<PAGE>
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934
For the quarterly period ended MARCH 31, 2000
Commission File No. 333-08871
MOTOR COACH INDUSTRIES INTERNATIONAL, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 86-0706940
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
10 EAST GOLF ROAD, DES PLAINES, ILLINOIS 60016
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 299-9900
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 that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----
The number of shares outstanding of the registrant's Common Stock: 1,000
shares as of March 31, 2000.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The condensed financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information, in accordance with
generally accepted accounting principles, has been condensed or omitted
pursuant to such rules and regulations, although the Company believes that
the disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Motor Coach Industries
International, Inc. Annual Report on Form 10-K dated December 31, 1999. In
the opinion of management, these statements contain all adjustments
consisting of only normal recurring adjustments, necessary to present fairly
the financial position as of March 31, 2000, and December 31, 1999 and
results of operations and cash flows for the three month periods ended March
31, 2000, and March 31, 1999. The 2000 interim results reported herein may
not necessarily be indicative of results of operations for the full year 2000.
FORWARD-LOOKING STATEMENTS
The Company makes "forward-looking statements" throughout this form 10-Q.
Whenever the reader reads a statement that is not simply a statement of
historical fact, such as when the Company describes what it "believes"
"expects" or "anticipates" will occur, and other similar statements, the
reader must remember that the Company's expectations may not be correct, even
though it believes they are reasonable. The reader is cautioned not to put
undue reliance on any forward-looking statement.
The reader should understand that a number of factors, in addition to those
discussed herein, could affect the Company and could cause its results to
differ materially from those expressed in such forward-looking statements.
Among these factors are: (1) increased competition in those markets, (2) the
Company's substantial leverage and uncertainties associated with servicing
its debt, (3) changes in laws or regulations and approvals and decisions of
courts, regulators and governmental bodies, (4) uncertainties associated with
the general economic conditions in our markets, (5) dependence on the
inter-city coach and transit bus industries, (6) changes in product demand,
(7) changes in customer concentration, (8) interest rate fluctuations, (9)
risks associated with Mexican operations, (10) foreign currency risks and
(11) dependence on suppliers. Further, the Company operates in an industry
sector where securities' values may be volatile and may be influenced by
economic and other factors beyond our control. The Company does not intend,
and undertakes no obligation, to update these forward-looking statements.
<PAGE>
MOTORCOACH INDUSTRIES INTERNATIONAL INC.
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
(DOLLARS IN THOUSANDS) 2000 1999
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Sales $157,249 $242,505
Finance income 2,298 708
------------- ------------
Total revenues 159,547 243,213
Operating costs and expenses:
Cost of sales (exclusive of items shown separately below) 120,985 184,899
Interest expense, finance operations 1,395 690
Depreciation and amortization 6,411 6,376
Research and development expenses 2,415 2,406
Selling, general and administrative expenses 23,250 24,962
------------- ------------
Total operating costs and expenses 154,456 219,333
Operating income 5,091 23,880
Other income and (expense):
Interest income (expense) (14,627) (6,353)
Interest (expense) pushed down from related party - (6,373)
Foreign currency translation gain (loss) (185) (1,003)
Other Income (expense) (857) (1,210)
------------- ------------
Total other income and (expense) (15,669) (14,939)
Income before income taxes (10,578) 8,941
Income taxes (benefit) (2,343) 8,499
------------- ------------
Net income (loss) $ (8,235) $ 442
============= ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2000 AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
(DOLLARS IN THOUSANDS) 2000 1999
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $16,616 $15,630
Trade and other accounts receivable, net 123,871 145,691
Current portion of notes receivable, net 18,348 17,483
Inventories, net 255,961 217,083
Deferred income taxes 33,612 25,489
Other current assets 6,330 4,751
--------- --------
Total Current Assets 454,738 426,127
Property, plant and equipment, net 107,095 110,470
Notes receivable, net 73,467 57,771
Investments in affiliates 24,051 23,820
Intangible assets, net 210,922 212,723
Deferred income taxes, non-current 19,638 19,975
Other non-current assets 36,416 40,388
-------- --------
Total Assets $926,327 $891,274
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $106,631 $90,183
Accrued compensation 8,917 9,149
Accrued warranties 12,912 13,365
Accrued income taxes 7,414 4,695
Self insurance reserves 3,401 3,101
Net liabilities of discontinued operations 3,956 3,949
Other current liabilities 36,381 31,832
------- --------
Total Current Liabilities 179,612 156,274
Long-term debt 555,757 536,534
Pensions and other benefits 17,147 16,689
Deferred income taxes 13,886 11,893
Other deferred items and self-insurance reserves 13,681 14,767
------ --------
Total Liabilities 780,083 736,157
------- -------
Stockholder's Equity
Common stock (1000 shares
authorized, issued and outstanding) and 341,813 341,813
additional paid-in capital
Accumulated deficit (175,486) (167,250)
Accumulated other comprehensive income (20,083) (19,446)
-------- ---------
Total Stockholder's Equity 146,244 155,117
--------- -------
Total liabilities and Stockholder's equity $926,327 $891,274
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
MOTORCOACH INDUSTRIES INTERNATIONAL INC.
UNAUDITED STATEMENT OF CONSOLIDATED CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 2000 and 1999
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
(DOLLARS IN THOUSANDS) 2000 1999
- --------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows Provided By (Used In) Operating Activities
Net income $ (8,235) $ 442
Adjustments to Reconcile Net Income to Net Cash
Provided By (Used In) Operations:
Depreciation and amortization 6,411 6,376
Deferred income taxes (5,793) 916
Gain (loss) on sale of property and notes receivable (88) 423
Non-cash interest expense pushed down from related party - 6,373
Other non-cash interest expense 781 -
Other non-cash items (63) 5,365
All other operating activities 5,763 (18,146)
---------- --------
Net Cash Provided By (Used In) Operating Activities (1,224) 1,749
---------- --------
Cash Flows Provided By (Used In) Investing Activities
Capital expenditures ( 3,427) (2,959)
Proceeds from sale of property and investments 2,968 8,677
Change in notes receivable (16,561) 2,133
Discontinued operations, net changes 7 666
---------- --------
Net Cash Provided By (Used In) Investing Activities (17,013) 8,517
---------- --------
Cash Flow Provided By (Used In) Financing Activities
Payment of term B loan principal (833) -
Net change in other long-term borrowings 56 1,581
Net change in related party receivables, payables - -
Dividends paid to parent company - (3,000)
Net change in bank credit facilities 20,000 -
---------- --------
Net Cash Provided By (Used In) Financing Activities 19,223 (1,419)
---------- --------
Net Increase (Decrease) in Cash 986 8,847
Cash and Cash Equivalents at Beginning of Period 15,630 24,038
---------- --------
Cash and Cash Equivalents at End of Period $ 16,616 $ 32,885
========== ========
</TABLE>
The accompanying notes are an integral part of these statements
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 1 - PRINCIPLES OF CONSOLIDATION AND PRESENTATION
The Company is a wholly owned subsidiary of MCII Holdings (USA), Inc. These
unaudited financial statements present the accounts of Motor Coach Industries
International Inc. ("MCII") together with its subsidiaries (the "Company").
The Company's principal operating subsidiaries are Motor Coach Industries,
Inc. ("MCI-U.S."), Motor Coach Industries Limited ("MCI-Canada"), Hausman Bus
Sales, Inc. ("HBSI"), Universal Coach Parts, Inc. ("UCP"), and Dina Autobuses
S.A. de C.V. ("Autobuses").
All significant inter-company balances and transactions have been eliminated
upon consolidation. Prior period amounts include all reclassifications necessary
to conform to current presentations.
NOTE 2- INVENTORIES
Inventories consisted of the following (dollars in thousands):
<TABLE>
<CAPTION>
MARCH 31, 2000 DECEMBER 31, 1999
-------------- -----------------
<S> <C> <C>
Raw Material $ 42,718 $ 42,865
Work in Process 44,161 41,513
Finished Goods 199,079 163,634
------------- --------------
285,958 248,012
Inventory Reserves (29,997) (30,929)
------------- --------------
Total $ 255,961 $ 217,083
============== ==============
</TABLE>
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 3 - REVENUES, GROSS PROFIT AND OPERATING INCOME, SUPPLEMENTARY INFORMATION
Revenues, gross profit and operating income for the three months ended March
31, 2000 and 1999 were as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
------------------------
2000 1999
(dollars in thousands) ------------------------
<S> <C> <C>
Revenues:
Coach Sales $ 117,509 $ 191,096
Customer Support Business 39,740 50,557
Finance 2,298 1,560
------------------------
$ 159,547 $ 243,213
========================
Gross profits:
Coach Sales $ 24,110 $ 45,365
Customer Support Business 9,366 10,396
Finance 903 843
------------------------
$ 34,379 $ 56,604
========================
Operating income (loss):
Coach Sales $ 3,092 $ 17,909
Customer Support Business 2,488 6,131
Finance (489) (160)
------------------------
$ 5,091 $ 23,880
========================
</TABLE>
Total assets as of March 31, 2000 were as follows (dollars in thousands):
<TABLE>
<S> <C>
Coach Sales $ 607,663
Customer Support Business 201,171
Finance 117,493
-----------
$ 926,327
===========
</TABLE>
NOTE 4 - COMPREHENSIVE INCOME (LOSS)
For the three months ended March 31, 2000 and 1999, the Company's comprehensive
income included net income and foreign currency translation losses. The foreign
currency translation losses totaled $637,000 and $1,305,000 for the three months
ended March 31, 2000 and 1999 respectively. Therefore, total comprehensive
income/(loss) was ($8,872,000) for the three months ended March 31 2000,
compared with ($863,000) for the comparable period of 1999.
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
NOTE 5- RELATED PARTY TRANSACTIONS
Related party transactions for the three months ended March 31, 2000 and 1999
were as follows:
<TABLE>
<CAPTION>
(dollars in thousands)
2000 1999
-----------------------------------
<S> <C> <C>
Purchases from affiliated companies:
Goods $ 2,257 $ 936
Services 1,083 1,205
-----------------------------------
$ 3,340 $ 2,141
===================================
Sales to affiliated companies:
Goods $ 494 $ 753
===================================
Charges from affiliated Companies:
MCII Financial Services $ 622 $ 398
Grupo Dina Royalties - 1,558
Grupo Dina Management Fee - 250
-----------------------------------
$ 622 $ 2,206
===================================
</TABLE>
NOTE 6. CHANGES IN OTHER OPERATING ACTIVITIES
Changes in other operating activities for the three months ended March 31,
2000 and 1999 consisted of:
<TABLE>
<CAPTION>
(Dollars in Thousands) 2000 1999
-----------------------------------
<S> <C> <C>
Decrease (increase) in accounts receivable $ 20,951 $ (31,314)
Decrease (increase) in inventories (34,598) 7,324
Increase (decrease) in accounts payable 16,448 (711)
Increase (decrease) in accrued income taxes 2,719 (3,225)
All other changes, net 243 9,780
-----------------------------------
Changes in other operating activities $ 5,763 $ (18,146)
===================================
</TABLE>
NOTE 7. - COMMITMENTS AND CONTINGENT LIABILITIES
The Company's Canadian income tax returns for 1982 through 1992 are currently
under review by Canada Customs and Revenue Agency ("CCRA"). Authorities have
proposed imputing additional income related to transactions with a U.S.
based subsidiary of the Company. A formal reassessment has been issued by
CCRA on the 1985 return. A notice of objection has been filed by the Company
for 1985. In the event of an adverse judgment, the additional income taxes
for 1982 through 1992 could amount to $24,000,000 plus interest of
approximately $57,000,000 and, in addition, the Company may be subject to
potential reassessments for the years subsequent to 1992 on the same basis
which could result in additional income taxes and interest. These amounts are
all before recoveries of U.S. federal income taxes which may be available to
offset a portion of any additional taxes paid to Canada as these years are
still open for U.S. Federal income tax purposes. In accordance with SFAS No.
109, "Accounting for Income Taxes," a portion of any ultimate liability owed
as a result of this issue would be treated as an adjustment of Dina's
purchase price on acquiring the Company, resulting in an increase of purchase
goodwill. (If the ultimate liability were $81,000,000, then approximately
$48,000,000 would be a purchase accounting adjustment.) Based on its review
of current relevant information, including the advice of outside counsel, the
Company is of the opinion that CCRA's arguments are without merit and that
any liability from this matter will not be material to its financial
condition or results of operations.
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 8 - GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000
-----------------------------------------
MCII GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue............................................... $ - $ 138,108 $ 64,020 $ (42,581) $ 159,547
Cost of sales (exclusive of items shown
separately below).................................. - 105,486 58,080 (42,581) 120,985
Interest expense, finance operations.................. - 1,395 - - 1,395
Depreciation & amortization expense................... 115 2,900 3,396 - 6,411
Research and development expense...................... - 1,315 1,100 - 2,415
Tax profit allocation MCI/MCI Ltd..................... - 7,569 (7,569) - -
Selling, general and administrative................... 2,991 13,952 6,307 - 23,250
---------- ---------- ----------- ---------- ---------
Operating income (loss)............................... (3,106) 5,491 2,706 - 5,091
Interest (expense) income............................. (13,193) (1,516) 82 - (14,627)
Foreign currency translation gain (loss).............. (8) 209 (386) - (185)
Other income (expense)................................ - (128) (729) - (857)
---------- ---------- ----------- ---------- ---------
(13,201) (1,435) (1,033) - (15,669)
---------- ---------- ----------- ---------- ---------
Income (loss) before income taxes..................... (16,307) 4,056 1,673 - (10,578)
Income taxes.......................................... (6,877) 2,121 2,413 - (2,343)
---------- ---------- ----------- ---------- ---------
$ (9,430) $ 1,935 $ (740) $ - $ (8,235)
---------- ---------- ----------- ---------- ---------
---------- ---------- ----------- ---------- ---------
</TABLE>
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 8 - GUARANTOR CONDENSED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED INCOME STATEMENT
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
----------------------------------------------------------------------
MCII GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
---- ---------- -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue $ - $209,257 $ 98,508 $(64,552) $ 243,213
Cost of sales (exclusive of items shown separately - 161,138 84,064 (60,303) 184,899
below)
Interest expense, finance operations - 640 50 - 690
Depreciation & amorization expense 61 2,603 3,712 - 6,376
Research and development expenses - 1,557 849 - 2,406
Tax profit allocation-MCI/MCI Ltd. - 12,763 (12,763) - -
Selling, general and marketing expenses (32) 14,179 10,710 105 24,962
-------- -------- -------- -------- --------
Operating income (loss) (29) 16,377 11,886 (4,354) 23,880
-------- -------- -------- -------- --------
Interest (expense) income (1,090) (3,465) 212 (1,304) (5,647)
Interest expense pushed down from related party (6,373) - - - (6,373)
Foreign currency translation gain (loss) - - (1,003) - (1,003)
Other income (expense) 100 (1,161) (855) - (1,916)
-------- -------- -------- -------- --------
(7,363) (4,626) (1,646) (1,304) (14,939)
-------- -------- -------- -------- --------
Income (loss) before income taxes (7,392) 11,751 10,240 (5,658) 8,941
Income taxes (565) 5,076 3,988 - 8,499
-------- -------- -------- -------- --------
Net income (loss) $(6,827) $ 6,675 $ 6,252 $ (5,658) $ 442
======== ======== ======== ======== ========
</TABLE>
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued)
NOTE 8. GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
For the Three Months Ended March 31, 2000
----------------------------------------------------------------------
MCII Guarantors Non-Guarantors Eliminations Consolidated
---------- ---------- -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents $ 3,990 $ 2,543 $ 10,083 $ - $ 16,616
Trade and other accounts receivable 631 70,999 52,241 - 123,871
Intercompany receivables (payables) 775,115 (550,320) (15,339) (209,456) -
Current portion of notes receivable - 17,789 559 - 18,348
Inventories - 190,037 67,424 (1,500) 255,961
Deferred incomes taxes 16,664 15,293 1,655 - 33,612
Other current assets 2,231 2,751 1,348 - 6,330
-------- --------- --------- --------- --------
Total Current Assets 798,631 (250,908) 117,971 (210,956) 454,738
Property plant & equipment 1,067 51,036 55,023 (31) 107,095
Notes receivable - 70,664 2,803 - 73,467
Investments in affiliates 160,581 - 38 (136,568) 24,051
Intangibles assets 1,717 140,340 68,865 - 210,922
Deferred Income taxes, non-current - 3,840 15,798 - 19,638
Other non-current assets 20,249 8,250 7,917 - 36,416
-------- --------- --------- --------- --------
Total Assets $982,245 $ 23,222 $ 268,415 $(347,555) $926,327
======== ========= ========= ========= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Accounts payable $ 2,209 $ 61,362 $ 43,060 $ - $106,631
Accrued compensation and other benefits 903 3,509 4,505 - 8,917
Accrued warranties - 9,990 2,922 - 12,912
Accrued income taxes 1,969 (361) 5,806 - 7,414
Self insurance reserves 3,401 - - - 3,401
Net liabilities of discontinued operations - 3,956 - - 3,956
Other current liabilities 12,053 6,135 18,193 - 36,381
-------- --------- --------- --------- --------
Total Current Liabilities 20,535 84,591 74,486 - 179,612
Long-term debt 555,757 - - - 555,757
Pensions and other benefits 12,890 - 4,257 - 17,147
Deferred income taxes 2,289 5,646 5,951 - 13,886
Other deferred items &
self insurance reserves 4,759 8,922 - - 13,681
-------- --------- --------- --------- --------
Total Liabilities 596,230 99,159 84,694 - 780,083
Stockholder's Equity
Common stock and additional paid-in capital 578,463 98,456 120,623 (455,729) 341,813
Accumulated deficit (192,412) (174,393) 82,876 108,443 (175,486)
Accumulated other comprehensive income (36) - (19,778) (269) (20,083)
-------- --------- --------- --------- --------
Total Stockholder's Equity 386,015 (75,937) 183,721 (347,555) 146,244
Total Liabilities and Stockholder's Equity $982,245 $23,222 $268,415 $(347,555) $926,327
======== ========= ========= ========= ========
</TABLE>
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 8 - GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED BALANCE SHEET--1999
<TABLE>
<CAPTION>
December 31, 1999
-----------------------------------------------------------
Non
MCII Guarantors Guarantors Eliminations Consolidated
---- ---------- ---------- ------------ -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents.............. $ 4,163 $ 2,204 $ 9,263 $ - $ 15,630
Trade and other accounts receivable... 6,782 91,407 47,502 - 145,691
Intercompany receivables/(payables)... 758,889 (543,678) (5,755) (209,456) -
Current portion of notes receivable... - 16,924 559 - 17,483
Inventories........................... - 163,478 55,105 (1,500) 217,083
Deferred income taxes................. 7,146 16,546 1,797 - 25,489
Other current assets.................. 653 2,920 1,178 - 4,751
--------- --------- --------- --------- ---------
Total Current Assets..................... 777,633 (250,199) 109,649 (210,956) 426,127
--------- --------- --------- --------- ---------
Property, plant and equipment......... 1,161 52,681 56,659 (31) 110,470
Notes receivable...................... - 54,833 2,938 - 57,771
Investments in affiliates............. 160,388 - - (136,568) 23,820
Intangible assets..................... 1,729 141,374 69,620 - 212,723
Deferred income taxes non-current..... 1,483 2,694 15,798 - 19,975
Other non-current assets.............. 20,811 11,844 7,733 - 40,388
--------- --------- --------- --------- ---------
Total Assets............................. $ 963,205 $ 13,227 $ 262,397 $(347,555) $ 891,274
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable....................... $ 2,541 $ 48,034 $ 39,608 $ - $ 90,183
Accrued compensation................... 1,195 3,861 4,093 - 9,149
Accrued warranties..................... - 10,115 3,250 - 13,365
Accrued income taxes................... 1,084 (183) 3,794 - 4,695
Self insurance reserves................ 3,101 - - - 3,101
Net liabilities of discontinued
operations........................... - 3,949 - - 3,949
Other current liabilities.............. 7,017 8,811 16,004 - 31,832
--------- --------- --------- --------- ---------
Total Current Liabilities................ 14,938 74,587 66,749 - 156,274
Long-term debt......................... 536,534 - - - 536,534
Pensions and other benefits............ 12,393 - 4,296 - 16,689
Other deferred items and self
insurance reserves................... 6,169 8,598 - - 14,767
Deferred income taxes.................. 853 4,786 6,254 - 11,893
--------- --------- --------- --------- ---------
Total Liabilities........................ 570,887 87,971 77,299 - 736,157
--------- --------- --------- --------- ---------
Stockholder's Equity:
Common Stock and additional paid-in
capital.............................. 578,463 98,456 120,623 (455,729) 341,813
Accumulated deficit.................... (186,109) (173,200) 83,616 108,443 (167,250)
Accumulated other comprehensive
income............................... (36) - (19,141) (269) (19,446)
--------- --------- --------- --------- ---------
Total Stockholder's Equity............... 392,318 (74,744) 185,098 (347,555) 155,117
--------- --------- --------- --------- ---------
Total Liabilities & Stockholder's Equity. $ 963,205 $ 13,227 $ 262,397 $(347,555) $ 891,274
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 8 - GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOW
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 2000
-----------------------------------------
MCII GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash Flows Provided By (Used in) Operating Activities
Net income............................................ $ (9,430) $ 1,935 $ (740) $ - $ (8,235)
Adjustments to Reconcile Net Income to Net Cash
Provided By (Used in) Operations:
Depreciation and amortization...................... 115 2,900 3,396 - 6,411
Deferred income taxes.............................. (6,599) 967 (161) - (5,793)
Gain (loss) on sale of property and income
receivable....................................... - (88) - - (88)
Other non-cash interest expense.................... 781 - - - 781
Other non-cash items............................... - (1,011) 948 - (63)
All other operating activities..................... 11,972 4,799 (11,008) - 5,763
---------- ---------- ----------- ---------- ---------
Net Cash Provided By (Used in) Operating Activities... (3,161) 9,502 (7,565) - (1,224)
---------- ---------- ----------- ---------- ---------
Cash Flows Provided By (Used in) Investing Activities
Cash expenditures.................................. (9) (2,219) (1,199) - (3,427)
Proceeds from sale of property and investments..... - 2,968 - - 2,968
Change in notes receivable......................... - (16,561) - - (16,561)
Discontinued operations, net changes............... - 7 - - 7
---------- ---------- ----------- ---------- ---------
Net Cash Provided By (Used in) Investing Activities (9) (15,805) (1,199) - (17,013)
---------- ---------- ----------- ---------- ---------
Cash Provided By (Used in) Financing Activities
Payment of term of loan principal.................. (833) - - - (833)
Net change in other long-term borrowings........... 56 56
Net change in related party receivables, payables.. (16,226) 6,642 9,584 - -
Net change in bank credit facilities............... 20,000 - - - 20,000
---------- ---------- ----------- ---------- ---------
Net Cash Provided By (Used in) Financing Activities... 2,997 6,642 9,584 - 19,223
---------- ---------- ----------- ---------- ---------
Net Increase (Decrease) in Cash....................... (173) 339 820 - 986
Cash and Cash Equivalents at Beginning of Period...... 4,163 2,204 9,263 - 15,630
---------- ---------- ----------- ---------- ---------
Cash and Cash Equivalents at End of Period............ $ 3,990 $ 2,543 $ 10,083 $ - $ 16,616
---------- ---------- ----------- ---------- ---------
---------- ---------- ----------- ---------- ---------
</TABLE>
<PAGE>
MOTOR COACH INDUSTRIES INTERNATIONAL INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
NOTE 8 - GUARANTOR CONDENSED FINANCIAL STATEMENTS (CONTINUED)
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1999
-----------------------------------------
MCII GUARANTORS NON-GUARANTORS ELIMINATIONS CONSOLIDATED
---------- ---------- -------------- ------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Cash Flows Provided By (Used In) Operating Activities
Net Income $(6,827) $ 6,675 $ 6,252 $ (5,658) $ 442
Adjustments to Reconcile Net Income to Net Cash
Provided By (Used In) Operations:
Depreciation and amortization 61 2,603 3,712 - 6,376
Deferred income taxes 1,035 182 (301) - 916
Non-cash interest expense pushed down from 6,373 - - - 6,373
related party
Gain on sale of property and notes receivable 0 125 298 - 423
Other non-cash items 3,717 (7,935) 9,583 - 5,365
All other operating activities (5,694) (23,140) 5,030 5,658 (18,146)
-------- -------- -------- -------- --------
Net Cash Provided By (Used In) Operating Activities (1,335) (21,490) 24,574 - 1,749
-------- -------- -------- -------- --------
Cash Flows Provided By (Used In) Investing Activities
Capital expenditures (118) (1,580) (1,261) - (2,959)
Proceeds from sale of property and investments - 2,490 6,187 - 8,677
Change in notes receivable - 2,012 121 - 2,133
Discontinued operations, net changes - 666 - 666
-------- -------- -------- -------- --------
Net Cash Provided By (Used In) Investing Activities (118) 3,588 5,047 - 8,517
-------- -------- -------- -------- --------
Cash Provided By (Used In) Financing Activities
Net change in other long-term borrowings 16,000 - (14,419) - 1,581
Net change in related party receivables, payables (1,962) 1,060 902 - -
Dividends paid to parent company (3,000) - - - (3,000)
-------- -------- -------- -------- --------
Net Cash Provided By (Used In) Financing Activities 11,038 1,060 (13,517) - (1,419)
-------- -------- -------- -------- --------
Net Increase (Decrease) in Cash 9,585 (16,842) 16,104 - 8,847
Cash and Cash Equivalents at Beginning of Period 5,415 12,368 6,255 - 24,038
-------- -------- -------- -------- --------
Cash and Cash Equivalents at End of Period $ 15,000 $ (4,474) 22,359 $ - $ 32,885
======== ======== ======== ======== ========
</TABLE>
NOTE 9 - SUBSEQUENT EVENTS
Subsequent to March 31, 2000, the Company executed two amendments to its $445
million Senior Credit Facility dated June 16, 1999 ("Credit Agreement"),
which provides the Company the opportunity to complete an asset
securitization agreement on its long-term receivables and finance leases,
allows for increases in the revolving credit line by up to $60 million and
also redefines certain loan covenant provisions continued in the Credit
Agreement. In conjunction with the execution of the amendments, MCII
Holdings, (USA), (the "Parent Company"), issued additional shares of its
common stock to an investment group led by Joseph Littlejohn a Levy Fund III
L.P. ("JLL Fund III") in exchange for $50 million in cash and the Parent
Company subsequently made an additional capital contribution in the company.
These funds will be used by the company to pay down existing borrowings. The
Company has completed all loan covenant calculations as of March 31, 2000
under the appropriate definitions which pertain to the period ending
March 31, 2000, and are in compliance with all such covenants.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
FINANCIAL CONDITION
On June 16, 1999, MCII Holdings (USA), Inc. ("The Parent Company") completed
a plan to financially restructure and reorganize itself. This move was
necessitated because the Parent Company did not anticipate being able to
generate sufficient cash flow to fund both its short term requirements for
the debt payments and working capital needs and meet the required expiration
of the Senior Credit Facility. On June 16, 1999 the Parent Company received
$175 million from an investment group led by Joseph Littlejohn & Levy Fund
III, in exchange for a 61% equity investment in the Parent, $50 million in
Senior Notes of the Parent Company and warrants to purchase up to an
additional 10% of the Parent Company's common stock on a fully dilutive
basis. Consorcio G. Grupo Dina, S.A. de C.V. ("Grupo Dina") now owns a
minority interest in the Parent Company. The Parent Company then made an
additional $175 million equity investment in the Company. The Company also
secured a $445 million Senior Secured Credit Facility and issued
approximately $152 million of 11 1/4 % Senior Subordinated Note due 2009 at a
discount of 98.575%. The $445 million Senior Secured Credit Facility consists
of $333 million variable rate term loans due in 2006 and a $112 million
revolving credit agreement due in 2005. The Company, as of March 31, 2000,
had $75 million of outstanding borrowings under the revolving credit
agreement. As part of the financial restructuring and reorganization, the
Parent Company retained ownership of Transportation Manufacturing Operations
("TMO") and Dina Autobuses, S.A. de C.V. ("Autobuses") and transferred its'
interest in its' other minor Mexican subsidiaries to Grupo Dina. Autobuses
has become a subsidiary of TMO and TMO's name was officially changed to Motor
Coach Industries International, Inc. (MCII).
The Company's total debt to equity ratio increased from 78% as of December
31, 1999 to 79% on March 31, 2000. The Company incurred $3.4 million in
capital expenditures during the first three months of 2000. These
expenditures were largely financed through the use of additional debt. The
Company will reduce its total debt to equity ratio during 2000 as a result of
events that occurred subsequent to quarter-end (see Subsequent Event section
below). The Company's working capital, excluding cash and cash equivalents,
also increased from $254.2 million at the end of 1999 to $258.5 million on
March 31, 2000.
Net cash used in operating activities during the first three months of 2000
totaled $1.2 compared to $1.7 million of cash provided by operating
activities for the comparable period of 1999. The major cause for the
decrease in net cash from operating activities is due to the net loss of $8.2
million realized in 2000.
Net cash used in investing activities totaled $17.0 million for the first
three months of 2000 compared to $8.5 million in cash provided from investing
activities during the same period of 1999. Capital expenditure of $3.4
million for the first three months of 2000 were $0.4 million higher than the
same period of 1999. Proceeds from the sales of property and investments of
$3.0 million compared to $8.7 million from the same period of last year
consisting primarily of proceeds from the sale of leased buses. The Company
also had $16.6 million of cash used during the first three months of 2000 in
the additional leasing of buses to customers compared to a $ 2.1 million of
net cash received for the comparable period of 1999 from the collection of
notes receivable.
Net cash provided by financing activities of $19.2 for the three months ended
March 31, 2000 compared to $1.4 million of cash used in financing activities
for the comparable period of 1999. The cash provided from financing
activities in 2000 is from additional borrowings under its long-term credit
facility while the cash used in 1999 was primarily due to a dividend paid to
the Parent Company.
SUBSEQUENT EVENTS
Subsequent to March 31, 2000, the Company executed two amendments to its $445
million Senior Credit Facility dated June 16, 1999 ("Credit Agreement"),
which provides the Company the opportunity to complete an asset
securitization agreement on its long-term receivables and finance leases,
allows for increases in the revolving credit line of up to $60 million and
also redefines certain loan covenant provisions contained in the Credit
Agreement. In conjunction with the execution of the amendments, the Parent
Company issued additional shares of its common stock to an investment group
led by JLL Fund III in exchange for $50 million in cash and the Parent
Company subsequently made an additional capital contribution in the company.
These funds will be used by the company to pay down existing borrowings. The
Company's pro-forma debt to equity ratio, after considering the effect of the
additional equity investment and subsequent pay down of existing borrowings
would be 72%. The Company would also have pro-forma additional available
borrowing of $77 million as of March 31, 2000 and up to $137 million under
the increased credit line. The Company has completed all loan covenant
calculations as of March 31, 2000 under the appropriate definitions which
pertain to the period ending March 31, 2000 and is in compliance with all
such covenants.
<PAGE>
COMPARISON OF THREE MONTHS ENDED MARCH 31, 2000
AS COMPARED TO THE THREE MONTHS ENDED MARCH 31, 1999.
OVERVIEW
Revenues for the three months ended March 31, 2000 were $159.5 million, a
decrease of $83.7 million from $243.2 million in 1999. Included with 1999
revenues was approximately $7.3 million in revenue realized from subsidiary
operations that were contributed to Grupo Dina as part of the financial
restructuring plan completed on June 16, 1999. The year-over-year revenue
decline, excluding this 1999 revenue, would have been $76.4 million or 31.4%.
Gross profit for the three months ended March 31, 2000, was $34.4 million, a
decrease of $22.2 million or 39% from $56.6 million from the comparable
period of 1999. The Company's gross profit margin decreased from 23.3% in
1999 to 21.5% in 2000, primarily due to new product start-up costs and
unabsorbed fixed costs at the Mexican manufacturing facility.
Selling, general and administrative expenses for the three months ended March
31, 2000 of $23.3 million decreased 6.8% from $25.0 million for the
comparable period of 1999. The decrease in selling, general and
administrative is due to a decrease of approximately $2.4 million in royalty
and management fees charged by Grupo Dina during the first three months of
1999 that did not reoccur during the comparable period of 2000 as a result of
the financial restructuring. Partially offsetting this decrease is higher
professional fees incurred during the first quarter of 2000.
Operating income for the three months ended March 31, 2000 of $5.1 million was
$18.8 or 79% below the same period of 1999. The Company's operating income
margin decreased from 9.8% in 1999 to 3.2% during 2000.
Interest expenses for the Company for the three months ended March 31, 2000
increased $1.9 million or 15% from the comparable period of 1999 due primarily
to higher average borrowings.
Foreign currency translation losses of $.2 million for 2000 compared to a $1.0
million loss for 1999 was primarily due to peso fluctuations against the US
dollar and changes in the monetary position of the Company's Mexican subsidiary
The Company recognized other expense of $.9 million for the three months ended
March 31, 2000 compared to $ 1.2 million for the same period of 1999. These
expenses are primarily due to losses on the disposal of fixed assets in Mexico.
Income taxes for the three months ended March 31, 2000 decreased $10.8
million from the comparable period of 1999. This decrease is due to a
reduction of $19.5 million in income before taxes on a quarter over quarter
basis and the impact of the 1999 non-deductible interest expense of $6.4
million associated with the push-down of Parent Company debt.
COACH SALES
Revenues from coach sales of $117.5 million for the three months ended March
31, 2000, decreased by $73.6 million or 39% from the comparable period of
1999. Revenue from new coaches decreased by $54.1 million or 33% as sales of
new inter-city coaches totaled 353 units (309 units in the United States and
Canada) compared to 507 units (460 units in the United States and Canada)
during the same period of the prior year. Three large customers purchased 141
less units during the first quarter of 2000 than they did during the
comparable period of 1999 due to the timing of their delivery requirements.
These customers are expected to take delivery of at least the same number of
coaches during full year 2000 as they did during full year 1999. Order
backlog as of March 31, 2000 was 546 units, (523 units in the United States
and Canada) compared to 497 units, (467 units in the United States and
Canada) at December 31, 1999. Order backlog excludes the recent award of a
large contract by New Jersey Transit, under which 650 cruiser buses will be
delivered within the next 15 months. Used coach revenue during the first
three months ended March 31, 2000, decreased $19.5 million or 73% over the
comparable period of 1999 due primarily to a decrease of 63% in the number of
used coaches sold.
Gross profits for coach sales of $24.1 million for the three months ended
March 31, 2000 decreased $21.3 million or 47% from the comparable period of
1999, as the gross profit margins decreased from 23.7% for the three months
ended March 31, 2000, to 20.5% for the same period of 1999. The decrease in
the gross margins is primarily attributed to the impact of the lower volume
of coaches sold during the period and losses incurred at the Company's
Mexican manufacturing facility in preparation for production of the Company's
new F-series and F-35 series coaches. These increased costs were partially
offset by the impact of cost reduction programs instituted during the second
half of 1999.
Operating income from coach sales of $3.0 million for the three months ended
March 31, 2000 decreased $14.8 million from the same period last year.
Operating income margins decreased from 9.4% for the three months ended March
31, 2000 to 2.6% for the comparable period of 1999. The elimination of Dina
royalty and management fees coupled with the lower selling expenses as a
result of lower sales resulted in a $6.4 million reduction in quarter over
quarter selling, general and administrative expenses.
<PAGE>
CUSTOMER SUPPORT BUSINESS
Revenues for the Customer Support Business of $39.7 million for the three
months ended March 31, 2000 declined by $10.8 million or 21% from the
comparable period of 1999. Effective June 16, 1999, as part of the financial
restructuring, the Company contributed its' Mexican parts company to Grupo
Dina which resulted in a decrease in revenue of approximately $4.8 million
from a year ago. The balance of the decrease is primarily due to a temporary
backlog issue in connection with the relocation of a major warehouse to the
Company's new distribution center in Louisville, KY.
Gross profits from Customer Support Business of $9.4 million for the three
months ended March 31, 2000, were $1.0 million or 10% below the same period
of 1999. Gross margin increased from 20.6% for the three months ended March
31, 1999 to 23.6% for the comparable period of 2000. The increase in the
gross margin percentage is largely due the impact of a quarter over quarter
sales product mix change.
Operating income from Customer Support Business of $2.5 million was $3.6
million or 59% below the comparable period 1999. Operating income margins
decreased from 12.1% for the three months ended March 31, 2000 to 6.3% for
the comparable period of 2000. The lower operating income margin for 2000 is
due primarily to the lower gross profits coupled with higher expenses
associated with the implementation of its plan to consolidate its
distribution center operations in Louisville, KY and the implementation of a
new computer system.
FINANCE OPERATIONS
Revenues from finance operations of $2.3 million for the three months ended
March 31, 2000 increased $.7 million or 47% from the comparable period of 1999.
The increase in revenues is a due to an increase in lease rental income.
Gross profits from finance operations of $.9 million for the three months
ended March 31, 2000 increased $.1million or 7% from the same period last
year while the gross margins decreased from 54% in 1999 to 39% for the
comparable period of 2000.
Operating losses from finance operations for the three months ended March 31,
2000 increased by $.3 million as the operating loss margin of 10.3% for the
three months ended March 31, 1999, increased to 21.2% for the comparable
period of 2000. The increase in losses is primarily due to higher selling,
general and administrative expenses.
<PAGE>
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of loss that may impact the financial position,
results of our operations or cash flows due to adverse changes in financial and
commodity market prices and rates. As a result of the financial restructuring
discussed above, we are exposed to market risk in the area of change in U.S.
interest rates. This exposure is directly related to our normal operating and
funding activities.
Because the Company's obligations under its Senior Credit Facility include
interest at floating rates, based on certain quoted rates, the Company is
sensitive to changes in prevailing interest rates. An increase of 1% in the
applicable base interest rates, based upon $406 million of borrowings under
the facility as of March 31, 2000, would result in additional annual interest
expense of approximately $4.1 million ($2.4 million after tax) and would not
be material to the Company cash flow or financial position.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In the ordinary course of business, the Company is party to various
employment and other legal actions as plaintiff or defendant. We are also
subject to various product liability lawsuits in the United States and Canada
for personal injuries and property damage, allegedly relating to the use of
products manufactured or sold by us. We consider litigation of this nature to
be in the ordinary course of business and, while we maintain product
liability insurance in customary amounts to cover such matters, we cannot be
assured that insurance will be available in the future or on terms acceptable
to us. While the Company cannot determine with certainty, the ultimate
outcome of such lawsuits, it believes that it is not involved in any current
litigation, or arbitration proceedings, which if determined adversely to it,
either individually or in the aggregate, would have a material adverse effect
on the Company's financial condition or results of operations.
<PAGE>
ITEM 6. EXHIBITS AND REPORT ON FORM 8-K
a) Exhibits
10.1 First Admendment to Credit Agreement dated June 16, 1999 among
MCII, TMO, The Bank of Nova Scotia, as syndication agent, General
Electric Capital Corporation, as documentation agent, and CIBC, as
administrative agent, and the lenders party thereto (the "Credit
Agreement"). (To be filed by amendment)
10.2 Second Admendment to Credit Agreement (to be filed by amendment)
27. Financial Data Schedule (Edgar filing only)
b) Reports on Form 8-K
The Company issued a report on Form 8-K dated February 3, 2000, announcing
the appointment of Roberto Cordaro as Chief Executive Officer, and also
announced that on March 1, 2000, Arthur Andersen LLP was re-appointed as
the Company's independent public accountants and auditors.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
Motor Coach Industries International, Inc.
By: Horst O. Sieben
May 15, 2000
/s/ Horst O. Sieben
----------------------------
Horst O. Sieben
Chief Financial Officer
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANIES UNAUDITED CONSOLIDATED INCOME STATEMENT, BALANCE SHEET AND STATEMENT
OF CASH FLOW AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 16,616
<SECURITIES> 0
<RECEIVABLES> 123,871
<ALLOWANCES> 0
<INVENTORY> 255,961
<CURRENT-ASSETS> 454,738
<PP&E> 107,095
<DEPRECIATION> 0
<TOTAL-ASSETS> 926,327
<CURRENT-LIABILITIES> 179,612
<BONDS> 555,757
0
0
<COMMON> 0
<OTHER-SE> 146,244
<TOTAL-LIABILITY-AND-EQUITY> 926,327
<SALES> 157,249
<TOTAL-REVENUES> 159,547
<CGS> 120,985
<TOTAL-COSTS> 122,380
<OTHER-EXPENSES> 32,076
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,627
<INCOME-PRETAX> (10,578)
<INCOME-TAX> (2,343)
<INCOME-CONTINUING> (8,235)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (8,235)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
