--------- ---------
Total Operating Expenses ............................................... 207,150 187,623
--------- ---------
Operating Loss .................................................................. (12,412) (6,903)
Settlement of Stock Options (see Note 4) ....................................... 19,929 --
Interest Expense ................................................................ 6,280 6,654
--------- ---------
Loss Before Income Taxes ........................................................ (38,621) (13,557)
Income Tax Benefit .............................................................. (17,353) (1,096)
Minority Interest ............................................................... 56 (8)
--------- ---------
Net Loss Before Extraordinary Item .............................................. (21,324) (12,453)
Extraordinary Item, net of tax benefit of $1,310 (see Note 3) .................. 1,607 --
--------- ---------
Net Loss ........................................................................ (22,931) (12,453)
Preferred Dividends ............................................................. 1,289 1,296
--------- ---------
Net Loss Attributable to Common Stockholders .................................... $ (24,220) $ (13,749)
========= =========
Net Loss Per Share of Common Stock:
Basic and Diluted
Net Loss Attributable to Common Stockholders Before Extraordinary Item .... $ (0.36) $ (0.23)
Extraordinary Item ........................................................ (0.04) --
--------- ---------
Net Loss Attributable to Common Stockholders .............................. $ (0.40) $ (0.23)
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
6
<PAGE> 7
GREYHOUND LINES, INC. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss .................................................... (22,931) (12,453)
Non-cash expenses and gains included in net loss ............ (6,628) 6,710
Net change in certain operating assets and liabilities ..... 7,855 (21,797)
--------- ---------
Net cash used for operating activities .................. (21,704) (27,540)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ........................................ (51,952) (5,385)
Buses purchased for sale and leaseback ...................... -- (7,683)
Proceeds from assets sold ................................... 266 764
Payments for business acquisitions, net of cash acquired .... (6,745) (1,004)
Other investing activities .................................. (748) (172)
--------- ---------
Net cash used for investing activities .................. (59,179) (13,480)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt and capital lease obligations .............. (2,682) (1,372)
Redemption of preferred stock ............................... (1,226) --
Parent company capital contributions ........................ 143,678 --
Proceeds from exercise of options ........................... -- 1,237
Payment of quarterly preferred dividends .................... (1,296) (1,296)
Net change in revolving credit facility ..................... (37,785) 43,778
--------- ---------
Net cash provided by financing activities ............... 100,689 42,347
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS ...................... 19,806 1,327
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................. 4,736 2,052
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ....................... $ 24,542 $ 3,379
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
7
<PAGE> 8
GREYHOUND LINES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Consolidated Financial
Statements of Greyhound Lines, Inc. and Subsidiaries (the "Company") include all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Company's financial position as of March 31, 1999, the
results of its operations for the three months ended March 31, 1999 and 1998 and
cash flows for the three months ended March 31, 1999 and 1998. Due to the
seasonality of the Company's operations, the results of its operations for the
interim period ended March 31, 1999 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, 1998.
On March 16, 1999, the Company's shareholders approved the Agreement and Plan of
Merger ("Merger") with Laidlaw Inc. ("Laidlaw") and Laidlaw Transit Acquisition
Corp. ("Laidlaw Transit"). On that date, Laidlaw Transit was merged with and
into the Company, with the Company, as the surviving corporation, becoming a
subsidiary of Laidlaw. As a result of the Merger, Laidlaw became the sole holder
of the Company's Common Stock.
Pursuant to the Merger, the Greyhound Preferred Stock, of which 98.5% or
2,363,200 shares remain outstanding, is convertible into the right to receive
$33.33 in cash per share. As a result, the Preferred Stock has been classified
as Redeemable Preferred Stock for periods after March 16, 1999.
The consolidated financial statements of the Company are presented on the
historical basis of accounting and do not reflect any purchase accounting
adjustments.
2. SIGNIFICANT ACCOUNTING POLICIES
Earnings/Loss Per Share
Basic 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"). The calculation of diluted
earnings (loss) per share of Common Stock considers the effect of Common Stock
equivalents outstanding during the period, the conversion of the Company's 8
1/2% Convertible Subordinated Debentures due 2007 (the "Convertible Debentures")
and 8 1/2% Convertible Exchangeable Preferred Stock (the "Preferred Stock").
Common Stock equivalents represent the dilutive effect of the assumed exercise
of certain outstanding stock options. As a result of the Merger, the Company no
longer has any common stock options and the Preferred Stock is no longer
convertible into Common Stock. For the three months ended March 31, 1999, the
conversion of the Convertible Debentures has an anti-dilutive effect. For the
three months ended March 31, 1998, the assumed exercise of outstanding
in-the-money stock options and conversion of Convertible Debentures and
Preferred Stock have an anti-dilutive effect. As a result, these shares are
excluded from the final determination of the weighted average shares outstanding
at March 31, 1999, and 1998.
8
<PAGE> 9
The earnings (loss) per share calculation reflect earnings attributable to
common shareholders after payment of preferred dividends. The following tables
detail the components utilized to calculate earnings per share for the quarters
ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31, 1999
-----------------------------------------
PER-SHARE
NET LOSS SHARES AMOUNT
------------ ---------- ---------
<S> <C> <C> <C>
BASIC AND DILUTED EARNINGS PER SHARE
Net Loss attributable to common stockholders........ $(24,220,000) 59,898,093 $ (0.40)
============ ========== =========
</TABLE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31, 1999
-----------------------------------------
PER-SHARE
NET LOSS SHARES AMOUNT
------------ ---------- ---------
<S> <C> <C> <C>
BASIC AND DILUTED EARNINGS PER SHARE
Net Loss attributable to common stockholders........ $(13,749,000) 59,427,216 $ (0.23)
============ ========== =========
</TABLE>
3. EXTRAORDINARY ITEM
Following the Merger, all amounts outstanding under the Revolving Credit
Facility were paid and the Revolving Credit Facility was terminated. As a
result, the Company recorded a $1.6 million charge, net of a $1.3 million tax
benefit, classified as an extraordinary item. This charge is related to the
write-off of previously incurred debt issuance costs that were being amortized
over the life of the Revolving Credit Facility. The Revolving Credit Facility
was paid with capital contributions from Laidlaw.
4. SETTLEMENT OF STOCK OPTIONS
As a result of the Merger, the Company incurred $19.9 million in charges related
to the settlement of the Company's outstanding stock options.
9
<PAGE> 10
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 84.0%, 4.4% and 4.0%,
respectively, of the Company's total operating revenues for the three months
ended March 31, 1999. The Company's consolidated operations include a nationwide
network of terminal and maintenance facilities, a fleet of approximately 2,750
buses and approximately 1,800 sales outlets.
RESULTS OF OPERATIONS
The following table sets forth the Company's results of operations as a
percentage of total operating revenue for the quarters ended March 31, 1999 and
1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1999 1998
------ ------
<S> <C> <C>
Operating Revenues
Transportation services
Regular route .................................. 84.0% 85.0%
Package express ................................ 4.4 4.4
Food services and related ......................... 4.0 3.9
Other operating revenues .......................... 7.6 6.7
------ ------
Total operating revenues .................. 100.0 100.0
Operating Expenses
Maintenance ....................................... 11.0 11.0
Transportation .................................... 25.5 25.5
Agents' commissions and station costs ............. 20.5 19.5
Marketing, advertising and traffic ................ 3.6 3.9
Insurance and safety .............................. 6.0 6.4
General and administrative ........................ 14.5 13.6
Depreciation and amortization ..................... 5.0 4.7
Operating taxes and licenses ...................... 7.4 7.5
Operating rents ................................... 9.6 8.7
Cost of good sold - food services and related ..... 2.8 2.6
Other operating expenses .......................... 0.5 0.4
------ ------
Total operating expenses .................. 106.4 103.8
------ ------
Operating loss ...................................... (6.4) (3.8)
Settlement of Stock Options ......................... 10.2 --
Interest expense .................................... 3.2 3.7
------ ------
Loss before income taxes ............................ (19.8) (7.5)
Income tax benefit .................................. (8.9) (0.6)
Minority interest ................................... (0.0) (0.0)
------ ------
Net loss before extraordinary item .................. (10.9) (6.9)
Extraordinary item .................................. 0.8 (0.0)
------ ------
Net loss ............................................ (11.7) (6.9)
Preferred dividends ................................. 0.7 0.7
------ ------
Net Loss attributable to common stockholders ........ (12.4) (7.6)
====== ======
</TABLE>
10
<PAGE> 11
The following table sets forth certain operating data for the Company for the
quarters ended March 31, 1999 and 1998. Certain statistics have been adjusted
and restated from that previously published to provide consistent comparisons.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------- PERCENTAGE
1999 1998 CHANGE
----------- ----------- ----------
<S> <C> <C> <C>
Regular Service Miles (000's)................... 75,118 69,058 8.8%
Total Bus Miles (000's)......................... 77,345 71,167 8.7
Passenger Miles (000's)......................... 1,822,903 1,691,898 7.7
Passengers Carried (000's)...................... 5,410 4,975 8.7
Average Trip Length (passenger
miles/passengers carried).................... 337 340 (0.9)
Load (avg. number of passengers per
regular service mile)........................ 24.3 24.5 (0.8)
Load Factor (% of available seats filled)....... 50.3% 52.3% (3.8)
Yield (regular route revenue/passenger miles)... $ 0.0900 $ 0.0908 (0.9)
Total Revenue Per Total Bus Mile................ 2.52 2.54 (0.8)
Operating Loss Per Total Bus Mile............... (0.46) (0.10) (360.0)
Cost per Total Bus Mile:
Maintenance................................... $ 0.277 $ 0.279 (0.7)
Transportation................................ 0.642 0.648 (0.9)
</TABLE>
THREE MONTHS ENDED MARCH 31, 1999 AND 1998 RESULTS OF OPERATIONS
The Company's results of operations include the operating results of
Peoria-Rockford Bus Company, Autobuses Americanos, Autobuses Amigos and On-Time
Delivery (collectively the "acquisitions"). The purchases of Peoria-Rockford Bus
Company, Autobuses Americanos and Autobuses Amigos were completed in the fourth
quarter of 1998 and the purchase of On-Time Delivery occurred during the first
quarter of 1999. The results for the acquisitions are included as of their
respective purchase dates.
Operating Revenues. Total operating revenues increased $14.0 million, up 7.8%,
for the three months ended March 31, 1999, compared to the same period in 1998.
Acquisitions accounted for $5.6 million of this growth, pre-acquisition growth
amounted to $8.4 million, or 4.6% over the same quarter last year.
Passenger services revenues increased $10.0 million, or 6.5%, for the three
months ended March 31, 1999, compared to the same period in 1998 (including $4.2
million related to the acquisitions). The increases in regular route revenues
reflect the consolidated impact of an 8.7% increase in the number of passengers
carried partially offset by a 0.9% decrease in average trip length and a 0.9%
decrease in yield. The decrease in average trip length and yield in the
Company's consolidated operating statistics, as compared to the prior year,
reflects, in part, the impact of the acquisitions, which carry passengers
traveling shorter trip lengths at lower yields.
Package express revenues increased $0.6 million, or 7.3%, for the three months
ended March 31, 1999, compared to the same period in 1998 (including $1.0
million related to the acquisitions). Excluding the acquisitions, the Company
experienced a decline of $0.4 million due in part to the impact of inclement
weather in January and February, combined with lower sales by interline
carriers.
Food services revenues increased $0.8 million, up 10.9%, for the three months
ended March 31, 1999, compared to the same period in 1998. Food services
revenues increased over the prior year due primarily to the increase in
passenger traffic discussed above.
Other operating revenues, consisting primarily of revenue from charter and other
in-terminal sales and services, increased $2.6 million, up 21.9%, for the three
months ended March 31, 1999, compared to the same period in 1998. The increase
was primarily attributable to an increase of $1.2 million, up 37.7%, in charter
service revenue, as well as increases in revenues from other tenant income and
the inclusion of the acquisitions.
11
<PAGE> 12
Operating Expenses. Total operating expenses increased $19.5 million, up 10.4%,
for the three months ended March 31, 1999, compared to the same period in 1998.
The increase is attributable to an increase in bus miles operated (8.9%),
contractual driver wage increases in April and October 1998, increased terminal
salaries, increased ticket commissions due to higher sales, an increase in the
number of buses operated under operating leases, and $5.3 million related to the
operations of the acquisitions.
Maintenance costs increased $1.6 million, up 7.9%, due to increased bus miles
and the inclusion of the acquisitions. Despite these increases, maintenance
costs decreased on a cost per bus mile basis.
Transportation expenses increased $3.5 million, up 7.6% for the three months
ended March 31, 1999, compared to the same periods in 1998 due to increased bus
miles operated, contractual driver wage increases in April and October 1998, and
the inclusion of the acquisitions. The increased expenses were partially offset
by a decrease in the cost per gallon of diesel fuel. The average cost per gallon
of fuel decreased to $0.48 for the three months ended March 31, 1999, compared
to $0.58 per gallon during the same period in 1998. The lower fuel prices
resulted in fuel cost savings of $1.2 million for the three months ended March
31, 1999, compared to the prior year. On a cost per bus mile basis,
transportation expenses decreased, due primarily to the impact of the lower fuel
prices partially offset by driver wage increases.
Agents' commissions and station costs increased $4.8 million, up 13.7%, for the
three months ended March 31, 1999, compared to the same periods in 1998
primarily due to commissions associated with increased ticket sales, annual wage
increases for terminal staff and the inclusion of the acquisitions.
Insurance and safety costs increased $0.1 million, up 0.7%, for the three months
ended March 31, 1999, compared to the same periods in 1998 due to increased bus
miles and the inclusion of the acquisitions.
General and administrative expenses increased $3.7 million, up 14.9%, for the
three months ended March 31, 1999, compared to the same periods in 1998 due
primarily due to additions to administrative personnel, increased expenses
associated with remediation of the Company's computer systems related to the
Year 2000 issue of $1.3 million and the inclusion of the acquisitions.
Depreciation and amortization increased by $1.3 million, up 15.6%, for the three
months ended March 31, 1999, compared to the same periods in 1998 due primarily
to depreciation and goodwill amortization attributable to the acquisitions and
increased depreciation related to increased capital expenditures in current and
prior periods.
Operating taxes and licenses expense increased $0.9 million, up 6.4%, for the
three months ended March 31, 1999, compared to the same periods in 1998. This
increase results from higher payroll taxes due to increased salaries, wages and
head-counts related to higher business volume and the inclusion of the
acquisitions.
Operating rents increased $2.9 million, up 18.5%, for the three months ended
March 31, 1999, compared to the same periods in 1998 due to the inclusion of the
acquisitions, combined with an increase in the number of buses financed under
operating leases.
Food services cost of goods sold increased $0.6 million, up 12.3%, for the three
months ended March 31, 1999, compared to the same periods in 1998, primarily due
to the 10.9% increase in Food services revenues for the same period.
Other operating expenses increased $0.2 million, up 34.3%, for the three months
ended March 31, 1999, compared to the same period in 1999 due to the inclusion
of the acquisitions.
As a result of Laidlaw Inc. ("Laidlaw") acquiring the Company, the Company
incurred $19.9 million in charges related to the settlement of the Company's
outstanding stock options.
Interest expense decreased $0.4 million, down 5.6%, for the three months ended
March 31, 1999, compared to the same periods in 1998. The decrease is the result
of a lower outstanding balance on the Company's Revolving Credit Facility
through March 16, 1999. Additionally, on March 17, 1999, subsequent to the
acquisition of the Company by Laidlaw, all amounts outstanding under the
Revolving Credit Facility were paid and the Revolving Credit Facility was
terminated.
12
<PAGE> 13
Additionally, the Company had an extraordinary item for the three months ended
March 31, 1999. This was a $1.6 million charge, net of tax benefit of $1.3
million, related to the termination of the Company's Revolving Credit Facility,
which included the write-off of previously incurred debt issuance costs that
were being amortized over the life of the Revolving Credit Facility. The
Revolving Credit Facility was paid with capital contributions from Laidlaw.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are to provide working capital,
to finance capital expenditures, including bus acquisitions, to meet debt
service requirements, including the payment of interest on the 11 1/2% Senior
Notes and to pay Preferred Stock dividends. The Company's principal sources of
liquidity are expected to be cash flow from operations and funds provided by
Laidlaw. The Company believes that its cash flow from operations, together with
funds provided by Laidlaw will be sufficient to meet its liquidity needs.
Net cash used by operating activities decreased $5.8 million, or 21.1%, to $21.7
million for the three months ended March 31, 1999, from $27.5 million in 1998.
Net cash used by operating activities during the three months ended March 31,
1999, were negatively impacted by the $19.9 million payments for settlement of
stock options, offset by a $23.8 million reduction in insurance deposits which
were obtained following the issuance by Laidlaw of letters of credit. Net cash
used for investing activities increased $45.7 million, to $59.2 million in 1999
from $13.5 million in 1998, principally due to $6.8 million in payments for
business acquisitions combined with a $38.9 million increase in capital
expenditures. Net cash provided by financing activities increased $58.3 million,
or 137.7%, to $100.7 million in 1999 from $42.3 million in 1998. This increase
can primarily be attributed to the $143.7 million capital contribution provided
by the Company's parent. This increase was partially offset by the retirement of
the $37.8 million related to the Revolving Credit Facility.
As a result of the Laidlaw acquisition of the Company, the Company will be
required to make a one-time offer to repurchase all or any part of each holder's
11 1/2% Senior Notes at a price equal to 101% of the principal amount thereof
plus interest. Additionally, the Company will be required to make a one-time
offer to repurchase all or any part of each holder's Convertible Debentures at a
price equal to 100% of the principal amount thereof plus interest. Also, the
Preferred Stock became convertible into $33.33 in cash for each share of
Preferred Stock, which is in excess of the liquidation preference.
SUBSTANTIAL LEVERAGE
The Company has consolidated indebtedness that is substantial in relation to its
stockholders' equity. As of March 31, 1999, the Company had outstanding
consolidated long-term indebtedness (including current portions) of
approximately $193.2 million and total stockholders' equity of approximately
$276.4 million. The seasonal fluctuations in the Company's cash flows can be
significant. The second quarter of each year typically represents the Company's
greatest period of leverage. Generally, the first quarter and most of the second
quarter are loss periods requiring the financing of substantial cash outflows
for operations. However, the last half of the year (primarily the third quarter)
provides substantial positive cash flows and, as a result, the Company is
typically at its least leveraged point at year end.
COMPUTER SYSTEMS / YEAR 2000 READINESS
Many existing computer systems, communications equipment, control devices and
software products, including several used by the Company, are coded to accept
only two-digit entries in the date code field. Beginning in the year 2000, these
date code fields will need to accept four-digit entries to distinguish 21st
century dates from 20th century dates. As a result, the Company's date critical
functions related to the year 2000 and beyond, such as scheduling, dispatch,
sales, purchasing, planning and financial systems may be materially adversely
affected unless these systems are or become year 2000 ready.
During the past three years, the Company has been replacing or upgrading its
computer systems to improve operating efficiencies. Through some of these
efforts, year 2000 ready applications or systems have been installed.
13
<PAGE> 14
The Company is preparing both its information technology ("IT") systems and its
non-IT, technology enabled systems for the year 2000 by implementing the year
2000 Readiness Process, comprised of five phases: Assessment, Planning,
Implementation, Testing and Clean Management.
The first phase is an assessment of the Company's systems with respect to year
2000 readiness. During the Assessment phase, the Company, with the assistance of
consultants, reviews individual applications and the hardware and network
infrastructure supporting those applications. The assessment also includes
non-"information technology" (non-IT) systems, such as fax machines, time clocks
and bus maintenance test equipment. A comprehensive review and inventory of
non-IT technology enabled equipment and functions will be completed in this
phase. The assessment of all of the Company's IT systems was completed during
the third quarter of 1998. The assessment of the Company's non-IT systems will
be completed in the second quarter of 1999. The Assessment phase also involves
an assessment of the readiness of third party vendors and suppliers. The Company
has already issued year 2000 readiness questionnaires to some vendors and will
continue this effort. However, responses to these inquiries have been limited.
Nevertheless, as a normal course of business, the Company has contingency plans
in place to deal with failures of most of the critical third-party systems.
Where such contingency plans are not in place, the Company is in the process of
developing those plans.
The purpose of the Planning phase is to develop a detailed set of plans for
bringing the Company's systems to year 2000 readiness. The Company first
developed plans to prepare individual applications and platforms for year 2000
readiness. These individual plans were then consolidated into an overall plan
for remediation of the IT systems. Priority has been given to the mission
critical functions. For those non-mission critical systems that might not be
ready for the year 2000, the overall plan calls for the development of
contingency plans to minimize disruption to the business. The overall plan for
IT systems was completed during the fourth quarter of 1998. The planning phase
for non-IT systems is targeted for completion in the second quarter of 1999,
following the completion of the Company's non-IT systems Assessment Phase.
In the Implementation phase, the Company will bring the IT systems to a state of
readiness as stand-alone units. Each application and its supporting
infrastructure components will be remediated, replaced or upgraded, as
appropriate. Each application will be tested to ensure the accuracy of current
functionality and to ensure the continuance of the functionality into the year
2000 and beyond. To date, the majority of infrastructure components and several
applications have been remediated. The Company expects to complete the
Implementation phase for mission critical IT systems in the second quarter of
1999. Non-mission critical IT systems and non-IT systems are expected to be made
year 2000 ready by the end of third quarter of 1999.
The Testing phase is the most complicated phase of the year 2000 Readiness
Process. In this phase, IT systems are tested for year 2000 readiness, meaning
that a series of tests using the same data but different dates is performed to
ensure readiness of the IT systems both prior to and after the year 2000.
Testing of individual infrastructure components and applications will continue
with the majority of testing completed by the third quarter of 1999.
Clean Management is confirming that any newly acquired components or
applications are deemed year 2000 ready before their introduction into the
Company. The Clean Management phase of the year 2000 Readiness Process is
conducted at the same time as all other phases.
The Company currently has a disaster recovery plan that has put contingency
planning in place to address problems that might occur in the ordinary course of
business. However, the Company is starting to re-evaluate its contingency
planning for critical operational areas that might be specifically affected by
the year 2000 problem if the Company or suppliers are not ready. Throughout
1999, the Company will review the extent to which contingency plans may be
required for any third parties that do not achieve year 2000 readiness, and the
Company expects to complete those necessary contingency plans by the third
quarter of 1999.
The Company's total costs related to year 2000 assessment and remediation are
based on presently available information. The total remaining costs related to
the year 2000 assessment and remediation efforts are estimated to be between
$10.0 million and $15.0 million, including internal salaries that would be
incurred without remediation efforts. The Company estimates that approximately
half of this amount will be capitalized, with the remainder being expensed as
incurred. The costs which include expenditures in 1999 and 2000 exceed the
previous rate of IT related expenditures, including capitalized expenditures, by
approximately $5.0 million to $10.0 million. These costs will be funded through
operating cash flows or from funds provided by Laidlaw. Since the Company has
been replacing
14
<PAGE> 15
and upgrading its computer systems in the ordinary course of business, the
Company cannot estimate the costs incurred to date related specifically to
remediating year 2000 issues.
The costs of the Company's year 2000 readiness project and the date on which the
Company plans to complete the year 2000 modifications are based on management's
estimates, which were derived utilizing numerous assumptions of future events
including the continued availability of certain resources, third-party
modification plans and other factors. The year 2000 issues present a number of
risks that are beyond the Company's reasonable control, such as the failure of
utility companies to deliver electricity, the failure of telecommunications
companies to provide voice and data services, the failure of financial
institutions to process transactions and transfer funds, and the impact on the
Company of the effects of year 2000 issues on the economy in general or on the
Company's business partners and customers. Although the Company believes that
its year 2000 readiness program is designed appropriately to identify and
address those year 2000 issues that are subject to the Company's reasonable
control, the Company can make no assurance that its efforts will be fully
effective or that the year 2000 issues will not have a material adverse effect
on the Company's business, financial condition or results of operations.
OTHER
There were no other material changes in the Company's financial condition nor
were there any substantive changes relative to matters discussed in the
Liquidity and Capital Resources section of Management's Discussion and Analysis
of Financial Condition and Results of Operations as presented in the Company's
annual 10-K for the year ended December 31, 1998.
15
<PAGE> 16
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 16, 1999, at the Company's special meeting of shareholders, the holders
of at least a majority of the outstanding shares of the Company's Common Stock
and Preferred Stock, voting together as a single class, voted in favor of, and
for approval of, the Agreement and Plan of Merger with Laidlaw Inc. and Laidlaw
Transit Acquisition Corp. Total votes for, against, and abstentions were
36,336,827 and 5,959,454 and 115,801, respectively.
16
<PAGE> 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 - Financial Data Schedule as of and for the three months ended March 31,
1999. (1)
- --------------------------------------------------------------------------------
(1) Filed only in EDGAR format with the Registrant's Quarterly Report on Form
10-Q for the quarter ended March 31, 1999.
(b) REPORTS ON FORM 8-K
During the three months ended March 31, 1999, the Company filed a current
report on Form 8-K with the Securities and Exchange Commission. The Company
filed Form 8-K on January 28, 1999, in order to report that Laidlaw delivered to
the Company a letter informing the Company that Laidlaw was irrevocably waiving
its right to satisfy any portion of the merger consideration with Laidlaw common
shares. As a result, the merger consideration will be paid entirely in cash.
17
<PAGE> 18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: May 13, 1999
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
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
LOS BUENOS LEASING CO., INC.
By: /s/ T. Scott Kirksey
------------------------------------
T. Scott Kirksey
Chief Financial Officer and Secretary
18
<PAGE> 19
SISTEMA INTERNACIONAL de
TRANSPORTE de AUTOBUSES, INC.
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
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule as of and for the three months ended
March 31, 1999.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813040
<NAME> GREYHOUND LINES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 24,542
<SECURITIES> 0
<RECEIVABLES> 41,839
<ALLOWANCES> 158
<INVENTORY> 6,235
<CURRENT-ASSETS> 121,723
<PP&E> 561,856
<DEPRECIATION> 158,759
<TOTAL-ASSETS> 709,424
<CURRENT-LIABILITIES> 129,796
<BONDS> 182,663
59,080
0
<COMMON> 587
<OTHER-SE> 275,855
<TOTAL-LIABILITY-AND-EQUITY> 709,424
<SALES> 0
<TOTAL-REVENUES> 194,738
<CGS> 0
<TOTAL-COSTS> 135,145
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,280
<INCOME-PRETAX> (38,621)
<INCOME-TAX> (17,353)
<INCOME-CONTINUING> (22,931)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,607
<CHANGES> 0
<NET-INCOME> (24,220)
<EPS-PRIMARY> 0.40
<EPS-DILUTED> 0.40
</TABLE>
