-----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, VtS1/PVOnBDJgJsVBabu5ZIJMDaWKrO1wqj3gA1HItoMWtggGWDmtd8qo0uUrd/j YRuk0uWJFermP0MsYavWNg== 0000950134-02-010000.txt : 20020814 0000950134-02-010000.hdr.sgml : 20020814 20020814142555 ACCESSION NUMBER: 0000950134-02-010000 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ATLANTIC GREYHOUND LINES OF VIRGINIA INC CENTRAL INDEX KEY: 0001041393 IRS NUMBER: 580869571 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-27267-01 FILM NUMBER: 02734661 BUSINESS ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 9727897415 MAIL ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 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: 02734662 BUSINESS ADDRESS: STREET 1: 15110 N DALLAS PKWY STE 600 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 9727897000 MAIL ADDRESS: STREET 1: 15110 N DALLAS PARKWAY STREET 2: SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TNM & O TOURS INC CENTRAL INDEX KEY: 0001041401 IRS NUMBER: 751188694 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-27267-11 FILM NUMBER: 02734664 BUSINESS ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 1313 13TH CITY: LUBBOCK STATE: TX ZIP: 79408 BUSINESS PHONE: 9727897415 MAIL ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TEXAS NEW MEXICO & OKLAHOMA COACHES INC CENTRAL INDEX KEY: 0001041400 IRS NUMBER: 750605295 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-27267-10 FILM NUMBER: 02734665 BUSINESS ADDRESS: STREET 1: 1313 13TH STREET STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: LUBBOCK STATE: TX ZIP: 79408 BUSINESS PHONE: 9727897415 MAIL ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SISTEMA INTERNACIONAL DE TRANSPORTE DE AUTOBUSES INC CENTRAL INDEX KEY: 0001041398 IRS NUMBER: 752548617 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-27267-08 FILM NUMBER: 02734666 BUSINESS ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 9727897415 MAIL ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GREYHOUND DE MEXICO SA DE CV CENTRAL INDEX KEY: 0001041396 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-27267-05 FILM NUMBER: 02734667 BUSINESS ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 N DALLAS PKWY STE 600 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 9727897415 MAIL ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VERMONT TRANSIT CO INC CENTRAL INDEX KEY: 0001041402 IRS NUMBER: 030164980 STATE OF INCORPORATION: VT FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-27267-12 FILM NUMBER: 02734663 BUSINESS ADDRESS: STREET 1: 345 PINE STREET CITY: BURLINGTON STATE: VT ZIP: 05401 BUSINESS PHONE: 9727897415 MAIL ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GLI HOLDING CO CENTRAL INDEX KEY: 0000813041 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 752146309 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 033-13588-01 FILM NUMBER: 02734668 BUSINESS ADDRESS: STREET 1: C/O GREYHOUND LINES INC STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 BUSINESS PHONE: 9727987415 MAIL ADDRESS: STREET 1: C/O GREYHOUND LINES STREET 2: 15110 NORTH DALLAS PARKWAY SUITE 600 CITY: DALLAS STATE: TX ZIP: 75248 10-Q 1 d99141e10vq.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2002 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 JUNE 30, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ---- ---- Commission file number 1-10841 GREYHOUND LINES, INC. and its Subsidiaries identified in Footnote (1) below (Exact name of registrant as specified in its charter) DELAWARE 86-0572343 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 15110 N. DALLAS PARKWAY, SUITE 600 DALLAS, TEXAS 75248 (Address of principal executive offices) (Zip code) (972) 789-7000 (Registrant's telephone number, including area code) NONE (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES X NO ----- ----- As of August 9, 2002, the registrant had 587 shares of Common Stock, $0.01 par value, outstanding all of which are held by the registrant's parent company. (1) This Form 10-Q is also being filed by the co-registrants specified under the caption "Co-Registrants", each of which is a wholly-owned subsidiary of Greyhound Lines, Inc. and each of which has met the conditions set forth in General Instructions H(1)(a) and (b) of Form 10-Q for filing Form 10-Q in a reduced disclosure format. CO-REGISTRANTS This Form 10-Q is also being filed by the following entities. Except as set forth below, each entity has the same principal executive offices, zip code and telephone number as that set forth for Greyhound Lines, Inc. on the cover of this report:
I.R.S. EMPLOYER JURISDICTION COMMISSION IDENTIFICATION OF NAME FILE NO. NO. INCORP. - ---- ----------- --------------- ------------ Atlantic Greyhound Lines of Virginia, Inc. 333-27267-01 58-0869571 Virginia GLI Holding Company 333-27267-04 75-2146309 Delaware Greyhound de Mexico, S.A. de C.V. 333-27267-05 None Republic of Mexico Sistema Internacional de Transporte de Autobuses, Inc. 333-27267-08 75-2548617 Delaware 802 Commerce Street, 3rd Floor Dallas, Texas 75201 (214) 849-8616 Texas, New Mexico & Oklahoma Coaches, Inc. 333-27267-10 75-0605295 Delaware 1313 13th Street Lubbock, Texas 79408 (806) 763-5389 T.N.M. & O. Tours, Inc. 333-27267-11 75-1188694 Texas (Same as Texas, New Mexico & Oklahoma Coaches, Inc.) Vermont Transit Co., Inc. 333-27267-12 03-0164980 Vermont 345 Pine Street Burlington, Vermont 05401 (802) 862-9671
As of June 30, 2002, Atlantic Greyhound Lines of Virginia, Inc. had 150 shares of common stock outstanding (at a par value of $50.00 per share); GLI Holding Company had 1,000 shares of common stock outstanding (at a par value of $0.01 per share); Greyhound de Mexico, S.A. de C.V. had 10,000 shares of common stock outstanding (at a par value of $0.10 Mexican currency per share); Sistema Internacional de Transporte de Autobuses, Inc. had 1,000 shares of common stock outstanding (at a par value of $0.01 per share); Texas, New Mexico & Oklahoma Coaches, Inc. had 1,000 shares of common stock outstanding (at a par value of $0.01 per share); T.N.M. & O. Tours, Inc. had 1,000 shares of common stock outstanding (at a par value of $1.00 per share); and Vermont Transit Co., Inc. had 505 shares of common stock outstanding (no par value). Each of the above named co-registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period such co-registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. 2 GREYHOUND LINES, INC. AND SUBSIDIARIES
PAGE NO. -------- PART I. FINANCIAL INFORMATION Item 1. Financial Statements: Interim Consolidated Statements of Financial Position as of June 30, 2002 (Unaudited) and December 31, 2001........................ 5 Interim Consolidated Statements of Operations for the Three and Six months Ended June 30, 2002 and 2001 (Unaudited).................... 6 Condensed Interim Consolidated Statements of Cash Flows for the Six months Ended June 30, 2002 and 2001 (Unaudited).................... 7 Notes to Interim Consolidated Financial Statements (Unaudited)............ 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............................................................ 12 Item 3. Quantitative and Qualitative Disclosures About Market Risk.................. 16 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders......................... 17 Item 6. Exhibits and Reports on Form 8-K............................................ 17 SIGNATURES ......................................................................... 18
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS 4 GREYHOUND LINES, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
JUNE 30, DECEMBER 31, 2002 2001 ------------- ------------- (UNAUDITED) Current Assets Cash and cash equivalents ..................................................... $ 8,062 $ 20,913 Accounts receivable, less allowance for doubtful accounts of $1,073 and $915 . 62,456 59,977 Inventories, less allowance for shrinkage of $276 and $177 ................... 9,140 8,409 Prepaid expenses .............................................................. 6,020 7,158 Current portion of deferred tax assets ........................................ 16,721 12,238 Other current assets .......................................................... 3,827 2,154 ------------- ------------- Total Current Assets ..................................................... 106,226 110,849 Property, plant and equipment, net of accumulated depreciation of $238,769 and $229,502 ................................................................. 408,248 412,027 Investments in unconsolidated affiliates .......................................... 16,231 15,896 Deferred income taxes ............................................................. 50,530 48,609 Insurance and security deposits ................................................... 29,373 29,142 Goodwill .......................................................................... 3,040 43,087 Intangible assets, net of accumulated amortization of $37,897 and $34,487 ......... 28,031 28,847 ------------- ------------- Total Assets ............................................................. $ 641,679 $ 688,457 ============= ============= Current Liabilities Accounts payable .............................................................. $ 28,559 $ 24,638 Accrued liabilities ........................................................... 63,517 66,961 Rents payable ................................................................. 12,950 11,839 Unredeemed tickets ............................................................ 12,830 12,001 Current portion of claims liability ........................................... 12,809 2,935 Current maturities of long-term debt .......................................... 11,500 7,975 ------------- ------------- Total Current Liabilities ................................................ 142,165 126,349 Pension obligation ................................................................ 48,860 46,432 Claims liability .................................................................. 27,603 18,615 Long-term debt, net ............................................................... 249,893 272,591 Minority interests ................................................................ 4,774 6,166 Other liabilities ................................................................. 28,951 30,385 ------------- ------------- Total Liabilities ........................................................ 502,246 500,538 ------------- ------------- Stockholder's Equity Common stock (1,000 shares authorized; par value $.01; 587 shares issued) ..... -- -- Capital in excess of par value ................................................ 320,391 320,391 Retained deficit .............................................................. (128,023) (79,003) Accumulated other comprehensive loss, net of tax benefit of $28,503 and $28,791 ......................................................... (52,935) (53,469) ------------- ------------- Total Stockholder's Equity ............................................... 139,433 187,919 ------------- ------------- Total Liabilities and Stockholder's Equity ............................... $ 641,679 $ 688,457 ============= =============
The accompanying notes are an integral part of these statements. 5 GREYHOUND LINES, INC. AND SUBSIDIARIES INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2002 2001 2002 2001 ------------ ------------ ------------ ------------ (Unaudited) (Unaudited) OPERATING REVENUES Passenger services .......................... $ 208,366 $ 223,629 $ 392,311 $ 415,252 Package express ............................. 10,024 10,398 19,492 20,319 Food services ............................... 10,659 11,024 20,477 21,000 Other operating revenues .................... 20,915 19,887 40,018 37,064 ------------ ------------ ------------ ------------ Total Operating Revenues ................ 249,964 264,938 472,298 493,635 ------------ ------------ ------------ ------------ OPERATING EXPENSES Maintenance ................................. 25,229 25,196 49,668 49,769 Transportation .............................. 62,510 66,312 118,484 128,871 Agents' commissions and station costs ....... 45,265 47,456 88,573 92,547 Marketing, advertising and traffic .......... 8,758 9,701 13,639 18,399 Insurance and safety ........................ 19,882 14,261 36,103 26,438 General and administrative .................. 31,492 37,944 64,125 69,755 Depreciation and amortization ............... 12,432 11,873 24,808 23,203 Operating taxes and licenses ................ 15,635 16,084 30,354 31,377 Operating rents ............................. 20,224 12,757 39,839 33,284 Cost of goods sold - food services .......... 6,991 7,488 13,538 14,439 Other operating expenses .................... 736 988 1,347 2,687 ------------ ------------ ------------ ------------ Total Operating Expenses ................ 249,154 250,060 480,478 490,769 ------------ ------------ ------------ ------------ Operating Income (Loss) ........................... 810 14,878 (8,180) 2,866 Interest Expense .................................. 6,702 7,651 13,511 14,963 ------------ ------------ ------------ ------------ Income (Loss) Before Income Taxes, Minority Interests and Cumulative Effect of Accounting Change ......................................... (5,892) 7,227 (21,691) (12,097) Income Tax Provision (Benefit) .................... 804 3,087 (8,676) (5,353) Minority Interests ................................ (465) 154 (1,559) 26 ------------ ------------ ------------ ------------ Income (Loss) Before Cumulative Effect of Accounting Change ........................... (6,231) 3,986 (11,456) (6,770) Cumulative Effect of a Change in Accounting for Goodwill, net of tax (Note 2) .............. -- -- (37,564) -- ------------ ------------ ------------ ------------ Net Income (Loss) ................................. $ (6,231) $ 3,986 $ (49,020) $ (6,770) ============ ============ ============ ============
The accompanying notes are an integral part of these statements. 6 GREYHOUND LINES, INC. AND SUBSIDIARIES CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
SIX MONTHS ENDED JUNE 30, 2002 2001 ------------- ------------- (Unaudited) CASH FLOWS FROM OPERATING ACTIVITIES Net loss ................................................. $ (49,020) $ (6,770) Cumulative effect of accounting change ................... 37,564 -- Non-cash expenses and gains included in net loss ......... 20,296 23,170 Net change in certain operating assets and liabilities ... 16,536 (11,505) ------------- ------------- Net cash provided by operating activities .............. 25,376 4,895 ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Capital expenditures ..................................... (24,314) (16,565) Proceeds from assets sold ................................ 6,001 546 Payments for business acquisitions, net of cash acquired . -- (1,320) Other investing activities ............................... 161 (383) ------------- ------------- Net cash used for investing activities ................. (18,152) (17,722) ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Payments on debt and capital lease obligations ........... (4,731) (3,291) Redemption of preferred stock ............................ -- (3,497) Payment of quarterly preferred dividends ................. -- (43) Redemption 81/2% debentures .............................. (45) -- Proceeds from equipment borrowing ........................ -- 7,850 Net change in revolving credit facility .................. (15,299) 11,053 ------------- ------------- Net cash provided by (used for) financing activities ... (20,075) 12,072 ------------- ------------- NET DECREASE IN CASH AND CASH EQUIVALENTS .................. (12,851) (755) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ............. 20,913 10,206 ------------- ------------- CASH AND CASH EQUIVALENTS, END OF PERIOD ................... $ 8,062 $ 9,451 ============= =============
The accompanying notes are an integral part of these statements. 7 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2002 (UNAUDITED) 1. INTERIM CONSOLIDATED FINANCIAL STATEMENTS In the opinion of management, the unaudited Interim Consolidated Financial Statements of Greyhound Lines, Inc. and Subsidiaries ("Greyhound" or the "Company") include all adjustments, consisting of only normal recurring adjustments, necessary to present fairly the Company's financial position as of June 30, 2002, the results of its operations for the three and six months ended June 30, 2002 and 2001 and cash flows for the six months ended June 30, 2002 and 2001. Due to the seasonality of the Company's operations, the results of its operations for the interim period ended June 30, 2002 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, 2001. Certain reclassifications have been made to the prior period statements to conform them to the current year presentation. For the three and six months ended June 30, 2002 and 2001, the Company's comprehensive income (loss) approximated its net income (loss). On March 16, 1999, the Company's stockholders approved the Agreement and Plan of Merger with Laidlaw Inc. ("Laidlaw") pursuant to which the Company became a wholly owned subsidiary of Laidlaw (the "Merger"). The consolidated financial statements of the Company do not reflect any purchase accounting adjustments relating to the Merger. On June 28, 2001, as part of a financial restructuring, Laidlaw USA, Inc., Laidlaw Inc., Laidlaw International Finance Corporation, Laidlaw Investments Ltd., Laidlaw One, Inc. and Laidlaw Transporation, Inc. filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Western District of New York, under a jointly administered case captioned, In re: Laidlaw USA, Inc., et al, Case No. 01-14099. On that date, Laidlaw Inc. and Laidlaw Investments Ltd. also filed cases under the Canada Companies' Creditors Arrangement Act in the Ontario Superior Court of Justice in Toronto, Canada, court file no. 01-CL-4178. Laidlaw is the ultimate parent company of Greyhound. Neither Greyhound, nor any of its subsidiaries were included in, or made party to, these reorganization filings and proceedings. The reorganization filings and proceedings do not cause a cross default with any of the Company's debt which would place the Company's debt in default with its financial institutions and, as of the date of this report, the Company is in compliance with all covenants in its various debt agreements. Although the outcome of the foregoing matters is uncertain, management believes that the likely outcome will have no material impact on the Company's financial position, cash flows or results of operations. In July 2002, the Company amended the Revolving Credit Facility to extend the maturity date one year, to October 24, 2004. 2. GOODWILL AND OTHER INTANGIBLE ASSETS Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 ("SFAS 142") "Accounting for Goodwill and Other Intangible Assets" and, as a result, the Company ceased to amortize goodwill. In lieu of amortization, SFAS 142 requires that goodwill be reviewed for impairment upon adoption of SFAS 142 and at least annually thereafter. Under SFAS 142, goodwill impairment is deemed to exist if the net book value of a reporting unit exceeds its estimated fair value. To determine estimated fair value of the reporting units the Company utilizes both a discounted cash flow methodology as well as the implied values of comparable companies. This methodology differs from the Company's previous accounting policy, which used undiscounted cash flows to determine possible impairment. 8 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2002 (UNAUDITED) 2. GOODWILL AND OTHER INTANGIBLE ASSETS (CONTINUED) The Company recently completed the initial impairment assessment as required by SFAS 142 and has determined that the carrying value of its Bus Operations reporting unit exceeded that unit's fair value. As a result, effective to the first quarter of 2002, the Company recorded a non-cash charge of $40.0 million ($37.6 million after tax) as a cumulative effect of a change in accounting for goodwill. The Company's remaining goodwill ($3.0 million) relates to the Courier Services reporting unit where fair value exceeds carrying value. In connection with adopting SFAS 142 the Company reassessed the useful lives and classification of its identifiable intangible assets and, with the exception of the useful life of trademarks, determined that the useful lives and classifications continue to be appropriate. Trademarks, which had previously been amortized over a fifteen year life, are now considered to have an indefinite life and are no longer amortized. During the first quarter of 2002 the Company completed an impairment test on its trademarks as required by SFAS 142 which did not result in an impairment charge. The trademarks will be subjected to an impairment test in the future at least annually. The following table provides information relating to the Company's amortized and unamortized intangible assets as of June 30, 2002 and December 31, 2001 (in thousands):
JUNE 30, 2002 DECEMBER 31, 2001 ------------------------------- ------------------------------- ACCUMULATED ACCUMULATED COST AMORTIZATION COST AMORTIZATION -------------- -------------- -------------- -------------- Amortized intangible assets: Software $ 48,734 $ 29,294 $ 46,070 $ 27,154 Debt issuance costs 9,757 5,829 9,758 4,825 Deferred lease costs 3,847 2,630 3,847 2,357 Other 277 144 346 151 -------------- -------------- -------------- -------------- Total $ 62,615 $ 37,897 $ 60,021 $ 34,487 ============== ============== ============== ============== Unamortized intangible assets: Trademark $ 3,313 $ 3,313
Amortization expense for intangible assets during the three and six months ended June 30, 2002 was $1.9 million and $3.5 million, respectively. Estimated amortization expense, excluding the effect of costs that may be capitalized in future periods, for the year ended December 31, 2002 and the four succeeding years are as follows: $7.0 million (2002); $6.2 million (2003); $4.4 million (2004); $3.8 million (2005) and $2.8 million (2006). Actual results of operations for the three and six months ended June 30, 2002 and proforma results of operations for the three and six months ended June 30, 2001 had the Company applied the provisions of SFAS 142 in that period is as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 ------------------------------ ------------------------------ 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Reported Net Income (Loss) $ (6,231) $ 3,986 $ (49,020) $ (6,770) Add: goodwill and trademark amortization, net of tax -- 520 -- 1,040 ------------- ------------- ------------- ------------- Adjusted Net Income (Loss) $ (6,231) $ 4,506 $ (49,020) $ (5,730) ============= ============= ============= =============
9 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2002 (UNAUDITED) 3. RELATED PARTY TRANSACTIONS During the three months ended June 30, 2002 the Company sold buses to Greyhound Canada Transportation Corp. ("GCTC"), an affiliated company owned by Laidlaw, which resulted in a recorded gain of $0.3 million on gross proceeds from the sale of approximately $5.7 million. The Company makes available to Hotard Coaches, Inc. ("Hotard"), an affiliated company engaged in the travel services business in the U.S., a revolving credit line subject to a maximum availability of $3.0 million. Borrowings are available at a rate equal to the prime rate plus 2.5%, and mature the earlier of October 23, 2002 or upon 30 days notice by the Company. The revolving credit line is secured by liens on substantially all of the assets of Hotard. At June 30, 2002, outstanding borrowings were $2.9 million. Included in accounts receivable on the Company's Consolidated Statements of Financial Position at June 30, 2002, are amounts due from Laidlaw of $1.6 million, amounts due from GCTC of $0.7 million and $2.9 million due from Hotard for outstanding borrowings under their revolving credit facility with the Company. 4. MATERIAL CONTINGENCIES GOLDEN STATE INDICTMENT In December 2001, Gonzalez, Inc. d/b/a Golden State Transportation ("Golden State") and 22 current and former employees and agents of Golden State were indicted as part of a 42-count federal criminal proceeding. The case, filed before the United States District Court for the District of Arizona, is styled U.S. v. Gonzalez, Inc, et al., Case No. CR 01-1696-TUC-RCC. The indictment alleges that the defendants were engaged in a conspiracy, spanning over a two-year period, to transport and harbor illegal aliens within the United States. As part of the indictment, the U.S. Government has sought a forfeiture of substantially all of Golden State's assets and obtained a restraining order restricting access to bank accounts and restraining certain other real property and vehicles. The restraining order allows Golden State to continue to operate its business in the ordinary course and the order has been modified to permit the payment of certain normal course expenses. On July 2, 2002, the restraining order was lifted entirely as to Golden State's bank accounts and future cash receipts. Golden State and the individuals have pleaded not guilty to the charges. Golden State intends to vigorously defend the matter. No trial date has been set for this case. Golden State is currently in the process of obtaining and assessing the significant volume of evidence amassed by the Government. At this early stage in the proceeding, the probable outcome of this case cannot be predicted. Additionally, management is unable to make a reasonable estimate of the liability that may result from the final resolution of the indictment. Accordingly, no liability relating to this matter has been recorded in the Company's Consolidated Financial Statements. Greyhound has a 51.4% ownership interest in Golden State and, at June 30, 2002, the Company's investment in Golden State totaled $2.5 million. In addition, the Company leases to, or guarantees the leases of, 67 of Golden State's buses and the Company has a receivable of approximately $1.0 million due from Golden State. As of the date of this report these buses are subject to $12.1 million of third-party liens, which is comparable to management's estimate of the fair market value of the buses. 10 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2002 (UNAUDITED) 4. MATERIAL CONTINGENCIES (CONTINUED) POTENTIAL PENSION PLAN FUNDING REQUIREMENTS The Company maintains nine defined benefit pension plans, the most significant of which (the "ATU Plan") covers approximately 14,500 current and former employees, fewer than 1,200 of which are active employees of the Company. The ATU Plan was closed to new participants in 1983 and over 85% of its participants are over the age of 50. For financial reporting and investment planning purposes, the Company currently uses an actuarial mortality table that closely matches the actual experience related to the existing participant population. For funding purposes, legislation passed by the United States Congress mandates the use of a prescribed actuarial mortality table and discount rates that differ from those used by the Company for financial reporting and investment planning purposes. Based upon the application of the actuarial mortality table, discount rates and funding calculations prescribed by current regulations, and further assuming a continuation of the freeze of wage and service accruals and that the ATU Plan assets can obtain annual investment returns of 7.5%, estimated Company contributions to the ATU Plan total $73 million over the next five years. Lowering the assumed investment return on ATU plan assets to 5% results in estimated contributions over the next five years of $91 million, while a 10% return results in estimated contributions over the next five years of $64 million. However, no contributions are projected during the next two years under either of the three scenarios discussed above. Nevertheless, there is no assurance that the ATU Plan will be able to earn the assumed rate of return, that new regulations may result in changes in the prescribed actuarial mortality table and discount rates, or that there will be market driven changes in the discount rates, which would result in the Company being required to make contributions in the future that differ significantly from the estimates above. 11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Greyhound is the only nationwide provider of scheduled intercity bus transportation services in the United States. The Company's primary business consists of scheduled passenger service, package express service and food services at certain terminals. The Company's consolidated operations include a nationwide network of terminal and maintenance facilities, a fleet of approximately 2,900 buses and approximately 1,800 sales outlets. The Company's business is seasonal in nature and generally follows the pattern of the travel industry as a whole, with peaks during the summer months and the Thanksgiving and Christmas holiday periods. As a result, the Company's operating cash flows are also seasonal with a disproportionate amount of the Company's annual operating cash flows being generated during the peak travel periods. The day of the week on which certain holidays occur, the length of certain holiday periods, and the date on which certain holidays occur within the fiscal quarter, may also affect the Company's quarterly results of operations. RESULTS OF OPERATIONS The following table sets forth the Company's results of operations as a percentage of total operating revenue for the three and six months ended June 30, 2002 and 2001:
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2002 2001 2002 2001 ------------- ------------- ------------- ------------- Operating Revenues Passenger services ..................... 83.3% 84.4% 83.1% 84.1% Package Express ........................ 4.0 3.9 4.1 4.1 Food services .......................... 4.3 4.2 4.3 4.3 Other operating revenues ............... 8.4 7.5 8.5 7.5 ------------- ------------- ------------- ------------- Total Operating Revenues ............. 100.0 100.0 100.0 100.0 ------------- ------------- ------------- ------------- Operating Expenses Maintenance ............................ 10.1 9.5 10.5 10.1 Transportation ......................... 25.0 25.0 25.1 26.1 Agents' commissions and station costs .. 18.1 17.9 18.8 18.7 Marketing, advertising and traffic ..... 3.5 3.7 2.9 3.7 Insurance and safety ................... 7.9 5.4 7.6 5.4 General and administrative ............. 12.6 14.3 13.6 14.1 Depreciation and amortization .......... 5.0 4.5 5.2 4.7 Operating taxes and licenses ........... 6.3 6.1 6.4 6.4 Operating rents ........................ 8.1 4.8 8.4 6.7 Cost of goods sold - food services ..... 2.8 2.8 2.9 3.0 Other operating expenses ............... 0.3 0.4 0.3 0.5 ------------- ------------- ------------- ------------- Total Operating Expenses ............. 99.7 94.4 101.7 99.4 ------------- ------------- ------------- ------------- Operating Income (Loss) .................. 0.3 5.6 (1.7) 0.6 Interest Expense ......................... 2.7 2.9 2.9 3.1 ------------- ------------- ------------- ------------- Income (Loss) Before Income Taxes ........ (2.4) 2.7 (4.6) (2.5) Income Tax Provision (Benefit) ........... 0.3 1.1 (1.9) (1.1) Minority Interests ....................... (0.2) 0.1 (0.3) 0.0 ------------- ------------- ------------- ------------- Income (Loss) Before Cumulative Effect of Accounting Change .................. (2.5) 1.5 (2.4) (1.4) Cumulative Effect of a Change in Accounting for Goodwill, net of Tax ... -- -- (8.0) -- ------------- ------------- ------------- ------------- Net Income (Loss) ........................ (2.5) 1.5 (10.4) (1.4) ============= ============= ============= =============
12 The following table sets forth certain operating data for the Company for the three and six months ended June 30, 2002 and 2001. Certain statistics have been adjusted and restated from that previously published to provide consistent comparisons.
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30, 2002 2001 % CHANGE 2002 2001 % CHANGE ---------- ---------- ---------- ---------- ---------- ---------- Regular Service Miles (000's) ... 84,297 88,234 (4.5%) 162,427 168,171 (3.4%) Total Bus Miles (000's) ......... 86,792 91,062 (4.7%) 167,204 173,325 (3.5%) Passenger Miles (000's) ......... 2,190,769 2,284,856 (4.1%) 4,159,131 4,277,907 (2.8%) Passengers Carried (000's) ...... 5,680 6,387 (11.1%) 11,043 12,120 (8.9%) Average Trip Length (passenger miles / passengers carried) .... 386 358 7.8% 377 353 6.8% Load (avg number of passengers per regular service mile) ...... 26.0 25.9 0.4% 25.6 25.4 0.8% Load Factor (% of available seats filled) .................. 51.7% 51.9% (0.4%) 50.9% 51.0% (0.2%) Yield (regular route revenue / passenger miles) ............... $ 0.0951 $ 0.0979 (2.9%) $ 0.0943 $ 0.0971 (2.9%) Total Revenue Per Total Bus Mile $ 2.880 $ 2.909 (1.0%) $ 2.825 $ 2.848 (0.8%) Cost Per Total Bus Mile: Maintenance ................... $ 0.291 $ 0.277 5.1% $ 0.297 $ 0.287 3.5% Transportation ................ $ 0.720 $ 0.728 (1.1%) $ 0.709 $ 0.744 (4.7%)
THREE AND SIX MONTHS ENDED JUNE 30, 2002 COMPARED TO THE SAME PERIODS IN 2001 Operating Revenues. Total operating revenues decreased $15.0 million, down 5.7%, and $21.3 million, down 4.3% for the three and six months ended June 30, 2002, compared to the same periods in 2001. Passenger services revenues decreased $15.3 million, down 6.8%, and $22.9 million, down 5.5%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. Subsequent to the events of September 11, 2001, and continuing through the second quarter of 2002, the Company has experienced significant declines in its short haul markets (450 miles and less), while long haul travel (over 450 miles) has increased. Although long haul passenger traffic continues to grow, the declines in short haul passengers have more than offset long haul traffic gains resulting in a 4.1% and 2.8% decline in passenger miles during the three and six months ended June 30, 2002, respectively. Additionally, the change in passenger mix has resulted in an increase in average trip length of 7.8% and 6.8% during the three and six months ended June 30, 2002, respectively. Because longer trips produce lower revenue per mile, the change in passenger mix has also resulted in a 2.9% decline in yield. Second quarter 2002 passenger revenue declines exceed first quarter declines due to the calendar placement of Easter (which occurred in the first quarter of 2002 as compared to the second quarter of 2001). Package express revenues decreased $0.4 million, down 3.6%, and $0.8 million, down 4.1%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. The Company continues to experience reduced standard product deliveries (the traditional, low value, terminal to terminal market segment) which has more than offset growth in the Company's same day delivery product and freight forwarding services. Food services revenues decreased $0.4 million, down 3.3%, and $0.5 million, down 2.5%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. Food services revenues decreased over the prior year due primarily to the declines in passenger miles, offset somewhat by product price increases. Other operating revenues, consisting primarily of revenue from travel services and in-terminal sales and services, increased $1.0 million, up 5.2%, and $3.0 million, up 8.0%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. The increase is principally due to increased charter services and government provided route subsidies, offset somewhat by decreases in our "meet and greet" service provided to cruise lines. 13 Operating Expenses. Total operating expenses decreased $0.9 million, down 0.4%, and $10.3 million, down 2.1%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. The decrease is attributable to a 4.7% decrease in bus miles during the three months ended June 30, 2002 and a 3.5% decrease in bus miles operated for the six months ended June 30, 2002. In addition, the Company experienced decreases in fuel cost, driver training and hiring costs, marketing costs, incentive costs and ticket and express commissions due to lower sales, offset somewhat by increases in insurance, employee benefits costs and operating rents, when compared with the same periods in 2001. Maintenance costs were essentially flat for the three and six months ended June 30, 2002, compared to the same periods in 2001. On a per mile basis, maintenance cost increased 5.1% and 3.5%, for the three and six months ended June 30, 2002, due to a higher average fleet age, fewer buses under warranty and increased material and labor related to accident repairs. Transportation expenses which consist primarily of fuel costs and driver salaries, decreased $3.8 million, down 5.7%, and $10.4 million, down 8.1%, for the three and six months ended June 30, 2002, compared to the same periods in 2001, due primarily to decreased fuel prices and driver hiring and training costs. During the three and six months ended June 30, 2002 the average cost per gallon of fuel was $0.74 and $0.69 per gallon, compared to $0.91 and $0.92 per gallon during the same periods in 2001, resulting in reduced fuel costs of $2.6 million and $6.5 million, respectively. Additionally, driver hiring and training costs were $2.6 million lower during the six months ended June 30, 2002 as the Company needed to hire fewer drivers due to the reduction in bus miles operated. On a per-mile basis, excluding the effects of fuel price changes and driver hiring costs, transportation expenses increased by 2.7% and 2.5%, for the three and six months ended June 30, 2002. Agents' commissions and station costs decreased $2.2 million, down 4.6%, and $4.0 million, down 4.3%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. The decrease is primarily due to lower commissions and terminal wages from decreased ticket sales, offset somewhat by increased security costs. Marketing, advertising and traffic expenses decreased $0.9 million, down 9.7%, and $4.8 million, down 25.9%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. Since September 11, 2001, leisure or discretionary travel in non-peak periods has been soft. As a result management viewed the opportunity to stimulate discretionary travel during the traditionally slow winter travel period as being low, and substantially reduced advertising spending during the first quarter of 2002. However, to support the heavy summer travel period, the Company increased spending in the second quarter of 2002 (albeit still at lower levels than the prior period) and currently expects spending in future quarters to be at levels consistent with the prior year. Insurance and safety costs increased $5.6 million, up 39.4%, and $9.7 million, up 36.6%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. The increase is primarily due to an increase in the cost of excess insurance coverage and a growth in the average cost per claim due principally to medical cost inflation. General and administrative expenses decreased $6.5 million, down 17.0%, and $5.6 million, down 8.1%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. During the three months ended June 30, 2002, the decrease is attributable to lower incentive plan costs ($4.5 million) due to the Company's reduced financial performance, lower pension costs ($1.8 million) as the second quarter of 2001 included a year-to-date adjustment, a decrease in management fees ($0.9 million) charged by the Company's parent, Laidlaw Inc., offset somewhat by higher health and welfare costs ($1.2 million) due principally to medical cost inflation. During the six months ended June 30, 2002, the decrease is due to lower incentive plan costs ($5.1 million) and a decrease in management fees ($1.7 million), offset somewhat by higher health and welfare costs ($1.4 million). Depreciation and amortization expenses increased $0.6 million, up 4.7%, and $1.6 million, up 6.9%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. The increases are primarily due to inflationary increases in the cost of recent capital expenditures for buses, structures and capitalized software which, due to the long-lived nature of the Company's assets, significantly exceeds the historical cost basis of asset disposals, offset by a decrease in goodwill and trademark amortization. Operating taxes and licenses expense decreased $0.4 million, down 2.8%, and $1.0 million, down 3.3%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. The decrease is due to lower payroll taxes resulting from decreased wages. 14 Operating rents increased $7.5 million, up 58.5%, and $6.6 million, up 19.7%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. This is due to the settlement of the Port Authority license agreement in June 2001 that resulted in a reduction to operating rents of approximately $7.5 million in the second quarter of 2001. Food services cost of goods sold decreased $0.5 million, down 6.6%, and $0.9 million, down 6.2%, for the three and six months ended June 30, 2002, compared to the same periods in 2001. This is primarily due to the decrease in food services revenues related to decreased passenger counts. Other operating expenses decreased $0.3 million, down 25.5%, and $1.3 million, down 49.9% for the three and six months ended June 30, 2002, compared to the same periods in 2001. The decrease for the three and six months ended June 30, 2002 is principally due to losses on disposals of property plant and equipment in 2001 compared to small gains recorded in 2002. Interest expense decreased $0.9 million, down 12.4%, and $1.5 million, down 9.7%, for the three and six months ended June 30, 2002, compared to the same periods in 2001, due to a decrease in the average debt outstanding and a decrease in interest rates. Effective January 1, 2002, the Company adopted Statement of Financial Accounting Standards No. 142 "Accounting for Goodwill and Other Intangible Assets" and, as a result, recorded a non-cash charge of $37.6 million (after tax) as a cumulative effect of a change in accounting principle. See Note 2 to the Interim Consolidated Financial Statements for further discussion. LIQUIDITY AND CAPITAL RESOURCES The Company's principal liquidity requirements are to provide working capital, to finance capital expenditures, including bus acquisitions and to meet debt service requirements, including the payment of interest on the 11 1/2% Senior Notes. The Company's principal sources of liquidity are expected to be cash flow from operations and borrowings under the Revolving Credit Facility. The Company believes that its cash flow from operations, together with borrowings under the Revolving Credit Facility, will fund its working capital and near-term capital expenditure needs. As of June 30, 2002, the Company had outstanding borrowings under the Revolving Credit Facility of $42.7 million, issued letters of credit of $26.9 million and availability of $55.4 million. In July 2002, the Company amended the Revolving Credit Facility to extend the maturity date one year, to October 24, 2004. Net cash provided by operating activities for the six months ended June 30, 2002 was $25.4 million, an increase of $20.5 million compared to $4.9 million provided by operating activities during the same period of 2001. The principal reason for the increase is an increase in claims liabilities under the Company's self-insurance program. Net cash used for investing activities for the six months ended June 30, 2001 was $18.2 million compared to $17.7 million net cash used for investing during the same period in 2001. The $0.5 million change is principally due to a slight increase in net capital expenditures compared to the same period in 2001. Net cash used by financing activities for the six months ended June 30, 2002 was $20.1 million as compared to net cash provided by financing activities of $12.1 million during the same period in 2001. The $32.2 million difference is principally due to the pay down of the Revolving Credit Facility from the increased operating cash flow and reduction of cash balances. GOLDEN STATE INDICTMENT In December 2001, Gonzalez, Inc. d/b/a Golden State Transportation ("Golden State") and 22 current and former employees and agents of Golden State were indicted as part of a 42-count federal criminal proceeding. The case, filed before the United States District Court for the District of Arizona, is styled U.S. v. Gonzalez, Inc, et al., Case No. CR 01-1696-TUC-RCC. The indictment alleges that the defendants were engaged in a conspiracy, spanning over a two-year period, to transport and harbor illegal aliens within the United States. As part of the indictment, the U.S. Government has sought a forfeiture of substantially all of Golden State's assets and obtained a restraining order restricting access to bank accounts and restraining certain other real property and vehicles. The restraining order allows Golden State to continue to operate its business in the ordinary course and the order has been modified to permit the payment of certain normal course expenses. On July 2, 2002, the restraining order was lifted entirely as to Golden State's bank accounts and future cash receipts. 15 Golden State and the individuals have pleaded not guilty to the charges. Golden State intends to vigorously defend the matter. No trial date has been set for this case. Golden State is currently in the process of obtaining and assessing the significant volume of evidence amassed by the Government. At this early stage in the proceeding, the probable outcome of this case cannot be predicted. Additionally, management is unable to make a reasonable estimate of the liability that may result from the final resolution of the indictment. Accordingly, no liability relating to this matter has been recorded in the Company's Consolidated Financial Statements. Greyhound has a 51.4% ownership interest in Golden State and, at June 30, 2002, the Company's investment in Golden State totaled $2.5 million. In addition, the Company leases to, or guarantees the leases of, 67 of Golden State's buses and the Company has a receivable of approximately $1.0 million due from Golden State. As of the date of this report these buses are subject to $12.1 million of third-party liens, which is comparable to management's estimate of the fair market value of the buses. POTENTIAL PENSION PLAN FUNDING REQUIREMENTS The Company maintains nine defined benefit pension plans, the most significant of which (the "ATU Plan") covers approximately 14,500 current and former employees, fewer than 1,200 of which are active employees of the Company. The ATU Plan was closed to new participants in 1983 and over 85% of its participants are over the age of 50. For financial reporting and investment planning purposes, the Company currently uses an actuarial mortality table that closely matches the actual experience related to the existing participant population. For funding purposes, legislation passed by the United States Congress mandates the use of a prescribed actuarial mortality table and discount rates that differ from those used by the Company for financial reporting and investment planning purposes. Based upon the application of the actuarial mortality table, discount rates and funding calculations prescribed by current regulations, and further assuming a continuation of the freeze of wage and service accruals and that the ATU Plan assets can obtain annual investment returns of 7.5%, estimated Company contributions to the ATU Plan total $73 million over the next five years. Lowering the assumed investment return on ATU plan assets to 5% results in estimated contributions over the next five years of $91 million, while a 10% return results in estimated contributions over the next five years of $64 million. However, no contributions are projected during the next two years under either of the three scenarios discussed above. Nevertheless, there is no assurance that the ATU Plan will be able to earn the assumed rate of return, that new regulations may result in changes in the prescribed actuarial mortality table and discount rates, or that there will be market driven changes in the discount rates, which would result in the Company being required to make contributions in the future that differ significantly from the estimates above. RISKS ASSOCIATED WITH FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q Statements in this Form 10-Q that are not purely historical facts, including statements regarding our beliefs, expectations, intentions, projections or strategies for the future, may be "forward-looking statements" under the Private Securities Litigation Reform Act of 1995. All forward-looking statements involve risks and uncertainties that could cause actual results to differ materially from the plans, intentions and expectations reflected in or suggested by the forward-looking statements. Such risks and uncertainties include, among others, the general economic condition of the United States and the future level of bus travel demand; the impact of future terrorist incidents; operational disruptions as a result of bad weather; the Company's future yields; increased costs for security; the cost and availability of excess insurance coverage and the Company's ability to retain authority to self-insure; the impact of changes in fuel prices; the effect of future Government regulations; potential pension plan funding requirements; limitations on financing flexibility and availability due to changing credit markets and the uncertainty surrounding the outcome of the Laidlaw Inc. reorganization proceedings; and other factors described from time to time in the Company's publicly available Securities and Exchange Commission filings. The Company undertakes no obligation to publicly update or revise any forward-looking statements to reflect events or circumstances that may arise after the date of this filing. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There have been no material changes in market risk from the disclosures provided in Item 7A. Quantitative and Qualitative Disclosures About Market Risk as set forth in the Company's 2001 Form 10-K. 16 PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ELECTION OF DIRECTORS On April 9, 2002, by written consent in lieu of an annual meeting of shareholders, Laidlaw Transportation, Inc., the holder of all of the voting securities of the Company re-elected John R. Grainger as the sole member of the Board of Directors of the Company. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS 10.19 Amendment Number Two to Loan and Security Agreement among Greyhound Lines, Inc., as Borrower, the Financial Institutions named as Lenders, and Foothill Capital Corporation as Agent dated July 24, 2002 10.20 Amendment Number Three to Loan and Security Agreement among Greyhound Lines, Inc., as Borrower, the Financial Institutions named as Lenders, and Foothill Capital Corporation as Agent dated July 26, 2002 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (b) REPORTS ON FORM 8-K None 17 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: August 14, 2002 GREYHOUND LINES, INC. By: /s/ Jeffrey W. Sanders --------------------------------------- Jeffrey W. Sanders Senior Vice President and Chief Financial Officer ATLANTIC GREYHOUND LINES OF VIRGINIA, INC. By: /s/ Jeffrey W. Sanders --------------------------------------- Jeffrey W. Sanders Senior Vice President and Chief Financial Officer GLI HOLDING COMPANY By: /s/ Jeffrey W. Sanders --------------------------------------- Jeffrey W. Sanders Senior Vice President and Chief Financial Officer GREYHOUND de MEXICO, S.A. de C.V. By: /s/ Cheryl W. Farmer --------------------------------------- Cheryl W. Farmer Examiner SISTEMA INTERNACIONAL de TRANSPORTE de AUTOBUSES, INC. By: /s/ Cheryl W. Farmer --------------------------------------- Cheryl W. Farmer Senior Vice President and Chief Financial Officer TEXAS, NEW MEXICO & OKLAHOMA COACHES, INC. By: /s/ Jeffrey W. Sanders --------------------------------------- Jeffrey W. Sanders Senior Vice President and Chief Financial Officer T.N.M. & O. TOURS, INC. By: /s/ Jeffrey W. Sanders --------------------------------------- Jeffrey W. Sanders Senior Vice President and Chief Financial Officer VERMONT TRANSIT CO., INC. By: /s/ Jeffrey W. Sanders --------------------------------------- Jeffrey W. Sanders Senior Vice President and Chief Financial Officer 18 INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION - ------ ----------- 10.19 Amendment Number Two to Loan and Security Agreement among Greyhound Lines, Inc., as Borrower, the Financial Institutions named as Lenders, and Foothill Capital Corporation as Agent dated July 24, 2002 10.20 Amendment Number Three to Loan and Security Agreement among Greyhound Lines, Inc., as Borrower, the Financial Institutions named as Lenders, and Foothill Capital Corporation as Agent dated July 26, 2002 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
EX-10.19 3 d99141exv10w19.txt AMENDMENT NO. 2 TO LOAN AND SECURITY AGREEMENT Exhibit 10.19 AMENDMENT NUMBER TWO TO LOAN AND SECURITY AGREEMENT This Amendment Number Two to Loan and Security Agreement ("Amendment") is entered into as of July __, 2002, by and between Greyhound Lines, Inc., a Delaware corporation ("Borrower"), on the one hand, and the various financial institutions that are or may from time to time become parties to the Agreement referred to below (collectively, the "Lenders" and each individually a "Lender"), and Foothill Capital Corporation, a California corporation, as agent for the Lenders ("Agent"), on the other hand, in light of the following: A. Borrower, Lenders, and Agent have previously entered into that certain Loan and Security Agreement, dated as of October 24, 2000 (as amended or modified, from time to time, the "Agreement"). B. Borrower, Lenders, and Agent desire to amend the Agreement as provided for and on the conditions herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Borrower, Lenders, and Agent 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) Section 3.4 of the Agreement is hereby amended and restated in its entirety to read as follows: 3.4 TERM. This Agreement shall become effective upon the execution and delivery hereof by Borrower and the Lender Group and shall continue in full force and effect for a term ending on the earlier of (a) October 24, 2004 (the "Maturity Date"), or (b) termination hereof by the Lender Group pursuant to Section 9.1(b) following an Event of Default. (b) Subsection (i) of Section 2.2(a) of the Agreement is hereby amended and restated in its entirety to read as follows: (i) Subject to the terms and conditions of this Agreement, Agent agrees to issue letters of credit for the account of Borrower (each, an "L/C") or to issue guarantees of payment (each such guaranty, an "L/C Guaranty") with respect to letters of credit issued by Issuer for the account of Borrower, in an aggregate undrawn and unreimbursed amount not to exceed on any date the least of (x) the 1 Borrowing Base less the aggregate amount of all Advances outstanding on such date, (y) the Maximum Revolving Amount less the aggregate amount of all Advances outstanding on such date, and (z) $50,000,000. 3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Agent and the Lenders that all of Borrower's representations and warranties set forth in the Agreement are true, complete and accurate in all material respects as of the date hereof (except to the extent that such representations and warranties relate solely to an earlier event). 4. NO DEFAULTS. Borrower hereby affirms to Agent and the Lenders 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) Payment by Borrower to Agent, for the ratable benefit of the Lenders, of an amendment fee in the aggregate amount of $468,750, such fee to be charged to Borrower's loan account pursuant to Section 2.7(e) of the Agreement; and (b) Receipt by Agent of a copy of this Amendment executed by Borrower and Lenders. 6. CONDITION SUBSEQUENT. As a condition subsequent to the effectiveness of this Amendment, Borrower shall perform or cause to be performed the following (the failure by Borrower to so perform or cause to be performed shall permit the Agent to create a reserve against the Borrowing Base under Section 2.1(a)(y) after September __, 2002, by such amount as determined by Agent in its sole discretion): (a) Within 60 days of the date of this Amendment, Borrower shall have delivered to Agent endorsements to the policies of title insurance with respect to the Core Real Property Collateral and amendments to Mortgages, the form and substance of which shall be reasonably satisfactory to Agent and its counsel. 7. COSTS AND EXPENSES. Borrower shall pay to Agent all of Agent's reasonable 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, documentation fees, title insurance endorsement, and other fees) arising in connection with the preparation, execution, and delivery of this Amendment and all related documents. 8. 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. 9. COUNTERPARTS; EFFECTIVENESS. This Amendment may be executed in any number of counterparts and by different parties on separate 2 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, as Agent and as a Lender By: ------------------------------------------ Name: Kevin Belanger Title: Vice President CONGRESS FINANCIAL CORPORATION, as a Lender By: ----------------------------------------- Name: Paul Truax Title: Vice President FLEET CAPITAL CORPORATION, as a Lender By: ------------------------------------------ Name: Title: TRANSAMERICA BUSINESS CAPITAL CORPORATION, as a Lender By: ------------------------------------------ Name: Ari Kaplan Title: Vice President GREYHOUND LINES, INC. By: ------------------------------------------ Name: Craig R. Lentzsch Title: President and Chief Executive Officer 3 Each of the undersigned has executed a Continuing Guaranty in favor of the Lender Group (as defined in each Continuing Guaranty) respecting the obligations of Greyhound Lines, Inc., a Delaware corporation ("Borrower") owing to the Lender Group. Each of the undersigned acknowledges the terms of the above Amendment and reaffirms and agrees that its Continuing Guaranty remains in full force and effect; nothing in such Continuing Guaranty obligates the Lender Group to notify the undersigned of any changes in the financial accommodations made available to Borrower or to seek reaffirmations of the Continuing Guaranty; and no requirement to so notify the undersigned or to seek reaffirmations in the future shall be implied by the execution of this reaffirmation. ATLANTIC GREYHOUND LINES OF VIRGINIA, INC., a Virginia corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chairman of the Board and President and Chief Executive Officer SISTEMA INTERNACIONAL DE TRANSPORTE DE AUTOBUSES, INC., a Delaware corporation By: -------------------------------------------- Name: Cheryl W. Farmer Title: Senior Vice President and Chief Financial Officer GLI HOLDING COMPANY, a Delaware corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: President and Chief Executive Officer 4 TEXAS, NEW MEXICO & OKLAHOMA COACHES, INC., a Delaware corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer VERMONT TRANSIT CO., INC., a Vermont corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: President and Chief Executive Officer T.N.M. & O. TOURS, INC., a Texas corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer ROCKFORD COACH LINES, L.L.C., a Delaware limited liability company By: -------------------------------------------- Name: Craig R. Lentzsch Title: President and Chief Executive Officer ASI ASSOCIATES, INC., a Hawaii corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: President 5 CAROLINA COACH COMPANY, a Virginia corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer SEASHORE TRANSPORTATION COMPANY, a North Carolina corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer LSX DELIVERY, L.L.C., a Delaware limited liability company By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chairman of the Board VALLEY GARAGE COMPANY, a Texas corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer VALLEY TRANSIT CO., INC., a Texas corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer 6 ON TIME DELIVERY SERVICE, INC., a Minnesota corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer 7 EX-10.20 4 d99141exv10w20.txt AMENDMENT NO. 3 TO LOAN AND SECURITY AGREEMENT Exhibit 10.20 AMENDMENT NUMBER THREE TO LOAN AND SECURITY AGREEMENT This Amendment Number Three to Loan and Security Agreement ("Amendment") is entered into as of July __, 2002, by and between Greyhound Lines, Inc., a Delaware corporation ("Borrower"), on the one hand, and the various financial institutions that are or may from time to time become parties to the Agreement referred to below (collectively, the "Lenders" and each individually a "Lender"), and Foothill Capital Corporation, a California corporation, as agent for the Lenders ("Agent"), on the other hand, in light of the following: A. Borrower, Lenders, and Agent have previously entered into that certain Loan and Security Agreement, dated as of October 24, 2000 (as amended or modified, from time to time, the "Agreement"). B. Borrower, Required Lenders, and Agent desire to amend the Agreement as provided for and on the conditions herein. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto 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 "Consolidated Cash Flow" in Section 1.1 of the Agreement is hereby deleted in its entirety and replaced with the following: "Consolidated Cash Flow" means, with respect to any Person for any period, the Consolidated Net Income of such Person for such period plus, to the extent deducted or excluded in calculating Consolidated Net Income for such period, (a) an amount equal to any extraordinary loss plus any net loss realized in connection with an asset sale, (b) provision for taxes based on income or profits of such Person and its Restricted Subsidiaries, (c) Consolidated Interest Expense and (d) depreciation and amortization (including amortization of goodwill and other intangibles but excluding amortization of prepaid cash expenses that were paid in a prior period) of such Person and its Restricted Subsidiaries, in each case, on a consolidated basis and determined in accordance with GAAP. (b) The definition of "Consolidated Net Worth" in Section 1.1 of the Agreement is hereby deleted in its entirety and replaced with the following: 1 "Consolidated Net Worth" means, with respect to any Person as of any date, the sum of (a) the consolidated equity of the common stockholders of such Person and its consolidated Restricted Subsidiaries as of such date; plus (b) the respective amounts reported on such Person's balance sheet as of such date with respect to any series of preferred stock (other than Disqualified Stock) that by its terms is not entitled to the payment of dividends unless such dividends may be declared and paid only out of net earnings in respect of the year of such declaration and payment, but only to the extent of any cash received by such Person upon issuance of such preferred stock; plus (c) the amount (but in no event more than $30,000,000) by which the consolidated equity described in clause (a) above would be reduced in the event the unfunded accumulated pension obligation of Borrower under the Plans is increased as a result of a Requirement of Law; plus (d) in the case of Borrower, the amount of Indebtedness evidenced by, and subordinated to the Obligations by, the Intercompany Agreement; plus (e) the amount (but in no event more than $43,087,000) by which the consolidated equity described in clause (a) above has been reduced as a result of any impairment adjustment that results from Borrower's application of Statement of Financial Accounting Standards No. 142." 3. REPRESENTATIONS AND WARRANTIES. Borrower hereby affirms to Agent and the Lenders that all of Borrower's representations and warranties set forth in the Agreement are true, complete and accurate in all material respects as of the date hereof (except to the extent that such representations and warranties relate solely to an earlier event). 4. NO DEFAULTS. Borrower hereby affirms to Agent and the Lenders that no Event of Default has occurred and is continuing as of the date hereof. 5. CONDITION PRECEDENT. The effectiveness of this Amendment is expressly conditioned upon the receipt by Agent of a copy of this Amendment executed by Borrower and Required Lenders. 6. COSTS AND EXPENSES. Borrower shall pay to Agent all of Agent's reasonable 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, documentation fees, title insurance endorsement, 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. 2 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, as Agent and as a Lender By: -------------------------------------------- Name: -------------------------------- Title: ------------------------------- CONGRESS FINANCIAL CORPORATION, as a Lender By: ------------------------------------------- Name: -------------------------------- Title: ------------------------------- FLEET CAPITAL CORPORATION, as a Lender By: -------------------------------------------- Name: -------------------------------- Title: ------------------------------- TRANSAMERICA BUSINESS CAPITAL CORPORATION, as a Lender By: -------------------------------------------- Name: -------------------------------- Title: ------------------------------- GREYHOUND LINES, INC. By: -------------------------------------------- Name: Craig R. Lentzsch Title: President and Chief Executive Officer 3 Each of the undersigned has executed a Continuing Guaranty in favor of the Lender Group (as defined in each Continuing Guaranty) respecting the obligations of Greyhound Lines, Inc., a Delaware corporation ("Borrower") owing to the Lender Group. Each of the undersigned acknowledges the terms of the above Amendment and reaffirms and agrees that its Continuing Guaranty remains in full force and effect; nothing in such Continuing Guaranty obligates the Lender Group to notify the undersigned of any changes in the financial accommodations made available to Borrower or to seek reaffirmations of the Continuing Guaranty; and no requirement to so notify the undersigned or to seek reaffirmations in the future shall be implied by the execution of this reaffirmation. ATLANTIC GREYHOUND LINES OF VIRGINIA, INC., a Virginia corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chairman of the Board and President and Chief Executive Officer SISTEMA INTERNACIONAL DE TRANSPORTE DE AUTOBUSES, INC., a Delaware corporation By: -------------------------------------------- Name: Cheryl W. Farmer Title: Senior Vice President and Chief Financial Officer GLI HOLDING COMPANY, a Delaware corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: President and Chief Executive Officer 4 TEXAS, NEW MEXICO & OKLAHOMA COACHES, INC., a Delaware corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer VERMONT TRANSIT CO., INC., a Vermont corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: President and Chief Executive Officer T.N.M. & O. TOURS, INC., a Texas corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer ROCKFORD COACH LINES, L.L.C., a Delaware limited liability company By: -------------------------------------------- Name: Craig R. Lentzsch Title: President and Chief Executive Officer ASI ASSOCIATES, INC., a Hawaii corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: President 5 CAROLINA COACH COMPANY, a Virginia corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer SEASHORE TRANSPORTATION COMPANY, a North Carolina corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer LSX DELIVERY, L.L.C., a Delaware limited liability company By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chairman of the Board VALLEY GARAGE COMPANY, a Texas corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer VALLEY TRANSIT CO., INC., a Texas corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer 6 ON TIME DELIVERY SERVICE, INC., a Minnesota corporation By: -------------------------------------------- Name: Craig R. Lentzsch Title: Chief Executive Officer 7 EX-99.1 5 d99141exv99w1.txt CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 Exhibit 99.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Greyhound Lines, Inc. and Subsidiaries (the "Company") on Form 10-Q for the period ended June 30, 2002 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), the undersigned President and Chief Executive Officer and Senior Vice President and Chief Financial Officer of the Company hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 that to the best of their knowledge: 1. The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Craig R. Lentzsch - ------------------------------- Craig R.Lentzsch, President and Chief Executive Officer August 14, 2002 /s/ Jeffrey W. Sanders - ------------------------------ Jeffrey W. Sanders, Senior Vice President and Chief Financial Officer August 14, 2002 -----END PRIVACY-ENHANCED MESSAGE-----