<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, 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 November 11, 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
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 September 30, 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); 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>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Interim Consolidated Statements of Financial Position as of
September 30, 1999 (Unaudited) and December 31, 1998........................ 5
Interim Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1999 and 1998 (Unaudited)......... 6
Condensed Interim Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 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>
SEPTEMBER 30, DECEMBER 31,
1999 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents ............................................................. $ 7,778 $ 4,736
Accounts receivable, less allowance for doubtful accounts of $328 and $198 ............ 48,269 40,774
Inventories, less allowance for shrinkage of $223 and $205 ............................ 6,952 5,705
Prepaid expenses ...................................................................... 4,739 5,170
Assets held for sale .................................................................. 4,989 3,029
Current portion of deferred tax assets ................................................ 28,661 24,053
Other current assets .................................................................. 2,841 9,907
---------- ----------
Total current assets ............................................................... 104,229 93,374
Prepaid Pension Plans ..................................................................... 29,183 27,917
Property, Plant and Equipment, net of accumulated depreciation
of $169,763 and $151,468 .............................................................. 414,636 362,417
Investments in Unconsolidated Affiliates .................................................. 14,872 13,560
Deferred Income Taxes ..................................................................... 7,474 8,988
Insurance and Security Deposits ........................................................... 40,623 67,908
Goodwill, net of accumulated amortization of $3,065 and $1,755 ............................ 45,921 39,510
Intangible Assets, net of accumulated amortization of $31,069 and $28,503 ................. 27,512 29,704
---------- ----------
Total assets ....................................................................... $ 684,450 $ 643,378
========== ==========
Current Liabilities
Accounts payable ...................................................................... $ 30,981 $ 27,724
Due to Laidlaw ........................................................................ 21,551 --
Accrued liabilities ................................................................... 71,629 64,819
Unredeemed tickets .................................................................... 10,086 12,143
Current portion of reserve for injuries and damages ................................... 23,032 22,967
Current maturities of long-term debt .................................................. 5,244 7,970
---------- ----------
Total current liabilities .......................................................... 162,523 135,623
Reserve for Injuries and Damages .......................................................... 14,109 37,392
Long-Term Debt ............................................................................ 176,222 225,688
Minority Interests ........................................................................ 3,734 3,058
Other Liabilities ......................................................................... 22,830 23,604
---------- ----------
Total liabilities .................................................................. 379,418 425,365
---------- ----------
Redeemable Preferred Stock (2,400,000 shares authorized and 1,732,100 shares
issued as of September 30, 1999; aggregate
Liquidation preference $43,303) (Note 1)............................................ 43,303 --
Stockholders' Equity
Preferred stock (10,000,000 shares authorized as of December 31, 1998; 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 September 30, 1999 and December 31,
1998 respectively) ................................................................. 587 603
Capital in excess of par value ........................................................ 356,457 237,441
Retained deficit ...................................................................... (87,621) (71,761)
Accumulated Other Comprehensive Income, net of tax benefit of $3,181 .................. (7,694) (7,232)
Less: Treasury stock, at cost (109,192 shares at December 31, 1998) ................... -- (1,038)
---------- ----------
Total stockholders' equity ......................................................... 261,729 218,013
---------- ----------
Total liabilities and stockholders' equity ..................................... $ 684,450 $ 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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
---------- ---------- ---------- ----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Transportation Services
Passenger services .......................... $ 231,016 $ 213,214 $ 585,506 $ 547,484
Package express ............................. 10,381 8,702 29,158 25,491
Food services and related ....................... 11,579 8,921 29,241 23,817
Other operating revenues ........................ 15,401 13,297 47,563 39,309
---------- ---------- ---------- ----------
Total operating revenues ................ 268,377 244,134 691,468 636,101
---------- ---------- ---------- ----------
OPERATING EXPENSES
Maintenance ..................................... 22,738 21,849 65,643 62,384
Transportation .................................. 60,112 53,914 164,465 151,339
Agents' commissions and station costs ........... 48,042 41,813 130,667 115,366
Marketing, advertising and traffic .............. 9,316 6,277 23,553 20,182
Insurance and safety ............................ 16,285 13,147 40,657 37,589
General and administrative ...................... 31,248 26,633 89,860 77,594
Depreciation and amortization ................... 11,073 8,888 31,812 26,730
Operating taxes and licenses .................... 15,355 15,022 44,052 42,688
Operating rents ................................. 20,164 16,988 57,057 48,886
Cost of goods sold - food services and related... 7,529 5,637 19,296 15,543
Other operating expenses ........................ 501 1,182 2,106 2,563
---------- ---------- ---------- ----------
Total operating expense ................. 242,363 211,350 669,168 600,864
---------- ---------- ---------- ----------
Operating Income ................................... 26,014 32,784 22,300 35,237
Settlement of Stock Options (see Note 3) .......... -- -- 21,294 --
Interest Expense ................................... 5,304 7,263 16,961 21,222
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes .................. 20,710 25,521 (15,955) 14,015
Income Tax Provision (Benefit) ..................... 10,789 (16,250) (5,683) (17,167)
Minority Interest .................................. 460 134 783 42
---------- ---------- ---------- ----------
Net Income (Loss) Before Extraordinary Item ........ 9,461 41,637 (11,055) 31,140
Extraordinary Item (see Note 4) ................... -- -- 1,607 --
---------- ---------- ---------- ----------
Net Income (Loss) .................................. 9,461 41,637 (12,662) 31,140
========== ========== ========== ==========
</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>
NINE MONTHS ENDED
SEPTEMBER 30,
1999 1998
---------- ----------
(UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ............................................ $ (12,662) $ 31,140
Extraordinary item ........................................... 1,607 --
Non-cash expenses and gains included in net income (loss) .... 28,313 2,338
Net change in certain operating assets and liabilities ...... 33,218 (16,165)
---------- ----------
Net cash provided by operating activities ................ 50,476 17,313
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ......................................... (87,511) (17,627)
Buses purchased for sale and leaseback ....................... -- (40,976)
Proceeds from assets sold .................................... 942 1,133
Payments for business acquisitions, net of cash acquired ..... (7,491) (2,523)
Other investing activities ................................... (958) 357
---------- ----------
Net cash used for investing activities ................... (95,018) (59,636)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt and capital lease obligations ............... (10,797) (4,330)
Redemption of preferred stock ................................ (22,260) --
Redemption of 8 1/2% Debentures .............................. (3,740) --
Parent company capital contributions ......................... 265,805 --
Dividends to Parent company .................................. (140,204) --
Proceeds from exercise of options ............................ -- 2,595
Payment of quarterly preferred dividends ..................... (3,435) (3,888)
Net change in revolving credit facility ...................... (37,785) 48,821
---------- ----------
Net cash provided by financing activities ................ 47,584 43,198
---------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ....................... 3,042 875
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .................. 4,736 2,052
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................ $ 7,778 $ 2,927
========== ==========
</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
SEPTEMBER 30, 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 September 30, 1999, the
results of its operations for the three and nine months ended September 30, 1999
and 1998 and cash flows for the nine months ended September 30, 1999 and 1998.
Due to the seasonality of the Company's operations, the results of its
operations for the interim period ended September 30, 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 72.2% or
1,732,100 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 do not reflect any purchase
accounting adjustments relating to the Merger.
2. RELATED PARTY TRANSACTIONS
Following the Merger, the Company began to purchase its insurance through
Laidlaw. The Company has a $50,000 deductible for property damage claims and no
deductible for all other claims. As a result, there is no insurance reserve
associated with claims arising after March 16, 1999. The Company has recorded
$21.6 million in insurance expense under this program, which the Company
believes is comparative to the cost under its previous insurance program.
Additionally, the Company has entered into a tax allocation agreement with
Laidlaw whereby benefits from deductions and taxes on income are generally
allocated to the Company on a basis equivalent to or more favorable than the
basis the Company would have recognized as a stand alone company.
Following the Merger, the Company had a $23.8 million reduction in insurance
deposits which were obtained following the issuance by Laidlaw of letters of
credit and $12.2 million in security deposit returns due to an improved credit
rating as a result of Laidlaw acquiring the Company.
Also, Laidlaw has guaranteed four bus leases entered into by the Company
covering 88 buses. This guarantee resulted in a lower effective interest rate on
the leases, resulting in monthly payments per bus of $2,642 compared to $2,696.
8
<PAGE> 9
3. SETTLEMENT OF STOCK OPTIONS
As a result of the Merger, the Company incurred $21.3 million in charges related
to the settlement of the Company's outstanding stock options.
4. 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 in the first quarter of 1999,
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.
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 in-terminal
food services at certain terminals. The Company's consolidated operations
include a nationwide network of terminal and maintenance facilities, a fleet of
approximately 2,800 buses and approximately 1,800 ticket 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 three and nine months ended
September 30, 1999 and 1998:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1999 1998 1999 1998
------ ------ ------ ------
<S> <C> <C> <C> <C>
Operating Revenues
Transportation services
Passenger services ............................. 86.1% 87.3% 84.7% 86.1%
Package express ................................ 3.9 3.6 4.2 4.0
Food services and related ........................... 4.3 3.7 4.2 3.7
Other operating revenues ............................ 5.7 5.4 6.9 6.2
------ ------ ------ ------
Total operating revenues ................... 100.0 100.0 100.0 100.0
Operating Expenses
Maintenance ......................................... 8.5 8.9 9.5 9.8
Transportation ...................................... 22.4 22.1 23.8 23.8
Agents' commissions and station costs ............... 17.9 17.1 18.9 18.1
Marketing, advertising and traffic .................. 3.5 2.6 3.4 3.2
Insurance and safety ................................ 6.1 5.4 5.9 5.9
General and administrative .......................... 11.6 10.9 13.0 12.2
Depreciation and amortization ....................... 4.1 3.6 4.6 4.2
Operating taxes and licenses ........................ 5.7 6.2 6.4 6.7
Operating rents ..................................... 7.5 7.0 8.3 7.7
Cost of goods sold - food services and related ...... 2.8 2.3 2.8 2.4
Other operating expenses ............................ 0.2 0.5 0.2 0.5
------ ------ ------ ------
Total operating expenses ................... 90.3 86.6 96.8 94.5
------ ------ ------ ------
Operating Income ...................................... 9.7 13.4 3.2 5.5
Settlement of stock options ........................... 0.0 0.0 3.1 0.0
Interest Expense ...................................... 2.0 2.9 2.4 3.3
------ ------ ------ ------
Income (Loss) Before Income Taxes ..................... 7.7 10.5 (2.3) 2.2
Income Tax Provision (Benefit) ........................ 3.8 (6.7) (0.9) (2.7)
Minority Interest ..................................... 0.2 0.1 0.1 0.0
------ ------ ------ ------
Net Income (Loss) Before Extraordinary Item ........... 3.7 17.1 (1.5) 4.9
Extraordinary Item .................................... 0.0 0.0 0.3 0.0
------ ------ ------ ------
Net Income (Loss) ..................................... 3.7 17.1 (1.8) 4.9
====== ====== ====== ======
</TABLE>
10
<PAGE> 11
The following table sets forth certain operating data for the Company for the
three and nine months ended September 30, 1999 and 1998. 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, PERCENTAGE SEPTEMBER 30, PERCENTAGE
1999 1998 CHANGE 1999 1998 CHANGE
----------- ----------- ---- ----------- ----------- ----
<S> <C> <C> <C> <C> <C> <C>
Total Bus Miles (000's) .................. 97,862 91,282 7.2 261,323 243,030 7.5
Passenger Miles (000's) .................. 2,641,272 2,379,650 11.0 6,642,330 6,065,606 9.5
Passengers Carried (000's) ............... 7,140 6,620 7.9 18,591 17,184 8.2
Average Trip Length (passenger miles/
passengers carried) ................... 370 359 3.1 357 353 1.1
Load (avg. number of passengers per
regular service mile) ................. 27.3 26.4 3.4 26.0 25.6 1.6
Load Factor (% of available seats
filled) ............................... 56.2 55.7 0.9 53.7 54.2 (0.9)
Yield (regular route
revenue/passenger miles) .............. $ 0.0872 $ 0.0896 (2.7) $ 0.0881 $ 0.0903 (2.4)
Total Revenue Per Total Bus Mile ......... 2.74 2.67 2.6 2.65 2.62 1.1
Cost Per Total Bus Mile:
Maintenance ........................... $ 0.232 $ 0.239 (2.9) $ 0.251 $ 0.257 (2.3)
Transportation ........................ 0.614 0.591 3.9 0.629 0.623 1.0
Insurance and Safety .................. 0.166 0.144 15.3 0.156 0.155 0.6
</TABLE>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 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, On-Time
Delivery and Larson Express (collectively the "acquisitions"). The purchases of
Peoria-Rockford Bus Company, Autobuses Americanos and Autobuses Amigos were
completed in the fourth quarter of 1998, the purchase of On-Time Delivery
occurred during the first quarter of 1999 and the purchase of Larson Express
occurred during the second quarter of 1999. The results for the acquisitions are
included as of their respective purchase dates.
Operating Revenues. Total operating revenues increased $24.2 million, up 9.9%,
and $55.4 million, up 8.7%, for the three and nine months ended September 30,
1999, compared to the same periods in 1998. Acquisitions accounted for $8.1
million and $20.6 million of this growth for the three and nine months,
resulting in internal growth of $16.2 million, or 6.6%, and $34.8 million, or
5.5%, for the three and nine months compared to the same periods in the prior
year.
Passenger services revenues increased $17.8 million, up 8.3%, and $38.0 million,
up 6.9%, for the three and nine months ended September 30, 1999, compared to the
same periods in 1998 (including $5.5 million and $14.4 million related to the
acquisitions). The increases in regular route revenues reflect the consolidated
impact of a 7.9% and 8.2% increase in the number of passengers carried for the
three and nine months, combined with a 3.1% and 1.1% increase in average trip
length, partially offset by a 2.7% and 2.4% decrease in yield. The decrease in
yield is a reflection of the longer trip length and promotional pricing in the
long-haul corridors to meet airline competition.
Package express revenues increased $1.7 million, up 19.3%, and $3.7 million, up
14.4%, for the three and nine months ended September 30, 1999, compared to the
same periods in 1998 (including $2.2 million and $5.2 million related to the
acquisitions). Excluding the acquisitions, the Company experienced a decline of
$0.5 million and $1.5 million for the three and nine months ended September 30,
1999, due to declines in its standard product offering (the traditional,
low-value, terminal to terminal market segment) offset somewhat by gains in same
day and priority product offerings. The declines in the standard offering are a
result of continued competition, as well as expanded product offerings (such as
United Parcel Service's guaranteed service "brown label" product), from larger
next day package delivery companies. In response, the Company continues to
increase its focus on the same day delivery market niche through selling of
priority service and the creation of new product offerings such as Daily Direct,
a guaranteed same day or early overnight service.
11
<PAGE> 12
Food services revenues increased $2.7 million, up 29.8%, and $5.4 million, up
22.8%, for the three and nine months ended September 30, 1999, compared to the
same periods in 1998. Food services revenues increased over the prior year due
to the acquisition of eight in-terminal, concessionaire-operated locations that
were previously Burger King locations ($1.5 million and $3.0 million for the
three and nine months ended September 30, 1999), the increase in passenger
traffic discussed above, and increased phone card sales.
Other operating revenues, consisting primarily of revenue from charter and other
in-terminal sales and services, increased $2.1 million, up 15.8%, and $8.3
million, up 21.0%, for the three and nine months ended September 30, 1999,
compared to the same periods in 1998. Excluding the acquisitions, the increase
was due to increases in tenant income primarily as a result of the Peter Pan
Pool, initiated on January 12, 1999, which results in income to the Company for
sharing its terminal space offset by a slight decrease in charter service
revenue of $0.5 million, down 13.5% for the three months ended September 30,
1999. Charter revenues were down for the quarter as the Company utilized more of
its resources to handle the summer line-haul traffic. However, charter service
revenue is up $1.8 million, or 16.3% for the nine months ended September 30,
1999.
Operating Expenses. Total operating expenses increased $31.0 million, up 14.7%,
and $68.3 million, up 11.4%, for the three and nine months ended September 30,
1999, compared to the same periods in 1998. The increase is attributable to an
increase in bus miles operated (7.2% and 7.5% for the three and nine months
ended September 30, 1999 compared to the same periods in 1998), driver wage
increases, increased terminal salaries, increased ticket commissions due to
higher sales, an increase in the number of buses operated under operating
leases, and $6.8 million and $18.4 million for the three and nine months ended
September 30, 1999, related to the operations of the acquisitions.
Maintenance costs increased $0.9 million, up 4.1%, and $3.3 million, up 5.2%,
for the three and nine months ended September 30, 1999, compared to the same
periods in 1998 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 $6.2 million, up 11.5%, and $13.1 million, up
8.7%, for the three and nine months ended September 30, 1999, compared to the
same periods in 1998 due to increased bus miles operated, an additional driver
wage increase above normal annual increases due to renegotiation of the union
contract in October 1998, increased fuel costs and the inclusion of the
acquisitions. Fuel prices have gone above 1998 levels, with the average cost per
gallon of fuel increasing to $0.648 and $0.575 for the three and nine months
ended September 30, 1999, compared to $0.501 and $0.540 per gallon during the
same periods in 1998. The increased fuel prices resulted in increased fuel cost
of $2.4 million and $1.5 million for the three and nine months ended September
30, 1999, compared to the prior year.
Agents' commissions and station costs increased $6.2 million, up 14.9%, and
$15.3 million, up 13.3%, for the three and nine months ended September 30, 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. Additionally, the Peter Pan Pool increased
terminal wages as the increase in sales resulted in increased staffing needs.
Income from the Peter Pan Pool that offsets these costs is reflected in other
operating revenue.
Marketing, advertising and traffic expense increased $3.0 million, up 48.4%, and
$3.4 million, up 16.7%, for the three and nine months ended September 30, 1999,
compared to the same periods in 1998 due to a shift in advertising spending to
increase peak-season advertising.
Insurance and safety costs increased $3.1 million, up 23.9%, and $3.1 million,
up 8.2%, for the three and nine months ended September 30, 1999, compared to the
same periods in 1998. The increase is due principally to increased miles and the
inclusion of the acquisitions.
General and administrative expenses increased $4.6 million, up 17.3%, and $12.3
million, up 15.8%, for the three and nine months ended September 30, 1999,
compared to the same periods in 1998 due primarily to increased expenses
associated with remediation of the Company's computer systems related to the
Year 2000 issue, the inclusion of the acquisitions and additions in
administrative personnel. For the three and nine months ended September 30,
1999, Year 2000 expenses totaled $1.8 million and $4.5 million, respectively.
12
<PAGE> 13
Depreciation and amortization increased $2.2 million, up 24.6%, and $5.1
million, up 19.0%, for the three and nine months ended September 30, 1999,
compared to the same periods in 1998 due primarily to depreciation and goodwill
amortization attributable to the acquisitions and depreciation related to
increased capital expenditures in current and prior periods. Additionally, the
Company has purchased 50 buses that were previously under operating leases.
Operating taxes and licenses expense increased $0.3 million, up 2.2%, and $1.4
million, up 3.2%, for the three and nine months ended September 30, 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 $3.2 million, up 18.7%, and $8.2 million, up 16.7%,
for the three and nine months ended September 30, 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 and increased
facility rents.
Food services cost of goods sold increased $1.9 million, up 33.6%, and $3.8
million, up 24.1%, for the three and nine months ended September 30, 1999,
compared to the same periods in 1998, primarily due to the 29.8% and 22.8%
increase in Food services revenues for the same periods and due to increased
labor costs.
As a result of Laidlaw Inc. ("Laidlaw") acquiring the Company, the Company
incurred $21.3 million in charges related to the settlement of the Company's
outstanding stock options.
Interest expense decreased $2.0 million, down 27.0%, and $4.3 million, down
20.1%, for the three and nine months ended September 30, 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.
Additionally, the Company had an extraordinary item in March. 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.
Operating activities produced cash of $50.5 million for the nine months ended
September 30, 1999, which is an improvement of $33.2 million compared to 1998.
Net cash used by operating activities during the nine months ended September 30,
1999, were negatively impacted by the $21.3 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 and $12.2
million in security deposit returns due to an improved credit rating as a result
of the Laidlaw acquiring the Company. Net cash used for investing activities
increased $35.4 million compared to 1998, principally due to $7.5 million in
payments for business acquisitions combined with a $28.9 million increase in
capital expenditures. Net cash provided by financing activities increased $7.9
million compared to 1998. This increase can primarily be attributed to the
$265.8 million capital contribution provided by the Company's parent offset by
dividends to the parent of $140.2 million. This increase was partially offset by
the retirement of the $37.8 million related to the Revolving Credit Facility,
$22.3 million of Preferred Stock conversions and $3.7 million due to the
repurchase of a portion of the outstanding Convertible Debentures.
As a result of the Laidlaw acquisition of the Company, the Company made 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,
which was accepted by no holders of these notes. Additionally, the Company made
a one-time offer to repurchase
13
<PAGE> 14
all or any part of each holder's Convertible Debentures at a price equal to 100%
of the principal amount thereof plus interest, which was accepted in July by
holders of $3.7 million of the outstanding $9.8 million. 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 AND SEASONALITY
The Company has consolidated indebtedness that is substantial in relation to its
stockholders' equity. As of September 30, 1999, the Company had outstanding
consolidated long-term indebtedness (including current portions) of
approximately $181.5 million and total stockholders' equity of approximately
$261.7 million. The seasonal fluctuations in the Company's cash flows can be
significant. 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.
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. 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, reviewed individual applications and the hardware and network
infrastructure supporting those applications. The assessment also included
non-"information technology" (non-IT) systems, such as fax machines, time clocks
and bus maintenance test equipment. The assessment of all of the Company's IT
systems and non-IT systems were completed in the third quarter of 1999. The
Assessment phase also involves an assessment of the readiness of third party
vendors and suppliers. The Company has 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.
The purpose of the Planning phase was 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 was completed in the third quarter of 1999.
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, most of the infrastructure components and the majority
of applications have been remediated. The Company completed the Implementation
phase for mission critical IT systems in the second quarter of 1999. The
majority of the non-mission critical IT systems and non-IT systems were made
year 2000 ready by the end of third quarter of 1999.
14
<PAGE> 15
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,
however, the majority of testing was completed in 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 disaster recovery or contingency plans in place to
address problems that might occur in the ordinary course of business. In light
of the year 2000 problem, the Company re-evaluated its contingency planning
for critical operational areas that might be specifically affected by the year
2000 problem if the Company or suppliers were not ready. The Company completed
this evaluation in the third quarter of 1999; however, the Company will
continue to evaluate these plans as there are any changes or issues within the
Company or with third parties.
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
$2.0 million and $3.0 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. These costs will be funded through operating cash flows or from funds
provided by Laidlaw. Since the Company has been replacing 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 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
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
ELECTIONS OF DIRECTORS
On July 23, 1999, at the Company's annual meeting of shareholders, Mr. James R.
Bullock was elected as sole Director for a one-year term. The election was
determined by a plurality vote. Total stockholder votes for and against on the
election of Mr. Bullock were 60,003,514 and 600, respectively.
16
<PAGE> 17
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 - Financial Data Schedule as of and for the nine months ended
September 30, 1999.(1)
- --------------------------------------------------------------------------------
(1) Filed only in EDGAR format with the Registrant's Quarterly Report on Form
10-Q for the quarter ended September 30, 1999.
(b) REPORTS ON FORM 8-K
During the three months ended September 30, 1999, the Company did not file
any current reports on Form 8-K with the Securities and Exchange Commission.
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: November 12, 1999
GREYHOUND LINES, INC.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
ATLANTIC GREYHOUND LINES OF VIRGINIA, INC.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
GLI HOLDING COMPANY
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
GREYHOUND de MEXICO S.A. de C.V.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
LOS BUENOS LEASING CO., INC.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
SISTEMA INTERNACIONAL de TRANSPORTE
de AUTOBUSES, INC.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
18
<PAGE> 19
TEXAS, NEW MEXICO & OKLAHOMA
COACHES, INC.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
T.N.M. & O. TOURS, INC.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
VERMONT TRANSIT CO., INC.
By: /s/ Jeffrey W. Sanders
-------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
19
<PAGE> 20
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
27 - Financial Data Schedule as of and for the nine months ended September 30, 1999.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813040
<NAME> GREYHOUND LINES INC
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 7,778
<SECURITIES> 0
<RECEIVABLES> 48,597
<ALLOWANCES> 328
<INVENTORY> 6,952
<CURRENT-ASSETS> 104,229
<PP&E> 584,399
<DEPRECIATION> 169,763
<TOTAL-ASSETS> 684,450
<CURRENT-LIABILITIES> 162,523
<BONDS> 176,222
43,303
0
<COMMON> 587
<OTHER-SE> 356,457
<TOTAL-LIABILITY-AND-EQUITY> 684,450
<SALES> 0
<TOTAL-REVENUES> 691,468
<CGS> 0
<TOTAL-COSTS> 436,954
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16,961
<INCOME-PRETAX> (15,955)
<INCOME-TAX> (5,683)
<INCOME-CONTINUING> (11,055)
<DISCONTINUED> 0
<EXTRAORDINARY> 1,607
<CHANGES> 0
<NET-INCOME> (12,662)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
