<DOCUMENT>
<TYPE>10-Q
<SEQUENCE>1
<FILENAME>file001.txt
<DESCRIPTION>FORM 10-Q
<TEXT>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
|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 0-24247
ATLANTIC EXPRESS TRANSPORTATION CORP.
--------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Its Charter)
New York 13-392-3467
------------------------------- --------------------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
7 North Street, Staten Island, New York, 10302-1205
--------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(718) 442-7000
--------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
--------------------------------------------------------------------------------
(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 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 |_|
APPLICABLE ONLY TO REGISTRANTS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE REGISTRANTS
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
100 Shares of Common Stock, no par value.
================================================================================
<PAGE>
TABLE OF CONTENTS
PART I. Financial Information
Page
----
ITEM 1. Financial Statements:
Consolidated Balance Sheets at September 30, 2001
(unaudited) and June 30, 2001 (audited) ........................... 1
Consolidated Statements of Operations for the
Three Month Periods Ended September 30, 2001
(unaudited) and 2000 (unaudited) .................................. 2
Consolidated Statements of Stockholder's Equity
for the Three Months Ended September 30, 2001 (unaudited) ......... 3
Consolidated Statements of Cash Flows for the
Three Month Periods Ended September 30, 2001
(unaudited) and 2000 (unaudited) .................................. 4
Notes to Consolidated Financial Statements (unaudited) ............... 5-7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ............................... 8-9
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk ....................................................... 9-10
PART II. Other Information 11
Signatures ................................................................ 12
Index to Exhibits ......................................................... E-1
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Balance Sheets
September 30, June 30,
2001 2001
------------ ----------
(unaudited) (audited)
Assets
Current:
Cash and cash equivalents .................... $ 1,046,820 $ 1,909,719
Current portion of marketable securities ..... 5,920,000 5,282,000
Accounts receivable, net of allowance
for doubtful accounts ...................... 60,911,450 69,699,369
Inventories .................................. 11,078,259 14,484,980
Notes receivable ............................. 40,337 33,459
Prepaid expenses and other current assets .... 22,425,197 17,067,262
------------ ------------
Total current assets ..................... 101,422,063 108,476,789
------------ ------------
Property, plant and equipment, at cost,
less accumulated depreciation ................ 181,694,399 175,655,190
------------ ------------
Other assets:
Goodwill, net ................................ 11,410,221 11,491,698
Investments .................................. 488,150 488,150
Marketable securities, net of current portion 4,520,822 6,697,337
Transportation contract rights, net .......... 19,031,533 19,577,871
Deferred financing and organization costs, net 7,937,739 8,791,385
Due from parent company ...................... 735,937 805,540
Notes receivable ............................. 155,982 166,541
Deposits and other noncurrent assets ......... 3,594,079 3,540,280
Deferred tax assets .......................... 16,969,249 10,045,465
Covenant not to compete, net ................. 351,000 395,000
------------ ------------
Total other assets ....................... 65,194,712 61,999,267
------------ ------------
$348,311,174 $346,131,246
============ ============
Liabilities and Stockholder's Equity
Current:
Current portion of long-term debt ............ $ 3,543,356 $ 1,795,144
Insurance financing payable .................. 14,501,736 9,724,226
Accounts payable ............................. 5,951,149 4,607,497
Accrued compensation ......................... 10,708,792 10,114,488
Current portion of insurance reserve ......... 6,340,000 6,330,000
Accrued interest ............................. 3,644,328 6,841,781
Other accrued expenses and current liabilities 15,863,428 11,809,590
------------ ------------
Total current liabilities ................ 60,552,789 51,222,726
------------ ------------
Long-term debt, net of current portion .......... 241,030,672 244,637,001
------------ ------------
Premium on bond issuance ........................ 424,620 470,115
------------ ------------
Other long-term liabilities ..................... 2,668,968 1,873,272
------------ ------------
Commitments and contingencies
Stockholder's equity:
Common stock, no par value, authorized
shares 200; issued and outstanding 100 ..... 250,000 250,000
Additional paid-in capital ................... 62,198,517 56,698,517
Accumulated deficit .......................... (15,913,646) (7,487,911)
Accumulated other comprehensive loss ......... (2,900,746) (1,532,474)
------------ ------------
Total stockholder's equity ............... 43,634,125 47,928,132
------------ ------------
$348,311,174 $346,131,246
============ ============
The accompanying notes to consolidated financial statements are an integral part
of these balance sheets.
1
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Operations
Three Months Ended
September 30,
--------------------------------
2001 2000
------------- -------------
(unaudited)
Revenues:
Transportation Operations ............... $ 59,825,490 $ 61,241,364
Bus Sales Operations .................... 35,702,096 39,062,804
------------- -------------
Total revenues ............................. 95,527,586 100,304,168
------------- -------------
Costs and expenses:
Cost of operations - Transportation
Operations ............................ 57,443,947 55,422,503
Cost of operations - Bus Sales
Operations ............................ 32,572,649 35,716,354
General and administrative .............. 7,280,035 7,055,299
Depreciation and amortization ........... 6,382,418 5,903,103
------------- -------------
Total operating costs and expenses ......... 103,679,049 104,097,259
------------- -------------
Loss from operations ................ (8,151,463) (3,793,091)
Interest expense (net) ..................... (7,071,451) (6,889,580)
Other expense .............................. (96,605) (125,001)
------------- -------------
Loss before benefit from
income taxes ...................... (15,319,519) (10,807,672)
Benefit from income taxes .................. 6,893,784 4,863,453
------------- -------------
Net loss ................................... $ (8,425,735) $ (5,944,219)
============= =============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
2
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Stockholder's Equity
Three months ended September 30, 2001
<TABLE>
<CAPTION>
Accumulated
Additional other
Common stock paid-in Accumulated comprehensive Comprehensive
no par value capital deficit loss loss Total
------------ ---------- ----------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, June 30, 2001 .... $250,000 $56,698,517 $ (7,487,911) $(1,532,474) $47,928,132
Contribution from parent
company ................ -- 5,500,000 -- -- $ -- 5,500,000
Net loss .................. -- -- (8,425,735) -- (8,425,735) (8,425,735)
Unrealized loss on
marketable securities .. -- -- -- (1,368,272) (1,368,272) (1,368,272)
-----------
Comprehensive loss ........ -- -- -- -- $(9,794,007) --
-------- ----------- ------------ ----------- =========== -----------
Balance, September 30, 2001 $250,000 $62,198,517 $(15,913,646) $(2,900,746) $43,634,125
======== =========== ============ =========== ===========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of these statements.
3
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended
September 30,
-----------------------------
2001 2000
------------ ------------
(unaudited)
Cash flows from operating activities:
Net loss .................................. $ (8,425,735) $ (5,944,219)
Adjustments to reconcile net loss to net
cash provided by (used in) operating
activities:
(Gain) loss on sale of marketable
securities and investments ................ 117,994 (86,560)
Loss on sale of fixed assets ................ 11 --
Deferred income taxes ....................... (6,923,784) (4,863,453)
Depreciation ................................ 5,681,378 5,238,874
Amortization ................................ 1,501,750 1,137,528
Reserve for doubtful accounts
receivable ................................ 30,000 30,000
Decrease (increase) in:
Accounts receivable ..................... 8,757,919 1,275,055
Inventories ............................. 3,406,721 365,732
Prepaid expenses and other
current assets ........................ (5,357,935) (106,250)
Deposits and other noncurrent assets .... (53,799) 631,896
Increase (decrease) in:
Accounts payable ........................ 1,343,652 1,712,201
Accrued expenses and other current
liabilities ........................... 1,470,689 3,749,659
Other long-term liabilities ............. 795,696 (766,156)
------------ ------------
Net cash provided by (used in)
operating activities ...................... 2,344,557 2,374,307
------------ ------------
Cash flows from investing activities:
Proceeds from sale of fixed assets .......... 1,750 185,012
Additions to property, plant
and equipment ............................. (11,732,346) (16,019,754)
Purchase of transportation
contract rights ........................... (21,786) (38,626)
Due from parent company ..................... 69,603 70,912
Notes receivable ............................ 3,681 15,901
Marketable securities and investments ....... 52,249 (877,655)
------------ ------------
Net cash used in investing activities ... (11,626,849) (16,664,210)
------------ ------------
Cash flows from financing activities:
Capital contributed from parent company ..... 5,500,000 --
Revolving lines of credit ................... (1,600,739) 11,753,000
Principal payments on long-term debt, net ... (257,378) (311,326)
Insurance financing payable ................. 4,777,510 --
Deferred financing and organization costs ... -- (105,111)
------------ ------------
Net cash provided by financing
activities ............................ 8,419,393 11,336,563
------------ ------------
Net increase (decrease) in cash and
cash equivalents ............................. (862,899) (2,953,340)
Cash and cash equivalents, beginning
of period .................................... 1,909,719 5,585,901
------------ ------------
Cash and cash equivalents, end of period ....... $ 1,046,820 $ 2,632,561
============ ============
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest ................................ $ 9,482,261 $ 10,094,192
Income taxes ............................ 147,766 140,791
============ ============
Supplemental schedule of noncash
investing and financing activities:
Loans incurred for purchase of
property, plant and equipment ............. $ -- $ 88,500
The accompanying notes to consolidated financial statements are an integral part
of these statements.
4
<PAGE>
Atlantic Express Transportation Corp. and Subsidiaries
Notes to Consolidated Financial Statements
1. Basis of Accounting
These consolidated financial statements should be read in conjunction with
the consolidated financial statements and related notes contained in the
Company's financial statements as of and for the year ended June 30, 2001 as
filed on Form 10-K. In the opinion of management, all adjustments and accruals
(consisting only of normal recurring adjustments) which are necessary for a fair
presentation of operating results are reflected in the accompanying financial
statements. Operating results for the periods presented are not necessarily
indicative of the results for the full fiscal year.
2. Inventories
Inventories comprised the following:
September 30, June 30,
2001 2001
------------ -----------
Parts and fuel ................. $ 5,177,288 $ 5,235,312
Buses held for sale ............ 5,900,971 9,249,668
----------- -----------
$11,078,259 $14,484,980
=========== ===========
3. Receivable Agreement
In July 2001 the Company entered into an agreement (the "Receivable
Agreement") with Congress Financial Corp. ("Congress"), to sell Congress,
without recourse, up to approximately $5.9 million of accounts receivable of the
Company. Under the Receivable Agreement, Congress purchases receivables at the
gross amount of such accounts (less three and one-quarter percent purchase
commission) and immediately credits 85% of this amount to the Company, with the
balance paid to the Company upon Congress receiving cumulative collections on
all receivables purchased in excess of the purchase price previously credited.
This Agreement which was to expire on October 31, 2001, was extended to May 31,
2002.
4. Equity Contribution
In September 2001, Atlantic Express Transportation Group, Inc. ("AETG")
made an additional capital contribution to the Company of $5.5 million.
5. Paratransit Agreement
In August 2001, the Company signed an Assignment, Assumption and
Subcontract of Paratransit Services (the "Paratransit Agreement") with the
Southeastern Pennsylvania Transportation Authority ("SEPTA") and Anderson
Travel, Inc. (the "Assignee") whereby the Company granted the Assignee all of
its rights, obligation and interest to and under a paratransit contract with
SEPTA which was due to expire on March 15, 2002 and in addition retained the
Assignee to perform all of its obligations under a second paratransit contract
between the Company and SEPTA which was due to expire in October 2001. The
Company negotiated the Paratransit Agreement when SEPTA declined to reimburse
the Company for material amounts of automobile liability insurance costs for the
paratransit operations in Pennsylvania which would have caused the Company to
incur significant losses in the operations of these two contracts. Revenues for
these contracts totaled approximately $12.7 million and $13.0 million for the
fiscal years ended June 30, 2001 and June 30, 2000, respectively.
6. Supplemental Financial Information
The following are unaudited condensed consolidating financial statements
regarding the Company (on a stand-alone basis and on a consolidated basis) and
its subsidiaries which are guarantors and non-guarantors of the Company's
10 3/4% Senior Secured Notes due 2004 as of and for the three months ended
5
<PAGE>
September 30, 2001, and a consolidating balance sheet as of June 30, 2001 and
consolidating statements of operations and cash flows for the three months ended
September 30, 2000.
Condensed Consolidating Balance Sheet
September 30, 2001
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets ..................... $ 5,674,230 $ 90,951,131 $ 6,434,952 $ (1,638,250) $ 101,422,063
Investment in affiliates ........... 82,856,673 -- -- (82,856,673) --
Total assets ....................... 291,851,154 303,001,581 11,663,868 (258,205,429) 348,311,174
Current liabilities ................ 3,400,796 50,774,603 8,015,640 (1,638,250) 60,552,789
Total liabilities .................. 239,009,471 255,772,489 10,440,783 (200,545,694) 304,677,049
Stockholder's equity ............... 52,841,683 47,229,092 1,223,085 (57,659,735) 43,634,125
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended September 30, 2001
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues ........................ $ -- $ 95,552,691 $ 1,613,145 $ (1,638,250) $ 95,527,586
Loss from operations ................ -- (8,075,274) (76,189) -- (8,151,463)
Loss before income taxes ............ -- (15,243,330) (76,189) -- (15,319,519)
Net loss of subsidiaries ............ (8,425,735) -- -- 8,425,735 --
Net loss ............................ (8,425,735) (8,383,831) (41,904) 8,425,735 (8,425,735)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 2001
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities .............. $ 7,476,492 $ (4,451,686) $ (680,249) $ -- $ 2,344,557
Net cash provided by (used in)
investing activities .............. (9,415,744) (2,263,354) 52,249 -- (11,626,849)
Net cash provided by (used in)
financing activities .............. 1,899,261 6,520,132 -- -- 8,419,393
Increase (decrease) in cash and
cash equivalents .................. (39,991) (194,908) (628,000) -- (862,899)
Cash and cash equivalents,
beginning of period ............... 86,000 775,719 1,048,000 -- 1,909,719
----------------------------------------------------------------------------------
Cash and cash equivalents,
end of period ..................... 46,009 580,811 420,000 -- 1,046,820
</TABLE>
6
<PAGE>
Condensed Consolidating Balance Sheet
June 30, 2001
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Current assets ..................... $ 4,725,601 $ 100,566,814 $ 6,460,874 $ (3,276,500) $ 108,476,789
Investment in affiliates ........... 92,492,921 -- -- (92,492,921) --
Total assets ....................... 301,839,696 307,402,943 13,832,020 (276,943,413) 346,131,246
Current liabilities ................ 15,963,375 28,912,128 9,623,723 (3,276,500) 51,222,726
Total liabilities .................. 253,271,435 251,790,020 11,198,759 (218,057,100) 298,203,114
Stockholder's equity ............... 48,568,261 55,612,923 2,633,261 (58,886,313) 47,928,132
</TABLE>
Condensed Consolidating Statement of Operations
Three months ended September 30, 2000
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net revenues ......................... $ -- $ 100,153,947 $ 1,150,079 $ (999,858) $ 100,304,168
Income (loss) from operations ........ -- (3,892,316) 99,225 -- (3,793,091)
Income (loss) before income
taxes .............................. -- (10,906,897) 99,225 -- (10,807,672)
Net loss of subsidiaries ............. (5,944,219) -- -- 5,944,219 --
Net income (loss) .................... (5,944,219) (5,998,793) 54,574 5,944,219 (5,944,219)
</TABLE>
Condensed Consolidating Statement of Cash Flows
Three months ended September 30, 2000
<TABLE>
<CAPTION>
Atlantic
Express Non-
Transportation Guarantor Guarantor Elimination
Corp. Subsidiaries Subsidiaries Entries Consolidated
-------------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by (used in)
operating activities .............. $ (9,514,939) $ 11,890,591 $ (1,345) $ -- $ 2,374,307
Net cash provided by (used in)
investing activities .............. (342,061) (15,444,494) (877,655) -- (16,664,210)
Net cash provided by (used in)
financing activities .............. 9,753,000 1,583,563 -- -- 11,336,563
Increase (decrease) in cash
and cash equivalents .............. (104,000) (1,970,340) (879,000) -- (2,953,340)
Cash and cash equivalents,
beginning of period ............... 150,000 3,696,901 1,739,000 -- 5,585,901
--------------------------------------------------------------------------------------
Cash and cash equivalents,
end of period ..................... 46,000 1,726,561 860,000 -- 2,632,561
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company believes that this report contains forward-looking statements
within the meaning of the federal securities laws and as such involve known and
unknown risks and uncertainties. These statements may use forward-looking words
such as "anticipate", "estimate", "expect", "will" or other similar words. These
statements discuss future expectations or contain projections of future events.
Actual results may differ materially from those expressed or implied by the
forward-looking statements for various reasons, including general economic
conditions, reliance on suppliers, labor relations and other factors, many of
which are beyond the Company's control. Readers are cautioned not to place undue
reliance on such forward-looking statements.
Three months ended September 30, 2001 compared to three months ended
September 30, 2000.
Revenues. Revenues from Transportation Operations were $59.8 million for
the three months ended September 30, 2001 compared to $61.2 million for the
three months ended September 30, 2000, a decrease of $1.4 million or 2.3%. This
decrease was due primarily to the Paratransit Agreement (see Note 5 to
consolidated financial statements) which reduced revenues by $2.3 million and a
$1.2 million decrease due to exit from an under-performing contract partially
offset by a $0.6 million net increase in other new contracts, a $1.4 million
increase in summer revenues and $0.1 million in contract rate increases and
service requirements of existing contracts. Revenues from Bus Sales Operations
were $35.7 million for the three months ended September 30, 2001 compared to
$39.1 million for the three months ended September 30, 2000, a decrease of $3.4
million or 8.6%. This decrease was primarily due to decreases in new bus sales
occurring primarily in the month of September.
Gross Profit. Gross profit from Transportation Operations was $2.4 million
for the three months ended September 30, 2001 compared to $5.8 million for the
three months ended September 30, 2000, a decrease of $3.4 million or 59.1%. As a
percentage of revenues, gross profit decreased to 4.0% for the three months
ended September 30, 2001 from 9.5% for the three months ended September 30,
2000. This decrease was primarily due to increased automobile liability
insurance costs (3.0%) and labor costs (2.5%) partially offset by reduced
vehicle maintenance costs (1.0%). Labor costs increases resulted primarily from
a reduction of two revenue days in New York City in September 2001 compared to
September 2000 with no reduction in driver and escort payroll days. Gross profit
from Bus Sales Operations was $3.1 million for the three months ended September
30, 2001 compared to $3.3 million for the three months ended September 30, 2000,
a decrease of $0.2 million or 6.5%. As a percentage of revenues, gross profit
increased to 8.8 % for the three months ended September 30, 2001 from 8.6% for
the three months ended September 30, 2000. This increase was primarily due to an
increase in proportion of sales made in the New York market which has
historically higher margins than the New Jersey market and a decrease in
proportion of sales of commercial vehicles which have lower margins than school
buses.
General and administrative expenses. General and administrative expenses
for the Transportation Operations were $6.2 million for the three months ended
September 30, 2001 compared to $6.1 million for the three months ended September
30, 2000, an increase of $0.1 million or 2.4%. This increase was primarily due
to an increase of $0.3 million in professional fees partially offset by a $0.2
million decrease in advertising and recruitment expenses. As a percentage of
revenues, general and administrative expenses increased to 10.4% for the three
months ended September 30, 2001 from 9.9% for the three months ended September
30, 2000. General and administrative expenses for the Bus Sales Operations for
the three months ended September 30, 2001 were $1.1 million compared to $1.0
million for the three months ended September 30, 2000, an increase of $0.1
million or 7.8%. As a percentage of revenues, general and administrative
expenses increased to 3.0% for the three months ended September 30, 2001 from
2.5% for the three months ended September 30, 2000.
Depreciation and amortization expenses. Depreciation and amortization
expenses for the Transportation Operations were $6.2 million for the three
months ended September 30, 2001 compared to $5.7 million for the three months
ended September 30, 2000, an increase of $0.5 million or 8.5%. This increase was
primarily due to (i) a $0.2 million increase in depreciation relating to
purchase of new vehicles; and (ii) a $0.3 million increase in amortization of
deferred financing costs. Depreciation and
8
<PAGE>
amortization expenses for the Bus Sales Operations were $0.2 million for the
three months ended September 30, 2001 and September 30, 2000, respectively.
Loss from operations. Loss from operations was $8.2 million for the three
months ended September 30, 2001 compared to $3.8 million for the three months
ended September 30, 2000, an increase of $4.4 million. This increase was due to
the net effect of the items discussed above.
Net interest expense. Net interest expense was $7.1 million for the three
months ended September 30, 2001 compared to $6.9 million for the three months
ended September 30, 2000, an increase of $0.2 million or 2.6%. This increase was
due primarily to higher average indebtedness outstanding during the three months
ended September 30, 2001, partially offset by reductions in interest rates.
Net loss. The Company generated a net loss of $8.4 million for the three
months ended September 30, 2001 compared to a net loss of $5.9 million for the
three months ended September 30, 2000, an increase of $2.5 million. This
increase was due to the net effect of the items discussed above.
Liquidity and Capital Resources
Management anticipates total capital expenditures of $18.5 million in
fiscal 2002 of which approximately $11.7 million were made by September 30,
2001. This included approximately $9.2 million for purchase of new vehicles and
$2.5 million for other property and equipment.
Net Cash Provided By Operating Activities. Net cash provided by operating
activities of $2.3 million for the three months ended September 30, 2001
resulted primarily from $9.6 million of increases in source of funds for working
capital plus non-cash items of depreciation and amortization of $7.2 million and
$0.8 million of increases in other sources of funds offset by (i) the net loss
of $8.4 million; and (ii) a $6.9 million increase in deferred income tax asset.
Net Cash Used in Investing Activities. For the three months ended
September 30, 2001, the Company made $11.7 million of capital expenditures to
acquire additional vehicles, other property and equipment.
Net Cash Provided by Financing Activities. Net cash provided by financing
activities totaled $8.4 million for the three months ended September 30, 2001,
due primarily to (i) a $5.5 million capital contribution from the Company's
parent, AETG; and (ii) $4.8 million of insurance premium financing, partially
offset by a $1.6 million net reduction in the Company's revolving lines of
credit and $0.3 million of principal payments on borrowings.
The Company continues to experience higher automobile liability insurance
costs which are impacting profit margins.
The first quarter is historically the period of the Company's greatest use
of its revolving line of credit due to the purchase of vehicles for the upcoming
school year and seasonal lower revenues in this quarter. The Company believes
that its Receivable Agreement along with its borrowing capacity under its $125
million revolving credit facility (of which $9.9 million was undrawn at
September 30, 2001), and the equity contribution received from AETG in September
2001 will provide it with sufficient liquidity to conduct its operations for the
balance of the year.
At September 30, 2001, the Company's total debt and stockholder's equity
were $244.6 million and $43.6 million respectively.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company is exposed to market risk from fluctuations in interest rates,
which could impact its consolidated financial position, results of operations
and cash flows. The Company manages the exposure to market risk through its
regular operating and financing activities. The Company does not use derivative
9
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financial instruments for speculative or trading purposes and does not maintain
such instruments that may expose it to significant market risk.
Our earnings are sensitive to changes in short-term interest rates as a
result of our borrowings under variable rate debt. If interest rates increase by
10 percent for the year ending June 30, 2002, our interest expense would
increase, and income before income taxes would decrease, by approximately $0.9
million. This analysis does not consider the effects of the reduced level of
overall economic activity, or other factors that could exist in such an
environment. Further, in the event of a change of such magnitude, management
could take actions to further mitigate its exposure to the change. However, due
to the uncertainty of the specific actions that would be taken and their
possible effects, the sensitivity analysis assumes no changes in our financial
structure.
In addition, the Company manages its fuel costs to reduce its exposure to
market changes. Fuel costs are sensitive to market changes as well as the
overall growth or decline of the Company's business. Changes in fuel costs would
result in an increase or decrease in the Company's gross margin percentage.
Based on a hypothetical 10 percent increase in fuel costs for the year ended
June 30, 2001, the total costs would be equivalent to an increase in cost of
$1.6 million, or .37% of total revenues.
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PART II OTHER INFORMATION
Item 1. Legal Proceedings
None.
Item 2. Changes in Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
See Exhibit Index on Page E-1 for exhibits filed with this report on Form
10-Q.
b) Reports on Form 8-K - None.
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SIGNATURES
In accordance with the requirements of the Securities and Exchange Act of
1934, the Company has duly caused this report to be signed on behalf by the
undersigned, thereunto duly authorized.
ATLANTIC EXPRESS TRANSPORTATION CORP.
By: /s/ NATHAN SCHLENKER
---------------------------------
Nathan Schlenker
Chief Financial Officer
November 19, 2001
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Index to Exhibits
The following documents are exhibits to this Quarterly Report on Form
10-Q. For convenient reference, each exhibit is listed according to the Exhibit
Table of Regulation S-K. The page number, if any, listed opposite an exhibit
indicates the page number in the sequential numbering system on the manually
signed original of this Quarterly Report on Form 10-Q where such exhibit can be
found.
Exhibit Sequential Page
Number Exhibit Number
------ ------- ------
None
E-1
</TEXT>
</DOCUMENT>