<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, 2000
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, 2000, the registrant had 58,743,069 shares of Common
Stock, $0.01 par value, outstanding all of which are held by the
registrant's parent company.
(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.
(2) The registrant meets the conditions set forth in General Instructions
H(1)(a) and (b) of Form 10-Q and is therefore filing this form with the
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
Sistema Internacional de Transporte de Autobuses, Inc. 333-27267-08 75-2548617 Delaware
Texas, New Mexico & Oklahoma Coaches, Inc. 333-27267-10 75-0605295 Delaware
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
345 Pine Street
Burlington, Vermont 05401
(802) 862-9671
</TABLE>
As of September 30, 2000, 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); 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, 2000 (Unaudited) and December 31, 1999........................ 5
Interim Consolidated Statements of Operations for the Three and
Nine months Ended September 30, 2000 and 1999 (Unaudited)................... 6
Condensed Interim Consolidated Statements of Cash Flows for the
Nine months Ended September 30, 2000 and 1999 (Unaudited)................... 7
Notes to Interim Consolidated Financial Statements (Unaudited)................. 8
Item 2. Management's Narrative Analysis of Results of Operations......................... 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings......................................................................... 14
Item 6. Exhibits and Reports on Form 8-K.......................................................... 14
SIGNATURES......................................................................................... 15
</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,
2000 1999
-------------- --------------
(UNAUDITED)
<S> <C> <C>
Current Assets
Cash and cash equivalents ....................................................... $ 11,052 $ 8,295
Accounts receivable, less allowance for doubtful accounts of $398 and $402 ...... 51,644 46,830
Inventories, less allowance for shrinkage of $260 and $226 ...................... 8,325 7,494
Prepaid expenses ................................................................ 4,606 5,694
Assets held for sale ............................................................ 4,490 4,545
Current portion of deferred tax assets .......................................... 12,966 12,864
Other current assets ............................................................ 2,624 1,851
-------------- --------------
Total Current Assets ....................................................... 95,707 87,573
Prepaid pension plans ............................................................... 31,908 29,983
Property, plant and equipment, net of accumulated depreciation of $191,892
and $173,273 ................................................................... 416,312 397,077
Investments in unconsolidated affiliates ............................................ 15,763 16,028
Deferred income taxes ............................................................... 17,078 14,711
Insurance and security deposits ..................................................... 25,198 22,220
Goodwill, net of accumulated amortization of $4,897 and $3,523 ...................... 44,009 45,384
Intangible assets, net of accumulated amortization of $35,970 and $31,82 ............ 27,015 25,821
-------------- --------------
Total Assets ............................................................... $ 672,990 $ 638,797
============== ==============
Current Liabilities
Accounts payable ................................................................ $ 22,757 $ 23,824
Due to Laidlaw .................................................................. 74,379 42,560
Accrued liabilities ............................................................. 97,006 57,238
Rents payable ................................................................... 24,449 19,129
Unredeemed tickets .............................................................. 9,414 11,956
Current portion of environmental reserves ....................................... 1,896 1,473
Current maturities of long-term debt ............................................ 4,051 5,671
-------------- --------------
Total Current Liabilities .................................................. 233,952 161,851
Environmental reserves .............................................................. 5,621 5,840
Long-term debt, net ................................................................. 170,877 174,581
Minority interests .................................................................. 4,163 4,233
Other liabilities ................................................................... 21,584 22,432
-------------- --------------
Total Liabilities .......................................................... 436,197 368,937
-------------- --------------
Redeemable preferred stock (2,400,000 shares authorized; 208,550 and
1,678,150 shares issued as of September 30, 2000 and December 31, 1999) ........... 5,214 41,954
Stockholders' Equity
Common stock (100,000,000 shares authorized; par value $.01; 58,743,069
shares issued as of September 30, 2000 and December 31, 1999) ............. 587 587
Capital in excess of par value .................................................. 315,617 322,026
Retained deficit ................................................................ (82,100) (92,182)
Accumulated other comprehensive loss, net of tax benefit of $1,360 .............. (2,525) (2,525)
-------------- --------------
Total Stockholders' Equity ................................................. 231,579 227,906
-------------- --------------
Total Liabilities and Stockholders' Equity ................................... $ 672,990 $ 638,797
============== ==============
</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,
2000 1999 2000 1999
------------ ------------ ------------ ------------
(Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Transportation service
Passenger services ........................ $ 251,852 $ 231,016 $ 648,203 $ 585,506
Package express ........................... 10,729 10,803 31,961 30,741
Food services ................................. 12,169 11,579 32,599 29,241
Other operating revenues ...................... 16,525 15,401 50,382 47,563
------------ ------------ ------------ ------------
Total Operating Revenues .................. 291,275 268,799 763,145 693,051
------------ ------------ ------------ ------------
OPERATING EXPENSES
Maintenance ................................... 25,442 22,738 71,394 65,643
Transportation ................................ 68,499 60,112 190,323 164,465
Agents' commissions and station costs ......... 50,815 48,464 138,729 132,250
Marketing, advertising and traffic ............ 8,055 9,316 23,809 23,553
Insurance and safety .......................... 14,124 16,285 39,627 40,657
General and administrative .................... 35,188 31,248 93,375 89,860
Depreciation and amortization ................. 12,137 11,073 33,654 31,812
Operating taxes and licenses .................. 15,473 15,355 45,927 44,052
Operating rents ............................... 21,405 20,164 63,275 57,057
Cost of goods sold - food services ............ 8,015 7,529 21,364 19,296
Other operating expenses ...................... 2,863 501 5,119 2,106
------------ ------------ ------------ ------------
Total Operating Expenses .................. 262,016 242,785 726,596 670,751
------------ ------------ ------------ ------------
Operating Income .................................... 29,259 26,014 36,549 22,300
Settlement of Stock Options ......................... -- -- -- 21,294
Interest Expense .................................... 5,590 5,304 16,612 16,961
------------ ------------ ------------ ------------
Income (Loss) Before Income Taxes ................... 23,669 20,710 19,937 (15,955)
Income Tax Provision (Benefit) ...................... 10,243 10,789 8,750 (5,683)
Minority Interests .................................. 7 460 (156) 783
------------ ------------ ------------ ------------
Net Income (Loss) Before Extraordinary Item ......... 13,419 9,461 11,343 (11,055)
Extraordinary Item, net of tax benefit of $1,310 .... -- -- -- 1,607
------------ ------------ ------------ ------------
Net Income (Loss) ................................... $ 13,419 $ 9,461 $ 11,343 $ (12,662)
============ ============ ============ ============
</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,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) ............................................. $ 11,343 $ (12,662)
Extraordinary item ............................................ -- 1,607
Non-cash expenses and gains included in net income (loss) ..... 37,608 28,313
Net change in certain operating assets and liabilities ........ 47,162 33,218
------------ ------------
Net cash provided by operating activities ................... 96,113 50,476
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures .......................................... (61,498) (87,511)
Proceeds from assets sold ..................................... 20,200 942
Payments for business acquisitions, net of cash acquired ...... -- (7,491)
Other investing activities .................................... (1,662) (958)
------------ ------------
Net cash used for investing activities ..................... (42,960) (95,018)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt and capital lease obligations ................ (4,934) (10,797)
Redemption of preferred stock ................................. (48,982) (22,260)
Proceeds from issuance of common stock to Laidlaw ............. 243,158 265,805
Purchase of common stock from Laidlaw ......................... (237,325) (140,204)
Redemption of 8 1/2% debentures ............................... (205) (3,740)
Payment of quarterly preferred dividends ...................... (2,108) (3,435)
Net change in revolving credit facility ....................... -- (37,785)
------------ ------------
Net cash provided by (used for) financing activities ........ (50,396) 47,584
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS ....................... 2,757 3,042
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .................. 8,295 4,736
------------ ------------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................ $ 11,052 $ 7,778
============ ============
</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, 2000
(UNAUDITED)
1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the unaudited Interim Consolidated Financial
Statements of Greyhound Lines, Inc. and Subsidiaries ("Greyhound" or the
"Company") include all adjustments, consisting of only normal recurring
adjustments, necessary to present fairly the Company's financial position as of
September 30, 2000, the results of its operations for the three and nine months
ended September 30, 2000 and 1999 and cash flows for the nine months ended
September 30, 2000 and 1999 and have been prepared on a going concern basis
which contemplates the realization of assets and the settlement of liabilities
and commitments in the normal course of operations. Due to the seasonality of
the Company's operations, the results of its operations for the interim period
ended September 30, 2000 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, 1999. Certain
reclassifications have been made to the prior period statements to conform them
to the current year presentation. For the three and nine months ended September
30, 2000 and 1999, the Company's comprehensive income (loss) approximated its'
net income (loss).
2. COMMITMENTS AND CONTINGENCIES
The Company's principal sources of liquidity are cash flow from operations and,
previously, funds provided by the Company's parent, Laidlaw Inc. ("Laidlaw").
During the third quarter, Laidlaw advised the Company that cash funding, after
August 1, 2000, would be limited to the cash flow generated by the Company from
its operations and that additional funds from Laidlaw would not be available.
Laidlaw further requested and authorized the Company to seek additional funding
from outside financing sources for its seasonal cash requirements and capital
expenditure programs. On October 24, 2000, the Company completed and closed on a
two-year, $125 million revolving credit facility ("Revolving Credit Facility")
with Foothill Capital Corporation ("Foothill") to fund its working capital and
near-term capital expenditure needs.
Upon completion of this transaction, Greyhound paid $43 million of intercompany
amounts due to Laidlaw, with all remaining intercompany amounts then due
converting to an intercompany loan subordinate to the Revolving Credit Facility.
The intercompany loan matures 91 days after the maturity of the Foothill
agreement. Interest on the loan accrues at the Applicable Federal Rate and is
payable at maturity.
Letters of credit or borrowings are available under the Revolving Credit
Facility subject to a maximum of $125 million based upon 85% of the appraised
wholesale value of certain bus collateral and 50% of the fair market value
(based on appraisals to be obtained) of certain real property collateral. The
Company currently has availability under the Revolving Credit Facility of $87.5
million and, after obtaining current appraisals on the real property collateral
and pledging additional buses, anticipates having full availability by December
31, 2000.
Borrowings under the Revolving Credit Facility will initially bear interest at a
rate equal to Wells Fargo Bank's prime rate plus 0.50% per annum or LIBOR plus
2.0% as selected by the Company. After December 31, 2000, the interest rates
will be subject to quarterly adjustment based upon the Company's ratio of debt
to EBITDA for the four previous quarters. Initially, letter of credit fees will
be 2.00% per annum based upon the maximum amount available to be drawn under
each letter of credit. After December 31, 2000, letter of credit fees will be
based on the then applicable LIBOR margin.
The Revolving Credit Facility is secured by liens on substantially all of the
assets of the Company and the stock and assets of certain of its subsidiaries.
The Revolving Credit Facility is subject to certain affirmative and negative
operating and financial covenants, including maximum total debt to EBITDA ratio;
minimum EBITDA to interest ratio; minimum shareholder's equity; limitation on
non-bus capital expenditures; limitations on additional liens, indebtedness,
guarantees, asset disposals, advances, investments and loans; and restrictions
on the redemption or retirement of certain subordinated indebtedness or equity
interests, payment of dividends and transactions with affiliates, including
Laidlaw.
8
<PAGE> 9
The Company's primary uses of cash are for operating activities, capital
expenditures and debt service. As of September 30, 2000, the Company had $174.9
million of long-term indebtedness (including a current portion of $4.1 million),
principally, its 11-1/2% Senior Notes due 2007 in the amount of $150 million.
Interest on the Senior Notes is payable in semi-annual installments of $8.6
million, each April and October. The Company has received ninety (90) new motor
coaches from Motor Coach Industries International. Payment for the buses,
totaling $27.5 million, is payable to Motor Coach in December 2000. The Company
is seeking permanent lease or purchase money financing for these buses or will
finance the buses using the Revolving Credit Facility.
At September 30, 2000, the Company had 208,550 shares of Redeemable Preferred
Stock outstanding. Each share of Redeemable Preferred Stock is convertible, at
the option of the holder, into $33.33 in cash. As of the date of this report,
the Company has made all required conversion payments called for shares tendered
for conversion. On November 1, 2000, the Company paid a quarterly dividend to
holders of the Redeemable Preferred Stock.
9
<PAGE> 10
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF 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. The Company's consolidated operations include a
nationwide network of terminal and maintenance facilities, a fleet of
approximately 2,900 buses and approximately 1,800 sales outlets.
The Company's business is seasonal in nature and generally follows the pattern
of the travel industry as a whole, with peaks during the summer months and the
Thanksgiving and Christmas holiday periods. As a result, the Company's operating
cash flows are also seasonal with a disproportionate amount of the Company's
annual operating cash flows being generated during the peak travel periods. The
day of the week on which certain holidays occur, the length of certain holiday
periods, and the date on which certain holidays occur within the fiscal quarter,
may also affect the Company's quarterly results of operations.
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, 2000 and 1999:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
OPERATING REVENUES
Transportation service
Passenger services ........................... 86.5% 86.0% 84.9% 84.5%
Package express .............................. 3.7 4.0 4.2 4.4
Food services .................................. 4.1 4.3 4.3 4.2
Other operating revenues ....................... 5.7 5.7 6.6 6.9
------------ ------------ ------------ ------------
Total Operating Revenues ..................... 100.0 100.0 100.0 100.0
------------ ------------ ------------ ------------
OPERATING EXPENSES
Maintenance .................................... 8.7 8.5 9.4 9.5
Transportation ................................. 23.5 22.4 24.9 23.7
Agents' commissions and station costs .......... 17.4 18.0 18.2 19.1
Marketing, advertising and traffic ............. 2.8 3.5 3.1 3.4
Insurance and safety ........................... 4.8 6.0 5.2 5.9
General and administrative ..................... 12.1 11.6 12.2 13.0
Depreciation and amortization .................. 4.2 4.1 4.4 4.6
Operating taxes and licenses ................... 5.3 5.7 6.0 6.3
Operating rents ................................ 7.4 7.5 8.3 8.2
Cost of goods sold - food services ............. 2.8 2.8 2.8 2.8
Other operating expenses ....................... 1.0 0.2 0.7 0.3
------------ ------------ ------------ ------------
Total Operating Expenses ..................... 90.0 90.3 95.2 96.8
------------ ------------ ------------ ------------
Operating Income ................................. 10.0 9.7 4.8 3.2
Settlement of Stock Options ...................... -- -- -- 3.1
Interest Expense ................................. 1.9 2.0 2.2 2.4
------------ ------------ ------------ ------------
Income (Loss) Before Income Taxes ................ 8.1 7.7 2.6 (2.3)
Income Tax Provision (Benefit) ................... 3.5 4.0 1.1 (0.8)
Minority Interests ............................... -- 0.2 -- 0.1
------------ ------------ ------------ ------------
Net Income (Loss) Before Extraordinary Item ...... 4.6 3.5 1.5 (1.6)
Extraordinary Item ............................... -- -- -- 0.2
------------ ------------ ------------ ------------
Net Income (Loss) ................................ 4.6 3.5 1.5 (1.8)
============ ============ ============ ============
</TABLE>
10
<PAGE> 11
The following table sets forth certain operating data for the Company for the
three and nine months ended September 30, 2000 and 1999. Certain statistics have
been adjusted and restated from that previously published to provide consistent
comparisons.
<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30, NINE MONTHS ENDED SEPTEMBER 30,
2000 1999 % CHANGE 2000 1999 % CHANGE
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Regular Service Miles (000's) .......... 98,091 96,750 1.4% 263,935 255,305 3.4%
Total Bus Miles (000's) ................ 99,262 97,862 1.4% 270,410 261,323 3.5%
Passenger Miles (000's) ................ 2,714,214 2,641,272 2.8% 7,040,729 6,642,330 6.0%
Passengers Carried (000's) ............. 7,149 7,140 0.1% 19,196 18,591 3.3%
Average Trip Length (passenger miles
/ passengers carried) .................. 380 370 2.7% 367 357 2.8%
Load (avg. number of passengers per
regular service mile) .................. 27.7 27.3 1.5% 26.7 26.0 2.7%
Load Factor (% of available seats
filled) ................................ 55.9% 56.2% (0.5%) 53.9% 53.7% 0.4%
Yield (regular route revenue /
passenger miles) ....................... $ 0.0928 $ 0.0875 6.1% $ 0.0921 $ 0.0881 4.5%
Average Ticket Price ................... $ 35.23 $ 32.36 8.9% $ 33.77 $ 31.49 7.2%
Total Revenue Per Total Bus Mile ....... $ 2.934 $ 2.747 6.8% $ 2.822 $ 2.652 6.4%
Cost Per Total Bus Mile:
Maintenance .......................... $ 0.256 $ 0.232 10.3% $ 0.264 $ 0.251 5.2%
Transportation ....................... $ 0.690 $ 0.614 12.4% $ 0.704 $ 0.629 11.9%
</TABLE>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 RESULTS OF OPERATIONS
The Company's results of operations include the operating results of On-Time
Delivery and LSX Delivery (collectively the "acquisitions"). The purchase of
On-Time Delivery occurred during the first quarter of 1999 and the acquisition
involving LSX Delivery 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 $22.5 million, up 8.4%,
and $70.1 million, up 10.1% for the three and nine months ended September 30,
2000, compared to the same periods in 1999.
Passenger services revenues increased $20.8 million, up 9.0%, and $62.7 million,
up 10.7%, for the three and nine months ended September 30, 2000, compared to
the same periods in 1999. The increases in regular route revenues reflect the
impact of a 6.1% and 4.5% improvement in yield for the three and nine months
ended September 30, 2000, combined with 2.7% and 2.8% increases in average trip
length and 0.1% and 3.3% increases in passengers carried.
Package express revenues decreased $0.1 million, down 0.7%, and increased $1.2
million, up 4.0%, for the three and nine months ended September 30, 2000,
compared to the same periods in 1999 (including increases of $0.1 million and
$1.8 million related to the acquisitions). Excluding the acquisitions, the
Company experienced a decrease due to reduced standard product deliveries (the
traditional, low value, terminal to terminal market segment) offset somewhat by
gains in same day and priority product deliveries.
Food services revenues increased $0.6 million, up 5.1%, and $3.4 million, up
11.5%, for the three and nine months ended September 30, 2000, compared to the
same periods in 1999. Food services revenues increased over the prior year due
primarily to the addition of eight in-terminal restaurants that were previously
concessionaire-operated Burger King locations and the increase in passenger
traffic.
Other operating revenues, consisting primarily of revenue from charter and
in-terminal sales and services, increased $1.1 million, up 7.3%, and $2.8
million, up 5.9%, for the three and nine months ended September 30, 2000,
compared to the same periods in 1999. The increases are attributable to higher
tenant income and long distance commissions.
11
<PAGE> 12
Operating Expenses. Total operating expenses increased $19.2 million, up 7.9%,
and $55.8 million, up 8.3%, for the three and nine months ended September 30,
2000, compared to the same periods in 1999. The increase is attributable to 1.4%
and 3.5% increases in bus miles operated for the three and nine months ended
September 30, 2000, increased fuel prices, higher driver wages, higher
maintenance costs, increased benefits costs, increased ticket and express
commissions resulting from higher sales and, for the nine months ended September
30, 2000, $1.5 million related to the operations of the acquisitions.
Maintenance costs increased $2.7 million, up 11.9%, and $5.8 million, up 8.8%,
for the three and nine months ended September 30, 2000, compared to the same
periods in 1999, due to increased bus miles, higher labor and materials costs
and fewer buses remaining under warranty.
Transportation expenses which consist primarily of fuel costs and driver
salaries, increased $8.4 million, up 14.0%, and $25.9 million, up 15.7%, for the
three and nine months ended September 30, 2000, compared to the same periods in
1999, due primarily to increased bus miles, fuel costs, and higher driver wages.
Transportation expenses increased on a per-mile basis by 12.4% and 11.9%, for
the three and nine months ended September 30, 2000, due largely to higher fuel
prices in 2000 compared to the prior year, and to the impact of the driver wage
increases. For the three and nine months ended September 30, 2000, the average
cost per gallon of fuel increased to $0.945 and $0.900 per gallon, compared to
$0.648 and $0.590 per gallon during the same periods in 1999, resulting in
increased fuel cost of $4.8 million and $13.8 million.
Agents' commissions and station costs increased $2.4 million, up 4.9%, and $6.5
million, up 4.9%, for the three and nine months ended September 30, 2000,
compared to the same periods in 1999. The increase is primarily due to
commissions from increased ticket sales, terminal salaries associated with
staffing for the increase in passengers, terminal salary raises and the
inclusion of the acquisitions.
Marketing, advertising and traffic expenses decreased $1.3 million, down 13.5%,
and increased $0.3 million, up 1.1%, for the three and nine months ended
September 30, 2000, compared to the same periods in 1999, due to the timing of
advertising expenditures.
Insurance and safety costs decreased $2.2 million, down 13.3%, and $1.0 million,
down 2.5%, for the three and nine months ended September 30, 2000, compared to
the same periods in 1999 principally due to insurance rebates received as a
result of lower accident frequency.
General and administrative expenses increased $3.9 million, up 12.6%, and $3.5
million, up 3.9%, for the three and nine months ended September 30, 2000,
compared to the same periods in 1999 due to higher benefits costs ($3.2 million
and $4.1 million related to the Company's management incentive plan and $1.6
million and $4.3 million related to the Company's health and welfare plan for
the three and nine months ended September 30, 2000, compared to the same periods
in 1999) partially offset by a reduction in expenses associated with remediation
of the Company's computer systems related to the Year 2000. For the three and
nine months ended September 30, 1999, Year 2000 expenses totaled $1.8 million
and $4.5 million, respectively.
Depreciation and amortization increased $1.1 million, or 9.6%, and $1.8 million,
or 5.8%, for the three and nine months ended September 30, 2000, compared to the
same periods in 1999. The increases are primarily due to higher capital
expenditures in prior periods, and goodwill amortization attributable to the
acquisitions.
Operating taxes and licenses expense increased $0.1 million, up 0.8%, and $1.9
million, up 4.3%, for the three and nine months ended September 30, 2000,
compared to the same periods in 1999 due to increased payroll taxes resulting
from increased salaries and head-counts related to higher business volume
(including increased miles operated) and increased fuel taxes resulting from
increased miles.
Operating rents increased $1.3 million, up 6.2%, and $6.2 million, up 10.9%, for
the three and nine months ended September 30, 2000, compared to the same periods
in 1999 due to the increase in revenues and an increase in the number of buses
financed under operating leases.
Food services cost of goods sold increased $0.5 million, up 6.5%, and $2.1
million, up 10.7%, for the three and nine months ended September 30, 2000,
compared to the same periods in 1999, primarily due to the increases in food
services revenues.
Other operating expenses increased $2.4 million, up 471.5%, and $3.0 million, up
143.1%, for the three and nine months ended September 30, 2000, compared to the
same periods in 1999 due to the write-down of an investment and losses on
disposal of property, plant and equipment.
12
<PAGE> 13
Interest expense increased $0.3 million, up 5.4%, for the three months ended
September 30, 2000 and decreased $0.3 million, down 2.1%, for the nine months
ended September 30, 2000, compared to the same periods in 1999. For the
three-month period, the increase is attributable to interest on the installment
conversion payments to certain preferred stockholders. For the nine-month
period, the decreased expense is due to a reduction in the average debt
outstanding partially offset by interest on the installment conversion payments
to certain preferred stockholders.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of liquidity are cash flow from operations and,
previously, funds provided by the Company's parent, Laidlaw Inc. ("Laidlaw").
During the third quarter, Laidlaw advised the Company that cash funding, after
August 1, 2000, would be limited to the cash flow generated by the Company from
its operations and that additional funds from Laidlaw would not be available.
Laidlaw further requested and authorized the Company to seek additional funding
from outside financing sources for its seasonal cash requirements and capital
expenditure programs. On October 24, 2000, the Company completed and closed on a
two-year, $125 million revolving credit facility ("Revolving Credit Facility")
with Foothill Capital Corporation ("Foothill") to fund its working capital and
near-term capital expenditure needs.
The Company's primary uses of cash are for operating activities, capital
expenditures and debt service. As of September 30, 2000, the Company had $174.9
million of long-term indebtedness (including a current portion of $4.1 million),
principally, its 11-1/2% Senior Notes due 2007 in the amount of $150 million.
Interest on the Senior Notes is payable in semi-annual installments of $8.6
million, each April and October. The Company has received ninety (90) new motor
coaches from Motor Coach Industries International. Payment for the buses,
totaling $27.5 million, is payable to Motor Coach in December 2000. The Company
is seeking permanent lease or purchase money financing for these buses or will
finance the buses using the Revolving Credit Facility.
Net cash provided by operating activities for the nine months ended September
30, 2000 was $96.1 million, an increase of $45.6 million from the $50.5 million
generated during the same period of 1999. The increase is due primarily to the
improvement in net income and an increase in accrued expenses related to terms
provided by the Company's vendor for new bus purchases. Net cash used for
investing activities for the first nine months of 2000 was $43.0 million
compared to $95.0 million for the first nine months of 1999. The decrease is
principally due to $44.0 million in sale-leaseback proceeds received in the
first nine months of 2000, compared to no sale-leaseback proceeds during the
same period of 1999, reduced capital expenditures and no acquisition spending
during the first nine months of 2000 compared to the same period of 1999. Net
cash used for financing activities in the first nine months of 2000 was $50.4
million versus $47.6 million cash provided by financing activities during the
same period in 1999. The $98.0 million reduction in cash provided from financing
activities is primarily due to repurchase of common stock from Laidlaw, the
improved operating income in 2000, as well as reduced capital expenditures and
increased sale-leaseback proceeds during 2000.
GOVERNMENT REGULATION
On August 17, 2000, in response to cautionary statements contained in the
Company's Form 10-Q for the period ending June 30, 2000, concerning the loss of
funding from Laidlaw, the U.S. Surface Transportation Board ("STB") issued a
decision requesting comments concerning the liquidity situation of the Company
and its potential impact on operations. The Company and Laidlaw have responded
to the STB inquiry and have advised the STB that the Company has completed the
Revolving Credit Facility. Additionally, the U.S. Department of Transportation,
which oversees the Company's authority to self-insure a portion of its
automobile insurance, is monitoring the Company's financial situation and its
capability to fund self-insured claims. Loss of self-insurance authority or
modification of its terms may adversely affect the Company's results of
operations, liquidity, or financial condition.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On May 9, 2000, a lawsuit was filed by two holders of Redeemable Preferred Stock
alleging: (i) that the Company, in violation of federal securities laws,
materially misrepresented facts, and omitted reference to material facts, with
respect to the conversion rights of holders of the Redeemable Preferred Stock
and (ii) that the Company was in breach of the rights of holders of Redeemable
Preferred Stock as contained in the Company's Restated Certificate of
Incorporation. The suit sought recovery from the Company of the conversion
payments relating to the Redeemable Preferred Stock held by the plaintiffs,
totaling $17.4 million, costs, attorneys' fees and interest. Laidlaw was also
named as a defendant in the suit. Plaintiffs alleged that Laidlaw tortiously
interfered with the Company's obligations to the plaintiffs and sought
injunctive relief, actual and punitive damages, costs, attorneys' fees and
interest. The suit, Reliant Trading and Deutsche Bank AG, London Branch v.
Greyhound Lines, Inc. and Laidlaw Inc., is pending in the United States District
Court for the Eastern District of Wisconsin, Civil Action 00-C-0656. On May 31,
2000, another holder of Redeemable Preferred Stock, Silverado Arbitrage Trading
Ltd., filed a motion with the Court seeking to intervene in the lawsuit.
Silverado sought recovery of conversion payments totaling $4.9 million, costs,
attorneys' fees and interest from the Company and sought injunctive relief,
actual and punitive damages, costs, attorneys' fees and interest as to Laidlaw.
On June 8 and 15, 2000, the Company and Laidlaw reached separate confidential
settlements with the plaintiffs and Silverado whereby they would receive
payments from the Company of the conversion amounts for their Redeemable
Preferred Stock, together with interest accruing from May 1, 2000, in weekly
installments through August 31, 2000. The Company has fulfilled all of its
obligations under the settlements. Accordingly, the foregoing litigation is
expected to be dismissed in the near future.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.44 - Loan and Security Agreement among Greyhound Lines, Inc., as
Borrower, the Financial Institutions named as Lenders, and Foothill
Capital Corporation as Agent dated October 24, 2000.(1)
27 - Financial Data Schedule as of and for the nine months ended
September 30, 2000.(2)
----------
(1) Incorporated by reference from the Registrant's Report on Form 8-K
regarding the financing agreement dated October 27, 2000.
(2) Filed only in EDGAR format with the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 2000.
(b) REPORTS ON FORM 8-K
On September 22, 2000 the Company filed a current report on Form 8-K with
the Securities and Exchange Commission to report that Laidlaw Inc., the parent
of Greyhound Lines, Inc., anticipates securing financing facilities sufficient
to satisfy its projected working capital needs.
On October 27, 2000 the Company filed a current report on Form 8-K with the
Securities and Exchange Commission to report that Greyhound Lines, Inc. had
entered into a two year $125 million revolving credit facility with Foothill
Capital Corporation which management believes will be sufficient to satisfy it's
working capital and near-term capital needs.
14
<PAGE> 15
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 13, 2000
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/ Cheryl W. Farmer
--------------------------------------
Cheryl W. Farmer
Examiner
SISTEMA INTERNACIONAL de
TRANSPORTE de AUTOBUSES, INC.
By: /s/ Jeffrey W. Sanders
--------------------------------------
Jeffrey W. Sanders
Senior Vice President and Chief
Financial Officer
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
15
<PAGE> 16
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
27 FINANCIAL DATA SCHEDULE
</TABLE>
