-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NN3Kg7V2RgH5t1soqebAg9YTLgmnGXYU4bZH/UM8DIjv4bUN0dq+JXHeO9HV2U4L SsSILLIXVq8BrQ8UU/KuXQ== 0001005477-99-000570.txt : 19990215 0001005477-99-000570.hdr.sgml : 19990215 ACCESSION NUMBER: 0001005477-99-000570 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990212 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC EXPRESS TRANSPORTATION CORP CENTRAL INDEX KEY: 0001035423 STANDARD INDUSTRIAL CLASSIFICATION: LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRAINS [4100] IRS NUMBER: 133924567 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-24247 FILM NUMBER: 99536340 BUSINESS ADDRESS: STREET 1: 7 NORTH STREET STREET 2: STATEN ISLAND CITY: NEW YORK STATE: NY ZIP: 10302-1205 BUSINESS PHONE: 7184427000 MAIL ADDRESS: STREET 1: 7 NORTH STREET STREET 2: STATEN ISLAND CITY: NEW YORK STATE: NY ZIP: 10302-1205 10-Q 1 FORM 10-Q ================================================================================ 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 December 31, 1998 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. ================================================================================ TABLE OF CONTENTS PART I. Financial Information Page ----- ITEM 1. Financial Statements: Consolidated Balance Sheets at June 30, 1998 (audited) and December 31, 1998 (unaudited)................................... 1 Consolidated Statements of Operations for the Three Month and Six Month Periods Ended December 31, 1997 (unaudited) and 1998 (unaudited)............................................ 2 Consolidated Statements of Comprehensive Income (Loss) for the Three Months and Six Months Ended December 31, 1997 (unaudited) and 1998 (unaudited)................................ 3 Consolidated Statements of Cash Flows for the Six Month Periods Ended December 31, 1997 (unaudited) and 1998 (unaudited)........ 4 Notes to Consolidated Financial Statements (unaudited)............ 5-8 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................. 9-12 PART II. Other Information 13 Signatures............................................................ 14 Index to Exhibits..................................................... E-1 Atlantic Express Transportation Corp. and Subsidiaries Consolidated Balance Sheets
June 30, December 31, 1998 1998 ------------ ------------ (audited) (unaudited) Assets Current: Cash and cash equivalents ......................................................... $ 13,772,537 $ 2,491,118 Current portion of marketable securities .......................................... 850,000 2,700,000 Accounts receivable, net of allowance for doubtful accounts ....................... 37,310,006 40,962,184 Inventories ....................................................................... 10,762,839 9,913,095 Notes receivable .................................................................. 1,182,425 124,839 Prepaid expenses and other current assets ......................................... 5,692,610 6,990,474 ------------ ------------ Total current assets .................................................... 69,570,417 63,181,710 ------------ ------------ Property, plant and equipment, less accumulated depreciation ........................... 99,887,054 125,345,670 ------------ ------------ Other assets: Goodwill, net ..................................................................... 12,469,422 12,306,468 Notes receivable from affiliates .................................................. 510,000 -- Investments ....................................................................... 229,000 229,000 Marketable securities ............................................................. 7,027,937 7,450,835 Deferred lease expense ............................................................ 334,115 276,811 Transportation contract rights, net ............................................... 3,807,743 8,955,742 Deferred financing and organization costs, net .................................... 8,310,723 7,583,802 Due from affiliates ............................................................... 672,589 831,117 Notes receivable .................................................................. 25,000 22,339 Deposit and other noncurrent assets ............................................... 1,394,301 1,721,051 Deferred tax assets ............................................................... 2,087,000 4,464,809 Covenant not to compete, net ...................................................... 160,000 245,000 ------------ ------------ Total other assets ...................................................... 37,027,830 44,086,974 ------------ ------------ $206,485,301 $232,614,354 ============ ============ Liabilities and Stockholder's Equity Current: Current portion of long-term debt ................................................. $ 641,574 $ 1,272,948 Accounts payable .................................................................. 2,250,615 2,924,060 Accrued compensation .............................................................. 4,703,334 4,457,427 Current portion of insurance reserve .............................................. 3,657,442 3,760,000 Accrued interest .................................................................. 6,776,630 6,899,913 Other accrued expenses and current liabilities .................................... 4,158,333 3,592,410 ------------ ------------ Total current liabilities ............................................... 22,187,928 22,906,758 ------------ ------------ Long-term debt, net of current portion ................................................. 157,284,116 181,246,282 ------------ ------------ Premium on bond issuance ............................................................... 1,202,550 1,094,850 ------------ ------------ Other long-term liabilities ............................................................ 5,641,135 7,116,526 ------------ ------------ Stockholder's equity: Common stock, no par value - shares authorized 200; issued and outstanding 100 .... 250,000 250,000 Additional paid-in capital ........................................................ 13,188,926 15,898,517 Retained earnings ................................................................. 6,354,353 2,773,750 Accumulated other comprehensive income: Unrealized gain on marketable securities, net ................................ 376,293 1,327,671 ------------ ------------ Total stockholder's equity .............................................. 20,169,572 20,249,938 ------------ ------------ $206,485,301 $232,614,354 ============ ============
See accompanying notes to consolidated financial statements. 1 Atlantic Express Transportation Corp. and Subsidiaries Consolidated Statements of Operations
Three Months Ended Six Months Ended December 31, December 31, ------------------------------ ------------------------------ 1997 1998 1997 1998 ------------- ------------- ------------- ------------- (unaudited) (unaudited) Revenues ....................................... $ 68,138,099 $ 84,968,315 $ 127,291,475 $ 156,001,102 ------------- ------------- ------------- ------------- Costs and expenses: Cost of operations ........................ 57,915,037 68,403,973 109,169,121 133,060,046 General and administrative ................ 7,000,890 5,606,220 10,773,210 10,190,642 Depreciation and amortization ............. 3,419,061 3,123,996 6,711,340 5,979,982 ------------- ------------- ------------- ------------- 68,334,988 77,134,189 126,653,671 149,230,670 ------------- ------------- ------------- ------------- Income (loss) from operations ........ (196,889) 7,834,126 637,804 6,770,432 Interest ....................................... (4,919,498) (5,263,970) (9,057,169) (10,081,573) Other income (expense) ......................... 124,748 (72,999) 232,902 (72,999) ------------- ------------- ------------- ------------- Income (loss) before nonrecurring item and benefit for income taxes ............................. (4,991,639) 2,497,157 (8,186,463) (3,384,140) Nonrecurring item .............................. -- (2,709,591) -- (2,709,591) ------------- ------------- ------------- ------------- Loss before benefit for income taxes ............................. (4,991,639) (212,434) (8,186,463) (6,093,731) Benefit for income taxes ....................... (2,342,083) (95,595) (3,683,910) (2,742,178) ------------- ------------- ------------- ------------- Net loss ............................. $ (2,649,556) $ (116,839) $ (4,502,553) $ (3,351,553) ============= ============= ============= =============
See accompanying notes to consolidated financial statements. 2 Atlantic Express Transportation Corp. and Subsidiaries Consolidated Statements of Comprehensive Income (Loss)
Three Months Ended Six Months Ended December 31, December 31, -------------------------- -------------------------- 1997 1998 1997 1998 ----------- ----------- ----------- ----------- (unaudited) (unaudited) Net loss ................................... $(2,649,556) $ (116,839) $(4,502,553) $(3,351,553) Other comprehensive income (loss): Unrealized gain (loss) on marketable securities ....................... (168,528) 1,561,228 86,357 951,378 ----------- ----------- ----------- ----------- Comprehensive income (loss) ................ $(2,818,084) $ 1,444,389 $(4,416,196) $(2,400,175) =========== =========== =========== ===========
See accompanying notes to consolidated financial statements. 3 Atlantic Express Transportation Corp. and Subsidiaries Consolidated Statements of Cash Flows
Six Months Ended December 31, ---------------------------- 1997 1998 ------------ ------------ (unaudited) Cash flows from operating activities: Net income (loss) ............................................................. $ (4,502,553) $ (3,351,553) Adjustments to reconcile net loss to net cash provided by operating activities: Gain on sale of marketable securities .................................... (232,902) (194,329) Deferred income taxes .................................................... (3,683,860) (2,742,178) Depreciation ............................................................. 5,857,519 5,401,850 Amortization ............................................................. 1,835,166 1,205,624 Write-off of accounts receivable ......................................... 480,000 -- Reserve for doubtful accounts receivable ................................. 1,270,000 60,000 Interest accrued on notes receivable ..................................... (157,775) -- Transfer from restricted cash ............................................ 914,408 -- Nonrecurring item ........................................................ -- 2,709,591 Decrease (increase) in: Accounts receivable and retainage (net of receivables sold) ......... (575,882) (3,092,168) Inventories ......................................................... 1,557,316 1,014,617 Prepaid expenses and other current assets ........................... (2,646,982) (1,209,744) Deferred lease expense .............................................. 75,202 57,304 Deposits and other noncurrent assets ................................ (113,901) 200,699 Increase (decrease) in: Accounts payable .................................................... (388,852) 595,259 Accrued expenses and other current liabilities ...................... 5,429,580 (1,975,650) Other long-term liabilities ......................................... 752,364 475,390 ------------ ------------ Net cash provided (used in) operating activities .................... 5,868,848 (845,288) ------------ ------------ Cash flows from investing activities: Acquisition of subsidiaries (net of cash acquired of $207,441 and $1,100,009 in 1997 and 1998 respectively) ........................................... (21,519,397) (6,014,361) Proceeds from sale of fixed assets ............................................ 234,064 33,887 Additions to property, plant and equipment .................................... (15,426,604) (18,745,242) Purchase of transportation contract rights .................................... (39,665) (70,215) Due from affiliates ........................................................... (564,422) (158,528) Notes receivable .............................................................. (643,042) 1,570,247 Marketable securities sold (purchased), net ................................... (2,167,328) (1,127,191) ------------ ------------ Net cash used in investing activities ............................... (40,126,394) (24,511,403) ------------ ------------ Cash flows from financing activities: Proceeds of additional borrowings ............................................. 45,770,000 19,355,307 Principal payments on borrowings .............................................. (13,252,118) (5,000,991) Deferred financing and organization costs ..................................... (3,567,213) (49,995) Other ......................................................................... (379,756) (229,049) ------------ ------------ Net cash provided by financing activities ................................ 28,570,913 14,075,272 ------------ ------------ Net decrease in cash and cash equivalents .......................................... (5,686,633) (11,281,419) Cash and cash equivalents, beginning of period ..................................... 16,818,889 13,772,537 ------------ ------------ Cash and cash equivalents, end of period ........................................... $ 11,132,256 $ 2,491,118 ============ ============ Supplemental disclosures of cash flow information: Cash paid during the period for: Interest ................................................................. $ 6,320,900 $ 9,521,069 Income taxes ............................................................. 331,527 182,068 Supplemental schedule of noncash investing and financing activities: Loans incurred for purchase of property, plant and equipment .................. $ 6,368,900 $ 5,686,617 Liability incurred for acquisition of contract rights ......................... -- 1,000,000 Additional paid-in capital contributed ........................................ -- 2,709,591 Transfer of bus from inventory to fixed assets ................................ 47,558 --
See accompanying notes to financial statements. 4 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, 1998 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. Certain amounts in the fiscal 1998 financial statements have been reclassified to conform with current period presentation. Operating results for the periods presented are not necessarily indicative of the results for the full fiscal year. 2. New Accounting Pronouncement Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income", which requires that all components of comprehensive income (loss) and total comprehensive income (loss) be reported on one of the following: a statement of income and comprehensive income (loss), a statement of comprehensive income (loss) or a statement of stockholder's equity. The Company is reporting this information on a separate statement of comprehensive income (loss) which includes all changes to stockholder's equity, except those due to investments by owners (changes in paid in capital) and distributions to owners (dividends). This statement did not change the current accounting treatment for components of comprehensive income. 3. Inventories Inventories comprised the following: June 30, December 31, 1998 1998 ----------- ----------- Parts and fuel..................... $3,921,237 $4,105,675 Buses.............................. 6,841,602 5,807,420 ----------- ----------- $10,762,839 $ 9,913,095 =========== =========== 4. Change of Control of the Company and Nonrecurring Item On October 27, 1998 the holders of a majority in principal amount of the Company's 10 3/4% Senior Secured Notes due 2004 (the "Notes") consented to an amendment to the Indenture relating to the Notes which in substance exempted the transactions contemplated by a Recapitalization and Stock Purchase Agreement (the "Recapitalization") from the definition of "Change of Control" under the Indenture. On November 4, 1998 the Recapitalization was consummated. As a result, GSCP II Holdings (AE), LLC, an affiliate of Greenwich Street Capital Partners, Inc., a New York based private equity fund, acquired an approximately 88% equity interest in a recapitalized Atlantic Express Transportation Group, Inc. ("AETG") which owns all of the issued and outstanding shares of capital stock of the Company. $2.7 million of fees and expenses paid by the stockholders of AETG in connection with the amendment to the Indenture have been recorded as a nonrecurring charge with a corresponding contribution to additional paid in capital. 5 5. 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 Notes as of and for the six months ended December 31, 1998, and a consolidating balance sheet as of June 30, 1998 and consolidating statements of operations for the three months ended December 31, 1998 and 1997 and for the six months ended December 31, 1997, and consolidating statement of cash flows for the six months ended December 31, 1997. Condensed Consolidating Balance Sheet December 31, 1998
Atlantic Express Non- Transportation Guarantor Guarantors Elimination Corp. Subsidiaries Subsidiaries Entries Consolidated -------------- -------------- -------------- -------------- -------------- Current assets ......................... $ 2,911,199 $ 58,353,400 $ 6,568,262 $ (4,651,151) $ 63,181,710 Investment in affiliates ............... 68,340,331 -- -- (68,340,331) -- Total assets ........................... 215,736,244 189,048,763 14,788,778 (186,959,431) 232,614,354 Current liabilities .................... 8,035,215 14,878,354 4,685,458 (4,692,269) 22,906,758 Total liabilities ...................... 179,950,126 162,386,314 10,731,984 (140,704,008) 212,364,416 Stockholder's equity ................... 35,786,118 26,662,449 4,056,794 (46,255,423) 20,249,938
Condensed Consolidating Statement of Operations Three months ended December 31, 1998
Atlantic Express Transportation Guarantor Non- Elimination Corp. Subsidiaries Guarantors Entries Consolidated -------------- -------------- -------------- -------------- -------------- Net revenues ........................... $ -- $ 84,667,851 $ 2,273,552 $ (1,973,088) $ 84,968,315 Income (loss) from operations .......... (267,415) 7,853,713 247,828 -- 7,834,126 Income (loss) before nonrecurring item, (provision for) benefit from income taxes ......................... (267,415) 2,516,744 247,828 -- 2,497,157 Nonrecurring item ...................... (2,709,591) -- -- -- (2,709,591) Net income of subsidiaries ............. 1,520,514 -- -- (1,520,514) -- Net income (loss) ...................... (116,839) 1,382,786 137,728 (1,520,514) (116,839)
Condensed Consolidating Statement of Operations Six months ended December 31, 1998
Atlantic Express Transportation Guarantor Non- Elimination Corp. Subsidiaries Guarantors Entries Consolidated -------------- -------------- -------------- -------------- -------------- Net revenues ........................... $ -- $ 155,644,406 $ 3,442,232 $ (3,085,536) $ 156,001,102 Income (loss) from operations .......... (320,906) 6,829,282 262,056 -- 6,770,432 Income (loss) before nonrecurring item, (provision for) benefit from income taxes ......................... (320,906) (3,325,290) 262,056 -- (3,384,140) Nonrecurring item ...................... (2,709,591) -- -- -- (2,709,591) Net loss of subsidiaries ............... (1,684,780) -- -- 1,684,780 -- Net income (loss) ...................... (3,351,553) (1,828,911) 144,131 1,684,780 (3,351,553)
6 Condensed Consolidating Statement of Cash Flows Six months ended December 31, 1998
Atlantic Express Non- Transportation Guarantor Guarantor Elimination Corp. Subsidiaries Subsidiaries Entries Consolidated -------------- -------------- -------------- -------------- -------------- Net cash provided by (used in) operating activities .............. $ (18,865,166) $ 15,950,730 $ 2,069,148 $ -- $ (845,288) Net cash used in investing activities ........................ (5,842,005) (17,542,207) (1,127,191) -- (24,511,403) Net cash provided by (used in) financing activities .............. 19,076,263 (5,000,991) -- -- 14,075,272 Increase (decrease) in cash and cash equivalents .................. (5,630,908) (6,592,468) 941,957 -- (11,281,419) Cash and cash equivalents, beginning of period ............... 6,932,910 4,014,584 2,825,043 -- 13,772,537 ------------------------------------------------------------------------------------ Cash and cash equivalents, end of period ..................... $ 1,302,002 $ (2,577,884) $ 3,767,000 $ -- $ 2,491,118
Condensed Consolidating Balance Sheet June 30, 1998
Atlantic Express Non- Transportation Guarantor Guarantor Elimination Corp. Subsidiaries Subsidiaries Entries Consolidated -------------- -------------- -------------- -------------- -------------- Current assets ......................... $ 13,459,022 $ 47,736,795 $ 8,374,600 $ -- $ 69,570,417 Investment in affiliates ............... 60,404,818 -- -- (60,404,818) -- Total assets ........................... 193,219,371 165,426,379 15,993,943 (168,154,392) 206,485,301 Current liabilities .................... 7,688,435 6,743,371 7,756,122 -- 22,187,928 Total liabilities ...................... 160,355,739 120,676,905 13,032,657 (107,749,572) 186,315,729 Stockholder's equity ................... 32,863,632 44,749,474 2,961,286 (60,404,820) 20,169,572
Condensed Consolidating Statement of Operations Three months ended December 31, 1997
Atlantic Express Non- Transportation Guarantor Guarantor Elimination Corp. Subsidiaries Subsidiaries Entries Consolidated -------------- -------------- -------------- -------------- -------------- Net revenues ........................... $ -- $ 68,138,099 $ 2,520,904 $ (2,520,904) $ 68,138,099 Income (loss) from operations .......... -- (140,130) (56,759) -- (196,889) Income (loss) before income taxes ...... -- (5,157,648) 166,009 -- (4,991,639) Net loss of subsidiaries ............... (2,649,556) -- -- 2,649,556 -- Net income (loss) ...................... (2,649,556) (2,740,861) 91,305 2,649,556 (2,649,556)
7 Condensed Consolidating Statement of Operations Six months ended December 31, 1997
Atlantic Express Non- Transportation Guarantor Guarantor Elimination Corp. Subsidiaries Subsidiaries Entries Consolidated -------------- -------------- -------------- -------------- -------------- Net revenues ........................... $ -- $ 127,291,475 $ 3,708,814 $ (3,708,814) $ 127,291,475 Income (loss) from operations .......... -- 736,314 (98,510) -- 637,804 Income (loss) before income taxes ...... -- (8,505,199) 318,736 -- (8,186,463) Net loss of subsidiaries ............... (4,502,553) -- -- 4,502,553 -- Net income (loss) ...................... (4,502,553) (4,677,858) 175,305 4,502,553 (4,502,553)
Condensed Consolidating Statement of Cash Flows Six months ended December 31, 1997
Atlantic Express Non- Transportation Guarantor Guarantor Elimination Corp. Subsidiaries Subsidiaries Entries Consolidated -------------- -------------- -------------- -------------- -------------- Net cash provided by (used in) operating activities .............. $ (24,399,331) $ 27,584,225 $ 2,683,954 $ -- $ 5,868,848 Net cash used in investing activities ........................ (22,223,082) (15,735,984) (2,167,328) -- (40,126,394) Net cash provided by (used in financing activities .............. 41,713,031 (13,142,118) -- -- 28,570,913 Increase (decrease) in cash and cash equivalents .................. (4,909,382) (1,293,877) 516,626 -- (5,686,633) Cash and cash equivalents, beginning of period .............. 15,029,114 479,933 1,309,842 -- 16,818,889 ------------------------------------------------------------------------------------ Cash and cash equivalents, end of period ............................ $ 10,119,732 $ (813,944) $ 1,826,468 -- $ 11,132,256
8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion 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 December 31, 1998 compared to three months ended December 31, 1997. Revenues. Revenues from Transportation Operations were $68.5 million for the three months ended December 31, 1998 compared to $55.8 million for the three months ended December 31, 1997, an increase of $12.7 million or 22.8%. This increase was due primarily to (i) an increase in billings on existing contracts of $5.8 million; (ii) the award of new contracts which added $3.8 million of revenues; and (iii) $3.1 million from the operations of five newly acquired subsidiaries. Revenues from Bus Sales Operations were $16.5 million for the three months ended December 31, 1998 compared to $12.4 million for the three months ended December 31, 1997, an increase of $4.1 million or 33.1%. Gross Profit. Gross profit from Transportation Operations was $15.0 million for the three months ended December 31, 1998 compared to $8.6 million for the three months ended December 31, 1997, an increase of $6.4 million or 73.6%. As a percentage of revenues, gross profit increased to 21.9% in the second quarter of 1998 from 15.5% in the second quarter of 1997. In the second quarter of 1997, there was a one time bonus which reduced gross profit by $1.7 million or 3.0%. The increase in gross profit (exclusive of the one time bonus) of $4.7 million was due primarily to (i) increased revenues (ii) an increase in gross profit percentage of 2.6% due primarily to a reduction in health and welfare, fuel and vehicle insurance expenses and (iii) gross profit of $1.2 million generated from operations of newly acquired subsidiaries. Gross Profit for the Bus Sales Operations was $1.6 million for the three months ended December 31, 1998 and December 31, 1997. As a percentage of revenues, gross profit decreased to 9.4% for the three months ended December 31, 1998 from 12.7% for the three months ended December 31, 1997. The reduction in gross profit percentage was due primarily to an increase in the current quarter of the proportion of sales made in the New Jersey market which has had historically lower gross profit margins than the New York market. General and administrative expenses. General and administrative expenses for the Transportation Operations were $4.6 million for the three months ended December 31, 1998 compared to $6.0 million for the three months ended December 31, 1997, a decrease of $1.4 million or 23.5%. This decrease was primarily due to a $1.8 million provision for doubtful accounts taken in the second quarter of 1997 partially offset by $0.4 million of general and administrative expenses incurred by newly acquired subsidiaries. As a percentage of revenues, general and administrative expenses decreased to 6.7% for the three months ended December 31, 1998 from 10.8% for the three months ended December 31, 1997. General and administrative expenses for the Bus Sales Operations were $1.0 million for the three months ended December 31, 1998 and 1997. As a percentage of revenues, general and administrative expenses decreased to 6.2% for the three months ended December 31, 1998 from 8.1% for the three months ended December 31, 1997. Depreciation and amortization expenses. Depreciation and amortization expenses for the Transportation Operations were $2.9 million for the three months ended December 31, 1998 compared to $3.1 million for the three months ended December 31, 1997, a decrease of $0.1 million. This decrease was due to the Company reassessing (on January 1, 1998) and extending the useful lives of certain fixed assets which reduced depreciation by approximately $0.9 million, which was partially offset by increases in depreciation due to the purchase of new vehicles. Depreciation and amortization of Bus Sales Operations was $0.2 million for the second quarter of 1998 compared to $0.3 million for the second quarter of 1997. 9 Income (loss) from operations. Income from operations was $7.8 million for the three months ended December 31, 1998 compared to a loss from operations of $0.2 million for the three months ended December 31, 1997, an increase of $8.0 million. This increase was due to the net effect of the items discussed above. Net interest expense. Net interest expense was $5.3 million for the three months ended December 31, 1998 compared to $4.9 million for the three months ended December 31, 1997, an increase of $0.3 million or 7.0%. This increase was primarily due to increased interest in connection with the Company's revolving line of credit and equipment financing. Income (loss) before nonrecurring item and taxes. Income before nonrecurring item and taxes was $2.5 for the three months ended December 31, 1998 compared to a loss before nonrecurring item and taxes of $5.0 million for the three months ended December 31, 1997, and increase of $7.5 million. Nonrecurring item. Nonrecurring item was $2.7 million for the three months ended December 31, 1998. This represented fees and expenses paid by the shareholders of Atlantic Express Transportation Group, Inc. (the parent of AETC) for the benefit of the Company. (See Note 4 of Notes to Consolidated Financial Statements). There were no nonrecurring items for the three months ended December 31, 1997. Net loss. The Company generated a net loss of $0.1 million for the three months ended December 31, 1998 compared to a net loss of $2.6 million for the three months ended December 31, 1997, a decrease of $2.5 million due to the net effect of the items discussed above. Six months ended December 31, 1998 compared to six months ended December 31, 1997 Revenues. Revenues from Transportation Operations were $104.1 million for the six months ended December 31, 1998 compared to $87.3 million for the six months ended December 31, 1997, an increase of $16.8 million or 19.2%. This increase was due primarily to (i) the award of new contracts which added $8.3 million of revenues; (ii) an increase in billings on existing contracts of $4.3 million; (iii) $3.1 million in revenues from operations of five newly acquired subsidiaries and (iv) $1.1 million of additional summer revenues. Revenues from Bus Sales Operations were $51.9 million for the six months ended December 31, 1998 compared to $40.0 million for the six months ended December 31, 1997, an increase of $11.9 million or 29.8%. Gross Profit. Gross profit from Transportation Operations was $17.3 million for the six months ended December 31, 1998 compared to $13.0 million for the six months ended December 31, 1997, an increase of $4.4 million or 33.8%. As a percentage of revenues, gross profit increased to 16.6% for the six months ended December 31, 1998 from 14.8% for the six months ended December 31, 1997. In the second quarter of 1997, there was a one time bonus which reduced gross profit for the six months ended December 31, 1997 by $1.7 million or 1.9%. The increase in gross profit (exclusive of the one time bonus) of $2.7 million was due primarily to (i) increased revenues (ii) gross profit generated by operations from newly acquired subsidiaries partially offset by a decrease in gross profit due to a net reduction in revenue days (primarily in New York City) for the six months ended December 31, 1998. Gross profit for the Bus Sales Operations was $5.6 million for the six months ended December 31, 1998 compared to $5.2 million for the six months ended December 31, 1997, an increase of $0.4 million or 8.6%. As a percentage of revenues, gross profit decreased to 10.8% for the six months ended December 31, 1998 from 12.9% for the six months ended December 31, 1997. This decrease was due primarily to an increase in the current six months of the proportion of sales in the New Jersey market which has had historically lower gross margins then the New York market. General and administrative expenses. General and administrative expenses for the Transportation Operations were $8.2 million for the six months ended December 31, 1998 compared to $9.0 million for the six months ended December 31,1997, a decrease of $0.8 million or 8.8%. This decrease was principally due to a $1.8 million provision for doubtful accounts taken in the second quarter of 1997 partially offset by increases in professional fees of $0.5 million and $0.4 million of general and administrative expenses incurred by newly acquired subsidiaries. As a percentage of revenues, general and administrative expenses decreased to 7.9% for the six months ended December 31, 1998 from 10.3% for 10 the six months ended December 31, 1997. General and administrative expenses for the Bus Sales Operations was $2.0 million for the six months ended December 31, 1998 compared to $1.7 million for the six months ended December 31, 1997, an increase of $0.2 million or 12.2%. As a percentage of revenues, general and administrative expenses decreased to 3.8% for the six months ended December 31, 1998 from 4.4% for the six months ended December 31, 1997. Depreciation and amortization expenses. Depreciation and amortization expenses for the Transportation Operations were $5.6 million for the six months ended December 31, 1998 compared to $6.0 million for the six months ended December 31, 1997, a decrease of $0.4 million. This decrease was due to the Company reassessing (on January 1, 1998) and extending the useful life of certain fixed assets which reduced depreciation by approximately $1.8 million, which was partially offset by increases in depreciation due to the purchase of new vehicles. Depreciation and amortization of Bus Sales Operations were $0.4 million for the six months ended December 31, 1998, compared to $0.7 million for the six months ended December 31, 1997, a decrease of $0.3 million. Income (loss) from operations. Income from operations was $6.8 million for the six months ended December 31, 1998 compared to $0.6 million for the six months ended December 31, 1997, an increase of $6.1 million. This increase was due to the net effect of the items discussed above. Net interest expense. Net interest expense was $10.1 million for the six months ended December 31, 1998 compared to $9.1 million for the six months ended December 31, 1997, an increase of $1.0 million. This increase was primarily due to increased interest in connection with the Company's revolving line of credit and equipment financing. Loss before nonrecurring item and taxes. Loss before nonrecurring item and taxes was $3.4 million for the six months ended December 31, 1998 compared to $8.2 million for the six months ended December 31, 1997, a decrease of $4.8 million. Nonrecurring item. Nonrecurring item was $2.7 million for the six months ended December 31, 1998. This represented fees and expenses paid by the shareholders of Atlantic Express Transportation Group, Inc. (the parent of AETC) for the benefit of the Company. (See Note 4 of Notes to Consolidated Financial Statements). There were no nonrecurring items for the six months ended December 31, 1997. Net loss. The Company generated a net loss of $3.4 million for the six months ended December 31, 1998 compared to a net loss of $4.5 million for the six months ended December 31, 1997, a decrease of $1.2 million due to the net effect of the items discussed above. Liquidity and Capital Resources Management anticipates total capital expenditures of $25.8 million in fiscal 1999 of which approximately $24.4 million were made by December 31, 1998. This included approximately $21.3 million for purchase of new vehicles and $3.1 million for other property and equipment. Net Cash Used In Operating Activities. Net cash used in operating activities was $0.8 million for the six months ended December 31, 1998 primarily due to the following: (i) a net loss of $3.4 million plus non cash items of depreciation and amortization of $6.6 million and a nonrecurring item of $2.7 million less a $2.7 million increase in deferred tax benefit (ii) use of cash for working capital of $4.7 million and (iii) an increase of $0.6 million in other items. Net Cash Used in Investing Activities. For the six months ended December 31, 1998, the Company made $24.4 million of capital expenditures to acquire additional vehicles and equipment. Of these capital expenditures $5.7 million were directly financed. Effective October 1, 1998, the Company acquired five new subsidiaries for $6.0 million (net of $1.1 million cash acquired). These acquisitions were funded from the Company's revolving line of credit. 11 Net Cash Provided by Financing Activities. Net cash provided by financing activities totaled $14.1 million due primarily to $19.4 million net borrowings under the Company's revolving line of credit, partially offset by principal payments of $5.0 million on borrowings. The Company believes that its Revolving Credit Facility of $30.0 million (of which $9.2 million was undrawn at December 31, 1998) will provide it with sufficient liquidity to conduct its operations. At December 31, 1998, the Company's total debt and stockholder's equity were $182.5 million and $20.2 million respectively. Impact of Year 2000 on the Company's Systems The Company has completed its assessment of all of its computerized systems and has determined what changes, if any, need to be made so that such systems, which include information and non-information technology systems, will function properly with respect to dates in the year 2000 and thereafter to ensure that the Company's financial, information and operational systems are year 2000 compliant. The Company has developed a program to implement these changes, which consists of the following phases: (i) developing solutions for affected technology and systems (ii) modifying or replacing affected technology and systems, (iii) testing and verifying solutions, (iv) implementing solutions and (v) developing contingency plans. The Company has completed its year 2000 compliance at 3 of its locations, including its corporate office. The Company intends to complete its compliance of its remaining locations by the end of the calendar year. Costs incurred to date directly related to the year 2000 issue have not been material to the Company. Having completed its assessment of the changes required to become year 2000 compliant, the Company expects that the total cost of meeting the goals of its year 2000 program will not be material and will be expensed as incurred. Management is in the process of assessing the potential impact of any year 2000 non-compliant systems of its vendors or customers and has begun communicating with those vendors and customers with whom the Company does significant business. A third-party's failure to become year 2000 compliant or the Company's inability to become compatible with third parties with which the Company has a material relationship may have an adverse effect on the Company; however, the Company does not expect its operations to be materially impacted by any potential systems problems incurred by such vendors or customers. The Company is in the process of developing its contingency plan for its facilities to provide for the most reasonable likely worst case scenarios regarding year 2000 compliance. This contingency plan is expected to be completed in 1999. New Accounting Pronouncement Effective July 1, 1998, the Company adopted SFAS No. 130, "Reporting Comprehensive Income", which requires that all components of comprehensive income (loss) and total comprehensive income (loss) be reported on one of the following: a statement of income and comprehensive (loss), a statement of comprehensive income (loss) or a statement of stockholder's equity. The Company is reporting this information on a separate statement of comprehensive income (loss). Comprehensive income (loss) is comprised of net income (loss) and all changes to stockholder's equity, except those due to investments by owners (changes in paid-in capital) and distributions to owners (dividends). This statement did not change the current accounting treatment for components of comprehensive income. 12 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 The Company filed a Current Report on Form 8-K dated November 10, 1998, reporting under Item 1 the consummation of the Recapitalization of AETG. 13 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 February 12, 1999 14 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 ------ ------- ------ 4.1 Third Supplemental Indenture, dated as of October 29, 1998, by and among Atlantic Express Transportation Corp., the Guarantors named therein and The Bank of New York, as Trustee (incorporated by reference to Exhibit 1.1 to the Company's Current Report on Form 8-K filed November 10, 1998). 27.1 Financial Data Schedule E-1 EX-27 2 FDS
5 This schedule contains summary financial information extracted from 10-Q at December 31, 1998 and is qualified in its entirety by reference to such financial statements 6-MOS JUN-30-1999 JUL-01-1998 DEC-31-1998 2,491,118 10,150,835 43,520,343 1,579,864 9,913,095 63,181,170 225,651,436 100,305,766 232,614,354 22,906,758 182,519,230 0 0 250,000 19,999,938 232,614,354 51,903,202 156,001,102 46,287,981 143,250,688 0 60,000 10,081,573 (3,384,140) (2,742,178) (6,093,731) 0 0 0 (3,351,553) 0 0
-----END PRIVACY-ENHANCED MESSAGE-----