-----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, HW7rRCs8tPZ8TYLIDXBI9s2RspbOCuwya6XaOtw30eL8PYK8gL8DNEBQEY0nrdtZ JJo3ym1cOEmMFzh1Iprz+w== 0000950134-96-001967.txt : 19960514 0000950134-96-001967.hdr.sgml : 19960514 ACCESSION NUMBER: 0000950134-96-001967 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREYHOUND LINES INC CENTRAL INDEX KEY: 0000813040 STANDARD INDUSTRIAL CLASSIFICATION: LOCAL & SUBURBAN TRANSIT & INTERURBAN HWY PASSENGER TRAINS [4100] IRS NUMBER: 860572343 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10841 FILM NUMBER: 96561986 BUSINESS ADDRESS: STREET 1: 15110 N DALLAS PKWY STE 600 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 2147157000 MAIL ADDRESS: STREET 1: 15110 N DALLAS PARKWAY STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 10-Q 1 FORM 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ______________________ FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1996 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. (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) (214) 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 ----- ----- APPLICABLE ONLY TO ISSUERS 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 Sections 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 X NO ----- ----- APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. CLASS OF COMMON STOCK OUTSTANDING AT MAY 6, 1996 --------------------- -------------------------- $.01 PAR VALUE 58,187,126 SHARES 2 GREYHOUND LINES, INC. AND SUBSIDIARIES
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Interim Consolidated Statements of Financial Position as of March 31, 1996 (Unaudited) and December 31, 1995 . . . . . . . . . . . . 4 Interim Consolidated Statements of Operations for the Three Months Ended March 31, 1996 and 1995 (Unaudited) . . . . . . . . . 5 Condensed Interim Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995 (Unaudited) . . . . . . . . . 6 Notes to Interim Consolidated Financial Statements (Unaudited) . . . . . . 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . 10 PART II. OTHER INFORMATION Item 1. Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . . . . . . . . . 17 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
2 3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 3 4 GREYHOUND LINES, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
MARCH 31, DECEMBER 31, 1996 1995 ---------- -------- (UNAUDITED) Current Assets Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . $ 815 $ 3,494 Accounts receivable, less allowance for doubtful accounts of $237 and $217 . . . . . . . . . . . . . . . . . . . . . . . . . 29,904 29,912 Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,778 3,615 Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 8,614 7,353 Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . 4,282 4,534 Other current assets . . . . . . . . . . . . . . . . . . . . . . . . 10,886 8,885 -------- -------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . 58,279 57,793 Prepaid Pension Plans . . . . . . . . . . . . . . . . . . . . . . . . . . 24,415 24,299 Property, Plant and Equipment, net of accumulated depreciation of $85,949 and $84,234 . . . . . . . . . . . . . . . . . . . . . . . 294,649 300,603 Investments in Unconsolidated Affiliates . . . . . . . . . . . . . . . . 1,346 1,367 Insurance and Security Deposits . . . . . . . . . . . . . . . . . . . . . 77,371 76,586 Intangible Assets, net of accumulated amortization of $16,411 and $14,901 19,697 20,000 -------- -------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . $475,757 $480,648 ======== ======== Current Liabilities Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . $ 23,746 $ 18,871 Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 43,598 54,305 Unredeemed tickets . . . . . . . . . . . . . . . . . . . . . . . . . 6,148 9,140 Current portion of reserve for injuries and damages . . . . . . . . . 24,741 24,605 Current maturities of long-term debt . . . . . . . . . . . . . . . . 4,325 5,259 -------- -------- Total current liabilities . . . . . . . . . . . . . . . . . . . . 102,558 112,180 Reserve for Injuries and Damages . . . . . . . . . . . . . . . . . . . . 37,405 41,056 Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201,063 172,671 Deferred Gains . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 830 920 Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,659 4,059 -------- -------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . 347,515 330,886 -------- -------- Commitments and Contingencies (Note 3) Stockholders' Equity Preferred stock (10,000,000 shares authorized; par value $.01; none issued) Series A junior preferred stock (500,000 shares authorized; par value $.01; none issued) . . . . . . . . . . . . . . . . . . . . . . . . . . . --- --- Common stock (100,000,000 shares authorized; 58,289,418 and 58,277,318 shares issued as of March 31, 1996 and December 31, 1995 respectively; par value $.01) . . . . . . . . . . . . . . . . . . . . . . . . . 583 583 Capital in excess of par value . . . . . . . . . . . . . . . . . . . 228,447 228,422 Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . (96,178) (74,633) Less: Unfunded accumulated pension obligation . . . . . . . . . . . (3,572) (3,572) Less: Treasury stock, at cost (109,192 shares) . . . . . . . . . . . (1,038) (1,038) -------- -------- Total stockholders' equity . . . . . . . . . . . . . . . . . . . . 128,242 149,762 -------- -------- Total liabilities and stockholders' equity . . . . . . . . . . $475,757 $480,648 ======== ========
The accompanying notes are an integral part of these statements. 4 5 GREYHOUND LINES, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED ------------------ MARCH 31, --------- 1996 1995 ----------- --------- (UNAUDITED) OPERATING REVENUES Transportation Services Passenger services . . . . . . . . . . . . . . . . . . . . . . . . . $ 118,743 $ 109,454 Package express . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,182 8,643 Food services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,651 4,403 Other operating revenues . . . . . . . . . . . . . . . . . . . . . . . . 10,067 9,293 --------- --------- Total operating revenues . . . . . . . . . . . . . . . . . . . . . 141,643 131,793 --------- --------- OPERATING EXPENSES Maintenance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18,102 16,690 Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37,421 32,540 Agents' commissions and station costs . . . . . . . . . . . . . . . . . . 29,011 27,222 Marketing, advertising and traffic . . . . . . . . . . . . . . . . . . . 5,187 3,129 Insurance and safety . . . . . . . . . . . . . . . . . . . . . . . . . . 10,910 10,660 General and administrative . . . . . . . . . . . . . . . . . . . . . . . 19,866 17,960 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 7,542 7,424 Operating taxes and licenses . . . . . . . . . . . . . . . . . . . . . . 11,740 12,640 Operating rents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,774 10,997 Cost of goods sold - food services . . . . . . . . . . . . . . . . . . . 3,096 2,991 Other operating expenses . . . . . . . . . . . . . . . . . . . . . . . . 1,850 1,387 --------- --------- Total operating expense . . . . . . . . . . . . . . . . . . . . . 156,499 143,640 --------- --------- OPERATING LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (14,856) (11,847) Interest Expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,626 6,868 --------- --------- LOSS BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . (21,482) (18,715) Income Tax Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 2 --------- --------- NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21,545) $ (18,717) ========= ========= Loss Per Share of Common Stock: Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.37) $ (0.36) ========= ========= Fully Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.37) $ (0.36) ========= =========
The accompanying notes are an integral part of these statements. 5 6 GREYHOUND LINES, INC. AND SUBSIDIARIES CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
THREE MONTHS ENDED MARCH 31, 1996 1995 --------- -------- (UNAUDITED) CASH FLOWS FROM OPERATING ACTIVITIES Net cash provided by (used for) operating activities . . . . . . . . . (28,334) (13,451) --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,309) (809) Other investing activities . . . . . . . . . . . . . . . . . . . . . . . . (1,392) 1,605 --------- --------- Net cash provided by (used for) investing activities . . . . . . . . . (3,701) 796 --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES Payments on debt and capital lease obligations . . . . . . . . . . . . . . (1,168) (14,788) Proceeds from issuance of Common Stock or Rights Offering . . . . . . . . 25 11,685 Net change in revolving credit facility . . . . . . . . . . . . . . . . . . 30,499 7,210 --------- --------- Net cash provided by (used for) financing activities . . . . . . . . . 29,356 4,107 --------- --------- NET DECREASE IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . . . . . . . (2,679) (8,548) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . . . 3,494 9,454 --------- --------- CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . . . $ 815 $ 906 ========= =========
The accompanying notes are an integral part of these statements. 6 7 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1996 (UNAUDITED) 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, the unaudited Interim Consolidated Financial Statements of Greyhound Lines, Inc. and Subsidiaries (the "Company") include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company's financial position as of March 31, 1996, and the results of its operations and cash flows for the three months ended March 31, 1996 and 1995. Due to the seasonality of the Company's operations, the results of its operations for the interim period ended March 31, 1996 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, 1995. 2. SIGNIFICANT ACCOUNTING POLICIES LOSS PER SHARE Primary loss per common share is calculated by dividing net loss by the weighted average shares of common stock of the Company ("Common Stock") and Common Stock equivalents outstanding during the period. Common Stock equivalents represent the dilutive effect of the assumed exercise of certain outstanding stock options. The calculation of fully diluted loss per share of Common Stock assumes the dilutive effect of the Company's 8.5% Convertible Subordinated Debentures due 2007 (the "Convertible Debentures") converted into Common Stock. For the three months ended March 31, 1996 and 1995, the assumed exercise of outstanding in-the-money stock options and conversion of Convertible Debentures have an antidilutive effect. As a result, these shares are not included in the weighted average shares outstanding at March 31, 1996 and 1995. The weighted average shares outstanding used in the calculation of primary and fully diluted loss per share of Common Stock for the three months ended March 31, 1996 and 1995 are as follows:
THREE MONTHS ENDED ------------------ MARCH 31, --------- 1996 1995 ----------- ---------- Primary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58,173,447 52,371,106 Fully diluted . . . . . . . . . . . . . . . . . . . . . . . . . . 58,173,447 52,371,106
3. COMMITMENTS AND CONTINGENCIES OKLAHOMA SALES TAX CLAIM In January 1991, the Oklahoma Tax Commission ("OTC") filed a proof of claim with the Bankruptcy Court in connection with the Company's 1990 Chapter 11 bankruptcy case. That claim related to sales taxes which the OTC alleged were due and owing by the Company on interstate bus tickets sold in Oklahoma. The OTC claim involved a proposed assessment of approximately $908,000 plus additional interest from the date of the claim. The Company objected to the claim on the basis that the tax the OTC proposed to assess was an improper burden on interstate commerce in violation of the Commerce Clause of the United States Constitution. In February 1993, the Bankruptcy Court denied the OTC's claim in its entirety, finding that the Oklahoma sales tax on interstate travel was unconstitutional. The OTC subsequently appealed the Bankruptcy Court's decision. In April 1995, the United States Supreme Court upheld the constitutionality of a sales tax imposed on interstate bus tickets by the State of 7 8 Oklahoma in a case involving another bus company. Subsequent to the Supreme Court's decision, the Company's case was remanded to the Bankruptcy Court. In April 1995, the Company began collecting sales taxes from its customers for interstate bus tickets sold in Oklahoma. Additionally, the OTC conducted an audit for the sales taxes due for the period from August 1992 to December 1995. The Company established a reserve during 1995 for its estimate of the liability for the Bankruptcy claim and such audits. Effective as of January 1, 1996, by federal legislation, all states, including Oklahoma, are prohibited from collecting sales, use or similar taxes on interstate bus tickets. In April 1996, the Company and the OTC agreed to a settlement of all outstanding sales tax liabilities for both the bankruptcy claim period and subsequent audit period. The final settlement is subject to court approval, however, the Company does not expect the obligation to materially exceed the amounts recorded. SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION Between August and December 1994, seven purported class action lawsuits were filed by purported owners of the Company's Common Stock, Convertible Debentures and Senior Notes (defined herein) against the Company and certain of its former officers and directors. The suits seek unspecified damages for securities law violations as a result of statements made in public reports and press releases and to securities analysts during 1993 and 1994 that are alleged to have been false and misleading. All the purported class action cases referred to above (with the exception of one suit that was dismissed before being served on any defendants) have been transferred to the United States District Court for the Northern District of Texas, the Court in which the first purported class action suit was filed, and are pending under a case styled In re Greyhound Securities Litigation, Civil Action 3-94-CV-1793-G. A joint pretrial order has been entered in the class action litigation which consolidates for pretrial and discovery purposes all of the stockholder actions and, separately, all of the debtholder actions. The joint pretrial order required plaintiffs to file consolidated amended complaints and excused answers to the original complaints. In July 1995, the plaintiffs filed their consolidated amended complaints, naming Greyhound Lines, Inc., Frank J. Schmieder, J. Michael Doyle, Phillip W. Taff, Robert R. Duty, Don T. Seaquist, Charles J. Lee, Charles A. Lynch and Smith Barney Incorporated as defendants. Messrs. Lee and Lynch were subsequently dismissed from the case by the plaintiffs. In September 1995, the various defendants filed motions to dismiss plaintiffs' complaints. In October 1995, plaintiffs filed a motion seeking to certify the class of plaintiffs. Both motions have been fully briefed and are pending for decision before the Court. In November 1994, a shareholder derivative lawsuit was filed by Harvey R. Rice, a purported owner of the Company's Common Stock, against present directors and former officers and directors of the Company and the Company as a nominal defendant. The suit seeks to recover monies obtained by certain defendants by allegedly trading in the Company's securities on the basis of nonpublic information and to recover monies for certain defendants' alleged fraudulent dissemination of false and misleading information concerning the Company's financial condition and future business prospects. The suit, filed in the Delaware Court of Chancery, New Castle County, is styled Harvey R. Rice v. Frank J. Schmieder, J. Michael Doyle, Charles A. Lynch, Richard J. Caley, Thomas F. Meagher, Thomas G. Plaskett, Kenneth R. Norton, Robert B. Gill, Alfred E. Osborne, Jr., J. Patrick Foley, Charles J. Lee and Greyhound Lines, Inc., Civil Action No. 13854. Pursuant to a stipulation, the time for all defendants to answer, move or otherwise plead with respect to the derivative complaint is not yet due. In May 1995, a lawsuit was filed on behalf of two individuals, purported owners of the Company's Common Stock, against the Company and certain of its former officers and directors. The suit seeks unspecified damages for securities law violations as a result of statements made in public reports and press releases and to securities analysts during 1993 and 1994 that are alleged to have been misleading. The suit, filed in the United States District Court for the Northern District of Ohio, is styled James Illius and Teodore J. Krawec v. Greyhound Bus Lines, Inc., Frank J. Schmieder and J. Michael Doyle, Civil Action No. 1-95-CV-1140. The defendants filed a motion to transfer venue seeking to have the case transferred to the Northern District of Texas where the class action litigation is pending. In September 1995, the defendants' motion was granted, and the matter has been transferred for consolidation into the litigation pending before the Court in Dallas. Based on a review of the litigation, a limited investigation of the underlying facts and discussions with legal and outside counsel, the Company does not believe that the outcome of this litigation would have a material adverse effect on its business and financial condition. The Company intends to defend against the actions vigorously. To 8 9 the extent permitted by Delaware law, the Company is obligated to indemnify and bear the cost of defense with respect to lawsuits brought against its officers and directors. The Company maintains directors' and officers' liability insurance that provides certain coverage for itself and its officers and directors against claims of the type asserted in the subject litigation. The Company has notified its insurance carriers of the asserted claims. In January 1995, the Company received notice that the Securities and Exchange Commission (the "SEC") is conducting a formal, non-public investigation into possible securities laws violations allegedly involving the Company and certain of its present and former officers, directors and employees and other persons. The SEC Order of Investigation (the "Order of Investigation") states that the SEC is exploring possible insider trading activities, as well as possible violations of the federal securities laws relating to the adequacy of the Company's public disclosures with respect to problems with its passenger reservation system implemented in 1993 and lower-than-expected earnings for 1993. In addition, the SEC has stated that it will investigate the adequacy of the Company's record keeping with respect to the passenger reservation system and its internal auditing controls. Although the SEC has not announced the targets of the investigation, it does not appear from the Order of Investigation that the Company is a target of the insider trading portion of the investigation. In September 1995, the SEC served a document subpoena on the Company requiring the production of documents, most of which the Company voluntarily produced to the SEC in late 1994. The Company is fully cooperating with the SEC's investigation of these matters. The probable outcome of this investigation cannot be predicted at this stage in the proceeding. ENVIRONMENTAL MATTERS The Company may be liable for certain environmental liabilities and clean-up costs relating to underground fuel storage tanks and systems in the various facilities presently or formerly owned or leased by the Company. Based upon surveys conducted by Company personnel, 73 locations have been identified as sites requiring potential clean-up and/or remediation as of March 31, 1996. The Company has estimated the clean-up and/or remediation cost of these sites to be $4.7 million of which approximately $1.0 million is indemnifiable by the predecessor owner of the Greyhound domestic bus operations now known as The Dial Corp ("Dial"). The Company has no reason to believe that Dial will not fulfill its indemnification obligations to the Company. However, if Dial does not fulfill such obligations, the Company could have liability with respect to those matters. Additionally, the Company has been designated as a potentially responsible party by the EPA at three Superfund sites where the Company and other parties face exposure for costs related to the clean-up of those sites. Based on the Environmental Protection Agency's (the "EPA") enforcement activities to date, the Company believes its liability at these sites will not be material because its involvement was as a de minimis generator of wastes disposed of at the sites. In light of the minimal involvement, the Company has been negotiating to be released from liability in return for the payment of immaterial settlement amounts. The Company has recorded a $1.0 million receivable from Dial for indemnification at March 31, 1996, including costs associated with previously remediated sites. The Company has also recorded a total environmental reserve of $4.2 million, at March 31, 1996, for noncapitalizable expenses related to the sites identified for potential clean-up and/or remediation. The reserve amount for these sites is based on discounted cash flows at a discount rate of 8%. Management believes that adequate accruals have been made related to all known environmental matters. OTHER LEGAL PROCEEDINGS In addition to the litigation discussed above, the Company is a defendant in various lawsuits arising in the ordinary course of business, primarily cases involving personal injury and property damage claims. Although these lawsuits involve a variety of different facts and theories of recovery, the majority arise from traffic accidents involving buses operated by the Company. The vast majority of these claims are covered by insurance for amounts in excess of the self-retention or deductible portion of the policies. Therefore, based on the Company's assessment of known claims and its historical claims payout pattern and discussion with legal and outside counsel and risk management personnel, management believes that there is no proceeding either threatened or pending against the Company relating to such personal injury and/or property damage claims arising out of the ordinary course of business that, if resolved against the Company, would materially exceed the amounts recorded. 9 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAPITAL RESOURCES AND LIQUIDITY Public Offering. The Company filed a registration statement on Form S-3 relating to the sale of up to 10,004,144 shares of Common Stock which was declared effective on September 28, 1995, and on October 3, 1995, the sale of the stock was completed. Of the 10,004,144 total shares sold, four million shares were sold by the Company and 6,004,144 shares were sold by Motor Coach Industries Limited, a selling stockholder. The Company did not receive any portion of the proceeds from the sale of shares of Common Stock by the selling stockholder. Net proceeds to the Company from the sale of the 4,000,000 shares of Common Stock offered by the Company were $15.4 million. In December 1995, the Company used $9.7 million of the net proceeds it received to repurchase (the "Senior Note Repurchase") $10.7 million aggregate principal amount of its 10% Senior Notes due 2001 (the "Senior Notes") pursuant to a put/call agreement with one of the Company's principal stockholders. The purchase price for the Senior Notes was based on arm's-length negotiations. The Company used the remaining net proceeds from the sale of the Common Stock for general corporate purposes. Pending use, the net proceeds to the Company from the offering were invested in short-term, interest-bearing securities or were used to reduce the borrowings under the Credit Facility (defined herein). Capital Structure and Leverage. The Company had $201.1 million in long-term debt outstanding (excluding $16.3 million of issued and undrawn standby letters of credit) at March 31, 1996, which primarily consisted of the Company's Senior Notes. Also included in long-term debt were outstanding borrowings of $30.5 million under the Credit Facility (defined herein). Although the Company generally requires significant cash flows to meet its debt and other continuing obligations, the Senior Note Repurchase will reduce these requirements for the near term. After giving effect to the Senior Note Repurchase, the Company's semi-annual interest payments on the Senior Notes has been reduced from $8.2 million to $7.6 million (each January 31 and July 31). The Senior Notes sinking fund requirements for 1996, in the amount of $8.0 million, will be met through the Senior Notes repurchased in 1995 and the $1.7 million of Senior Notes which the Company owned prior to the Senior Note Repurchase. The balance of the Senior Note Repurchase will be applied to the July 1997 sinking fund payment. As a result of the application of the remaining Senior Note Repurchase, the cash required for the July 1997 sinking fund payment has been reduced from $10.0 million to approximately $5.7 million. The sinking fund payment due July 1998 is $15.0 million and increases annually thereafter. The Company will also require $14.8 million in the aggregate for other debt service, $11.5 million of which is interest (including the remaining interest payment on the Senior Notes due in July) and $31.2 million for bus, real estate and other operating lease obligations during the remainder of 1996. Liquidity. Operating cash flows, together with cash from financing activities, seasonal revolving credit borrowings and sales of assets, historically have been sufficient to fund the Company's operations and investing activities which consist primarily of capital expenditures for new bus acquisitions, systems development costs and facility acquisitions, replacements or upgrades. The seasonal fluctuations in the Company's cash flows can be significant. Typically, cash flow for the first quarter of the year is negative, and is not offset until the third and fourth quarters, which typically produce substantial positive cash flows. For the quarter ended March 31, 1996, operating activities used net cash of $28.3 million. The net cash required for operating activities, as well as cash required for investing activities, were funded by cash provided by financing activities, principally revolving advances under the Company's Credit Facility (defined herein). At March 31, 1996, the Company had cash and cash equivalents of $0.8 million and available borrowing capacity of $15.1 million under the Credit Facility for general purposes. Additionally, the Company had sufficient unpledged collateral which could have been pledged under the terms of the Credit Facility to increase total available borrowing capacity to $23.1 million at March 31, 1996. The Company is party to a revolving credit facility (the "Credit Facility"). At March 31, 1996, the Credit Facility provided for revolving loans, letters of credit and letter of credit guarantees up to a maximum commitment of $73.5 million, with syndication commitments totalling $70.0 million. As of March 31, 1996, there were approximately $16.3 million in issued and undrawn standby letters of credit outstanding under the Credit Facility, and outstanding borrowings of $30.5 million under the Credit Facility. In April 1996, the Company amended the Credit Facility (the "Amended Credit Facility") to increase the maximum commitment to $80.0 million. Syndication commitments under the Amended Credit Facility, including Foothill's commitment as the lead agent, total $80.0 million at May 1, 1996. Availability under the Amended Credit Facility is limited to the aggregate of the following: (1) revolving advances of up to $2.5 million based on a formula of certain eligible accounts receivable; (2) revolving advances of up to 10 11 $47.5 million (the "Fixed Asset Advances") based on the value of certain fixed asset collateral pledged to Foothill; and (3) a bus purchase facility of up to $30.0 million (the "Bus Purchase Facility"). The Amended Credit Facility limits letters of credit and letters of credit guarantees to $35.0 million. Although there were total syndication commitments of $80.0 million as of May 1, 1996, the Company had pledged sufficient collateral to activate only up to $61.0 million. As of May 1, 1996, the Company had $ 21.2 million of issued and undrawn letters of credit and outstanding borrowings under the Amended Credit Facility of $19.2 million leaving $20.6 in available borrowing capacity. Borrowings under the Amended Credit Facility mature on January 15, 1999, although availability under the Fixed Asset Advances will be subject to quarterly reductions commencing October 1997, unless additional collateral is pledged. The Amended Credit Facility is secured by liens on substantially all the assets of the Company, excluding real estate purchases and new bus purchases that are specifically pledged to support borrowings under the Bus Purchase Facility. The Amended Credit Facility allows the Company to dispose of certain non-core real estate properties. In addition, non-bus capital expenditures are limited to $25.0 million annually with no spending limitations on bus purchases. The Amended Credit Facility is subject to financial covenants, including maintenance of a minimum net worth and an agreed ratio of cash flow to interest expense. At March 31, 1996, the Company was in compliance with these covenants. In addition, the Amended Credit Facility provides for a reduction in interest rates if certain ratio levels of cash flow to interest expense, in excess of a minimum, are achieved. As of December 31, 1995, the Company had exceeded the first threshold level and, as a result, the applicable interest rate on any borrowings under the Credit Facility was reduced from 2.0% above the prime rate to 1.75% above prime effective February 1, 1996. The Company is party to two floating rate interest rate swap agreements. In October 1994, the agreements were amended to lock in future payments under the agreements until maturity in July 1998. The net result of the amendments is that these swaps will not be subject to interest rate risk. Under the amendments, the Company will be required to pay $5.0 million in total from March 31, 1996 through the remaining term of the five-year agreements. Pursuant to an amendment finalized in April 1996, the Company has collateralized its payment obligations under the amended agreements with a $1.1 million letter of credit and liens on six pieces of Company-owned real property. In conjunction with the amendment, the counterparty has agreed to reduce the real estate collateral requirements beginning in 1997. The Company has embarked on an aggressive risk reduction and claims reduction program. Due to a decrease in the pending inventory of claims, certain insurance carriers have reduced their collateral and security requirements for previous years' claims, which resulted in a return of collateral and security to the Company of approximately $8.5 million during April 1995 and approximately $14 million during December 1995. Nevertheless, a decision by the Company's insurers to modify the Company's program substantially, by either increasing cost, reducing availability or increasing its collateral requirements, could have a material adverse effect on the future liquidity and operations of the Company. Pension Plan Status. Funding Requirements. The Company has five defined benefit pension plans. The most significant plan is the Greyhound Lines, Inc. Retirement and Disability Trust (the "ATU Plan") which covers approximately 17,000 current and former employees, primarily drivers, fewer than 1,500 of whom are active employees as of December 31, 1995. The ATU Plan was closed to new participants in November 1983 and, as a result, over 79% of the participants are 50 or more years old. For financial reporting and investment planning purposes, the Company uses a mortality table that closely matches the actual experience related to the existing participant population. In December 1994, the Congress passed the General Agreement on Tariffs and Trade ("GATT") legislation. Included in this bill was a specification that Employee Retirement Income Security Act of 1974, as amended ("ERISA") funding requirements for pension plans be calculated using a specific actuarial mortality table ("GATT-specified table"). This GATT-specified table differs significantly from the table the Company has been using to value the pension liabilities for financial reporting purposes. If the Company is required to measure the pension liability, for ERISA funding purposes, utilizing the GATT-specified table, it will be required to begin making contributions to the ATU Plan at some time after 1997 in annual amounts potentially ranging from $2.3 million to $19.8 million. Management believes, however, that the ATU Plan is currently adequately funded to meet the future benefit 11 12 obligations. In fact, as measured for financial reporting purposes, the ATU Plan's assets exceeded liabilities by $48.3 million at December 31, 1995. If, however, the Company is required to measure ERISA funding requirements using the GATT-specified table, and fund accordingly, the Company believes that the ATU Plan will be over-funded on an actual basis. Additionally, the ATU Plan documents provide that if the Company is required to make contributions, benefits will be frozen and active participants will not accrue any further benefits for continued service. This freeze could contribute to further over-funding since the earnings on the assets that are normally applied to fund current service accruals would be entirely applied to increase the funding levels of the ATU Plan. If the ATU Plan is over-funded, the excess assets cannot be returned to the Company. The Company is exploring whether it may be able to obtain general or specific relief from this requirement. Pension Plan Accounting Treatment. In addition to the potential impact on the Company's cash flow due to funding requirements, the ATU Plan represents a potential risk to the Company's compliance with the minimum net worth covenant in the Amended Credit Facility, particularly due to the size of the ATU Plan liabilities ($701.8 million at December 31, 1995) relative to the Company's net worth. Generally accepted accounting principles, which are different from ERISA funding requirements, require that if the liabilities of a pension fund exceeds its assets, a reduction in stockholder's equity be taken for the amount that liabilities exceed assets for any particular pension plan. At December 31, 1995, the ATU Plan's assets exceed the liabilities by $48.3 million, as measured for accounting purposes. A substantial further decline in market interest rates, among other factors, could result in the ATU Plan's liabilities exceeding the ATU Plan's assets as measured for accounting purposes. Additionally, in the event that the ATU Plan's liabilities exceed assets, the prepaid pension asset related to the ATU Plan ($23.8 million at December 31, 1995) would be reversed and stockholder's equity would be reduced by this amount, as well. There is no cash impact of such an event. Although management feels that it is unlikely that events would require the Company to record such a charge to equity, if the Company were required to record a substantial reduction to equity due to the above described pension accounting requirements, it could reduce the Company's net worth below the minimum covenant levels. In such an instance, the Company would seek a waiver for the minimum net worth requirement to the extent that it is caused by a reduction to stockholder's equity related to the ATU Plan. The determination of the requirement of a reduction to stockholder's equity is made on a plan by plan basis. Stockholder's equity reflects a reserve of $3.6 million related to the Greyhound Lines, Inc. Salaried Employees' Defined Benefit Plan (the "Salaried Plan"). The related size of the Salaried Plan ($36.7 million in plan liabilities at December 31, 1995) does not present substantial risk to the Company's net worth. Capital Expenditures. The Company's operations require significant annual capital and maintenance expenditures related to the Company's bus fleet, properties and systems software. For the quarter ended March 31, 1996, the Company's capital expenditures totalled $2.3 million, none of which related to the purchase of buses. During June and July 1995, the Company took delivery of 102 new buses from Motor Coach Industries International, Inc. ("MCII"). These buses were initially subject to a month-to-month operating lease but were purchased by the Company during December 1995. During April 1996, fifty-one of these buses were sold and leased back by the Company for net proceeds of $12.6 million. The Company also took delivery of and purchased 13 buses from MCII in September 1995, and an additional 10 buses in December 1995. These twenty- three buses were sold and leased back by the Company in December 1995 for net proceeds of $6.2 million. During December 1995, February 1996 and April 1996, the Company took delivery of 50, 20 and 48 new buses, respectively, from MCII. These buses are currently subject to month-to-month operating leases (180 day maximum term). At the end of the respective lease terms (or earlier, at the Company's discretion), the Company may either purchase the buses, finance them through other lenders or lessors (including the Amended Credit Facility), or convert to a long-term operating lease with MCII or its assignee. The average age of the bus fleet increased to 6.8 years at March 31, 1996 compared to 6.7 years at December 31, 1995, a change the Company believes is immaterial. As of March 31, 1996, approximately 29% of the Company's bus fleet was more than 10 years old compared to 30% at December 31, 1995. The Company's experience indicates that as the age of its fleet increases, the dependability and quality of service declines, which may make the Company less competitive. While the Company could continue to use older buses, the Company intends, over time, to replace older, less reliable vehicles with new buses. As a result, during 1996 the Company expects to retire 212 buses that are 10 or more years old. To replace these buses and to support the planned increase in miles to be operated, the Company expects to acquire at least 150 and as many as 250 new buses in 1996 (of which 68 buses have been received as of 4/30/96) at an aggregate cost of between approximately $37 million and $62 million. The Company intends to finance these purchases through cash flows 12 13 from operations, operating leases and vendor financing. Management believes that a continuing significant delay in acquiring these new buses could adversely affect future operations due to the higher operating costs associated with operating older buses and the inability to implement fully the Company's plans to increase total bus miles. The Company's ability to finance these and other capital expenditures and to meet its other financial obligations will depend on the Company's future operating performance, which will be subject to financial, economic, legal and other factors affecting the business and operations of the Company, many of which are beyond its control. Although cash flows from operating activities and the Amended Credit Facility are expected to be sufficient to make a portion of the Company's planned expenditures, the Company's operating strategy will depend on the availability of additional sources of financing, such as operating and capital lease financing or funds provided through sales of assets or sales of securities. There can be no assurance that the Company will be able to obtain financing on suitable terms for these purposes. Certain Contingencies. The Company is subject to various contingencies that could affect its liquidity position in the future. See "ITEM 1. LEGAL PROCEEDINGS." FIRST QUARTER 1996 AND 1995 RESULTS OF OPERATIONS The Company's business is seasonal in nature and generally follows the pattern of the travel business as a whole, with peaks during the summer months and the Thanksgiving and Christmas holiday periods. Historically, the Company has experienced substantial seasonal variances in its results of operations with the first quarter typically being a net loss period. The following table presents certain of the Company's consolidated operating statistics for the three months ended March 31, 1996 and 1995:
THREE MONTHS ENDED ------------------ MARCH 31, PERCENTAGE --------- 1996 1995 CHANGE ---- ---- ------ Regular Service Miles (000) . . . . . . . . . . . . . . . 57,545 54,552 5.49 Total Bus Miles (000) . . . . . . . . . . . . . . . . . . 58,468 55,083 6.15 Passenger Miles (000) . . . . . . . . . . . . . . . . . . 1,270,078 1,144,348 10.99 Available Seat Miles (000) . . . . . . . . . . . . . . . 2,647,070 2,509,392 5.49 Passengers Carried (000) . . . . . . . . . . . . . . . . 3,897 3,606 8.07 Average Trip Length (miles) . . . . . . . . . . . . . . . 326 317 2.84 Load Factor (% of available seats filled) . . . . . . . . 48.0 45.6 5.26 Yield (Revenue Per Passenger Mile) (cents) . . . . . . . 9.35 9.56 (2.20) Passenger Revenue Per Regular Service Mile (dollars) . . 2.06 2.01 2.49 Total Operating Revenue per Total Bus Mile (dollars) . . 2.42 2.39 1.26 Total Operating Expense per Total Bus Mile (dollars) . . 2.68 2.61 2.68 Cost per Total Bus Mile (cents): Maintenance . . . . . . . . . . . . . . . . . . . . . 31.0 30.3 2.31 Transportation . . . . . . . . . . . . . . . . . . . . 64.0 59.1 8.29 Insurance and Safety . . . . . . . . . . . . . . . . . 18.7 19.4 (3.61) Station Costs as a % of Total Revenue (%) . . . . . . . . 20.5 20.7 (0.97)
Operating Income (Loss). Operating loss for the three months ended March 31, 1996, was $14.9 million compared to a loss of $11.8 million for the same period in 1995. Operating revenues increased $9.9 million (or 7.5%) for the three months ended March 31, 1996, while operating expenses increased $12.9 million (or 9.0%) for the three months ended March 31, 1996, compared to the same period in 1995. Operating Revenues. Passenger service revenues increased $9.3 million (or 8.5%) for the three months ended March 31, 1996, compared to the same period in 1995 due primarily to increased ridership. The number of passengers carried increased 8.1% for the first quarter of 1996 compared to 1995. Management believes the increase in ridership reflects the introduction of everyday low pricing, improvements in handling customer telephone calls and more convenient bus schedules. The impact of reductions in long-haul prices, in order to stimulate travel (part of our 13 14 everyday low pricing strategy), had slightly greater impact on yield than price increases realized on certain short-haul fares. As a result, yield decreased slightly (2.2%) to 9.35 cents per mile versus 9.56 cents per mile last year. Also contributing to higher passenger revenues was an improvement in interline activity, which reflects an increase in the number of tickets being sold by other carriers for all or a portion of the travel occurring on Greyhound. The Company expects improvements in its interline relationships to continue. Package express delivery service revenues declined $0.5 million (or 5.3%) in the three months ended March 31, 1996, compared to the same period in 1995. The Company is beginning to see a slowing of the decline of the package express business. In 1994, the Company reduced the number of routes and the number of hours the terminals were opened. These reductions resulted in decreased convenience and level of service for the package express customers. As a result, many customers discontinued the use of the Company's package express service during late 1994 and 1995 and began using competitors' services. In an effort to reduce this revenue decline, the Company has made improvements to its service levels in the package express business by increasing hours and providing more convenient schedules to its customers, as well as implementation of a centralized telephone customer service department dedicated to the package express service. Other operating revenues increased approximately $0.8 million (or 8.3%) for the three months ended March 31, 1996, compared to the same period in 1995 due primarily to an increase in charter revenue and an increase in fees earned related to prepaid ticket orders. Operating Expenses. Total operating expenses increased $12.9 million (or 9.0%) for the three months ended March 31, 1996, compared to the same period in 1995. Regular service miles operated for the three months ended March 31, 1996, compared to 1995 increased by 3.0 million miles (or 5.5%). Maintenance costs for the three months ended March 31, 1996, compared to the same period in 1995, increased by $1.4 million (or 8.5%). On a cost per mile basis, expenses increased from 30.3 cents per mile during the first quarter of 1995 to 31.0 cents per mile during the first quarter of 1996 and primarily reflect the Company's efforts to accelerate engine changes and other maintenance during this off-peak season for buses that are projected to have engine failures during the busy summers period, when seasonal demands require high utilization of the entire bus fleet. Also contributing to the increase was a contractual pay rate increase for hourly maintenance employees. Transportation expenses increased $4.9 million (or 15.0%) for the three months ended March 31, 1996, compared to the same period in 1995, due in part to an increase of 3.4 million (or 6.1%) miles operated. On a comparable cost-per-mile basis, the added miles represented approximately $2.0 million of the increase. The remainder is due to increases in the quarter-over-quarter cost-per-mile for transportation expenses, which increased from 59.1 cents per mile in the first quarter of 1995 to 64.0 cents per mile in the first quarter of 1996. The variance in the cost-per-mile reflects a 12.1% increase in fuel prices (a $0.8 million impact), a reduction in fuel economy associated with the bad weather, a contractual wage increase for drivers, and increased driver hiring and training. Driver hiring and training contributed $0.9 million to the variance for the three months ended March 31, 1996 compared to the same period in 1995. Agents' commissions and station costs increased $1.8 million (or 6.6%) for the three months ended March 31, 1996, compared to the same period in 1995. Total agents' commission and station costs increased over the prior year primarily due to commissions on higher sales and additional terminal staffing required to handle the increase in traffic. An additional increase in commission expenses due to the conversion of approximately 70 company-operated facilities to commission agents, was offset by corresponding decreases in payroll, facility costs, utilities and supplies since these became the responsibility of the agent upon conversion. Also, the Company handled 0.9 million (or 20.1%) more calls for the three month period ended March 31, 1996 compared to the same period in 1995. The Company achieved the improved call handling by opening a new telephone center and improving staffing in its existing center while reducing call activity being directed to outsource telephone answering service providers. As a result, a $0.8 million increase in telephone information center salaries and long-distance costs related to the increased call handling was partially offset by the reduction of costs related to the outsource service provider. Marketing, advertising and traffic costs increased $2.1 million (or 65.8%) for the three months ended March 31, 1996, compared to the same period in 1995, due primarily to an increase in advertising expense in the first quarter of 1996. 14 15 Insurance and safety costs increased $0.3 million (or 2.3%) for the three months ended March 31, 1996, compared to the same period in 1995. The automobile and general liability expense increased in the first quarter of 1996 due to the additional claims exposure related to the increased miles operated. A portion of the increase is offset by a decline in worker's compensation expenses due to a reduction in claims reflecting the impact of management's proactive risk reduction programs. General and administrative expenses increased $1.9 million (or 10.6%) for the three months ended March 31, 1996, compared to the same period in 1995, due in part, to a $0.8 million increase in accounting, information technology and general management salaries which reflect necessary improvements to the Company's infrastructure. Additionally, increased business activity (sales and passengers) resulted in increased supplies, forms and printing costs compared to last year. Consulting expenses increased due to market research being done on bus travel along the border and in Mexico. Depreciation and amortization increased by $0.1 million (or 1.6%) for the three months ended March 31, 1996, compared to the same period in 1995 primarily due to depreciation on 102 buses which the Company purchased in December 1995. Operating taxes and licenses decreased $0.9 million (or 7.1%) for the three months ended March 31, 1996, compared to the same period in 1995, primarily as a result of a reserve recorded in the first quarter of 1995 for past sales taxes potentially owed on interstate bus tickets sold in Oklahoma. This decrease was partially offset by an increase in fuel and oil taxes for the three months ended March 31, 1996, compared to the same period in 1995 due to the increase in miles run by the Company. Also, payroll-related taxes have increased in 1996 due to increased salaries, primarily for drivers and telephone information agents. Operating rental expense increased by $0.8 million (or 7.1%) for the three months ended March 31, 1996, compared to the same period in 1995, primarily due to an increase in bus rents because of the sale/leaseback of 23 buses in December 1995 and additional operating leases for 50 buses which commenced in December 1995 and for 20 buses which commenced in February 1996. Station rents also increased $0.3 million, the largest component of which is related to rent for the New York terminal where the Company pays a portion of its rent based on ticket sales which are increasing. Other operating expenses increased $0.5 million (or 33.4%) for the three months ended March 31, 1996 compared to the same period in 1995. Interest Expense. For the three months ended March 31, 1996, interest expense was $6.6 million compared to $6.9 million for the first quarter of 1995. Interest expense decreased $0.2 million (or 3.5%) for the three months ending March 31, 1996, compared to 1995 due primarily to a $0.3 million reduction in interest expense on the Senior Notes resulting from the repurchase of $10.7 million of Senior Notes in December 1995, and the impact of $0.3 million in interest expense recorded during the first quarter 1995 related to the Oklahoma sales tax liability. These decreases were partially offset by an increase in interest expense related to a greater average outstanding balance under the Credit Agreement during the first quarter of 1996 compared to the first quarter of 1995. The weighted average of the Company's effective interest rate on long-term debt outstanding as of March 31, 1996 was 12.34%. 15 16 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS OKLAHOMA SALES TAX CLAIM In January 1991, the OTC filed a proof of claim with the Bankruptcy Court in connection with the Company's 1990 Chapter 11 bankruptcy case. Additionally, the OTC has conducted an audit of sales taxes owing for the period of July 1992 to December 1995. The claims relate to sales taxes which the OTC alleged were due and owing by the Company on interstate bus tickets sold in Oklahoma. In April 1996, the Company and the OTC agreed to a settlement of all outstanding sales tax liabilities for both the bankruptcy claim period and subsequent audit period. See Note 3 to the Interim Consolidated Financial Statements for the three months ended March 31, 1996, included elsewhere in this filing. SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION Between August 1994 to December 1994, seven purported class action lawsuits were filed by purported owners of the Company's Common Stock, Convertible Debentures and Senior Notes against the Company and certain of its former officers and directors. The suits seek unspecified damages for securities law violations. In November 1994, a shareholder derivative lawsuit was filed against present directors and former officers and directors of the Company and the Company as a nominal defendant. In addition, in January 1995 the Company received notice that the Securities and Exchange Commission is conducting a formal, non-public investigation into possible securities laws violations allegedly involving the Company and certain other parties. See Note 3 to the Interim Consolidated Financial Statements for the three months ended March 31, 1996, included elsewhere in this filing. OTHER LEGAL PROCEEDINGS In addition to the litigation discussed above, the Company is a defendant in various lawsuits arising in the ordinary course of business, primarily cases involving personal injury and property damage claims. Although these lawsuits involve a variety of different facts and theories of recovery, the majority arise from traffic accidents involving buses operated by the Company. The vast majority of these claims are covered by insurance for amounts in excess of the self-retention or deductible portion of the policies. Therefore, based on the Company's assessment of known claims and its historical claims payout pattern and discussion with legal and outside counsel and risk management personnel, management believes that there is no proceeding either threatened or pending against the Company relating to such personal injury and/or property damage claims arising out of the ordinary course of business that, if resolved against the Company, would materially exceed the amounts recorded. 16 17 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (A) EXHIBITS 4.1 - Indenture governing the 8 1/2% Convertible Subordinated Debentures due March 31, 2007, including the form of 8 1/2% Convertible Subordinated Debentures due March 31, 2007. (3) 4.2 - Indenture, dated October 31, 1991, between the Registrant and LaSalle National Bank, as Trustee, with respect to $165,000,000 principal amount of 10% Senior Notes due 2001, including form of 10% Senior Notes Due 2001. (1) 4.3 - First Supplemental Indenture to the Indenture between the Registrant and LaSalle National Bank, as Trustee. (3) 4.4 - Form of First Supplemental Indenture to the Indenture between the Registrant and Shawmut Bank Connecticut, N.A., as Trustee. (7) 4.5 - Rights Agreement, dated as of March 22, 1994, between the Registrant and Mellon Securities Trust Company, as Rights Agent. (4) 4.6 - Form of Promissory Note issued to holders of priority tax claims against the Registrant, including a schedule of holders of such notes and principal amounts thereof. (2) 4.7 - Second Amended and Restated Loan and Security Agreement dated as of June 5, 1995 by and between Greyhound Lines, Inc. and Foothill Capital Corporation. (9) 4.8 - Amendment Number One to Second Amended and Restated Loan and Security Agreement dated as of April 12, 1996 by and between Greyhound Lines, Inc. and Foothill Capital Corporation. (10) 10.1 - Fourth Amendment to Interest Rate Swap Agreement, dated as of April 25, 1996, between the Registrant and Banker's Trust Company. (10) 11.1 - Computation of Registrant's earnings per share for the three months ended March 31, 1995. (5) 11.2 - Computation of Registrant's earnings per share for the three months ended March 31, 1996. (10) 27 - Financial Data Schedule as of and for the three months ended March 31, 1996. (10) - ----------------------------------------------------------------------------------------------------------------------- (1) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991. (2) Incorporated by reference from the Registration Statement on Form S-1 (File Nos. 33-45060-01 and 33-45060-02) regarding the Registrant's 8 1/2% Convertible Subordinated Debentures Due 2007. (3) Incorporated by reference from the Company's Registration Statement on Form S-1 (File No. 33-47908) regarding the Registrant's Common Stock and 10% Senior Notes Due 2001 held by the Contested Claims Pool Trust. (4) Incorporated by reference from the Registrant's Quarterly Report on Form 8-K regarding the Rights Agreement dated March 22, 1994. (5) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. (6) Incorporated by reference from the Registration Statement on Form S-1 (File No. 33-56131) regarding the Registrant's Common Stock. (7) Incorporated herein by reference from the Registrant's Issuer Tender Offer Statement on Schedule 13E-4 (File No. 5-41800). (8) Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. (9) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. (10) Filed herewith.
(B) REPORTS ON FORM 8-K During the quarter ended March 31, 1996, the Company filed no current reports on Form 8-K with the Securities and Exchange Commission, nor was it required to do so. 17 18 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: May 13, 1996 GREYHOUND LINES, INC. By: /s/ Steven L. Korby ----------------------------- Steven L. Korby Executive Vice President, Chief Financial Officer and Treasurer (Duly Authorized Officer and Principal Financial and Accounting Officer) 18 19 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------- ----------- 4.8 - Amendment Number One to Second Amended and Restated Loan and Security Agreement dated as of April 12, 1996 by and between Greyhound Lines, Inc. and Foothill Capital Corporation. 10.1 - Fourth Amendment to Interest Rate Swap Agreement, dated as of April 25, 1996, between the Registrant and Banker's Trust Company. 11.2 - Computation of Registrant's earnings per share for the three months ended March 31, 1996. 27 - Financial Data Schedule as of and for the three months ended March 31, 1996.
EX-4.8 2 AMEND NO. 1 TO RESTATED LOAN & SECURITY AGREEMENT 1 Exhibit 4.8 AMENDMENT NUMBER ONE TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT This Amendment Number One to Second Amended and Restated Loan and Security Agreement ("Amendment") is entered into as of April 12, 1996, by and between FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"), and GREYHOUND LINES, INC., a Delaware corporation ("Borrower"), in light of the following: FACT ONE: Borrower and Foothill have previously entered into that certain Second Amended and Restated Loan and Security Agreement, dated as of June 5, 1995 (the "Agreement"). FACT TWO: Borrower and Foothill desire to amend the Agreement as provided for and on the conditions herein. NOW, THEREFORE, Borrower and Foothill hereby amend and supplement the Agreement as follows: 1. DEFINITIONS. All initially capitalized terms used in this Amendment shall have the meanings given to them in the Agreement unless specifically defined herein. 2. AMENDMENTS. (a) The definition of "Core Bus Collateral" is hereby amended to read as follows: "'Core Bus Collateral' means those Vehicles which are owned by Borrower on the Closing Date, and those that have been pledged to Foothill subsequent to the Closing Date, including any Vehicles included in Tranche A Additional Collateral, but excluding any Vehicles included in Tranche B Collateral, all as listed on Schedule C-1 as the same may be supplemented from time to time." (b) The definition of "Current Asset Sublimit" is hereby amended to read as follows: 1 2 "'Current Asset Sublimit' means Two Million Five Hundred Thousand Dollars ($2,500,000)." (c) Clause (i) of the definition of "Maximum Credit" is hereby amended to read as follows: "(i) Eighty Million Dollars ($80,000,000)," (d) The definition of "Maximum Tranche B Credit Amount" is hereby amended to read as follows: "'Maximum Tranche B Credit Amount' means Thirty Million Dollars ($30,000,000), as reduced from time to time pursuant to Section 3.7." (e) The definition of "Subsidiary Security Agreements" is hereby amended to read as follows: "Subsidiary Security Agreements" means those certain security agreements executed or to be executed by the Pledged Subsidiaries from time to time in order to grant to Foothill a security interest in that portion of the Tranche A Additional Collateral that is owned by such Pledged Subsidiaries, together with any and all schedules and/or exhibits thereto, as such security agreements may be amended from time to time in accordance with the terms thereof. (f) The definition of "Tranche A Additional Collateral" is hereby amended to read as follows: "Tranche A Additional Collateral" means the Vehicles or buses that are owned by either Borrower or a Pledged Subsidiary, and that are or have been pledged to Foothill subsequent to the Closing Date or have been redesignated from Tranche B Collateral subsequent to the Closing Date, in each case specifically to secure the Tranche A Borrowing Base pursuant to the terms of this Agreement. (g) Section 2.1 (a) of the Agreement is hereby amended to read as follows: (a) Subject to the terms and conditions of this Agreement, including the amount of the Maximum Credit and the Maximum Borrowing Amount, Foothill agrees to make revolving advances to Borrower in an amount not to exceed the sum of: (i) the lesser of: (x) eighty-five percent (85%) of Borrower's Eligible Accounts, net of reserves established pursuant to Section 2.1(b); (y) an amount equal to Borrower's total cash collections from all sources for the immediately preceding thirty (30) calendar day period; and (z) the Current Asset Sublimit; 2 3 plus (ii) Forty-Seven Million Five Hundred Thousand Dollars ($47,500,000), which amount is subject to reduction and/or increase in accordance with the terms of this Section 2.1(a)(ii) and Section 3.6 (the "Tranche A Borrowing Base"). The amount of the Tranche A Borrowing Base shall automatically be reduced in amounts which equal: (1) One Million Seven Hundred Thousand Dollars ($1,700,000) per quarter (the "Quarterly Reduction"), commencing October 15, 1997 and continuing on the first day of each January, April, July and October thereafter; (2) the higher of (x) one hundred percent (100%) of the net proceeds received from the sale of any of the Core Bus Collateral after the date of this Agreement and (y) the minimum release price for the Core Bus Collateral to be established by Foothill in its reasonable credit judgment; (3) the higher of (x) one hundred percent (100%) of the net proceeds received from the sale of any of the Core Real Property Collateral after the date of this Agreement and (y) the minimum release price for the Core Real Property Collateral to be established by Foothill in its sole and absolute discretion; and (4) ten percent (10%) of the net proceeds, which exceed an aggregate total of Fifteen Million Dollars ($15,000,000), from the sale, subsequent to January 1, 1995, of any Real Property (other than Core Real Property Collateral). In lieu of making the dollar reductions of the Tranche A Borrowing Base scheduled for October 15, 1997 and January 15, 1998, as set forth in clause (1) of the prior sentence, Borrower may elect to pledge to Foothill, to support the Tranche A Borrowing Base, Tranche A Additional Collateral consisting of buses having an aggregate bulk wholesale value of at least 125% of such scheduled dollar reduction of the Tranche A Borrowing Base, or redesignate as Tranche A Additional Collateral certain Vehicles currently constituting Tranche B Collateral having an aggregate bulk wholesale value of at least 125% of such scheduled dollar reduction of the Tranche A Borrowing Base. plus(iii) such amount as shall be made available in accordance with the terms of this Section 2.1(a)(iii) (the "Tranche B Borrowing Base"). The amount of the Tranche B Borrowing Base shall be equal to seventy-five percent (75%) of Borrower's actual cost (excluding costs of acquisition and transportation) of the Tranche B Collateral in which Foothill has been granted a first priority, perfected security interest from time to time by Borrower to either activate or increase, as the case may be, the Tranche B Borrowing Base (the product thereof being rounded down to the nearest One Million Dollar ($1,000,000) if the amount over a One Million Dollar ($1,000,000) increment is Five Hundred Thousand Dollars ($500,000), or less, or rounded up to the nearest One Million Dollar ($1,000,000) increment if the amount over a One Million Dollar ($1,000,000) increment is more than Five Hundred Thousand Dollars ($500,000)); provided, however, the availability and amount of the Tranche B Borrowing Base is subject to the amount of the Maximum Credit, and in no event shall the amount of the Tranche B Borrowing Base ever exceed the Maximum Tranche B Credit Amount; provided, further, prior to the activation or any increase, as the case may be, of the Tranche 3 4 B Borrowing Base, Borrower shall have taken such actions with respect to such Tranche B Collateral as Foothill shall require in accordance with Section 4.4. For each separate item of Tranche B Collateral pledged to Foothill in accordance with the terms of this Section 2.1(a)(iii), the Tranche B Borrowing Base shall thereafter be reduced on the first day of the thirteenth month following the date that such Tranche B Collateral was pledged to Foothill, and continuing on the first day of each third month thereafter by an amount equal to five percent (5%) of the Tranche B Borrowing Base attributable to such Tranche B Collateral pledged to Foothill. Concurrently with each such quarterly reduction, Borrower shall make a principal reduction payment to Foothill in such amount as shall be required in order to reduce the principal balance of advances owing under the Tranche B Borrowing Base to the amount of the Tranche B Borrowing Base, as so reduced on such date, together with all accrued but unpaid interest on the amount of such principal reduction payment calculated in accordance with Section 2.5. At Borrower's request, so long as an Event of Default is not continuing, Foothill shall release any security interests previously granted to it in and upon the Tranche B Collateral, or any portion thereof, or shall redesignate as Tranche A Additional Collateral certain Vehicles presently constituting Tranche B Collateral; provided, however, that concurrently therewith, the Tranche B Borrowing Base shall be reduced to an amount equal to seventy-five percent (75%) of Borrower's actual cost (excluding costs of acquisition and transportation) of the Tranche B Collateral, if any, which thereafter remains subject to Foothill's security interest and is designated as Tranche B Collateral (the product thereof being rounded down to the nearest One Million Dollar ($1,000,000) increment); provided, further, that prior to any release or redesignation of the Tranche B Collateral, Borrower shall have made a principal reduction payment to Foothill in such amount as shall be required in order to reduce the principal balance of advances owing under the Tranche B Borrowing Base to the amount of the Tranche B Borrowing Base, as reduced by the amount of such release and/or redesignation of the Tranche B Collateral, together with all accrued but unpaid interest on the amount of such principal reduction payment. (h) Clauses (ii) and (iii) of the definition of "Permitted Acquisition" is hereby amended to read as follows: "(ii) the company, once acquired by Borrower, will be at least twenty five percent (25%) owned by Borrower; and (iii) the purchase price paid by Borrower for its interest in such company, in the aggregate with the purchase price paid by Borrower for all other interests in companies meeting the conditions of clauses (i) and (ii) of this definition during the term of this Agreement, is equal to or less than Twenty Million Dollars ($20,000,000), including cash, notes issued by Borrower and/or funded debt that is assumed by Borrower." (i) Clause (i) of the definition of "Permitted Note Redemptions" is hereby amended to read as follows: 4 5 "(i) up to Thirty Three Million Dollars ($33,000,000) in face amount of Senior Notes; and" (j) Clause (ii) of Section 2.2 (a) of the Agreement is hereby amended to read as follows: "(ii) Thirty Five Million Dollars ($35,000,000)." (k) Section 2.8 of the Agreement is hereby amended by deleting the reference therein to ""Additional Tranche A Collateral" and replacing it with "Tranche A Additional Collateral". (l) Section 3.3 is hereby amended by deleting the date "May 31, 1998" and replacing it with the date "January 15, 1999". (m) Sections 3.5, 3.6, and 3.7 of the Agreement are hereby amended in their entirety to read as follows: 3.5 Early Termination by Borrower. Borrower has the option, at any time upon ninety (90) days prior written notice to Foothill, to terminate this Agreement prior to the Maturity Date by paying to Foothill, in cash, the Obligations (including an amount equal to the full amount of the L/Cs or L/C Guarantees to be held as cash collateral), provided, however, that such prepayment shall also be accompanied by a premium (the "Early Termination Premium") in an amount equal to that percent of the Maximum Credit, in effect at the time of such termination, which is indicated in the table below opposite the applicable period in which such termination occurs:
Period: Percent of Maximum Credit: ------ ------------------------- Closing Date to and including January 15, 1997 2% January 16, 1997 to and including July 15, 1997 1% July 16, 1997 to and including January 15, 1998 3/8% January 16, 1998 up to, but not including, 1/8% the Maturity Date
3.6 Partial Reductions of Tranche A Borrowing Base. Borrower has the option, from time to time after January 15, 1997, upon not less than thirty (30) days prior written notice to Foothill, to permanently reduce the Tranche A Borrowing Base in increments of Five Million Dollars ($5,000,000); provided, however, that the maximum amount that the Tranche A Borrowing Base may be reduced is Twenty Million Dollars ($20,000,000). Borrower shall not have any obligation to pay an Early Termination Premium in connection with any of the above described partial reductions unless, within six (6) months following the date 5 6 of any such reduction, Borrower elects to terminate this Agreement in its entirety pursuant to Section 3.5. 3.7 Partial Reductions of Maximum Tranche B Credit Amount. Borrower has the option, from time to time after January 15, 1997, upon not less than thirty (30) days prior written notice to Foothill, to permanently reduce the Maximum Tranche B Credit Amount in increments of Two Million Dollars ($2,000,000); provided, however, that the maximum amount that the Maximum Tranche B Credit Amount may be reduced shall not exceed the greater of (a) Twelve Million Dollars ($12,000,000) or (b) forty percent (40%) of the Maximum Tranche B Credit Amount. Borrower shall not have any obligation to pay an Early Termination Premium in connection with any of the above described partial reductions unless, within six (6) months following the date of any such reduction, Borrower elects to terminate this Agreement in its entirety pursuant to Section 3.5. (n) Section 4.4 of the Agreement is hereby amended by deleting the words "the Additional Tranche A Collateral" in the third line of such Section, and replacing them with "Tranche A Additional Collateral that is owned by a Pledged Subsidiary"; and by adding the following after the word "Collateral" in the penultimate line of such Section: ", Tranche A Additional Collateral, and Tranche B Collateral". (o) The proviso at the end of clause (b) of Section 6.12 of the Agreement is hereby amended to read as follows: "provided, however, that prior to an Event of Default, payments with respect to such losses of up to One Hundred Twenty Five Thousand Dollars ($125,000) per bus and Two Hundred Fifty Thousand Dollars ($250,000) per terminal, but in no event more than One Million Dollars ($1,000,000) per year for all buses, or One Million Dollars ($1,000,000) per year for all terminals, may be retained by Borrower to rebuild, repair, or replace such property." (p) Section 7.10 of the Agreement is hereby amended by deleting the words "Twenty Five Million Dollars ($25,000,000)" wherever they may appear and replacing them with "Thirty Million Dollars ($30,000,000)". (q) Clause (g) of Section 7.14 is hereby amended to read as follows: "(g) Borrower may hold evidence of previous advances or loans to its subsidiaries, and hereafter may: (i) make advances or loans to: (y) its wholly owned subsidiaries in an aggregate amount not to exceed Fifteen Million Dollars ($15,000,000) outstanding at any one time, and (z) companies in which it has at least a twenty five percent (25%) ownership interest but which are not wholly owned, in an aggregate amount not to exceed Ten Million Dollars ($10,000,000), outstanding at any one time, provided that all such indebtedness under clauses (y) 6 7 and (z) shall be evidenced by an instrument and (to the extent not prohibited by existing agreements of such companies) be secured by the available assets of such companies and Borrower's liens and security interests shall be pledged and assigned to Foothill hereunder; and (ii) make equity investments in its wholly owned subsidiaries in an amount not to exceed Ten Million Dollars ($10,000,000) in any fiscal year; provided, however, the difference between Ten Million Dollars ($10,000,000) and the amount of Borrower's actual contributions to its subsidiaries in any fiscal year of Borrower may be carried forward cumulatively to succeeding fiscal years to increase the foregoing annual contribution limitation by the amount of such carryforward until same has been used by Borrower;" (r) Clause (i) of Section 7.14 is hereby amended by deleting the words "Five Million Dollars ($5,000,000)" and replacing them with "Ten Million Dollars ($10,000,000)". (s) Section 8.9 is hereby amended by deleting the words "Two Hundred Fifty Thousand Dollars ($250,000)" and replacing them with "One Million Dollars ($1,000,000)". (t) Section 8.16 is hereby amended by deleting the words "Two Hundred Thousand Dollars ($200,000)" and replacing them with "One Million Dollars ($1,000,000)". (u) Schedule C-1 to the Agreement is hereby replaced by Schedule C-1 attached hereto. 3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Foothill that all of Borrower's representations and warranties set forth in the Agreement are true, complete and accurate in all respects as of the date hereof, except to the extent that they relate solely to an earlier date in which case they shall be true, complete and accurate as of such earlier date. 4. NO DEFAULTS. Borrower hereby affirms to Foothill that no Event of Default has occurred and is continuing as of the date hereof. 5. CONDITIONS PRECEDENT. The effectiveness of this Amendment is expressly conditioned upon the following: (a) Borrower shall have pledged, or caused its Pledged Subsidiaries to pledge, to Foothill as Tranche A Additional Collateral a first priority, perfected security interest in buses with a bulk wholesale value of at least $3,750,000, as determined by a third party appraisal that is satisfactory to Foothill in its reasonable credit judgment; (b) Payment by Borrower to Foothill of an amendment fee in the aggregate amount of Thirty Five Thousand Dollars ($35,000), such fee to be charged to Borrower's loan account pursuant to Section 2.5(d) of the Agreement; 7 8 (c) Payment by Borrower to Foothill of an increased commitment fee in the aggregate amount of One Hundred Twenty Five Thousand Dollars ($125,000), such fee to be charged to Borrower's loan account pursuant to Section 2.5(d) of the Agreement; and (d) Receipt by Foothill of an executed copy of this Amendment and any required amendments to the Mortgages or other Loan Documents. 6. COSTS AND EXPENSES. Borrower shall pay to Foothill all of Foothill's out-of-pocket costs and expenses (including, without limitation, the fees and expenses of its counsel, which counsel may include any local counsel deemed necessary, search fees, filing and recording fees, fees and costs arising out of the amendments to the Mortgages and any endorsements to policies of title insurance insuring the lien of any Mortgages, documentation fees, appraisal fees, travel expenses, and other fees) arising in connection with the preparation, execution, and delivery of this Amendment and all related documents. 7. LIMITED EFFECT. In the event of a conflict between the terms and provisions of this Amendment and the terms and provisions of the Agreement, the terms and provisions of this Amendment shall govern. In all other respects, the Agreement, as amended and supplemented hereby, shall remain in full force and effect. 8. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties on separate counterparts, each of which when so executed and delivered shall be deemed to be an original. All such counterparts, taken together, shall constitute but one and the same Amendment. This Amendment shall become effective upon the execution of a counterpart of this Amendment by each of the parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first set forth above. FOOTHILL CAPITAL CORPORATION, a California corporation By: /s/ KENT DAHL ------------------------------------ Title: Senior Vice President/Treasurer GREYHOUND LINES, INC., a Delaware corporation By: /s/ STEVEN L. KORBY ------------------------------------ Title: Executive Vice President, Chief Financial Officer and Treasurer 8 9 STATE OF TEXAS ) ) SS. COUNTY OF DALLAS ) ----------- Before me, the undersigned authority, on this day personally appeared Steve L. Korby [Name of Officer] Executive Vice President, Chief Financial - -------------- ----------------------------------------- Officer and Treasurer [Title of Officer] of GREYHOUND LINES, INC., a Delaware - --------------------- corporation, known to me to be the person whose name is subscribed to the foregoing instrument, and acknowledged to me that he executed the same for the purposes and consideration therein expressed, in the capacity therein stated, and as the act and deed of said corporation. Given under my hand and seal on April 11, 1996 [Date]. -------------- /s/ PHYLLIS W. MORRIS ---------------------------------- NOTARY PUBLIC, STATE OF TEXAS PRINTED NAME OF NOTARY PHYLLIS W. MORRIS ---------------------------------- MY COMMISSION EXPIRES: 9-8-99 - ------------------------ 9 10 The undersigned has executed a Security Agreement-Stock Pledge in favor of Foothill Capital Corporation ("Foothill") collateralizing the obligations of Greyhound Lines, Inc., ("Greyhound") owing to Foothill. The undersigned acknowledges the terms of the above Amendment and reaffirms and agrees that: its Security Agreement-Stock Pledge remains in full force and effect; nothing in such Security Agreement-Stock Pledge obligates Foothill to notify the undersigned of any changes in the financial accommodations made available to Greyhound or to seek reaffirmations of the Security Agreement-Stock Pledge; and no requirement to so notify the undersigned or to seek reaffirmations in the future shall be implied by the execution of this reaffirmation. T & V HOLDING COMPANY, a Delaware corporation By: /s/ STEVEN L. KORBY ------------------------------------ Name: STEVEN L. KORBY ---------------------------------- Title: Executive Vice President, Chief Financial Officer and Treasurer 10 EX-10.1 3 INTEREST RATE SWAP AGREEMENT 1 Exhibit 10.1 FOURTH AMENDMENT FOURTH AMENDMENT (this "Amendment") dated as of April 25, 1996 between GREYHOUND LINES, INC., a Delaware corporation (the "Counterparty") and BANKERS TRUST COMPANY ("BTCo"). All capitalized terms defined in the Agreement referred to below shall have the same meanings when used herein unless otherwise defined herein. W I T N E S S E T H: - - - - - - - - - - WHEREAS, the Counterparty and BTCo have entered into that certain Master Agreement dated as of July 12, 1993, as amended by the First Amendment dated as of October 14, 1993, the Second Amendment dated as of December 30, 1993 and the Third Amendment dated as of October 14, 1994 (as so amended, and as further amended, modified or supplemented from time to time, the "Agreement"); and WHEREAS, the Counterparty and BTCo desire to modify and amend certain of the terms and provisions of the Agreement. NOW THEREFORE, the parties hereto agree as follows: 1. Part 1(h) of the Schedule to the Agreement is hereby amended by deleting clause (iii) of such section in its entirety. 2. Part 5(f) of the Schedule to the Agreement is hereby amended by modifying or adding the defined terms listed below: "Appraised Value" shall mean, as respects the Real Estate, the appraised value reflected on Annex I, or such other value determined by an appraisal obtained by Party B pursuant to the provisions of Annex II, Section 3 (b). "Coverage Amount" shall mean, as of any date, the product of (x) Future Obligations minus the undrawn face amount of the Letter of Credit and (y) two. "Coverage Trigger Date" shall mean the first date after April 25, 1996 on which the Appraised Value of the Real Estate equals or exceeds the Coverage Amount. "Future Obligations" shall mean, as of any date, the aggregate of the undiscounted future payments owing by Party A to Party B under this Agreement minus the aggregate of the undiscounted future payments owing by Party B to Party A under this Agreement 1 2 "Letter of Credit" shall mean the Letter of Credit, dated as of April 25, 1996, in the face amount of $1.1 million, issued by Norwest Corporation in favor of Bankers Trust Company, as amended, modified or supplemented from time to time or as replaced in accordance with the terms of the Agreement. "Mortgages" shall mean each of the deeds of trust, mortgages, security agreements, financing statements and assignments thereto executed by Party A in favor of Party B relating to the Real Estate, as such documents may be amended, modified or supplemented from time to time. "Real Estate" shall mean the real properties initially set forth on Annex I hereto and made a part hereof and which is incorporated herein in its entirety by reference, as such Annex I shall be modified or supplemented pursuant to the provisions of Annex II. "Security Documents" shall mean each (x) of the Mortgages and (y) the Letter of Credit and (z) other Collateral that may be substituted therefor in accordance with the provisions of Annex II. 3. Annex I and Annex II to the Third Amendment to the Agreement are hereby amended by deleting said annexes in their entirety and inserting, in lieu thereof, Annex I and Annex II attached to the Amendment. 4. As specifically modified by this Amendment, all of the terms and provisions of the Agreement are hereby reaffirmed and shall remain in full force and effect. Each party shall bear its own costs in preparing and negotiating this Amendment. 5. This Amendment may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. 6. This Amendment shall become effective on the date (the "Amendment Effective Date") when the Counterparty and BTCo shall have executed a copy hereof (whether the same or different copies) and shall have delivered (including by way of telecopier) the same to each other. 7. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK. 8. This Amendment is limited as specified and shall not constitute a modification, acceptance or waiver of any other provision of the Agreement or any other Security Document. 2 3 9. From and after the Amendment Effective Date, all references in the Agreement and each of the other Security Documents to the Agreement shall be deemed to be references to the Agreement after giving effect to this Amendment. IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed and delivered by their respective authorized officers as of the date appearing in the first paragraph above. GREYHOUND LINES, INC. By: /s/ STEVEN L. KORBY ------------------------------------ Title: Executive Vice President and Chief Financial Officer BANKERS TRUST COMPANY By: /s/ CHRISTOPHER KINSLOW ------------------------------------ Title: Vice President 3 4 ANNEX I Core Properties Initially Pledged to Bankers Trust
Appraised Value --------------- 2515 Cleveland, OH 1465 Chester Avenue $1,300,000.00 4206 Birmingham, AL 619 N. 19th Street $1,000,000.00 2509 Cincinnati, OH 1005 Gilbert Avenue $ 450,000.00 3312 Richmond, VA 2910 North Boulevard $ 600,000.00 4733 Orlando, FL 2750 West Business Center Boulevard $1,600,000.00 3206 Washington, DC 1005 First Street N.E. $ 500,000.00 6 properties Total of Core Properties Pledged to Bankers Trust $5,450,000.00
5 Annex II PERFORMANCE ASSURANCE PROVISIONS 1. Security Interest. As security for its obligations under the ISDA Master Agreement to which this Annex is attached and into which this Annex is incorporated (the "Agreement"), Party A has agreed to deliver to party B the Letter of Credit and Mortgages on the Real Properties initially listed on Annex I hereto and after the first date of providing such collateral from time to time in accordance with the terms and conditions of this Annex. Party A hereby pledges all such property (together with all proceeds thereof, the "Collateral") to Party B and grants to Party B a continuing security interest in and lien on such Collateral. Party A further agrees to take any reasonable action which Party B may require or deems necessary in order to create, validate, confirm or perfect such pledge and security interest. 2. Release of Collateral. (a) On and after the Coverage Trigger Date, if (x) no Event of Default has occurred and is continuing and (y) the Appraised Value of the Real Estate exceeds the Coverage Amount at such time, then Party A may request in writing that Party B shall release its security interest in certain Real Estate (the "Excess Real Estate") having a value equal to such excess amount. If Party B receives an Officer's Certificate from the Chief Financial Officer of Party A stating that Party A shall be in compliance with all terms and conditions of the Refinancing Facility both before and after giving effect to the release of such Excess Real Estate, then (1) Party B shall release such Excess Real Estate and return such property to Party A in accordance with the procedures set forth in Section 4 below and (2) the Coverage Amount shall be reduced accordingly. (b) As used in this Annex, "Performance Exposure" means, on any day, the Future Obligations discounted by rates determined by the LIBOR interest rate curve in effect on such day, which would be payable to Party B if the Agreement were terminated as of such day as the result of an Event of Default with respect to Party A and a payment was due to Party B pursuant to Section 6(e)(i) thereof. 3. Collateral. (a) Party B may consent, in its sole discretion, upon written request by Party A, to modify or supplement the list of real properties acceptable as Collateral by executing and delivering written amendments to this Annex, which shall be signed by both parties (in counterpart or otherwise). (b) Party B reserves the right to recalculate the fair market or the appraised value of the Real Estate (as determined in good faith and a commercially reasonable manner by Party B) at any time. Upon a determination by Party B of revised Appraised Values, 1 6 such new values shall be automatically substituted for the values set forth on Annex I and appropriate adjustments shall be made, if necessary, in the Real Estate to be held by Party B, and/or released pursuant to Section 2 above and/or added pursuant to Section 3(c). (c) If on any New York Banking Day after the Coverage Trigger Date, the Coverage Amount exceeds the Appraised Value of the Real Estate at such time because of a change in such Appraised Value, then Party B may, on demand, require Party A to deliver additional Collateral in accordance with the procedures set forth in Section 4 below so that, after giving effect to such delivery, such Appraised Value will equal or exceed the Coverage Amount. 4. Transfers. (a) Demands for delivery or return of Collateral may be made in writing and Collateral that is demanded by 10:00 a.m., New York time, on a New York Banking Day shall be delivered by the close of business on the following New York Banking Day. It shall be a Termination Event with respect to a party if such party fails to deliver or return Collateral as required by any Section of this Annex and such failure continues for two New York Banking Days after notice from the other party. (b) In the case of Collateral consisting of securities which are transferable by book- entry, deliveries or returns of such securities shall be effected by book entries on the records of the applicable Federal Reserve Bank or clearing corporation. In the case of Collateral consisting of securities which are not transferable by book-entry, deliveries or returns of such securities shall be effective by delivery of the security to the transferee or its designee in appropriate physical form for legally valid transfer. In the case of Collateral consisting of cash, deliveries or returns of such cash shall be effected by deposit thereof in the account designated by the transferee. (c) All deliveries and returns of Collateral shall be rounded to the nearest integral multiple of $250,000 ( and shall be rounded up, if exactly between two such multiples). 5. Collateral Maintenance. (a) All cash or cash equivalent Collateral received by party B from Party A shall be entered in one or more accounts (each, a "Collateral Account") at Bankers Trust Company, each of which may include property of other parties but will bear a title indicating that the property in such Collateral Account is held as security. Party B shall have no interest in the Collateral except the security interest granted in Section 1 above until it has acquired some greater interest by exercise of its rights pursuant to Section 6 below. Party B shall cause statements concerning the Collateral held in each Collateral Account to be delivered to Party A on request, which may not be made more frequently than once in each calendar month. 2 7 (b) Party A may substitute acceptable property for other acceptable property then held as Collateral by Party B, provided that the value of such substitute property for the purposes of this Annex is at least equal to that of the property being replaced and provided further that notice of such proposed substitution is given to Party B prior to 10:00 a.m. New York time, on the new York Banking Day on which such substitution is to occur. Party B shall return Collateral which has been replaced by the close of business on the New York Banking Day following the day on which the relevant substitute Collateral is received in the relevant Collateral Account. (c) Any payment or other distribution in respect of property being held as cash or cash equivalent Collateral (a "Payment") shall be remitted to Party A within one New York Banking Day after such Payment is received so long as (i) Party A shall have complied with all of its obligations, if any, under Section 2 above, shall have made all payments due and payable under the Agreement and no Event of Default or Potential Event of Default with respect to Party A shall have occurred and be continuing and ((ii) after giving effect so such remittance, the value of the remaining Collateral for the purposes of this Annex will be equal to or greater than that required hereunder. Any Payment or any part thereof retained by Party B shall be held as additional Collateral. 6. Financial Reporting Requirements. Party A hereby covenants and agrees that on the Amendment Effective Date and thereafter for so long as this Agreement is in effect and until all obligations hereunder are paid in full, Party A will furnish to Party B copies of the annual and quarterly financial statements that Party A files with the Securities and Exchange Commission ("SEC"), such reports to be furnished by Party A to Party B within thirty (30) days of the filing date with the SEC. 7. Rights on Termination. (a) On or after an Early Termination Date, if any amount is payable by Party A to Party B under the Agreement, Party B may exercise any of the rights and remedies of a secured party with respect to the Collateral, including any such rights and remedies under then applicable law, in order to recover amounts owing to it under the Agreement. The exercise of such rights and remedies shall be free from any equity, right of redemption or other claim or right of any nature whatsoever of Party A. Party B shall not be required to realize on the Collateral prior to collecting from Party A. Party A shall in all events remain liable for any amounts remaining unpaid after realization on the Collateral and application of proceeds. Party B shall return any surplus proceeds or Collateral remaining after any such realization and application. (b) Any liquidation of non-cash Collateral shall be accomplished by a public or private sale of the Collateral conducted by Party B in a commercially reasonable manner with such notice, if any, as may be required by applicable law. Party B or any of its affiliates may be the purchaser of any or all of the Collateral so sold. Party A acknowledges and agrees that Collateral comprised of securities may decline speedily in value and is of a type 3 8 customarily sold on a recognized market and, accordingly, Party A is not entitled to prior notification of any sale or intended disposition of such Collateral by Party B. All costs and expenses, including, without limitation, brokers' fees, sales or other commissions, and attorneys' fees and expenses, incurred by or on behalf of Party B in connection with its realization on any Collateral shall be payable immediately by Party A and shall be additional obligations due under the Agreement which are secured by the Collateral. 8. Representations. Party A continuously represents, warrants and agrees that: (a) it has the power under the laws of the jurisdiction of its organization or incorporation and under its organizational documents to grant to Party B a security interest in any property it may transfer as Collateral; (b) as of each date on which it transfers property as Collateral to Party B, it will have title to and will be the sole owner of such property, free and clear of any security interest, lien, encumbrance or other restrictions other than the security interest granted hereby; (c) upon transfer of any property as Collateral to Party B in accordance with the terms of this Annex, Party B will have a valid and perfected security interest in such Collateral; and (d) the performance by it of its obligations under this Annex will not violate the provisions of any other indenture, agreement or other document to which it or its assets are bound or result in the creation of any security interest, lien or other encumbrance on it or any of its property other than the security interest granted hereby. 4 EX-11.2 4 COMPUTATION OF REGISTRANTS EARNINGS PER SHARE 1 EXHIBIT 11.2 PAGE 1 OF 1 GREYHOUND LINES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
THREE MONTHS ENDED MARCH 31, 1996 ---------------- PRIMARY LOSS PER SHARE Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21,545,000) =============== Shares Weighted average number of common shares issued . . . . . . . . . . . . . . . . 58,282,639 Less weighted average treasury stock . . . . . . . . . . . . . . . . . . . . . . (109,192) Assuming exercise of options reduced by the number of common shares which could have been purchased with the proceeds from exercise of such options . . --- * --------------- Weighted average number of common shares outstanding, as adjusted . . . . . . . 58,173,447 --------------- Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.37) =============== FULLY DILUTED LOSS PER SHARE Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21,545,000) Plus interest expense on Convertible Debentures . . . . . . . . . . . . . . . . . . --- ** --------------- Adjusted net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21,545,000) =============== Shares Weighted average number of common shares issued . . . . . . . . . . . . . . . . 58,282,639 Less weighted average treasury stock . . . . . . . . . . . . . . . . . . . . . . (109,192) Assuming exercise of options reduced by the number of common shares which could have been purchased with the proceeds from exercise of such options . . --- * Assuming conversion of Convertible Debentures into shares of Common Stock . . . --- ** --------------- Weighted average number of common shares outstanding, as adjusted . . . . . . . 58,173,447 --------------- Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.37) ===============
* Option exercises not considered in calculation as exercise would not have a dilutive effect. ** Not used in calculation of weighted average number of common shares due to the antidilutive effect of the assumed conversion of the Convertible Debentures. EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 815 0 30,141 237 3,778 58,279 380,598 85,949 475,757 102,558 201,063 583 0 0 127,659 475,757 0 141,643 0 111,144 0 0 6,626 (21,482) 63 (21,545) 0 0 0 (21,545) (0.37) (0.37)
-----END PRIVACY-ENHANCED MESSAGE-----