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, 2001
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 9, 2001, the registrant had 587 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.
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.
- ---- ----------- --------------- ------------
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
802 Commerce Street, 3rd Floor
Dallas, Texas 75201
(214) 849-8616
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, 2001, 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
GREYHOUND LINES, INC. AND SUBSIDIARIES
<Table>
<Caption>
PAGE NO.
--------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Interim Consolidated Statements of Financial Position as of
September 30, 2001 (Unaudited) and December 31, 2000........................ 5
Interim Consolidated Statements of Operations for the Three and
Nine months Ended September 30, 2001 and 2000 (Unaudited)................... 6
Condensed Interim Consolidated Statements of Cash Flows for the
Nine months Ended September 30, 2001 and 2000 (Unaudited)................... 7
Notes to Interim Consolidated Financial Statements (Unaudited)................. 8
Item 2. Management's Narrative Analysis of Results of Operations................................ 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K ......................................................... 16
SIGNATURES ........................................................................................ 17
</Table>
3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
4
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<Table>
<Caption>
SEPTEMBER 30, DECEMBER 31,
2001 2000
------------- -------------
(UNAUDITED)
Current Assets
Cash and cash equivalents ....................................................... $ 11,657 $ 10,206
Accounts receivable, less allowance for doubtful accounts of $743 and $398 ...... 54,194 57,923
Inventories, less allowance for shrinkage of $158 and $29 ....................... 8,852 7,788
Prepaid expenses ................................................................ 4,963 4,847
Assets held for sale ............................................................ 4,142 4,198
Current portion of deferred tax assets .......................................... 10,688 10,688
Other current assets ............................................................ 1,629 1,225
------------- -------------
Total Current Assets .................................................... 96,125 96,875
Prepaid pension plans .................................................................. 31,362 32,483
Property, plant and equipment, net of accumulated depreciation of $217,806
and $193,724 ...................................................................... 431,360 409,070
Investments in unconsolidated affiliates ............................................... 15,526 15,989
Deferred income taxes .................................................................. 23,127 27,452
Insurance and security deposits ........................................................ 29,451 24,692
Goodwill, net of accumulated amortization of $6,774 and $5,367 ......................... 43,563 43,540
Intangible assets, net of accumulated amortization of $39,660 and $37,571 .............. 28,139 28,011
------------- -------------
Total Assets ............................................................ $ 698,653 $ 678,112
============= =============
Current Liabilities
Accounts payable ................................................................ $ 24,622 $ 24,714
Accrued liabilities ............................................................. 97,909 66,807
Rents payable ................................................................... 8,873 27,211
Unredeemed tickets .............................................................. 9,169 11,750
Current portion of claims liability ............................................. 2,935 2,596
Current maturities of long-term debt ............................................ 7,602 5,079
------------- -------------
Total Current Liabilities ............................................... 151,110 138,157
Claims liability ....................................................................... 9,256 5,698
Long-term debt, net .................................................................... 260,789 267,887
Minority interests ..................................................................... 6,031 4,594
Other liabilities ...................................................................... 31,748 23,951
------------- -------------
Total Liabilities ....................................................... 458,934 440,287
------------- -------------
Redeemable preferred stock (2,400,000 shares authorized and 106,050
shares issued as of December 31, 2000) ............................................ -- 2,651
Stockholders' Equity
Common stock (1,000 shares authorized; par value $.01; 587
shares issued) ............................................................ -- --
Capital in excess of par value .................................................. 320,393 321,237
Retained deficit ................................................................ (75,556) (80,945)
Accumulated other comprehensive loss, net of tax benefit of $2,756 .............. (5,118) (5,118)
------------- -------------
Total Stockholders' Equity .............................................. 239,719 235,174
------------- -------------
Total Liabilities and Stockholders' Equity .............................. $ 698,653 $ 678,112
============= =============
</Table>
The accompanying notes are an integral part of these statements.
5
GREYHOUND LINES, INC. AND SUBSIDIARIES
INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
-------- -------- -------- --------
(Unaudited) (Unaudited)
OPERATING REVENUES
Transportation service
Passenger services ................ $249,139 $251,852 $664,391 $648,203
Package express ................... 10,646 10,729 30,965 31,961
Food services ............................. 12,472 12,169 33,472 32,599
Other operating revenues .................. 17,673 16,525 54,737 50,382
-------- -------- -------- --------
Total Operating Revenues .......... 289,930 291,275 783,565 763,145
-------- -------- -------- --------
OPERATING EXPENSES
Maintenance ............................... 26,016 25,442 75,785 71,394
Transportation ............................ 68,910 68,499 197,781 190,323
Agents' commissions and station costs ..... 50,160 50,815 142,707 138,729
Marketing, advertising and traffic ........ 8,166 8,055 26,565 23,809
Insurance and safety ...................... 17,458 14,124 43,896 39,627
General and administrative ................ 31,730 35,188 101,485 93,375
Depreciation and amortization ............. 12,214 12,137 35,417 33,654
Operating taxes and licenses .............. 16,565 15,473 47,942 45,927
Operating rents ........................... 19,638 21,405 52,922 63,275
Cost of goods sold - food services ........ 7,920 8,015 22,359 21,364
Other operating expenses .................. 1,250 2,863 3,937 5,119
-------- -------- -------- --------
Total Operating Expenses .......... 260,027 262,016 750,796 726,596
-------- -------- -------- --------
Operating Income ................................. 29,903 29,259 32,769 36,549
Interest Expense ................................. 7,011 5,590 21,974 16,612
-------- -------- -------- --------
Income Before Income Taxes ....................... 22,892 23,669 10,795 19,937
Income Tax Provision ............................. 10,136 10,243 4,783 8,750
Minority Interests ............................... 553 7 579 (156)
-------- -------- -------- --------
Net Income ....................................... $ 12,203 $ 13,419 $ 5,433 $ 11,343
======== ======== ======== ========
</Table>
The accompanying notes are an integral part of these statements.
6
GREYHOUND LINES, INC. AND SUBSIDIARIES
CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<Table>
<Caption>
NINE MONTHS ENDED
SEPTEMBER 30,
2001 2000
----------- -----------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income ................................................ $ 5,433 $ 11,343
Non-cash expenses and gains included in net income ........ 46,547 37,608
Net change in certain operating assets and liabilities .... 13,598 47,162
----------- -----------
Net cash provided by operating activities ............... 65,578 96,113
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures ...................................... (46,203) (61,498)
Proceeds from assets sold ................................. 498 20,200
Payments for business acquisitions, net of cash acquired .. (1,320) --
Other investing activities ................................ (648) (1,662)
----------- -----------
Net cash used for investing activities .................. (47,673) (42,960)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Payments on debt and capital lease obligations ............ (4,616) (5,139)
Redemption of preferred stock ............................. (3,497) (48,982)
Proceeds from issuance of common stock to Laidlaw ......... -- 243,158
Purchase of common stock from Laidlaw ..................... -- (237,325)
Payment of quarterly preferred dividends .................. (43) (2,108)
Proceeds from equipment borrowings ........................ 7,850 --
Net change in revolving credit facility ................... (16,148) --
----------- -----------
Net cash used for financing activities .................. (16,454) (50,396)
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS ................... 1,451 2,757
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .............. 10,206 8,295
----------- -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD .................... $ 11,657 $ 11,052
=========== ===========
</Table>
The accompanying notes are an integral part of these statements.
7
GREYHOUND LINES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
(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, 2001, the results of its operations for the three and nine months
ended September 30, 2001 and 2000 and cash flows for the nine months ended
September 30, 2001 and 2000. Due to the seasonality of the Company's operations,
the results of its operations for the interim period ended September 30, 2001
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, 2000. For the three and nine months ended September 30, 2001
and 2000, the Company's comprehensive income approximated its net income.
2. LAIDLAW BANKRUPTCY
On June 28, 2001, as part of a financial restructuring, Laidlaw USA, Inc.,
Laidlaw Inc., Laidlaw International Finance Corporation, Laidlaw Investments
Ltd., Laidlaw One, Inc. and Laidlaw Transportation, Inc. filed voluntary
petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the
United States Bankruptcy Court for the Western District of New York, under a
jointly administered case captioned, In re: Laidlaw USA, Inc., et al, Case No.
01-14099. On that date, Laidlaw Inc. and Laidlaw Investments Ltd. also filed
cases under the Canada Companies' Creditors Arrangement Act in the Ontario
Superior Court of Justice in Toronto, Canada, court file no. 01-CL-4178.
Laidlaw Inc. ("Laidlaw") is the ultimate parent company of Greyhound. Neither
Greyhound, nor any of its subsidiaries were included in, or made party to, these
reorganization filings and proceedings.
In August 2000, Laidlaw requested and authorized Greyhound to seek funding from
outside sources to satisfy the Company's seasonal cash requirements and capital
expenditure programs. On October 24, 2000, the Company entered into a two-year
$125 million revolving credit facility to fund its working capital and near-term
capital expenditure needs. With the closure of this agreement Greyhound became
independent of Laidlaw for financing purposes.
The reorganization filings and proceedings do not cause a cross default with any
of the Company's debt which would place the Company's debt in default with its
financial institutions and, as of the date of this report, the Company is in
compliance with all covenants in its various debt agreements. Although the
outcome of the foregoing matters is uncertain, management believes that the
likely outcome will have no material impact on the Company's financial position,
cash flows or results of operations.
8
GREYHOUND LINES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
(UNAUDITED)
3. REDEEMABLE PREFERRED STOCK
On March 30, 2001, the Company issued a redemption notice to the holders of the
outstanding shares of Redeemable Preferred Stock whereby any shares which had
not been validly tendered for conversion by April 27, 2001 were redeemed by the
Company at a price per share of $26.74625. During the notice period 98,700
shares, representing an aggregate conversion value of $3.3 million, were validly
tendered for conversion and the remaining 3,800 shares, representing an
aggregate redemption value of $0.1 million, were redeemed by the Company on
April 30, 2001. In May 2001 the Company's Restated Certificate of Incorporation
was amended to eliminate the authorization of preferred stock.
4. COMMON STOCK
In May 2001 the Company effectuated a reverse stock split whereby one share of
common stock was exchanged for every 100,000 shares outstanding. As a result the
number of common shares outstanding was reduced from 58,743,069 to 587.
Additionally, the Company's Restated Certificate of Incorporation was amended
such that the authorized number of shares of common stock, par value $.01, was
reduced from 100,000,000 shares to 1,000 shares. All of the historical shares
have been restated to reflect this reverse stock split.
5. NEW YORK PORT AUTHORITY
The Company operated out of its largest sales location, the Port Authority Bus
Terminal of New York (the "Port Authority"), on a month-to-month basis pursuant
to a license agreement which expired in 1994. The Company's fee was based upon a
fixed charge for dedicated space, a fixed charge for each departing bus and a
percentage of certain ticket sales. Because the majority of the other bus
operators utilizing the Port Authority are principally commuter or local transit
operators which are exempt from paying license fees on their sales, the Company
had paid a disproportionate share of the total fees received from bus operators
that use the Port Authority relative to the Company's share of bus departures,
passengers, bus gates or square footage utilized. The Company had been
negotiating with the Port Authority for several years to structure a
market-based fee for the renewal of the license agreement and, beginning in June
1999, without Port Authority concurrence, began paying a lower fixed fee in lieu
of a percentage of sales. The lower fee payment was based on the Company's
research of the local real estate market in Midtown Manhattan and transportation
facilities nationwide, both of which demonstrated that this fee reflected fair
market value. Nevertheless, because the Company did not yet have Port Authority
concurrence for the new fee structure, the Company continued to accrue for the
license fee based upon the 1994 agreement.
In May 2001, the Port Authority and the Company reached an agreement in
principle related to fees for the periods June 1999 through March 31, 2001 (the
"arrearage"), as well as on the form of the ongoing license fees. In August
2001, the Company and the Port Authority executed the arrearage agreement. The
agreement on the arrearage calls for payment to the Port Authority of $12
million over a 10-year period, interest free. The terms of the agreement
required an initial lump sum payment of $1 million and equal monthly
installments of $91,667 thereafter. In the second quarter of 2001, the Company
recorded a reduction in operating rents of approximately $7.5 million which
represented the accrued rent outstanding to the Port Authority at March 31, 2001
less the present value, using a discount rate of 11%, of the $12 million payback
agreement. The present value of the payback agreement, less the current portion,
is classified as part of other liabilities while the current portion is
classified as part of rents payable on the Interim Consolidated Statements of
Financial Position. Additionally, effective April 1, 2001, with Port Authority
concurrence, the Company began paying the monthly license fee based upon a flat
fee per gate utilized and bus departure. For the period from April 1, 2001
through September 30, 2001, the license fee expense recorded by the Company
utilizing this new methodology was approximately $4.0 million lower than the fee
as calculated under the expired agreement. The Company and the Port Authority
are currently negotiating the final details of the license agreement.
9
GREYHOUND LINES, INC. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 2001
(UNAUDITED)
6. ACQUISITIONS
In May 2001, the Company acquired for $1.3 million, the remaining 50% interest
it had not already owned in a regional line-haul carrier operating in west
Texas. This acquisition has been included in the Company's results of operations
and financial condition since the date of acquisition.
7. INSURANCE COVERAGE
The Company had previously purchased insurance through Laidlaw with coverage
subject to a $50,000 deductible for physical damage to Company property and no
deductible for all other claims. Effective with the beginning of the Company's
new policy year, September 1, 2001, the Company purchased coverage from
third-party insurers for claims up to $5 million with coverage subject to a $3
million deductible for automobile liability and a $1 million deductible for both
general liability and workers' compensation. The Company purchases excess
coverage for automobile liability, general liability and workers' compensation
insurance through Laidlaw for claims which exceed $5 million. The Company has
continued to purchase from Laidlaw coverage for physical damage to Company
property subject to $50,000 deductible. The Company is required by the
Department of Transportation, some states and some of its insurance carriers to
maintain collateral deposits or provide other security pursuant to its insurance
program. At September 30, 2001, the Company maintained $22.1 million of
collateral deposits and had issued $20.0 million of letters of credit in support
of these programs.
8. NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, Statement of Financial Accounting Standards No. 142 ("SFAS No.
142"), "Accounting for Goodwill and Other Intangible Assets", was issued. This
statement establishes new accounting rules for goodwill and intangible assets
and is effective for fiscal years beginning after December 15, 2001. Under SFAS
No. 142, goodwill is not amortized, but is subject to specific impairment
testing at least on an annual basis. During the three and nine months ended
September 30, 2001, the Company recorded amortization expense related to
goodwill and indefinite lived intangible assets of $0.6 million and $1.9
million, respectively. The Company is currently evaluating the effect of this
statement and has not yet determined the effect on its results of operations and
financial position.
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 3,000 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, 2001 and 2000:
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2001 2000 2001 2000
------- ------- ------- -------
OPERATING REVENUES
Transportation service
Passenger services ......................... 85.9% 86.5% 84.8% 84.9%
Package express ............................ 3.7 3.7 3.9 4.2
Food services ............................... 4.3 4.1 4.3 4.3
Other operating revenues .................... 6.1 5.7 7.0 6.6
------ ------ ------ ------
Total Operating Revenues ................... 100.0 100.0 100.0 100.0
------ ------ ------ ------
OPERATING EXPENSES
Maintenance ................................. 9.0 8.7 9.7 9.4
Transportation .............................. 23.8 23.5 25.2 24.9
Agents' commissions and station costs ....... 17.3 17.4 18.2 18.2
Marketing, advertising and traffic .......... 2.8 2.8 3.4 3.1
Insurance and safety ........................ 6.0 4.8 5.6 5.2
General and administrative .................. 10.9 12.1 12.9 12.2
Depreciation and amortization ............... 4.2 4.2 4.5 4.4
Operating taxes and licenses ................ 5.7 5.3 6.1 6.0
Operating rents ............................. 6.8 7.4 6.8 8.3
Cost of goods sold - food services .......... 2.8 2.8 2.9 2.8
Other operating expenses .................... 0.4 1.0 0.5 0.7
------ ------ ------ ------
Total Operating Expenses ................... 89.7 90.0 95.8 95.2
------ ------ ------ ------
Operating Income ........................... 10.3 10.0 4.2 4.8
Interest Expense ............................ 2.4 1.9 2.8 2.2
------ ------ ------ ------
Income Before Income Taxes .................. 7.9 8.1 1.4 2.6
Income Tax Provision ........................ 3.5 3.5 0.6 1.1
Minority Interests .......................... 0.2 -- 0.1 --
------ ------ ------ ------
Net Income .................................. 4.2 4.6 0.7 1.5
====== ====== ====== ======
</Table>
11
The following table sets forth certain operating data for the Company for the
three and nine months ended September 30, 2001 and 2000. 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,
2001 2000 % CHANGE 2001 2000 % CHANGE
---------- ---------- -------- ------------ ------------ --------
Regular Service Miles (000's) ......... 97,996 98,091 (0.1%) 266,167 263,935 0.8%
Total Bus Miles (000's) ............... 99,290 99,262 0.0% 272,615 270,410 0.8%
Passenger Miles (000's) ............... 2,679,005 2,714,214 (1.3%) 6,956,912 7,040,729 (1.2%)
Passengers Carried (000's) ............ 7,102 7,149 (0.7%) 19,222 19,196 0.1%
Average Trip Length (passenger miles
divided by passengers carried) ...... 377 380 (0.8%) 362 367 (1.4%)
Load (avg. number of passengers per
regular service mile) ............... 27.3 27.7 (1.4%) 26.1 26.7 (2.2%)
Load Factor (% of available seats
filled) ............................. 55.1% 55.9% (1.4%) 52.5% 53.9% (2.6%)
Yield (regular route revenue divided
by passenger miles) ................. $ 0.0930 $ 0.0928 0.2% $ 0.0955 $ 0.0921 3.7%
Average Ticket Price .................. $ 35.08 $ 35.23 (0.4%) $ 34.56 $ 33.77 2.3%
Total Revenue Per Total Bus Mile ...... $ 2.920 $ 2.934 (0.5%) $ 2.874 $ 2.822 1.8%
Cost Per Total Bus Mile:
Maintenance ......................... $ 0.262 $ 0.256 2.3% $ 0.278 $ 0.264 5.3%
Transportation ...................... $ 0.694 $ 0.690 0.6% $ 0.725 $ 0.704 3.0%
</Table>
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000 RESULTS OF OPERATIONS
Operating Revenues. Total operating revenues decreased $1.3 million, down 0.5%,
and increased $20.4 million, up 2.7% for the three and nine months ended
September 30, 2001, compared to the same periods in 2000.
Passenger services revenues decreased $2.7 million, down 1.1%, and increased
$16.2 million, up 2.5%, for the three and nine months ended September 30, 2001,
compared to the same periods in 2000. The decrease in regular route revenues for
the three months ended September 30, 2001 is the result of a 1.3% decline in
passenger miles offset slightly by a 0.2% increase in yield. Although passenger
miles are also down for the nine months ended September 30, 2001 a 3.7% increase
in yield more than offset the decrease in passenger miles. During 2000, rising
fuel costs, which dramatically increased automobile travel costs and resulted in
the airlines adding fuel surcharges to their ticket prices, allowed the Company
to implement broad-based ticket price increases (which increased yield)
throughout 2000 while still maintaining growth in passenger miles. During the
first half of 2001 the Company further raised ticket prices and, through the
first quarter, continued to achieve growth in passenger miles. The continued
ticket price increases, combined with stabilized fuel costs and airline price
discounting due to softening business travel demand, resulted in a 3.5% decline
in passenger miles during the second quarter. In response to this decline,
during the third quarter the Company reduced both prices and restrictions on
advance purchase fares and lowered some walkup fares. The slight reduction in
ticket prices that these actions produced were not enough to offset the effects
of significant reductions in retail fuel prices and airline ticket prices which
resulted in continued declines in passenger miles during the third quarter. This
decline was somewhat mitigated by a substantial increase in passengers during
the shutdown of the air system following the events of September 11th.
Package express revenues decreased $0.1 million, down 0.8%, and $1.0 million,
down 3.1%, for the three and nine months ended September 30, 2001, compared to
the same periods in 2000. The Company has continued to experience reduced
standard product deliveries (the traditional, low value, terminal to terminal
market segment) as a result of continued competition, as well as expanded and
improved product offerings, from larger package delivery companies.
12
Food services revenues increased $0.3 million, up 2.5%, and $0.9 million, up
2.7%, for the three and nine months ended September 30, 2001, compared to the
same periods in 2000. Food services revenues increased over the prior year due
primarily to product price increases and increased locations, offset somewhat by
volume declines as a result of the decline in passenger miles.
Other operating revenues, consisting primarily of revenue from charter and
in-terminal sales and services, increased $1.1 million, up 6.9%, and $4.4
million, up 8.6%, for the three and nine months ended September 30, 2001,
compared to the same periods in 2000. The increase is primarily attributable to
the Company's expansion during 2001 into "meet and greet" service provided to
cruise lines.
Operating Expenses. Total operating expenses decreased $2.0 million, down 0.8%,
and increased $24.2 million, up 3.3%, for the three and nine months ended
September 30, 2001, compared to the same periods in 2000.
Maintenance costs increased $0.6 million, up 2.3%, and $4.4 million, up 6.2%,
for the three and nine months ended September 30, 2001, compared to the same
periods in 2000. On a per mile basis, maintenance costs increased 2.3% and 5.3%
for the three and nine months ended September 30, 2001, due to fewer buses under
warranty, wage increases for mechanics, increased material and labor related to
body repairs and brake jobs and higher utility costs.
Transportation expenses which consist primarily of fuel costs and driver wages,
increased $0.4 million, up 0.6%, and $7.5 million, up 3.9%, for the three and
nine months ended September 30, 2001, compared to the same periods in 2000.
During the three months ended September 30, 2001, the average cost per gallon of
fuel decreased to $0.863, down from $0.945 per gallon in the prior period,
resulting in savings of $1.3 million. For the nine months ended September 30,
2001, the average cost per gallon was flat compared to the prior year. On a per
mile basis, excluding the effects of fuel price changes, transportation expenses
increased 2.5% and 3.0% for the three and nine months ended September 30, 2001,
due to driver wage increases and, during the nine months ended September 30,
2001, higher driver training and hiring costs of $1.2 million.
Agents' commissions and station costs decreased $0.7 million, down 1.3%, and
increased $4.0 million, up 2.9%, for the three and nine months ended September
30, 2001, compared to the same periods in 2000. Reduced commission expense due
to the decline in passenger revenues and communication rates more than offset
wage increases for customer service employees and increased utility costs during
the three months ended September 30, 2001. The increase during the nine months
ended September 30, 2001 is due to increased commission expense, wage increases
for customer service employees and increased utility costs, offset somewhat by
lower communication rates.
Marketing, advertising and traffic expenses increased slightly ($0.1 million, up
1.4%), for the three months ended September 30, 2001, compared to the same
period in 2000. During the nine months ended September 30, 2001, production
costs related to new television advertisements resulted in a 11.6% increase in
marketing, advertising and traffic expenses.
Insurance and safety costs increased $3.3 million, up 23.6%, and $4.3 million,
up 10.8%, for the three and nine months ended September 30, 2001, compared to
the same periods in 2000. The increase is due to an increase in the cost of
excess insurance coverage, growth in the average cost per claim due principally
to medical inflation and an increase in the number of severe accidents.
General and administrative expenses decreased $3.5 million, down 9.8%, and
increased $8.1 million, up 8.7%, for the three and nine months ended September
30, 2001, compared to the same periods in 2000. During the nine months ended
September 30, 2001, the increase is primarily due to higher management fee
charges ($2.7 million) from the Company's parent, Laidlaw and a $5.3 million
increase to pension expense due to a reduction in interest rates and
deterioration in plan returns principally related to equity investments. For the
three months ended September 30, 2001, the decrease was due to the timing of
incentive plan costs which resulted in a $5.3 million decrease in expense in the
quarter, partially offset by increased pension costs ($1.5 million).
Depreciation and amortization increased $0.1 million, or 0.6%, and $1.8 million,
or 5.2%, for the three and nine months ended September 30, 2001, compared to the
same periods in 2000. The increases are primarily due to higher capital
expenditures in prior periods.
13
Operating taxes and licenses expense increased $1.1 million, up 7.1%, and $2.0
million, up 4.4%, for the three and nine months ended September 30, 2001,
compared to the same periods in 2000 due to increased payroll taxes resulting
from increased wages and unusual state fuel tax refunds received in the prior
year.
Operating rents decreased $1.8 million, down 8.3%, and $10.4 million, down
16.4%, for the three and nine months ended September 30, 2001, compared to the
same periods in 2000. The decrease is mainly due to the settlement of the Port
Authority license agreement during the second quarter of 2001. See Note 5 to the
Interim Consolidated Financial statements for further discussion.
Food services cost of goods sold decreased $0.1 million, down 1.2%, and
increased $1.0 million, up 4.7%, for the three and nine months ended September
30, 2001, compared to the same periods in 2000. For the nine months ended
September 30, 2001, the increase in cost is primarily due to the increases in
food costs and the addition of new locations. During the three months ended
September 30, 2001, volume declines due to reduced passenger counts more than
offset the increases in food costs.
Other operating expenses decreased $1.6 million, down 56.3%, and $1.2 million,
down 23.1%, for the three and nine months ended September 30, 2001, compared to
the same periods in 2000. The decrease for the three and nine months ended
September 30, 2001 are due to the write-down of an investment during the three
months ended September 30, 2000 which was partially offset by losses on disposal
of property, plant and equipment in 2001.
Interest expense increased $1.4 million, up 25.4%, for the three months ended
September 30, 2001 and $5.4 million, up 32.3%, for the nine months ended
September 30, 2001, compared to the same periods in 2000, due to an increase in
the average debt outstanding.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are to provide working capital,
to finance capital expenditures, including bus acquisitions and to meet debt
service requirements, including the payment of interest on the 11 1/2% Senior
Notes. The Company's principal sources of liquidity are expected to be cash flow
from operations and borrowings under the Revolving Credit Facility. The Company
believes that its cash flow from operations, together with borrowings under the
Revolving Credit Facility, will fund its working capital and near-term capital
expenditure needs. As of September 30, 2001, the Company had outstanding
borrowings under the Revolving Credit Facility of $46.0 million, issued letters
of credit of $20.5 million and availability of $58.5 million.
Net cash provided by operating activities for the nine months ended September
30, 2001 was $65.6 million, a decrease of $30.5 million compared to the same
period in 2000. The principal reason for the decrease is a reduction, during the
nine months ended September 30, 2001, in rents payable and amounts due to
Laidlaw. Net cash used for investing activities for the nine months ended
September 30, 2001 was $47.7 million compared to $43.0 million during the same
period in 2000. The $4.7 million change is principally due to sale proceeds from
assets sold in the nine months of 2000. Net cash used in financing activities
for the nine months ended September 30, 2001 was $16.5 million as compared to
$50.4 million during the same period in 2000. The $33.9 million difference is
principally due to the redemption of $49.0 million of Redeemable Preferred Stock
in the nine months ended September 30, 2000.
The Company had previously purchased insurance through Laidlaw with coverage
subject to a $50,000 deductible for physical damage to Company property and no
deductible for all other claims. Effective with the beginning of the Company's
new policy year, September 1, 2001, the Company purchased coverage from
third-party insurers for claims up to $5 million with coverage subject to a $3
million deductible for automobile liability and a $1 million deductible for both
general liability and workers' compensation. The Company purchases excess
coverage for automobile liability, general liability and workers' compensation
insurance through Laidlaw for claims which exceed $5 million. The Company has
continued to purchase from Laidlaw coverage for physical damage to Company
property subject to $50,000 deductible. Management believes the cash flow
requirements of the new insurance program will be modestly higher during the
first half of the policy year, but comparable during the entire policy year to
what the requirements would have been had the old program been extended.
14
RECENT EVENTS
Subsequent to the events of September 11, 2001 the Company experienced
significant declines in its short haul markets (450 miles and less), principally
due to the reduced travel in the Northeastern United States, while long haul
travel (over 450 miles) increased dramatically as passengers chose bus travel
instead of air travel. On October 3, 2001 an incident on one of the Company's
buses resulted in a six-hour shutdown of operations nationwide. This shutdown,
and attendant heightened security concerns, caused material declines in sales
during the week after the incident. Although the level of sales decline lessened
each subsequent week in October, the Company continued to experience declines in
both long haul and short haul travel compared to the prior year. During the
month of October, passenger ticket sales at the Company's 300 largest electronic
ticket locations declined by 11.9% due to an 8.3% decline in passenger miles
coupled with a 3.9% decline in yield. As a result of these events the Company
has increased spending for security and management anticipates passenger revenue
declines of as much as 10% compared to prior year through the first quarter of
2002.
RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q
Statements in this Form 10-Q that are not purely historical facts, including
statements regarding our beliefs, expectations, intentions, projections or
strategies for the future, may be "forward-looking statements" under the Private
Securities Litigation Reform Act of 1995. All forward-looking statements involve
risks and uncertainties that could cause actual results to differ materially
from the plans, intentions and expectations reflected in or suggested by the
forward-looking statements. Such risks and uncertainties include, among others,
the general economic condition of the United States and the future level of bus
travel demand; operational disruptions as a result of bad weather; the Company's
future yields; increased costs for security; the cost and availability of excess
insurance coverage and the Company's ability to retain authority to self-insure;
the impact of changes in fuel prices; the effect of future Government
regulations; potential pension plan funding requirements; limitations on
financing flexibility and availability due to changing credit markets and the
uncertainty surrounding the outcome of the Laidlaw Inc. reorganization
proceedings; and other factors described from time to time in the Company's
publicly available Securities and Exchange Commission filings. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements to reflect events or circumstances that may arise after the date of
this filing.
15
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
None
(B) REPORTS ON FORM 8-K
None
16
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 14, 2001
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/ Cheryl W. Farmer
---------------------------------------------
Cheryl W. Farmer
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
17