-----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, RiuQMBTeOM6YA5KQ5b7X4pxMClC5SND8+hl2Kf2AJk1VUcZrB5oGc2Y4FbJv23So /x2Dl03Qd+5HcfTntEQeGw== 0000950134-97-001944.txt : 19970320 0000950134-97-001944.hdr.sgml : 19970320 ACCESSION NUMBER: 0000950134-97-001944 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970319 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-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 001-10841 FILM NUMBER: 97559495 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-K405 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1996 1 ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] 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 (I.R.S. EMPLOYER OF 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) SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- Common Stock, $.01 par value per share American Stock Exchange 10% Senior Notes, due July 31, 2001 American Stock Exchange 8.5% Convertible Subordinated Debentures, due March 31, American Stock Exchange 2007
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE 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 [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of the Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of Common Stock held by non-affiliates of the registrant based on the last reported sale price of the Common Stock on the American Stock Exchange composite tape on March 7, 1997, was $253,867,244, which value, solely for the purposes of this calculation, excludes shares held by registrant's executive officers and directors. Such exclusion should not be deemed a determination by the registrant that all such individuals are, in fact, affiliates of the registrant. 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 MARCH 7, 1997 --------------------- ---------------------------- $.01 par value 58,610,827 shares
DOCUMENTS INCORPORATED BY REFERENCE: Portions of the definitive proxy statement for the Registrant, to be filed not later than 120 days after the end of the fiscal year covered by this report, are incorporated into Part III by reference. ================================================================================ 2 GREYHOUND LINES, INC. AND SUBSIDIARIES INDEX TO FORM 10-K
PAGE NO. -------- PART I Item 1. Business.................................................... 3 Item 2. Properties.................................................. 10 Item 3. Legal Proceedings........................................... 10 Item 4. Submission of Matters to a Vote of Security Holders......... 12 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters......................................... 13 Item 6. Selected Consolidated Financial Information................. 14 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations................................... 16 Item 8. Financial Statements and Supplementary Data................. 25 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.................................... 57 PART III Item 10. Directors and Executive Officers of the Registrant.......... 58 Item 11. Executive Compensation...................................... 60 Item 12. Security Ownership of Certain Beneficial Owners and Management.................................................. 61 Item 13. Certain Relationships and Related Transactions.............. 62 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K......................................................... 64
3 PART I ITEM 1. BUSINESS GENERAL Greyhound is the only nationwide provider of intercity bus transportation services in the United States. The Company serves the value-oriented customer by connecting rural and urban markets throughout the United States, offering scheduled passenger service to more than 2,400 destinations with a fleet of approximately 2,000 buses and approximately 1,600 sales locations. The Company also provides package express service and, in many terminals, food service. For the year ended December 31, 1996, the Company generated total operating revenues of $700.9 million and EBITDA (as defined herein) of $51.5 million. The Company serves a diverse customer base, consisting primarily of low to middle income passengers from a wide variety of ethnic backgrounds. Management believes that the demographic groups that make up the core of the Company's customer base are growing at rates faster than the U.S. population as a whole. The Company believes that it is uniquely positioned to serve this broad and growing market because (i) the Company's operating costs, which are lower on an available-seat-mile basis than other modes of intercity transportation, enable it to offer passengers everyday low prices, (ii) the Company offers the only means of regularly scheduled intercity transportation in many of its markets, and (iii) the Company provides additional capacity during peak travel periods to accommodate passengers who lack the flexibility to shift their travel to an alternative schedule. BUSINESS STRATEGY In late 1994 and early 1995, under the direction of a new management team, the Company implemented a "back-to-basics" operating strategy. This strategy focused on emphasizing the Company's national bus network and capitalizing on its low operating costs to attract and retain customers, which management identified as the first step in rebuilding the Company's financial performance. To implement this strategy, the Company improved customer service by (i) rebuilding its infrastructure, (ii) expanding the frequency and convenience of its schedule offerings and providing flexible scheduling of its equipment, drivers and other resources to meet peak travel demand, and (iii) introducing everyday low prices and actively managing fares in individual markets. In response to these initiatives, the Company has experienced year-over-year revenue growth in each of its last seven consecutive quarters. The following table illustrates the Company's significant improvements in operating and financial performance from 1994 to 1996 (in millions):
YEARS ENDED DECEMBER 31, ---------------- 1994 1996 % CHANGE ------ ------ -------- Total Operating Revenues................................ $615.3 $700.9 13.9% EBITDA(1)............................................... $(29.4) $ 51.5 N/A Passengers Carried...................................... 15.9 18.3 15.1% Total Bus Miles......................................... 238.5 270.2 13.3%
- --------------- (1) Represents earnings before interest, taxes, depreciation and amortization and extraordinary items. For 1994, EBITDA includes $54.9 million in certain operating charges. Excluding the impact of those certain operating charges, 1994 EBITDA would have been $25.5 million. When comparing the 1994 EBITDA, adjusted for these changes to the 1996 EBITDA, 1996 shows a 102.0% increase over the adjusted 1994 EBITDA. See Note (a) to "Selected Consolidated Financial Information." 3 4 The principal elements of the Company's back-to-basics strategy were to: - REBUILD THE COMPANY'S INFRASTRUCTURE. In late 1994, Craig R. Lentzsch, who had been the Company's Vice Chairman from 1987 to 1989, rejoined the Company as President and Chief Executive Officer. Under Mr. Lentzsch's leadership, the Company assembled a new management team with significant bus operating experience. In addition, the Company hired additional drivers and field operating management and upgraded its driver hiring and training programs. The Company also increased its capacity to handle customer telephone inquiries for fare and schedule information, which resulted in a 45% increase in the number of telephone calls answered from 18.9 million calls in 1994 to 27.4 million calls in 1996. Moreover, the Company has continued to upgrade its bus fleet by acquiring 443 buses and retiring 376 older buses since January 1, 1995, thereby reducing the average age of its bus fleet to approximately six years. - EXPAND THE FREQUENCY AND CONVENIENCE OF SCHEDULE OFFERINGS AND PROVIDE FLEXIBLE CAPACITY. Since 1994, the Company has increased the annual number of regular service miles operated by 29.5 million miles, or 12.5%. Management added these miles to enhance customer service and improve the convenience of connecting service. In order to address fluctuations in customer demand, particularly during peak travel periods, the Company operates extra sections (i.e., additional buses on the same schedule) in addition to its base schedule offerings. This strategy enables the Company to allocate its bus and driver resources to maximize the number of passengers handled and optimize asset utilization. As a result, extra section miles increased from 8.3% of total bus miles in 1994 to 12.0% of total bus miles in 1996. - ACTIVELY MANAGE PRICING. In January 1995, the Company initiated an everyday low pricing strategy. In addition, the Company began to more actively manage pricing at the individual market level. As a result, the Company now manages fares for 1,250 city pair markets, as compared to 250 city pair markets in 1994. The Company has also implemented advance purchase promotional programs to stimulate demand, primarily in off peak-travel periods. The Company's pricing and promotional strategy is supported by a year-round advertising campaign that emphasizes the Company's ability to take its customers "where they want to go, when they want to go, at a price they can afford." GROWTH STRATEGY By the end of 1996, the Company had implemented the key elements of its operating strategy and had begun to focus on further expanding the growth of its operations. Although the Company's passenger revenues were $597.8 million in 1996 (a 15.3% increase over 1994 passenger revenues), those revenues were below the $714.3 million in passenger revenues achieved in 1989. The Company believes that it can achieve further growth in passenger revenues, primarily from increases in its core passenger business, supplemented by other growth opportunities. The Company believes that incremental increases in passenger revenues will produce disproportionately larger increases in operating profits as many of the Company's operating expenses are fixed and, accordingly, do not vary proportionately with short-term increases in demand for the Company's services. Management believes the following represent significant growth opportunities for the Company: - CORE PASSENGER GROWTH. The Company believes that its revenues will continue to grow as its core demographic customer base expands, and that this customer base is growing at a rate that exceeds the U.S. population growth rate as a whole. The Company also believes that there are opportunities to obtain incremental revenues from its existing customer base through continued targeted advertising and promotional programs and refinements in pricing and schedule offerings designed to reinforce the Company's position as the low-cost alternative to other forms of intercity transportation. Because bus transportation represents one of the smallest segments of the intercity transportation market, the 4 5 Company believes that it has a unique opportunity to realize substantial incremental revenues and operating profits by increasing its share of this market. - DOMESTIC ACQUISITIONS, INTERLINE RELATIONSHIPS AND INTERMODAL ALLIANCES. The bus transportation industry is highly fragmented. Accordingly, significant opportunities exist for the Company to acquire regional bus operators or to form strategic alliances with these carriers to increase its penetration of existing markets. In March 1997, the Company agreed to acquire Carolina Trailways, a mid-Atlantic bus operator, for approximately $25.6 million (including the repayment of debt and estimated transaction expenses). Carolina Trailways' unaudited financial statements for the year ended December 31, 1996 reflect approximately $16.6 million of revenues. The Company expects to realize operating efficiencies as a result of this acquisition. In addition, the Company is currently a party to four "pooling" arrangements (i.e., arrangements pursuant to which duplicative services are coordinated) with regional carriers serving overlapping markets (two of which were established in the past twelve months). These arrangements typically result in reduced expenses due to the consolidation of terminal facilities and the elimination of redundant schedule offerings, while providing incremental revenue opportunities due to improved schedule patterns. The Company also has two additional pooling arrangements pending. Management believes future acquisitions of domestic regional carriers and the establishment of additional pooling arrangements, as well as intermodal alliances with airlines and Amtrak, represent opportunities to achieve further growth in passenger revenues by capitalizing on the Company's ability to service additional passengers without proportionately increasing expenses. - HISPANIC MARKETS. Management believes the markets along the U.S.-Mexico border represent a significant growth opportunity. The Company believes that the most effective way to service passengers in this market is through joint ventures or other business combinations with Mexico-based bus carriers and U.S.-based bus operators that primarily serve these markets. The Company has invested $2.5 million in a joint venture that provides through-bus service on selected routes between destinations in the United States and Mexico and is involved in negotiations to establish other similar arrangements. The Company believes other revenue growth opportunities are available, such as providing increased bus service to casino and commuter markets and entering into agreements to provide "dead head" crew transportation for the trucking and rail industries. In addition to the Company's growth strategy for its passenger business, management has identified several complementary non-core growth opportunities. These include programs to rebuild the Company's package express service, to market selected products or services to its unique customer base and to market advertising space on its bus fleet through "bus wrap" advertisements. MARKETS Passengers. The Company's major passenger markets are large metropolitan areas. Although its business is geographically fragmented, the 50 largest sales outlets accounted for approximately 49% of 1996 ticket sales, and the 1,000 largest origin/destination city pairs comprised approximately 37% of 1996 ticket sales. Demographic studies have shown that the Company's potential riders are concentrated in the northeastern, southern and industrial midwestern United States, as well as Texas and California. The typical passenger travels to visit friends and relatives and generally has an annual income of below $35,000. Based on market studies, the Company believes its customers are more price sensitive than time sensitive. In many cases, the Company's passengers report that they own automobiles considered sufficiently reliable for a trip of a similar distance. Additionally, over half of the Company's customers report that they have travelled by air within the last year. The majority of the Company's customers usually make the decision to take a trip only a short time before actually traveling and, for the most part, pay cash for their tickets on the day of departure. Package Express. The Company's package express service primarily caters to commercial shippers and delivery companies that require rapid delivery of small parcels typically within 300 miles. Shipments include car repair parts, computer parts and forms, fresh flowers, eyeglasses, medical and dental supplies and pharmaceutical products. With its extensive national network and multiple schedules, the Company is able to provide expedited service, especially to small towns. Most shipments arrive at their destination on the same 5 6 day they are shipped. During 1996, the average parcel shipped via the Company's package express service weighed approximately 24 pounds and produced net revenue per shipment of $15.16, as compared to approximately 20 pounds and $13.35 during 1995. Food Service. The Company's food service division manages facilities in approximately 200 locations, which primarily serve the Company's passengers. These operations include Company-operated facilities and contract concessionaires and range in service levels from full-service cafeterias to vending machines. MARKETING AND ADVERTISING The Company's marketing and advertising philosophy is geared toward improving the awareness and image of Greyhound among potential customers, inducing first-time and renewed travel, stimulating extra travel through price awareness, and fostering long-term individual and community goodwill. The Company uses various means to advertise its passenger travel business including radio, television and print media (primarily yellow pages and magazines). Additionally, the Company offers convenient around-the-clock fare and schedule quotations via a toll-free telephone number through its telephone information centers. The Company's telephone centers, which have significantly increased their capacity since 1994, handled 27.4 million calls in 1996, an increase of 45% over 1994. In 1997, the Company intends to use its new bus wrap marketing program as a device for self publicity and as an additional source of revenue through the sale of bus wraps to other marketers. Additionally, the Company markets its other passenger and in-terminal services through advertising in the terminal facilities and in print media. OPERATIONS The scheduling and management of the Company's bus fleet and driver corps is a coordinated and centralized function performed by the Company's resource management group. This group's purpose is to serve as a liaison between management and the field in the planning and execution of daily operations through the Company's existing network. This is accomplished through the management of national dispatch operations for equipment and drivers, rental of additional buses to cover peak demand periods, planning and coordinating extra sections with the field and analyzing and implementing pooling arrangements with other carriers. Information technology is an integral component of the Company's operations. The Company's information systems support, among other things, its scheduling and pricing, bus maintenance, telephone information center, customer service, point of sale and finance functions. In 1996, the Company completed major system upgrades. The Company's automated fare and schedule quotation and ticketing system, called TRIPS, was extended from 232 locations in January 1994 to 317 locations in 1996. Of these locations, 148 utilize internet connectivity. Additionally, TRIPS functionality was expanded to cover package express service needs, which resulted in the ability to provide descriptive billing to the Company's credit customers. Moreover, the Company implemented a new schedule planning system to aid in the development of route schedules. This interactive, real-time system promotes more timely schedule development. The Company also realized the full benefit in 1996 of a new financial system implemented in late 1995. COMPETITION Passengers. The transportation industry is highly competitive. The Company's primary sources of competition for passengers are automobile travel, low cost air travel from both regional and national airlines, and in certain markets, regional bus companies and trains. During the past few years, airlines have increased their penetration in intermediate-haul markets (450 to 1,000 miles), which has resulted in the bus industry, in general, reducing prices in these markets in order to compete. Additionally, airline discount programs have attracted certain long-haul passengers from the Company. However, these lower airline fares usually contain restrictions and require advance purchase. Typically, the Company's customers decide to travel only a short time before their trip and purchase their tickets on the day of travel. The Company's everyday low pricing strategy results in "walk-up" fares substantially below comparable airline fares. In instances where the Company's fares exceed an airline discount fare, the Company believes the airline fares typically are more 6 7 restrictive and less readily available than travel provided by the Company. In addition, the Company believes that in many cases it offers more destination choices and more convenient schedules. The automobile is the most significant form of competition to the Company. The out-of-pocket costs of operating an automobile are generally less expensive than bus travel, particularly for multiple persons traveling in a single car. The Company meets this competitive threat through price and convenient scheduling. To some extent, the Company is protected from the incremental economies of auto travel since many of its customers travel alone. The lack of multiple, reliable cars within a family and fear of driving alone for long distances serve to offset the reduced convenience of bus travel and the economic advantage of multi-person travel in a single car. Competition from regional bus companies has increased materially during the past several years. Price, frequency of service and convenient scheduling are the current strategies of the Company to meet this competition. The Company's competitors possess operating authority for, but do not currently operate over, numerous routes potentially competitive to the Company. Based on market and competitive conditions, the regional bus companies could operate such routes in the future. Competition by U.S.-based bus and van operators for Spanish speaking customers is growing, particularly in states along the U.S.-Mexico border. As of January 1, 1997, barriers to entry into the cross-border intercity bus market in the U.S. and Mexico were eliminated under the North American Free Trade Agreement. Entry into either market is still regulated by the respective U.S. and Mexican regulatory authorities. To date, no Mexico-based carrier has applied for, or received operating authority within the U.S. Should that occur, the Company could experience significant new competition on routes to and from Mexican border points. In addition to bringing new competition, the Company believes that this change will increase the volume of bus travel along both sides of the border and provide the Company with a growth opportunity. The Company believes that the most effective way to service passengers in this market is through joint ventures or other business combinations with Mexico-based bus carriers and U.S.-based bus operators that primarily serve these markets. The Company has invested $2.5 million in a joint venture that provides through-bus service on selected routes between destinations in the United States and Mexico and is involved in negotiations to establish other similar arrangements. Package Express. The Company faces intense competition in its package express service from local courier services, the U.S. Postal Service and overnight, express and ground carriers. The Company is developing programs to meet this competition and rebuild its package express business. These programs focus on system upgrades to improve service, billing and tracking for its customers, localized marketing strategies, and alliances with pick-up and delivery ("P&D") carriers across the country. Due to the incremental nature of the package express business, the Company is able to provide same-day package express service at distances of up to 400 miles at a substantially lower price than charged by other delivery services. Management believes that if this capability is conveniently aligned with pickup and delivery services at both ends, the revenue potential of a value-priced, door-to-door, same-day delivery service would be enhanced beyond the current levels of package express revenues. Food Service. The captive nature of the food service operations in the Company's terminals limits competition; however, in some locations proximity to fast food outlets and convenience stores can pose a competitive factor. SEASONALITY 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 cash flows are seasonal in nature with a disproportionate amount of the Company's annual cash flows being generated during the peak travel periods. Therefore, an event that adversely affects ridership during any of these peak periods could have a material adverse effect on the Company's financial condition and results of operations for that year. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Seasonality." 7 8 WORKFORCE At March 7, 1997, the Company employed approximately 11,000 workers, consisting of approximately 4,000 terminal employees, 3,700 drivers, 1,200 supervisory personnel, 800 mechanics, 800 telephone information agents and 500 clerical workers. Of the total workforce, approximately 8,500 are full-time employees and approximately 2,500 are part-time employees. At March 7, 1997, 46.8% of the Company's employees were represented by collective bargaining agreements. The Amalgamated Transit Union (the "ATU") represents approximately 4,600 of the Company's employees, including drivers, telephone information agents in the Omaha location, terminal workers in eight locations and about one-half of the Company's mechanics. The largest ATU agreement expires on January 31, 1999. The International Association of Machinists and Aerospace Workers (the "IAM") represents approximately 400 of the Company's employees, including a portion of the remaining mechanics. The IAM agreements expire on October 1, 1999. The Company also has bargaining agreements with the International Brotherhood of Teamsters and the United Transportation Union, who represents employees at one of the Company's subsidiaries. Additionally during 1996, the ATU attempted to unionize employees in 11 terminal locations and succeeded in organizing employees at six terminals; the terms of these agreements are still in negotiation. TRADEMARKS The Company has a perpetual, exclusive license to use, at no cost, the Greyhound name and trademarks and the "image of the running dog" trademarks in the United States and Mexico for travel and transportation (except by water) purposes pursuant to a trademark license agreement. The Company believes that this name and trademark have substantial consumer awareness. GOVERNMENT REGULATION The Department of Transportation. As a motor carrier engaged in interstate, as well as intrastate, transportation of passengers and express shipments, the Company is, and must remain, registered with the United States Department of Transportation (the "DOT"). Failure to maintain a satisfactory safety rating or to meet minimum financial responsibility requirements, after notice and opportunity to remedy, may result in the DOT's ordering the suspension or revocation of the registration and its right to provide transportation. The Company is subject to periodic and random inspections and audits by the DOT to determine whether the Company's drivers, buses and records are in compliance with the DOT's regulations. The DOT's regulations govern the qualifications, duties and hours of service of drivers, the standards for vehicles, parts and accessories, the maintenance of records and the submission of reports pertaining to the Company's drivers, buses and operations. The Company, from time to time, has been cited by the DOT for noncompliance with its regulations but, nevertheless, has retained a satisfactory safety rating. The DOT establishes minimum financial responsibility requirements for motor carriers; the Company has met these requirements and has been authorized to partially self-insure its bodily injury and property damage liability. See "-- Insurance Coverage." The DOT also administers regulations to assure compliance with vehicle noise or emission standards prescribed by the Environmental Protection Agency (the "EPA"). All of the buses in the Company's fleet contain engines that comply with, or are exempt from compliance with, EPA regulations, but, on occasion, the Company has been cited and fined for non-compliance with noise or emission standards. Additionally, there is currently litigation pending in California, to which the Company is not a party, seeking to enforce the posting of public health warnings at locations where diesel fuel emissions are present. Surface Transportation Board. The Company is also regulated by the DOT's Surface Transportation Board (the "STB"). The STB must grant advance approval for the Company to conduct pooled operations with another passenger carrier. The STB, moreover, must authorize any merger by the Company with, or its acquisition or control of, another motor carrier of passengers. The Company must maintain reasonable through routes with other motor carriers of passengers, and, if found not to have done so, the STB can prescribe them. Agreements between motor carriers of passengers for their joint adoption of mileage guides, rules, divisions or general rate adjustments are subject to STB authorization and supervision. 8 9 State Regulations. As an interstate motor carrier of passengers, the Company may engage in intrastate operations over any of its authorized routes. By federal law, states are pre-empted from regulating the Company's fares or its schedules, including the withdrawal of service over any route. However, the Company's buses remain subject to state vehicle registration requirements, bus size and weight limitations, fuel sales and use taxes and other local standards not inconsistent with federal requirements. Other. The Company is subject to regulation under the Americans with Disabilities Act (the "ADA"), the Civil Rights Act of 1964, as amended, and the Occupational Safety and Health Act. Under the ADA, the Company will be required, at an uncertain date in the future, to make new buses accessible to disabled persons. The ADA does not require the retrofitting of existing buses with lift equipment. The DOT is currently developing regulations regarding bus access and determining whether new buses should be equipped with lift equipment or whether alternative forms of stationary terminal-based lift devices should be permitted. Following the promulgation of final regulations, which are not expected to be finalized until at least late 1997, the Company will have two years before the new regulations become effective, at which point newly acquired buses must be accessible. The form of required access is uncertain as of the date hereof, but the expense of compliance, once the new regulations take effect, could be material to the Company's financial condition and results of operations. The Company expects that new buses with built-in lift devices will be more costly to purchase by as much as $10,000 to $25,000 per bus and will be more costly to maintain. Additionally, the ADA requires the Company to design its new terminal facilities and retrofit existing terminal facilities to eliminate barriers affecting access by handicapped persons. The Company has a program to identify and address mobility barriers at its facilities and has made, and is expected to continue to make, expenditures to address these issues. INSURANCE COVERAGE The STB has granted the Company authority to self-insure its automobile liability exposure for interstate passenger service up to a maximum level of $5.0 million per occurrence. To maintain self-insurance authority, the Company is required to maintain a tangible net worth of $10.0 million (as of December 31, 1996, the Company's tangible net worth was $119.9 million) and to maintain a $15.0 million trust fund (currently fully funded) to provide security for payment of claims. Subsequent to the self-insurance grant by the STB, 38 states granted the Company the authority to self-insure its intrastate automobile liability exposure. The Company maintains comprehensive automobile liability and general liability insurance to insure its assets and operations subject to a $1.5 million self-insured retention per occurrence. The Company also maintains property insurance subject to a $0.1 million deductible per occurrence, and maintains workers' compensation insurance, subject to a $1.0 million deductible per occurrence. Insurance coverage and risk management expense are key components of the Company's cost structure. The loss of self-insurance authority from the STB or a decision by the Company's insurers to modify the Company's program substantially, by either increasing cost, reducing availability or increasing collateral, could have a materially adverse effect on the Company's financial condition. 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, 78 locations have been identified as sites requiring potential clean-up and/or remediation as of December 31, 1996. The Company has estimated the clean-up and/or remediation costs of these sites to be $3.8 million, of which approximately $0.5 million is indemnifiable by the predecessor owner of Greyhound's domestic bus operations now known as Viad Corp. The Company has no reason to believe that Viad Corp will not fulfill its indemnification obligations to the Company. However, if Viad Corp does not fulfill such obligations, the Company could have liability with respect to those matters. Additionally, the Company has a potential liability with respect to two Superfund sites where the Company and other parties face exposure for costs related to the clean-up of those sites. Based on the EPA's 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 its 9 10 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 total environmental reserve of $3.5 million at December 31, 1996, a portion of which has also been recorded as a receivable from Viad Corp for indemnification. The environmental reserve relates to sites identified for potential clean-up and/or remediation and represents the present value of estimated cash flows discounted at 8.0%. Management believes that adequate accruals have been made related to all known environmental matters. ITEM 2. PROPERTIES LAND AND BUILDINGS At March 7, 1997, the Company used 494 parcels of real property in its operations, of which it owns 152 properties and leases 342 properties. Of those properties, 357 are bus terminals, 34 are maintenance facilities, 30 are terminal/maintenance facilities, and the remaining properties consist of driver dormitories, parking/storage lots, office/storage/warehouse buildings and telephone information centers. These properties are located throughout the United States. Two of these properties are subject to mortgage loans. The Company believes the current makeup of its properties is adequate for its operations, and although there can be no assurance, based on its recent experience, the Company believes that it will be able to find suitable replacement properties on acceptable terms for any properties the Company chooses to replace, or which are condemned, or for which leases are not renewed or are otherwise terminated. FLEET COMPOSITION, FLEET AGE AND BUS ACQUISITIONS During 1996, the Company took delivery of 244 buses and retired 208 buses, resulting in a fleet of 2,105 buses at year-end. Since year-end, the Company has taken delivery of an additional 24 buses and retired 160 buses. At March 7, 1997, the Company owned 740 buses and leased an additional 1,229 buses. Motor Coach Industries International, Inc. ("MCII") produced all but 101 of these buses. The Company must purchase at least 75% of its bus requirements from MCII pursuant to a bus purchase requirements contract that continues through March 18, 1998. The Company is in discussions to order up to 100 new buses during 1997. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources". The average age of the Company's bus fleet has been reduced from 9.5 years in January 1993 to approximately six years as of March 7, 1997. However, 27.7% of the Company's bus fleet remains in excess of 10 years old. The Company intends, over time, to replace these older, less reliable vehicles with new buses. The Company believes that newer buses, as well as older buses with newer engines, are more fuel efficient than buses with older engines. In addition, new buses are generally less costly to maintain, in part because of warranty coverage, and generally enhance customer satisfaction. ITEM 3. LEGAL PROCEEDINGS 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 (defined herein), Convertible Debentures (defined herein) and Senior Notes (defined herein) against the Company and certain of its former officers and directors. The suits sought unspecified damages for securities laws violations as a result of statements made in public reports and press releases and to securities analysts during 1993 and 1994 that were 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) were 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 were pending under a case styled In re Greyhound Securities Litigation, Civil Action 3-94-CV-1793-G. A joint pretrial order was entered in the class action litigation which consolidated 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 the Company, Frank J. Schmieder, J. Michael 10 11 Doyle, Phillip W. Taff, Robert R. Duty, Don T. Seaquist, Charles J. Lee, Charles A. Lynch and Smith Barney Incorporated as defendants. Messrs. Lee, Lynch and Taff 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. On October 3, 1996, the Court ruled in favor of the Company and all other defendants, granting defendants' motions to dismiss. Pursuant to the Court's order, the complaints were dismissed, with leave granted to the plaintiffs to refile amended complaints within 20 days thereafter. On October 23, 1996, an amended complaint was tendered to the Court. All seven class representatives involved in the prior complaints were dropped from the case. A new purported class plaintiff, John Clarkson, was named and a motion was filed seeking leave to permit Mr. Clarkson to intervene as the new class representative. The amended complaint alleges a class period of May 4, 1993 to October 26, 1993 and has been brought only on behalf of holders of Common Stock. The amended complaint names the same defendants involved in the dismissed cases (the Company, Messrs. Schmieder, Doyle, Duty and Seaquist and Smith Barney Incorporated); no new defendants were added and none were dropped. In December 1996, the defendants filed responses to plaintiff's motion for intervention. In January 1997, the plaintiff filed a reply brief. Therefore, all briefing regarding the intervention has been completed. The Court has advised the parties that no responsive pleading need be filed to the amended complaint until such time as the Court rules on the motion for intervention filed by Mr. Clarkson. 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 laws 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, was 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 was pending. In September 1995, the defendants' motion was granted, and the matter was transferred and was consolidated into the class action litigation described above. On October 29, 1996, a purported class action lawsuit was brought by a purported holder of Common Stock against the Company, certain of its former officers and directors and Smith Barney and Morgan Stanley & Company, Inc. The suit seeks unspecified damages for alleged federal and Texas state securities laws violations in connection with a Common Stock offering made by the Company in May 1993. The suit, filed in the 44th Judicial District Court of Dallas County, Texas, is styled John Clarkson v. Greyhound Lines, Inc., Frank Schmieder, J. Michael Doyle, Robert R. Duty, Don T. Seaquist, Smith Barney, Inc. and Morgan Stanley & Company, Inc., Case No. 96-11329-B. Plaintiff, John Clarkson, is the same individual who seeks to intervene in the Federal Court litigation described above, and the same law firms have appeared for the plaintiffs in both cases. On December 20, 1996, the defendants filed their answers to the lawsuit and pleas in abatement asking the Court to stay all proceedings pending resolution of the federal intervention motion and federal class action lawsuit. The defendants have also filed motions to quash and motions for protective order in response to plaintiff's requests for production of documents. On February 28, 1997, the suit was transferred to a different judge in the 68th Judicial District Court in Dallas. 11 12 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 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 is conducting a formal, non-public investigation into possible securities laws violations allegedly involving the Company and certain of its former officers, directors and employees and other persons. The Commission's Order of Investigation (the "Order of Investigation") states that the Commission 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 Commission 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 Commission 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 Commission served a document subpoena on the Company requiring the production of documents, most of which the Company voluntarily produced to the Commission in late 1994. The Company has fully cooperated with the Commission's investigation of these matters. The Company has had no contact with the Commission in connection with the investigation since January 1996. The probable outcome of this investigation cannot be predicted at this stage in the proceeding. 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 and employment-related 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. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 12 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS MARKET INFORMATION The Common Stock, par value $.01 per share (the "Common Stock"), of the Company is listed on the American Stock Exchange under the symbol "BUS." The following table sets forth the high and low sale prices for the Company's Common Stock during the periods indicated as reported by the American Stock Exchange:
HIGH LOW ---- --- First Quarter 1995...................................... $2 3/4 $1 1/4 Second Quarter 1995..................................... 5 11/16 2 15/16 Third Quarter 1995...................................... 5 5/16 3 1/2 Fourth Quarter 1995..................................... 4 5/8 3 5/8 First Quarter 1996...................................... $4 9/16 $2 7/8 Second Quarter 1996..................................... 5 3 1/2 Third Quarter 1996...................................... 4 9/16 3 1/16 Fourth Quarter 1996..................................... 4 1/2 3 January 1, 1997 - March 14, 1997........................ $5 1/2 $3 15/16
HOLDERS The number of shares of Common Stock outstanding as of March 7, 1997, was 58,610,827. The Company has issued 58,720,019 Common Stock, of which 109,192 shares are currently held by the Company as treasury stock. As of March 7, 1997 there were approximately 11,396 recordholders of Common Stock. DIVIDENDS The Company has not paid any dividends on the Common Stock in the past and does not expect to pay any dividends on the Common Stock in the foreseeable future. The indenture governing the Senior Notes (defined herein) restricts the Company's ability to pay, and the Revolving Credit Facility (defined herein) prohibits the Company from paying cash dividends on the Common Stock. In the event the Company were not contractually prohibited from paying dividends, the holders of Common Stock would be entitled to receive dividends only when and as declared by the Board of Directors of the Company, subject to the prior rights and preferences, if any, of holders of preferred stock. CONVERTIBLE DEBENTURES At December 31, 1996, the Company had outstanding $9.8 million aggregate principal amount of its 8.5% Convertible Subordinated Debentures due March 31, 2007 (the "Convertible Debentures"). At the option of the holders thereof, the Convertible Debentures may be converted into shares of Common Stock at any time prior to maturity (unless earlier redeemed or repurchased), at a conversion rate of approximately 80.81 shares (subject to adjustment in certain events) of Common Stock per $1,000 principal amount of Convertible Debentures. In December 1994, the Company completed the Tender Offer (defined herein) in which approximately $89.0 million of its Convertible Debentures were exchanged for approximately 22.8 million shares of the Company's Common Stock. 13 14 ITEM 6. SELECTED CONSOLIDATED FINANCIAL INFORMATION The statement of operations data and balance sheet data set forth below have been derived from the audited Consolidated Financial Statements of the Company for each of the respective periods indicated. The following financial information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Business" and the Consolidated Financial Statements and notes thereto included elsewhere in this filing. Certain reclassifications have been made to the prior period statements to conform them to the December 31, 1996 classifications.
YEARS ENDED DECEMBER 31, ---------------------------------------------------- 1992 1993 1994(A) 1995 1996 -------- -------- -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA: Operating Revenues Transportation Services Regular route.................................. $580,557 $559,883 $518,431 $560,239 $597,779 Package express................................ 54,402 47,905 40,232 35,690 33,527 Food services.................................... 12,159 19,188 19,490 19,440 21,363 Other operating revenues......................... 45,863 38,578 37,158 41,752 48,189 -------- -------- -------- -------- -------- Total operating revenues.................. 692,981 665,554 615,311 657,121 700,858 -------- -------- -------- -------- -------- Operating Expenses Maintenance...................................... 97,323 77,893 73,469 68,540 73,441 Transportation................................... 138,443 133,284 133,766 156,878 170,979 Agents' commissions and station costs............ 117,732 122,209 119,438 125,650 131,715 Marketing, advertising and traffic............... 24,452 28,431 36,445 25,513 25,811 Insurance and safety............................. 47,838 51,143 82,786 52,820 41,088 General and administration....................... 66,208 67,436 70,583 72,105 80,496 Depreciation and amortization.................... 33,499 33,154 36,046 31,010 30,683 Operating taxes and licenses..................... 45,816 47,114 47,478 48,186 49,831 Operating rents(b)............................... 54,330 45,313 48,286 47,884 53,993 Cost of goods sold -- food services.............. 7,766 12,617 13,465 12,597 13,774 Other operating expenses......................... 4,186 7,119 16,502 6,575 8,243 Restructuring expenses........................... -- -- 2,523 -- -- -------- -------- -------- -------- -------- Total operating expenses.................. 637,593 625,713 680,787 647,758 680,054 -------- -------- -------- -------- -------- Operating Income (Loss)............................ 55,388 39,841 (65,476) 9,363 20,804 Gain on Sale of Assets............................. -- (5,838) -- -- -- Interest Expense................................... 35,297 30,832 33,456 26,807 27,346 Income Tax Provision............................... 9,142 6,253 16,862 374 62 -------- -------- -------- -------- -------- Income (Loss) Before Extraordinary Items and Cumulative Effect of a Change in Accounting Principle........................................ 10,949 8,594 (115,794) (17,818) (6,604) Extraordinary Items(c)............................. -- 407 (38,373) -- -- Cumulative Effect of a Change in Accounting Principle(d)..................................... -- 690 -- -- -- -------- -------- -------- -------- -------- Net Income (Loss).................................. $ 10,949 $ 7,497 $(77,421) $(17,818) $ (6,604) ======== ======== ======== ======== ======== Fully Diluted Earnings per Share of Common Stock(e): Income (Loss) before Extraordinary Items and Cumulative Effect of a Change in Accounting Principle.................................... $ 0.96 $ 0.65 $ (7.58) $ (0.33) $ (0.11) Extraordinary Items............................ -- (0.03) 2.51 -- -- Cumulative Effect of a Change in Accounting Principle.................................... -- (0.05) -- -- -- -------- -------- -------- -------- -------- Net Income (Loss) per share of Common Stock...... $ 0.96 $ 0.57 $ (5.07) $ (0.33) $ (0.11) ======== ======== ======== ======== ======== OTHER DATA: EBITDA(f)........................................ $ 88,887 $ 78,833 $(29,430) $ 40,373 $ 51,487 Outstanding Shares of Common Stock (000's)....... 9,911 14,651 37,459 58,168 58,360 Number of Common Stockholders.................... 15,890 14,611 14,692 15,228 11,383 Dividends Declared per Common Share.............. -- -- -- -- --
AS OF DECEMBER 31, ---------------------------------------------------- 1992 1993 1994(A) 1995 1996 -------- -------- -------- -------- -------- (IN THOUSANDS) STATEMENT OF FINANCIAL POSITION DATA: Total assets....................................... $485,936 $541,293 $511,449 $480,648 $500,282 Long-term debt(e).................................. 290,712 260,412 197,125 172,671 192,581 Stockholders' equity............................... 52,262 152,166 153,196 149,762 140,881
14 15 - --------------- FOOTNOTES TO SELECTED CONSOLIDATED FINANCIAL INFORMATION (a) The 1994 results reflect $61.9 million in certain operating charges, including increases in insurance and legal reserves to recognize pre-bankruptcy claims previously thought to have been barred in the Company's Chapter 11 reorganization (which concluded in October 1991), adverse claims development in 1994 and certain litigation exposure; write-downs of real estate and other assets (including $7.0 million of depreciation); costs associated with an operational restructuring; and a $17.0 million increase in the income tax provision due to the reversal of a previously recognized deferred tax benefit. (b) Operating rents include bus operating lease payments of $27.8 million, $20.0 million, $22.7 million, $23.7 million, and $27.5 million for the years ended December 31, 1992, 1993, 1994, 1995, and 1996, respectively. (c) For the year ended December 31, 1993, the Company recorded an extraordinary loss of $0.4 million on the write-off of debt issuance costs related to the replacement of the Company's then existing credit agreement with a new credit agreement. For the year ended December 31, 1994, the Company recorded (i) an extraordinary loss of $3.6 million, of which $3.2 million related to the write-off of debt issuance costs and $0.4 million related to professional fees in conjunction with the replacement of the Company's existing credit agreement with a new credit agreement and (ii) an extraordinary gain of $41.9 million related to the conversion of $89.0 million of Convertible Debentures into Common Stock. (d) The net impact from adoption of SFAS No. 109, Accounting For Income Taxes, was $0.7 million and is reported as a charge to earnings as the cumulative effect of a change in accounting principle for the year ended December 31, 1993. (e) In 1992, the Company had primary earnings per share of Common Stock of $1.10. The completion of the Company's 1994 financial restructuring resulted in the issuance of approximately 22.8 million shares of Common Stock in December 1994 upon the conversion of approximately $89.0 million of Convertible Debentures into Common Stock. In January 1995, the Company issued an additional 16.3 million shares of Common Stock in connection with the consummation of its Common Stock rights offering, which provided net proceeds of approximately $28.9 million. The Company issued 4.0 million shares of Common Stock on October 3, 1995 in a public offering, which provided net proceeds of $15.4 million. (f) Represents income before interest, taxes, depreciation and amortization, extraordinary items and changes in accounting principles. EBITDA is presented because management believes investors consider it useful in evaluating a company's ability to service and/or incur debt. EBITDA should not be considered in isolation from or as a substitute for net income, cash flows from operating activities and other consolidated income or cash flow data prepared in accordance with generally accepted accounting principles or as a measure of profitability or liquidity. 15 16 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Greyhound is the only nationwide provider of 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, which accounted for 85.3%, 4.8% and 3.0%, respectively, of the Company's total operating revenues for 1996. The Company's operations include a nationwide network of terminal and maintenance facilities, a fleet of approximately 2,000 buses and approximately 1,600 sales outlets. In late 1994 and early 1995, under the direction of the Company's new management team, the Company implemented a "back-to-basics" operating strategy. This strategy focused on the Company's national bus network and capitalizing on its low operating costs to attract and retain customers, which management identified as the first step in rebuilding the Company's financial performance. Management believes that a continued base offering of scheduled service is necessary to maintain the Company's competitive position, and that increases in profitability will be driven primarily by increasing revenues as contrasted with reducing costs. As part of its strategy to increase revenues, management has focused on restoring the Company's infrastructure and embarked on a revenue enhancement program including, among other initiatives, increasing scheduled miles and adopting an everyday low pricing strategy. The Company believes that incremental increases in passenger revenues will produce disproportionately larger increases in operating profits as many of the Company's operating expenses are fixed, such as depreciation, amortization, overhead and lease expenses related to buses and facilities. In addition, the operating costs necessary to produce the Company's base schedule of offerings, which consist of labor, fuel, maintenance, insurance and short-term bus rentals, cannot be changed rapidly. Accordingly, these costs do not vary proportionately with short-term increases in demand for the Company's services. 16 17 RESULTS OF OPERATIONS The following table sets forth the Company's results of operations as a percentage of total operating revenue for 1994, 1995 and 1996:
YEARS ENDED DECEMBER 31, -------------------------- 1994 1995 1996 ------ ------ ------ Operating Revenues Transportation services Regular route.......................................... 84.3% 85.3% 85.3% Package express........................................ 6.5 5.4 4.8 Food services............................................. 3.2 3.0 3.0 Other operating revenues.................................. 6.0 6.4 6.9 Total operating revenues.......................... 100.0 100.0 100.0 Operating Expenses Maintenance............................................... 11.9 10.4 10.5 Transportation............................................ 21.7 23.9 24.4 Agents' commissions and station costs..................... 19.4 19.1 18.8 Marketing, advertising and traffic........................ 5.9 3.9 3.7 Insurance and safety...................................... 13.5 8.0 5.9 General and administrative................................ 11.5 11.0 11.5 Depreciation and amortization............................. 5.9 4.7 4.4 Operating taxes and licenses.............................. 7.7 7.3 7.1 Operating rents........................................... 7.8 7.3 7.7 Cost of good sold -- food services........................ 2.2 1.9 2.0 Other operating expenses.................................. 2.7 1.0 1.2 Restructuring expenses.................................... 0.4 -- -- Total operating expenses.......................... 110.6 98.6 97.0 Operating Income (Loss)..................................... (10.6) 1.4 3.0 Interest Expense............................................ 5.4 4.1 3.9 Income Tax Provision........................................ 2.7 0.1 -- Loss Before Extraordinary Items............................. (18.8) (2.7) (0.9)
The following table sets forth certain operating data for the Company for 1994, 1995 and 1996. Certain statistics have been adjusted and restated from that previously published to provide consistent comparisons.
YEARS ENDED DECEMBER 31, --------------------------------- 1994 1995 1996 --------- --------- --------- Regular Service Miles (000's)......................... 235,786 256,683 265,259 Total Bus Miles (000's)............................... 238,457 259,746 270,187 Passenger Miles (000's)............................... 5,392,290 6,033,780 6,243,262 Passengers Carried (000's)............................ 15,949 17,548 18,348 Average Trip Length (passenger miles/passengers carried)............................................ 338 344 340 Load (avg. number of passengers per regular service mile)............................................... 22.9 23.5 23.5 Load Factor (% of available seats filled)............. 49.9% 51.1% 51.2% Yield (regular route revenue/passenger miles)......... $0.0961 $0.0929 $0.0957 Total Revenue Per Total Bus Mile...................... 2.58 2.53 2.59 Operating Income (Loss) Per Total Bus Mile............ (0.27) 0.04 0.08 Cost per Total Bus Mile: Maintenance......................................... $ 0.308 $ 0.264 $ 0.272 Transportation...................................... 0.561 0.604 0.633
17 18 YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995 Operating Revenues. Total operating revenues increased $43.8 million, or 6.7%, to $700.9 million for the year ended December 31, 1996 from $657.1 million for the year ended December 31, 1995. Transportation services revenues increased $35.4 million, or 5.9%, to $631.3 million in 1996 from $595.9 million for 1995 due to a $37.5 million, or 6.7%, increase in regular route revenues, offset in part by a $2.2 million, or 6.1%, decrease in package express revenues. The 6.7% increase in regular route revenues reflects a 4.6% increase in the number of passengers carried and a 3.0% increase in yield. The increase in yield is due in part to an increase in short-haul (less than 450 miles) and intermediate-haul (450 to 1,000 miles) traffic, which generally generate a higher yield than long-haul traffic. The following chart reflects the increase in regular route passenger revenue by quarter:
FIRST SECOND THIRD FOURTH FULL QUARTER QUARTER QUARTER QUARTER YEAR ------- ------- ------- ------- ------ (DOLLARS IN MILLIONS) 1996 regular route revenues........... $118.7 $146.2 $180.3 $152.6 $597.8 1995 regular route revenues........... 109.4 136.7 172.7 141.4 560.2 Percentage increase................... 8.5% 6.9% 4.4% 7.9% 6.7%
Package express revenues declined due to the continuing effects of a reduction in 1994 of the number of routes served and the number of hours that the Company's terminals were open, which resulted in a loss of customers that have not been regained. During 1996, the average parcel shipped via the Company's package express service weighed approximately 24 pounds and produced net revenue per shipment of $15.16, as compared to approximately 20 pounds and $13.35 during 1995. In 1996, the Company increased its focus on the package express business in an effort to reverse the decline in package express service revenues. The Company has implemented increased hours of service, improved billing and added more convenient schedules. In addition, in select markets, the Company has implemented a centralized telephone customer service department dedicated to package express service. Food service revenues increased $2.0 million, or 10.3%, to $21.4 million in 1996 from $19.4 million in 1995 primarily due to the addition of five new locations and the increase in passenger traffic, offset in part by the closing of two locations. Other operating revenues, consisting primarily of revenue from charter and in-terminal sales and services, increased $6.4 million, or 15.3%, to $48.2 million in 1996 from $41.8 million in 1995 primarily due to a $2.9 million increase in charter service revenues and an increase in revenues from other in-terminal services, such as money order sales, prepaid ticket orders and increased sales of gifts and other retail products. Operating Expenses. Total operating expenses increased $32.3 million, or 5.0%, to $680.1 million for the year ended December 31, 1996 from $647.8 million for the year ended December 31, 1995. Maintenance costs increased $4.9 million, or 7.2%, to $73.4 million in 1996 from $68.5 million in 1995 due to a 4.0% increase in bus miles and a 3.0% increase in maintenance costs per bus mile. Maintenance costs increased on a per-mile basis due to an increase in the number of engine changes, contractual pay increases for hourly maintenance employees, the opening of an additional maintenance facility in March 1996 and a rate increase from a third-party provider of bus cleaning services. As a percentage of total operating revenue, maintenance costs increased to 10.5% in 1996 from 10.4% in 1995. The Company intends to continue to manage the average age of its fleet in order to increase the reliability of its service while reducing overall costs. Transportation expenses, which consist primarily of fuel costs and driver salaries, increased $14.1 million, or 9.0%, to $171.0 million in 1996 from $156.9 million in 1995 due to the 4.0% increase in bus miles and a 4.8% increase in transportation expenses per bus mile. Transportation expenses increased on a per-mile basis due to a $5.8 million impact of increased fuel prices (average price per gallon of $0.71 in 1996 as compared to $0.59 in 1995), a contractual pay increase for drivers and additions to the driver supervisory staff. As a percentage of total operating revenue, transportation expenses increased to 24.4% in 1996 from 23.9% in 1995. The Company has taken steps to limit its exposure to fuel price increases by contracting for delivery of a portion of its 1997 fuel purchases at prices below peak 1996 levels. 18 19 Agents' commissions and station costs increased $6.0 million, or 4.8%, to $131.7 million in 1996 from $125.7 million in 1995 primarily due to increased ticket sales, as well as the conversion of 75 Company-operated ticketing facilities to commissioned agencies, offset in part by the elimination of facility, utility and supply costs associated with the converted ticketing facilities. The conversions also serve to reduce insurance and general and administrative costs. Increased costs associated with higher call volumes were entirely offset by lower long distance telephone rates and the discontinuance of a third-party provider of telephone customer services. As a percentage of total operating revenue, agents' commissions and station costs decreased to 18.8% in 1996 from 19.1% in 1995. Marketing, advertising and traffic expenses increased $0.3 million, or 1.2%, to $25.8 million in 1996 from $25.5 million in 1995 primarily due to an increase in advertising expenses in the fourth quarter of 1996. As part of the Company's growth strategy, the Company expects to continue to increase advertising expenditures in 1997. Insurance and safety costs decreased $11.7 million, or 22.2%, to $41.1 million in 1996 from $52.8 million in 1995 as the increased exposure relating to the 4.0% increase in bus miles was more than offset by continued favorable claims experience resulting from the Company's increased focus on claims management and risk reduction programs. General and administrative expenses increased $8.4 million, or 11.7%, to $80.5 million in 1996 from $72.1 million in 1995 primarily due to additions to administrative personnel and increased benefit costs Company-wide and to a reduction in pension income from $2.1 million in 1995 to $1.0 million in 1996. As a percentage of total operating revenues, general and administrative expenses increased to 11.5% in 1996 from 11.0% in 1995. Depreciation and amortization expense decreased $0.3 million, or 1.0%, to $30.7 million in 1996 from $31.0 million in 1995 primarily due to the write-down in the fourth quarter of 1995 of the realizable value of some older high maintenance buses and certain real estate that subsequently was sold, offset in part by the depreciation on 102 buses acquired in December 1995 (51 of which were sold and leased back in 1996) and 35 buses acquired in 1996 and other capital expenditures made in 1995 and 1996. As a percentage of total operating revenue, depreciation and amortization expense decreased to 4.4% in 1996 from 4.7% in 1995. Operating taxes and license costs increased $1.6 million, or 3.3%, to $49.8 million in 1996 from $48.2 million in 1995 primarily due to increased fuel and oil taxes resulting from a 4.0% increase in total bus miles in 1996 compared to 1995 and increased payroll taxes resulting from higher salaries. As a percentage of total operating revenue, operating taxes and license costs decreased to 7.1% in 1996 from 7.3% in 1995. Operating rents increased $6.1 million, or 12.7%, to $54.0 million in 1996 from $47.9 million in 1995 primarily due to an increase in the number of bus operating leases in 1996 and an increase in casual bus rentals to accommodate higher peak traffic volume in 1996 compared to 1995. As a percentage of total operating revenue, operating rents increased to 7.7% in 1996 from 7.3% in 1995. Other operating expenses increased $1.6 million, or 24.2%, to $8.2 million in 1996 from $6.6 million in 1995 primarily due to a $1.2 million gain in 1995 on the repurchase by the Company of $10.7 million aggregate principal amount of 10% Senior Notes ("Senior Notes"). Interest expense increased $0.5 million, or 1.9%, to $27.3 million in 1996 from $26.8 million in 1995 as a result of higher borrowings under the Revolving Credit Facility, offset in part by the elimination of interest expense on the portion of the Senior Notes repurchased by the Company in 1995. As a percentage of total operating revenue, interest expense decreased to 3.9% in 1996 from 4.1% in 1995. YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994 Operating Revenues. Total operating revenues increased $41.8 million, or 6.8%, to $657.1 million for the year ended December 31, 1995 from $615.3 million for the year ended December 31, 1994. Transportation services revenues increased $37.2 million, or 6.7%, to $595.9 million in 1995 from $558.7 million for 1994 due to a $41.8 million, or 8.1%, increase in regular route revenues, offset in part by a $4.5 million, or 11.3%, 19 20 decrease in package express revenues. Regular route revenues increased due to a 10.0% increase in total passengers carried, partially offset by a 3.3% decrease in yield. The decrease in yield is primarily driven by an increase in trip lengths; the average trip length increased 1.8% in 1995 compared to 1994 due to a larger increase in long-haul traffic than in intermediate-haul and short-haul traffic. Package express revenue declined due to the reduction in 1994 of the number of routes served and the number of hours that the Company's terminals were open, resulting in decreased convenience for customers. As discussed above, the Company increased its focus on package express in 1996 in an effort to reverse the decline in package express revenues. Other operating revenues increased $4.6 million, or 12.4%, to $41.8 million in 1995 from $37.2 million in 1994 primarily due to an increase in interest income on the Company's self-insurance deposits resulting from higher interest rates in 1995 compared to 1994, as well as an increase in prepaid ticket orders. Operating Expenses. Total operating expenses decreased $33.0 million, or 4.8%, to $647.8 million for the year ended December 31, 1995 from $680.8 million for the year ended December 31, 1994. Maintenance costs decreased $5.0 million, or 6.8%, to $68.5 million in 1995 from $73.5 million in 1994 primarily due to a $3.8 million reserve established in 1994 for environmental remediation costs, as well as savings realized from the closure of several garages in 1994 and 1995. As a result, maintenance costs decreased 14.3% on a per bus mile basis. As a percentage of total operating revenue, maintenance costs decreased to 10.4% in 1995 from 11.9% in 1994. Transportation expenses increased $23.1 million, or 17.3%, to $156.9 million in 1995 from $133.8 million in 1994 due to an 8.9% increase in bus miles and a 7.7% increase in transportation expenses per bus mile. Transportation expenses increased on a per-mile basis primarily due to the hiring and training of additional drivers to accommodate greater schedule offerings in 1995 compared to 1994, as well as a contractual pay increase for drivers and higher driver-related expenses. As a percentage of total operating revenue, transportation expenses increased to 23.9% in 1995 from 21.7% in 1994. Agents' commissions and station costs increased $6.3 million, or 5.3%, to $125.7 million in 1995 from $119.4 million in 1994 primarily due to increased ticket sales, the conversion of 65 Company-operated ticketing facilities to commissioned agencies and increased salary and communication costs associated with the opening of a new telephone center, which allowed the Company to handle 4.8 million, or 25.4%, more calls in 1995 compared to 1994, offset in part by the elimination of facility, utility and supply costs associated with the converted ticketing facilities. The conversions also serve to reduce insurance and general and administrative costs. In addition, agents' commission and station costs for 1994 includes a $1.3 million charge as a result of the write-off of certain receivables. As a percentage of total operating revenue, agents' commissions and station costs decreased to 19.1% in 1995 from 19.4% in 1994. Marketing, advertising and traffic expenses decreased $10.9 million, or 29.9%, to $25.5 million in 1995 from $36.4 million in 1994 primarily due to a planned spending reduction in direct advertising expenditures. As a percentage of total operating revenue, marketing, advertising and traffic expenses decreased to 3.9% in 1995 from 5.9% in 1994. Insurance and safety costs decreased $30.0 million, or 36.2%, to $52.8 million in 1995 from $82.8 million in 1994. Excluding the impact of a $30.7 million charge recorded in 1994 as a result of certain pre-bankruptcy claims that were allowed by the bankruptcy court and adverse claims development in 1994, insurance and safety costs increased slightly in 1995 as compared to 1994. This increase was a result of increased exposure relating to the 8.9% increase in bus miles and a shift in the Company's claims management strategy to settle claims more quickly. General and administrative expenses increased $1.5 million, or 2.1%, to $72.1 million in 1995 from $70.6 million in 1994 primarily due to expenses related to the Company's management incentive plan, higher salaries and benefit costs for administrative personnel and a reduction in pension plan income, offset in part by reduced group insurance costs and outside legal counsel fees. As a percentage of total operating revenues, general administrative expenses decreased to 11.0% in 1995 from 11.5% in 1994. 20 21 Depreciation and amortization expense decreased $5.0 million, or 13.9%, to $31.0 million in 1995 from $36.0 million in 1994. Excluding the impact of a $7.0 million charge recorded in 1994 to recognize an impairment in value of certain operating facilities that were not being fully utilized, depreciation and amortization expense increased primarily due to a full year of depreciation on 151 buses acquired in mid-1994 and by a $2.1 million charge due to the write-down in the fourth quarter of 1995 of the realizable value of some older buses and certain real estate that subsequently was sold. As a percentage of total operating revenue, depreciation and amortization expense decreased to 4.7% in 1995 from 5.9% in 1994. Operating taxes and license costs increased $0.7 million, or 1.5%, to $48.2 million in 1995 from $47.5 million in 1994 primarily due to increased fuel and oil taxes resulting from an 8.9% increase in total bus miles in 1995 compared to 1994 and increased payroll taxes resulting from higher salaries. As a percentage of total operating revenue, operating taxes and license costs decreased to 7.3% in 1995 from 7.7% in 1994. Operating rents decreased $0.4 million, or 0.8%, to $47.9 million in 1995 from $48.3 million in 1994 primarily due to cost savings associated with the closing of several maintenance facilities, offset in part by increased station rents and an increase in casual bus rentals to accommodate higher holiday traffic volume in 1995 compared to 1994. As a percentage of total operating revenue, operating rents decreased to 7.3% in 1995 from 7.8% in 1994. Other operating expense decreased $9.9 million, or 60.0%, to $6.6 million in 1995 from $16.5 million in 1994. Included in other operating expense for 1994 were a $4.5 million write-down of the realizable value of certain real estate to be sold, a $2.9 million charge relating to certain computer systems that no longer were being utilized by the Company and a charge relating to the discontinuance of a planned roll-out of a collision detection system in the Company's buses. Other operating expense in 1995 was also favorably impacted by a $1.2 million gain on the repurchase by the Company of $10.7 million of Senior Notes. Interest expense decreased $6.7 million, or 20.0%, to $26.8 million in 1995 from $33.5 million in 1994 as a result of the elimination of $7.6 million of annual interest expense as a result of the conversion of certain convertible debt debentures to common stock, offset in part by a full year of interest on financing entered into in mid-1994 to finance the acquisition of buses and the interest component of a settlement with the Internal Revenue Service for the Company's 1987, 1988 and 1989 federal income taxes. As a percentage of total operating revenue, interest expense decreased to 4.1% in 1995 from 5.4% in 1994. LIQUIDITY AND CAPITAL RESOURCES The Company's principal liquidity requirements are to provide working capital, to finance capital expenditures, including bus acquisitions, to meet debt service requirements, including the payment of principal and interest on borrowings under the Revolving Credit Facility and interest on the 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 be sufficient to meet its liquidity needs for the foreseeable future. Net cash provided by (used for) operating activities was ($13.2) million, $29.5 million and $16.0 million for the years ended December 31, 1994, 1995 and 1996, respectively. The increased cash provided by higher operating income and lower net loss in 1996 compared to 1995 was more than offset by an increase in current assets and a smaller increase in accrued liabilities in 1996 than in 1995. Net cash used for investing activities was $58.2 million, $34.1 million and $24.1 million for 1994, 1995 and 1996, respectively, principally due to capital expenditures, consisting primarily of acquisitions of buses and real estate and facility improvements, totalling $81.6 million, $46.4 million and $38.4 million for 1994, 1995 and 1996, respectively, offset in part by proceeds of assets sold of $28.6 million, $12.3 million and $16.7 million, respectively. The 1996 proceeds reflect the sale and leaseback of 59 buses for a total of $14.8 million. Net cash provided by (used for) financing activities was $41.2 million, ($1.4) million and $5.5 million for 1994, 1995 and 1996, respectively. The Company anticipates continuing to make significant capital expenditures in connection with improvements to its infrastructure, including acquiring buses, making improvements to its terminals and 21 22 maintaining and upgrading its computer systems. The Company's experience indicates that as the age of its bus fleet increases, the dependability and quality of service declines, which may make the Company less competitive. In addition, the Company believes that acquiring new buses and improving the Company's terminals and computer systems will permit the Company to continue to improve customer service, which the Company believes has contributed significantly to its improved operating results in 1995 and 1996. The Company estimates that capital expenditures for 1997 will total approximately $29.8 million, including the acquisitions of four bus terminals the Company has agreed to purchase, but excluding bus acquisitions. The Company is in discussions to order up to 100 new buses having an estimated aggregate purchase price of up to $26.0 million in 1997, a majority of which is expected to be financed through capital or operating leases. The Company generally uses lease financing with purchase options as the principal source of bus financing in order to achieve the lowest net cost of bus financing. Depending on the specific terms of a lease, such lease may be accounted for as either an operating or capital lease. The Company may also acquire buses outright and may purchase buses and subsequently engage in sale-leaseback transactions with respect to such buses. The following table summarizes the Company's bus acquisitions and other capital expenditures for 1994, 1995 and 1996:
1994 1995 1996 ----- ----- ----- Bus Acquisitions (NUMBER OF BUSES) - ------------------------------------------------------------ Buses acquired through operating leases(1)................ 125 73 132 Buses acquired through capital leases(1).................. -- -- 77 Buses purchased through cash flows or borrowings(2)....... 165 102 35 ----- ----- ----- Total buses acquired.............................. 290 175 244 ===== ===== ===== Capital expenditures (IN MILLIONS) - ------------------------------------------------------------ Bus purchases, net of sale proceeds(3).................... $38.6 $24.3 $(6.7) Real estate purchases..................................... 7.0 3.4 12.0 Other, net of sale proceeds............................... 7.3 6.3 16.4 ----- ----- ----- Total capital expenditures, net of sale proceeds........................................ $52.9 $34.0 $21.7 ===== ===== =====
- --------------- (1) Includes buses that were purchased in the year indicated and that subsequently were sold and leased back by the Company in such year. Excludes buses that were purchased in a prior year and sold and leased back by the Company in the year indicated. (2) Includes buses that were purchased in the year indicated and that were sold and leased back by the Company in a subsequent year. Excludes buses that were purchased in the year indicated and that subsequently were sold and leased back by the Company in such year. (3) Consists of the purchase price of buses purchased in the year indicated, including the purchase price of buses that subsequently were sold and leased back by the Company, minus the net proceeds to the Company from all sale-leaseback transactions and other sales of buses during such year. The Company requires significant cash flows to meet its debt service and other continuing obligations. As of December 31, 1996, the Company had $192.6 million of long-term indebtedness outstanding, including $10.7 million of borrowings under the Revolving Credit Facility and $138.7 million of Senior Notes. In addition, as of December 31, 1996, the Company had total availability of $47.9 million under the Revolving Credit Facility. The Revolving Credit Facility consists of (i) a revolving facility providing for advances of up to $62.5 million based on the value of certain fixed asset collateral (the "Fixed Asset Facility"), (ii) a revolving facility providing for advances of up to $2.5 million based on a formula of eligible accounts receivable, (iii) a bus purchase facility providing for borrowings of up to $30.0 million (the "Bus Purchase Facility") and (iv) a 22 23 real estate facility providing for borrowings of up to $10.0 million (the "Real Estate Facility"). As of February 1, 1997, borrowings under the Revolving Credit Facility bear interest at a rate equal to the prime rate (8.25% as of February 1, 1997) plus 1.5%, except for borrowings under the Real Estate Facility, which bear interest at a rate equal to the prime rate plus 1.75%. Borrowings under the Revolving Credit Facility mature on June 30, 1999, although availability under the Fixed Asset Facility will be subject to quarterly reductions commencing in 1998 unless additional collateral is pledged. The Revolving Credit Facility is secured by liens on substantially all of the assets of the Company. The Revolving Credit Facility is subject to certain operating and financial covenants, including maintenance of a minimum net worth and ratio of cash flow to interest expense. In addition, non-bus capital expenditures are limited to $30.0 million annually with no spending limitations on bus purchases. As of December 31, 1996, the Company was in compliance with all such covenants. The Company currently is in the process of renegotiating the terms of the Revolving Credit Facility. The Company expects that the amended facility will, among other things, increase the borrowing availability thereunder and provide a LIBOR-based interest rate option. The Company maintains cash deposits held for insurance claims and bus lease collateral, which as of March 7, 1997 aggregated approximately $82.9 million, including the following deposits. The Company maintains $15.0 million on deposit in a trust fund to support its self-insurance program pursuant to the Surface Transportation Board's approval of such program. Due to a decrease in pending claims and the Company's recent claims history, the Company's carriers reduced the level of cash and letters of credit required to be pledged by $8.5 million in April 1995 and $14.0 million in December 1995. As of March 7, 1997, the Company had pledged $32.0 million in cash and $8.8 million in letters of credit to secure its liability insurance obligations. Depending on the Company's future claims history and the policies of its insurance carriers, such carriers could increase or decrease the amount of collateral that the Company is obligated to pledge to secure its liability insurance obligations. The Company also has deposits of $20.3 million pledged as collateral in connection with the sale and leaseback of 319 buses. Additionally, the Company has deposits of $10.1 million pledged as collateral in connection with two other sale and leaseback agreements. The Company maintains five defined benefit pension plans, the most significant of which (the "ATU Plan") covers approximately 16,500 current and former employees, fewer than 1,300 of which are active employees of the Company. The ATU Plan was closed to new participants in 1983 and, as a result, over 80% of its participants are over the age of 50. For financial reporting and investment planning purposes, the Company currently uses an actuarial table that closely matches the actual experience related to the existing participant population. As a result of legislation enacted in 1994 by the United States Congress, the Company may be required to begin measuring its funding obligation under the ATU Plan utilizing an actuarial table prescribed by such legislation. If so required, the Company currently estimates, based on assumed rates of return on the ATU Plan's investments, that it would be required to begin making contributions to the ATU Plan beginning no earlier than 1998 in an aggregate amount over the next five years ranging from approximately $6.0 million to approximately $30.0 million. If the ATU Plan is unable to attain such assumed investment rates of return, such contributions could be higher. Although the Company is exploring whether it may be able to obtain relief from this requirement, there is no assurance that the Company will be able to obtain such relief, that the ATU Plan will be able to obtain the assumed rate of return or that contributions to the ATU Plan will not be significant. 23 24 SEASONALITY 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 cash flows are seasonal in nature with a disproportionate amount of the Company's annual cash flows being generated during the peak travel periods. Therefore, an event that adversely affects ridership during any of these peak periods could have a material adverse effect on the Company's financial condition and results of operations for that year. 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 a fiscal quarter, may also affect the Company's quarterly results of operations. The following table sets forth certain operating data of the Company by quarter for 1995 and 1996 (in millions):
YEAR ENDED DECEMBER 31, 1995 -------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- ------ Total Operating Revenues...................... $131.5 $161.0 $198.6 $166.0 $657.1 EBITDA(1)..................................... (4.4) 4.3 29.0 11.5 40.4 Operating Income (Loss)....................... (11.8) (2.8) 21.9 2.1 9.4 Net Income (Loss)............................. (18.7) (9.9) 15.3 (4.5) (17.8)
YEAR ENDED DECEMBER 31, 1996 -------------------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER TOTAL ------- ------- ------- ------- ------ Total Operating Revenues...................... $141.6 $172.3 $208.1 $178.9 $700.9 EBITDA(1)..................................... (7.3) 8.5 34.1 16.2 51.5 Operating Income (Loss)....................... (14.9) 1.2 26.4 8.1 20.8 Net Income (Loss)............................. (21.5) (5.5) 19.4 1.0 (6.6)
- --------------- (1) Represents earnings before interest, taxes, depreciation and amortization and extraordinary items. 24 25 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE NO. -------- Management Report on Responsibility for Financial Reporting................................................. 26 Report of Independent Public Accountants.................... 27 Consolidated Statements of Financial Position as of December 31, 1995 and 1996......................................... 28 Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996.......................... 29 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1995 and 1996.............. 30 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996.......................... 31 Notes to Consolidated Financial Statements.................. 32 Schedule II -- Valuation and Qualifying Accounts -- For the Years Ended December 31, 1994, 1995 and 1996.............. 55
25 26 MANAGEMENT REPORT ON RESPONSIBILITY FOR FINANCIAL REPORTING The management of Greyhound Lines, Inc. and its subsidiaries (the "Company") has the responsibility for preparing the accompanying consolidated financial statements and for their integrity and objectivity. The statements were prepared in accordance with generally accepted accounting principles applied on a consistent basis and are not misstated due to fraud or material error. The financial statements include amounts that are based on management's best estimates and judgments. Management also prepared the other information in the annual report on Form 10-K and is responsible for its accuracy and consistency with the financial statements. The Company's consolidated financial statements have been audited by Arthur Andersen LLP, independent public accountants approved by the Board of Directors. Management has made available to Arthur Andersen LLP all the Company's financial records and related data, as well as the minutes of the stockholders' and directors' meetings. Furthermore, management believes that all representations made to Arthur Andersen LLP during its audits were valid and appropriate. Management of the Company has established and maintains a system of internal control that provides reasonable assurance as to the integrity and reliability of the financial statements, the protection of assets from unauthorized use or disposition, and the prevention and detection of fraudulent financial reporting. The system of internal control provides for appropriate division of responsibility and is documented by written policies and procedures that are communicated to employees with significant roles in the financial reporting process and updated as necessary. Management continually monitors the internal control system for compliance. The Company maintains an internal auditing program that independently assesses the effectiveness of the internal controls and recommends possible improvements thereto. In addition, as part of its audits of the Company's consolidated financial statements, Arthur Andersen LLP considered the Company's system of internal control to the extent they deemed necessary to determine the nature, timing and extent of audit tests to be applied. Management has considered the internal auditors' and Arthur Andersen LLP's recommendations concerning the Company's system of internal control and has taken actions that the Company believes respond appropriately to these recommendations. Management believes that the Company's system of internal control is adequate to accomplish the objectives discussed herein. Management also recognizes its responsibility for fostering a strong ethical climate so that the Company's affairs are conducted according to the highest standards of personal and corporate conduct. This responsibility is characterized and reflected in the Company's code of corporate conduct, which is publicized throughout the Company. The code of conduct addresses, among other things, the necessity of ensuring open communication within the Company; potential conflicts of interests; compliance with all domestic and foreign laws, including those relating to financial disclosure; and the confidentiality of proprietary information. The Company maintains a systematic program to assess compliance with these policies. Steven L. Korby Executive Vice President, Chief Financial Officer Dallas, Texas March 19, 1997 26 27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Greyhound Lines, Inc.: We have audited the accompanying consolidated statements of financial position of Greyhound Lines, Inc. (a Delaware corporation) and subsidiaries as of December 31, 1995 and 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the three years in the period ended December 31, 1996. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Greyhound Lines, Inc. and subsidiaries as of December 31, 1995 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index at item 8 (Schedule II) is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP Dallas, Texas February 12, 1997 27 28 GREYHOUND LINES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
DECEMBER 31, -------------------- 1995 1996 -------- -------- Current Assets Cash and cash equivalents................................. $ 3,494 $ 898 Accounts receivable, less allowance for doubtful accounts of $217 and $241....................................... 29,912 32,844 Inventories............................................... 3,615 3,840 Prepaid expenses.......................................... 7,353 8,179 Assets held for sale...................................... 4,534 4,224 Other current assets...................................... 8,885 11,329 -------- -------- Total current assets.............................. 57,793 61,314 Prepaid Pension Plans....................................... 24,299 24,927 Property, Plant and Equipment, net of accumulated depreciation of $84,234 and $101,901...................... 300,603 314,454 Investments in Unconsolidated Affiliates.................... 1,367 2,437 Insurance and Security Deposits............................. 76,586 76,180 Intangible Assets, net of accumulated amortization of $14,901 and $19,105....................................... 20,000 20,970 -------- -------- Total assets...................................... $480,648 $500,282 ======== ======== Current Liabilities Accounts payable.......................................... $ 18,205 $ 23,900 Accrued liabilities....................................... 54,971 53,500 Unredeemed tickets........................................ 9,140 9,523 Current portion of reserve for injuries and damages....... 24,605 19,864 Current maturities of long-term debt...................... 5,259 11,662 -------- -------- Total current liabilities......................... 112,180 118,449 Reserve for Injuries and Damages............................ 41,056 40,099 Long-Term Debt.............................................. 172,671 192,581 Deferred Gains.............................................. 920 562 Other Liabilities........................................... 4,059 7,710 -------- -------- Total liabilities................................. 330,886 359,401 Commitments and Contingencies (Note 18) 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; 58,277,318 and 58,469,469 shares issued as of December 31, 1995 and 1996, respectively; par value $.01)................ 583 585 Capital in excess of par value............................ 228,422 229,104 Retained deficit.......................................... (74,633) (81,237) Less: Unfunded accumulated pension obligation............. (3,572) (6,533) Less: Treasury stock, at cost (109,192 shares)............ (1,038) (1,038) -------- -------- Total stockholders' equity........................ 149,762 140,881 -------- -------- Total liabilities and stockholders' equity........ $480,648 $500,282 ======== ========
The accompanying notes are an integral part of these statements. 28 29 GREYHOUND LINES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1995 1996 --------- -------- -------- Operating Revenues Transportation services Regular route.......................................... $ 518,431 $560,239 $597,779 Package express........................................ 40,232 35,690 33,527 Food services............................................. 19,490 19,440 21,363 Other operating revenues.................................. 37,158 41,752 48,189 --------- -------- -------- Total operating revenues.......................... 615,311 657,121 700,858 --------- -------- -------- Operating Expenses Maintenance............................................... 73,469 68,540 73,441 Transportation............................................ 133,766 156,878 170,979 Agents' commissions and station costs..................... 119,438 125,650 131,715 Marketing, advertising and traffic........................ 36,445 25,513 25,811 Insurance and safety...................................... 82,786 52,820 41,088 General and administrative................................ 70,583 72,105 80,496 Depreciation and amortization............................. 36,046 31,010 30,683 Operating taxes and licenses.............................. 47,478 48,186 49,831 Operating rents........................................... 48,286 47,884 53,993 Cost of goods sold -- food services....................... 13,465 12,597 13,774 Other operating expenses.................................. 16,502 6,575 8,243 Restructuring expenses.................................... 2,523 -- -- --------- -------- -------- Total operating expenses.......................... 680,787 647,758 680,054 --------- -------- -------- Operating Income (Loss)..................................... (65,476) 9,363 20,804 Interest Expense............................................ 33,456 26,807 27,346 --------- -------- -------- Loss Before Income Taxes and Extraordinary Items............ (98,932) (17,444) (6,542) Income Tax Provision........................................ 16,862 374 62 --------- -------- -------- Loss Before Extraordinary Items............................. (115,794) (17,818) (6,604) Extraordinary Items......................................... (38,373) -- -- --------- -------- -------- Net Loss.................................................... $ (77,421) $(17,818) $ (6,604) ========= ======== ======== Earnings Per Share of Common Stock: Primary Loss before extraordinary items........................ $ (7.58) $ (0.33) $ (0.11) Extraordinary items.................................... 2.51 -- -- --------- -------- -------- Net loss............................................... $ (5.07) $ (0.33) $ (0.11) ========= ======== ======== Fully diluted Loss before extraordinary items........................ $ (7.58) $ (0.33) $ (0.11) Extraordinary items.................................... 2.51 -- -- --------- -------- -------- Net loss............................................... $ (5.07) $ (0.33) $ (0.11) ========= ======== ========
The accompanying notes are an integral part of these statements. 29 30 GREYHOUND LINES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (IN THOUSANDS, EXCEPT SHARE AMOUNTS)
COMMON STOCK CAPITAL IN COMMON STOCK SUBSCRIBED TREASURY STOCK CAPITAL IN EXCESS OF ------------------- -------------------- ----------------- EXCESS OF PAR VALUE SHARES AMOUNT SHARES AMOUNT SHARES AMOUNT PAR VALUE SUBSCRIBED ---------- ------ ----------- ------ ------- ------- ---------- ---------- BALANCE, DECEMBER 31, 1993..... 14,776,066 $148 -- $ -- 124,912 $(1,102) $134,013 $ -- Exercise of stock options...... 1,370 -- -- -- -- -- 13 -- Issuance of treasury stock..... -- -- -- -- (15,720) 64 28 -- Tender Offer (see Note 17)..... 22,790,308 227 -- -- -- -- 48,772 -- Rights Offering (see Note 17).......................... -- -- 16,279,070 163 -- -- -- 29,184 Net loss....................... -- -- -- -- -- -- -- -- ---------- ---- ----------- ----- ------- ------- -------- -------- BALANCE, DECEMBER 31, 1994..... 37,567,744 375 16,279,070 163 109,192 (1,038) 182,826 29,184 Rights Offering................ 16,279,070 163 (16,279,070) (163) -- -- 29,184 (29,184) Tender of debentures........... 6,060 -- -- -- -- -- 75 -- Issuance of new equity interests in connection with 401(k) match................. 415,044 5 -- -- -- -- 962 -- Issuance of new equity interests.................... 4,000,000 40 -- -- -- -- 15,347 -- Exercise of stock options...... 9,400 -- -- -- -- -- 28 -- Adjustment for unfunded accumulated pension obligation................... -- -- -- -- -- -- -- -- Net loss....................... -- -- -- -- -- -- -- -- ---------- ---- ----------- ----- ------- ------- -------- -------- BALANCE, DECEMBER 31, 1995..... 58,277,318 583 -- -- 109,192 (1,038) 228,422 -- Exercise of stock options...... 100,450 1 -- -- -- -- 257 -- Issuance of stock in connection with 401(k) match............ 91,701 1 -- -- -- -- 425 -- Adjustment for unfunded accumulated pension obligation................... -- -- -- -- -- -- -- -- Net loss....................... -- -- -- -- -- -- -- -- ---------- ---- ----------- ----- ------- ------- -------- -------- BALANCE, DECEMBER 31, 1996..... 58,469,469 $585 -- $ -- 109,192 $(1,038) $229,104 $ -- ========== ==== =========== ===== ======= ======= ======== ======== UNFUNDED ACCUMULATED RETAINED PENSION EARNINGS OBLIGATION (DEFICIT) TOTAL ----------- --------- -------- BALANCE, DECEMBER 31, 1993..... $(1,499) $ 20,606 $152,166 Exercise of stock options...... -- -- 13 Issuance of treasury stock..... -- -- 92 Tender Offer (see Note 17)..... -- -- 48,999 Rights Offering (see Note 17).......................... -- -- 29,347 Net loss....................... -- (77,421) (77,421) ------- -------- -------- BALANCE, DECEMBER 31, 1994..... (1,499) (56,815) 153,196 Rights Offering................ -- -- -- Tender of debentures........... -- -- 75 Issuance of new equity interests in connection with 401(k) match................. -- -- 967 Issuance of new equity interests.................... -- -- 15,387 Exercise of stock options...... -- -- 28 Adjustment for unfunded accumulated pension obligation................... (2,073) -- (2,073) Net loss....................... -- (17,818) (17,818) ------- -------- -------- BALANCE, DECEMBER 31, 1995..... (3,572) (74,633) 149,762 Exercise of stock options...... -- -- 258 Issuance of stock in connection with 401(k) match............ -- -- 426 Adjustment for unfunded accumulated pension obligation................... (2,961) -- (2,961) Net loss....................... -- (6,604) (6,604) ------- -------- -------- BALANCE, DECEMBER 31, 1996..... $(6,533) $(81,237) $140,881 ======= ======== ========
The accompanying notes are an integral part of these statements. 30 31 GREYHOUND LINES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1995 1996 -------- -------- -------- Cash Flows From Operating Activities Net loss.................................................. $(77,421) $(17,818) $ (6,604) Noncash expenses and gains included in net loss Depreciation and amortization........................... 36,046 31,010 30,683 Amortization of deferred gain........................... (332) (357) (358) Amortization of discount on Senior Notes................ 2,659 3,037 3,117 Amortization of debt issuance costs..................... 1,586 925 962 Net loss on assets sold................................. 3,663 515 295 Unfunded net pension gain............................... (6,179) (2,051) (1,294) Settlement of tax liability............................. -- -- (760) Deferred tax provision.................................. 17,000 -- -- Write-down of surplus property.......................... 4,513 -- -- Write-off of intangible assets.......................... 806 -- -- Write-off of debt issuance costs -- prior credit facility.............................................. 3,158 -- -- Extraordinary gain on debt conversion................... (41,948) -- -- Gain on Senior Notes Repurchase......................... -- (1,166) -- Net change in certain operating assets and liabilities Checks payable.......................................... -- -- 8,141 Accounts receivable..................................... 3,777 4,129 (2,932) Inventories............................................. 3,405 164 (225) Prepaid expenses........................................ (1,131) 2,895 (826) Other current assets.................................... (1,401) 3,974 (2,444) Insurance and security deposits......................... 10,759 7,962 406 Intangible assets....................................... (4,446) (5,301) (6,038) Accounts payable........................................ (3,162) 3,763 (2,266) Accrued liabilities..................................... 6,135 5,594 237 Reserve for injuries and damages........................ 29,444 (6,682) (5,698) Unredeemed tickets...................................... (102) (1,119) 383 Other liabilities....................................... -- -- 1,251 -------- -------- -------- Net cash provided by (used for) operating activities....................................... (13,171) 29,474 16,030 -------- -------- -------- Cash Flows From Investing Activities Capital expenditures.................................... (81,565) (46,370) (38,402) Proceeds from assets sold............................... 28,646 12,349 16,680 Proceeds from termination of interest rate swap......... 1,609 -- -- Buyout of MDFC Lease.................................... -- -- (1,624) Deposit to collateralize operating leases............... (7,127) -- -- Other investing activities.............................. 208 (55) (758) -------- -------- -------- Net cash used for investing activities............. (58,229) (34,076) (24,104) -------- -------- -------- Cash Flows From Financing Activities Payments on debt and capital lease obligations.......... (7,548) (18,771) (9,551) Proceeds from long-term borrowings...................... 31,541 -- 4,106 Net proceeds from Rights Offering....................... 17,205 11,685 -- Proceeds from issuance-exercise of Common Stock......... 13 15,415 258 Repurchase Senior Notes................................. -- (9,687) -- Net change in revolving bank loans...................... -- -- 10,665 -------- -------- -------- Net cash provided by (used for) financing activities....................................... 41,211 (1,358) 5,478 -------- -------- -------- Net decrease in Cash and Cash Equivalents................... (30,189) (5,960) (2,596) Cash and Cash Equivalents, Beginning of Period.............. 39,643 9,454 3,494 -------- -------- -------- Cash and Cash Equivalents, End of Period.................... $ 9,454 $ 3,494 $ 898 ======== ======== ======== Supplemental Schedule of Noncash Investing and Financing Activities: Cash capital expenditures............................... $(81,565) $(46,370) $(38,402) Noncash capital expenditures (See Note 3)............... $ -- $ -- $(20,004) -------- -------- -------- Total Capital Expenditures.............................. $(81,565) $(46,370) $(58,406) ======== ======== ========
The accompanying notes are an integral part of these statements. 31 32 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 1. BACKGROUND AND OPERATING ENVIRONMENT Greyhound Lines, Inc. and subsidiaries (the "Company") is the only nationwide provider of intercity bus service in the United States. The Company provides various services including scheduled passenger service, package express service and food services at certain terminals. The Company's operations include a nationwide network of terminal and maintenance facilities, a fleet of approximately 2,000 buses and approximately 1,600 sales outlets. The Company's operating subsidiaries include Texas, New Mexico & Oklahoma Coaches, Inc. ("TNM&O") and Vermont Transit, Co., Inc. ("VTC"). The Company is subject to regulation by the Department of Transportation (the "DOT") and certain states. 2. SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company. Investments in companies that are 25% to 50% owned ("affiliates") are accounted for using the equity method. All significant intercompany transactions and balances have been eliminated. Certain Reclassifications Certain reclassifications have been made to the prior period statements to conform them to the December 31, 1996, classifications. Cash and Cash Equivalents Cash and cash equivalents include short-term investments that are part of the Company's cash management portfolio. These investments are highly liquid and have original maturities of three months or less. Inventories Inventories are stated at the lower of cost or market, with costs determined using the first-in, first-out method. Property, Plant and Equipment Property, plant and equipment, including capitalized leases, are recorded at cost, including interest during construction, if any. Depreciation is provided over their estimated useful lives or lease terms, ranging from three to 20 years for structures and improvements, four to 12 years for revenue equipment, and five to 10 years for all other items, using principally the straight-line method of depreciation for financial reporting purposes and accelerated methods for tax reporting purposes. Maintenance costs are expensed as incurred, and renewals and betterments are capitalized. Debt Issuance Costs and Discounts Costs incurred related to the issuance of debt are deferred, and such costs and any related discounts are amortized to interest expense using the straight-line method over the life of the related debt. Software Development Costs The direct costs of internally developed software are capitalized when technological feasibility has been established, and amortization of the software begins when the software is ready for use. The cost of the capitalized software is amortized over a period of five years. 32 33 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Income Taxes Deferred tax assets and liabilities are determined annually based upon the estimated future tax effects of the differences in the tax bases of existing assets and liabilities and the related financial statement carrying amounts, using currently enacted tax laws and rates. Reserve for Injuries and Damages The Company maintains comprehensive automobile liability, general liability, workers' compensation, and property insurance to insure its assets and operations. Automobile and general liability insurance coverages are subject to a $1.5 million self-insured retention per occurrence. The Company also maintains property insurance subject to a $0.1 million deductible per occurrence, and maintains workers' compensation insurance, subject to a $1.0 million deductible per occurrence. Successful claims against the Company, which do not exceed the deductible or self-insured retention, are paid out of operating cash flows. A reserve for injuries and damages has been established for these claim payments. The reserve is based on an assessment of actual claims and claims incurred but not reported, based upon historical experience. This reserve also includes an estimate of environmental liabilities. Revenue Recognition Transportation revenue is recognized when the service is provided. A liability for tickets sold but not used is recorded. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Long-Lived Assets The Company periodically evaluates whether the remaining useful life of long-lived assets may require revision or whether the remaining unamortized balance is recoverable. When factors indicate that an asset should be evaluated for possible impairment, the Company uses an estimate of the asset's cash flow in evaluating its fair value. Earnings Per Share Primary earnings (loss) per common share are calculated by dividing net income (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 reflect the assumed exercise of only those outstanding stock options which would be dilutive. The calculation of fully diluted earnings (loss) per share of Common Stock considers the additional effect of conversion of the Company's 8.5% Convertible Subordinated Debentures due 2007 (the "Convertible Debentures") if conversion has a dilutive effect. For the years ended December 31, 1994, 1995 and 1996, the assumed exercise of outstanding in-the-money stock options and conversion of Convertible Debentures has an anti-dilutive effect. As a result, these shares are excluded from the final determination of the weighted average shares outstanding at December 31, 1994, 1995 and 1996. The 33 34 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) weighted average shares outstanding used in the calculation of primary and fully diluted earnings (loss) per share of Common Stock for the years ended December 31, 1994, 1995 and 1996, are as follows:
YEARS ENDED DECEMBER 31, -------------------------------------- 1994 1995 1996 ---------- ---------- ---------- Primary........................................ 15,284,050 54,595,377 58,263,327 Fully diluted.................................. 15,284,050 54,595,377 58,263,327
3. STATEMENTS OF CASH FLOWS SUPPLEMENTARY DISCLOSURES Cash paid for interest was $25.1 million, $22.7 million and $24.5 million for the years ended December 31, 1994, 1995 and 1996, respectively. There were no cash payments for federal income taxes for the years ended December 31, 1994, 1995 and 1996, other than a $0.3 million settlement payment related to an Internal Revenue Service "IRS" audit of the Company's 1987 through 1989 tax returns. Significant noncash investing and financing activities during 1996 included 77 buses which were acquired under capital lease for $17.9 million and computer equipment which was acquired under capital lease for $2.1 million. In 1994, noncash activity included the conversion of $89.0 million of Convertible Debentures into equity resulting in the issuance of approximately 22.8 million shares of Common Stock. 4. INVENTORIES Inventories consisted of the following (in thousands):
DECEMBER 31, ---------------- 1995 1996 ------ ------ Service parts............................................... $2,121 $2,078 Fuel........................................................ 381 609 Food service operations..................................... 1,113 1,153 ------ ------ Inventories............................................... $3,615 $3,840 ====== ======
5. PREPAID EXPENSES Prepaid expenses consisted of the following (in thousands):
DECEMBER 31, ---------------- 1995 1996 ------ ------ Insurance................................................... $3,504 $4,003 Taxes and licenses.......................................... 1,195 1,303 Rents....................................................... 1,292 992 Other....................................................... 1,362 1,881 ------ ------ Prepaid expenses.......................................... $7,353 $8,179 ====== ======
34 35 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 6. OTHER CURRENT ASSETS Other current assets consisted of the following (in thousands):
DECEMBER 31, ----------------- 1995 1996 ------ ------- Deposits on insurance....................................... $7,505 $ 7,090 Deposits on business combinations........................... -- 2,080 Other....................................................... 1,380 2,159 ------ ------- Other current assets...................................... $8,885 $11,329 ====== =======
The deposits on insurance held as of December 31, 1995 and 1996, are the current portion of insurance deposits that include self-insurance deposits required by the Company's primary insurance carrier to cover interstate and certain intrastate claims for bodily injury and property damage liability. Deposits on business combinations represent deposits on two pending transactions, one of which the Company is awaiting approval from the Surface Transportation Board (the "STB"). 7. BENEFIT PLANS Pension Plans The Company has five defined benefit pension plans. The first plan (the "ATU Plan") covers substantially all of the Company's ongoing hourly employees hired before November 1, 1983. The Company's hourly plan provides normal retirement benefits to the covered employees based upon a percentage of average final earnings, reduced pro rata for service of less than 15 years. Participants in this plan will continue to accrue benefits as long as no contributions are due from the Company. In the event a contribution is required, the plan benefits will be frozen until such time as the assets of the plan exceed 115% of the plan liabilities. The second plan covered salaried employees through May 7, 1990, when the plan was curtailed. The third plan is a multi-employer pension plan, instituted in 1992, to cover certain union mechanics. The remaining two plans are held by TNM&O and VTC and cover substantially all of their salaried and hourly personnel. It is the Company's policy to fund the minimum required contribution under existing tax laws. The Company's net periodic pension income included the following (in thousands):
YEARS ENDED DECEMBER 31, -------------------------------- 1994 1995 1996 -------- -------- -------- Service cost -- benefits earned during the period......................................... $ 6,362 $ 4,331 $ 3,779 Interest cost on projected benefit obligations... 61,261 60,041 51,257 Actual return on plan assets..................... 23,474 (148,028) (49,621) Net amortization and deferral.................... (95,805) 81,922 (6,072) -------- -------- -------- Net periodic pension income.................... $ (4,708) $ (1,734) $ (657) ======== ======== ========
35 36 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The following table sets forth the funded status and amounts recognized in the consolidated statements of financial position for the pension plans (in thousands):
DECEMBER 31, 1995 DECEMBER 31, 1996 -------------------------------- -------------------------------- PREPAID ACCRUED PENSION PREPAID ACCRUED PENSION PENSION PLANS PLAN LIABILITIES PENSION PLANS PLAN LIABILITIES ------------- ---------------- ------------- ---------------- Actuarial present value of benefit obligations Vested benefit obligations................. $ 672,665 $ 39,078 $ 648,142 $ 43,254 ========= ========= ========= ========= Accumulated benefit obligations............ $ 696,223 $ 39,188 $ 661,682 $ 43,474 ========= ========= ========= ========= Projected benefit obligations................ $ 706,292 $ 39,767 $ 672,863 $ 44,177 Plan assets at fair value.................... 754,582 36,184 720,136 38,345 --------- --------- --------- --------- Plan assets greater than (less than) projected benefit obligations.............. 48,290 (3,583) 47,273 (5,832) Unrecognized net (gain) loss................. (23,991) 2,481 (22,346) 3,324 Adjustment required to recognize minimum liability.................................. -- (2,073) -- (2,961) --------- --------- --------- --------- Prepaid (accrued) pension costs............ $ 24,299 $ (3,175) $ 24,927 $ (5,469) ========= ========= ========= =========
Statement of Financial Accounting Standards No. 87, "Employers Accounting for Pensions," required the Company to record an additional minimum liability of $3.0 million as of December 31, 1996. This provision is reflected as a reduction of stockholders' equity. In determining the benefit obligations and service costs for the Company's defined benefit pension plans, the following assumptions were used:
DECEMBER 31, ------------------------ 1995 1996 ---------- ---------- Weighted average discount rate............................. 7.25% 7.50% Expected long-term rate of return on plan assets........... 9.00% 7.50-9.00% Rate of salary progression................................. 0.00-6.00% 0.00-6.00%
Plan assets consist primarily of government-backed securities, corporate equity securities, guaranteed insurance contracts, annuities and corporate debt obligations. Cash or Deferred Retirement Plans The Company sponsors 401(k) cash or deferred retirement plans that cover substantially all of its ongoing salaried, hourly and represented employees. Costs to the Company related to these plans were $1.2 million, $1.1 million, and $2.1 million for the years ended December 31, 1994, 1995 and 1996, respectively. On October 31, 1991, the Company contributed 500,000 shares of its Common Stock to an employee stock ownership plan ("ESOP") for its employees. Effective December 31, 1994, this plan was amended to merge it into the Company's 401(k) profit sharing plan. An IRS determination letter relating to this merger was filed and received in 1996. Other Plans A contributory trusteed health and welfare plan has been established for all active hourly employees which are represented by collective bargaining agreements and a contributory health and welfare plan has been established for salaried employees and hourly employees who are not represented by collective bargaining agreements. For the years ended December 31, 1994, 1995 and 1996, the Company incurred costs of 36 37 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $15.5 million, $13.9 million, and $16.3 million, respectively, related to these plans. No post-retirement health and welfare plans exist. The Company also has a Supplemental Executive Retirement Plan (the "SERP"), which covers only key executives of the Company. During 1995, the SERP was converted from a defined benefit plan to a defined contribution plan. The Company incurred costs of $0.4 million during 1996. Due to the conversion, the Company recorded $0.3 million of income in 1995. 8. PROPERTY, PLANT, AND EQUIPMENT Property, plant and equipment consisted of the following (in thousands):
DECEMBER 31, --------------------- 1995 1996 -------- --------- Land and improvements....................................... $ 72,351 $ 77,954 Structures and improvements Owned..................................................... 82,730 89,473 Capitalized leased assets................................. 650 650 Lease interests........................................... 4,376 4,376 Leasehold improvements.................................... 22,423 27,006 Revenue equipment Owned..................................................... 143,198 135,732 Capitalized leased assets................................. 22,118 34,165 Leasehold improvements.................................... 1,707 2,900 Furniture and fixtures...................................... 25,122 32,499 Vehicles, machinery and equipment Owned..................................................... 10,162 9,478 Capitalized lease assets.................................. -- 2,122 -------- --------- Property, plant and equipment............................... 384,837 416,355 Accumulated depreciation............................... (84,234) (101,901) -------- --------- Property, plant and equipment, net................ $300,603 $ 314,454 ======== =========
During 1996, the Company took delivery of 244 buses, all of which were manufactured by Motor Coach International, Inc. ("MCII"). The Company purchased 43 of these buses, 77 were recorded as capital leases, and the remaining were financed as long-term operating leases. In April 1996, the Company sold and leased back 51 buses that were purchased in 1995 for net proceeds of $12.6 million. Additionally in 1996, the Company sold and leased back eight buses purchased in 1996 for net proceeds of $2.2 million. The Company purchased terminal facilities in Columbus, Ohio and Pittsburgh, Pennsylvania for $8.0 million in 1996. Accumulated depreciation of capitalized leased assets amounted to $11.6 million and $9.2 million at December 31, 1995 and 1996, respectively. 37 38 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 9. INSURANCE AND SECURITY DEPOSITS Insurance and security deposits consisted of the following (in thousands):
DECEMBER 31, ------------------ 1995 1996 ------- ------- Insurance deposits.......................................... $41,713 $40,481 Security deposits........................................... 34,679 35,314 Other....................................................... 194 385 ------- ------- Insurance and security deposits................... $76,586 $76,180 ======= =======
Insurance deposits are required by the Company's self-insurance authorizations and the Company's primary insurance carrier to cover self-insured interstate and certain intrastate auto liability as well as workers' compensation coverage in certain states. Security deposits at December 31, 1995 and 1996, include (i) a $20.3 million pledge of assets required as a collateral deposit for a $70.1 million sale/leaseback of 319 buses, (ii) an $8.1 million deposit required by the lessor in conjunction with a separate sale/leaseback of 125 buses, and (iii) a $2.0 million deposit required by the lessor in conjunction with another separate sale/leaseback of 46 buses. 10. INTANGIBLE ASSETS Intangible assets consisted of the following (in thousands):
DECEMBER 31, -------------------- 1995 1996 -------- -------- Trademark................................................... $ 10,198 $ 10,198 Software.................................................... 21,007 23,340 Debt issuance costs......................................... 3,667 4,807 Deferred lease costs........................................ -- 1,701 Other....................................................... 29 29 -------- -------- Intangible assets........................................... 34,901 40,075 Accumulated amortization.................................. (14,901) (19,105) -------- -------- Intangible assets, net............................ $ 20,000 $ 20,970 ======== ========
Trademarks are amortized using the straight-line method over 15 years. 11. ACCRUED LIABILITIES Accrued liabilities consisted of the following (in thousands):
DECEMBER 31, ------------------ 1995 1996 ------- ------- Compensation, benefits and payroll-related taxes............ $18,237 $18,750 Bus operating leases and rentals............................ 1,207 4,125 Interest.................................................... 8,134 8,000 Operating, property and income taxes........................ 5,982 4,115 Other expenses.............................................. 21,411 18,510 ------- ------- Accrued liabilities............................... $54,971 $53,500 ======= =======
38 39 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 12. LONG-TERM DEBT AND INTEREST EXPENSE Long-term debt consisted of the following (in thousands):
DECEMBER 31, -------------------- 1995 1996 -------- -------- Secured Indebtedness Revolving bank loans, prime plus 2.0% and 1.75% (weighted average 10.5% and 10.0%) at December 31, 1995 and 1996, respectively, due 1998................................. $ -- $ 10,665 Capital lease obligations (weighted average 10.8% and 10.4% at December 31, 1995 and 1996, respectively) due through 2003........................................... 14,494 29,604 Real estate mortgages (weighted average 9.6% and 9.4% at December 31, 1995 and 1996, respectively) due through 2006................................................... 2,066 1,685 Note payable, prime plus 1.5%, due 2004................... 15,588 13,452 Unsecured Indebtedness Senior Notes, 10% stated rate (13.5% imputed rate), due 2001, net of unamortized discount of $17,108 and $13,991 at December 31, 1995 and 1996, respectively.... 135,561 138,679 Convertible Debentures, 8.5%, due 2007.................... 9,804 9,804 Other long-term debt (weighted average 10.0% at December 31, 1995 and 1996) due through 1997.................... 417 354 -------- -------- Long-term debt.............................................. 177,930 204,243 Less current maturities................................... (5,259) (11,662) -------- -------- Long-term debt, net............................... $172,671 $192,581 ======== ========
Revolving Credit Facility During October 1994 as part of a financial restructuring (the "Financial Restructuring"), the Company entered into a Revolving Credit Facility (the "Revolving Credit Facility") with Foothill Capital Corporation ("Foothill"), which replaced the Company's prior bank facility. At the time of the Financial Restructuring, the Revolving Credit Facility provided for revolving loans and letters of credit and/or letter of credit guarantees of up to $35.0 million. In December 1996, the Company renegotiated its Revolving Credit Facility. Availability under the Revolving Credit Facility is limited to the aggregate of the following: (1) revolving advances of up to $62.5 million (the "Fixed Asset Advances") based on the value of certain fixed asset collateral currently pledged to Foothill; (2) revolving advances of up to $2.5 million based on a formula of certain eligible accounts receivable; (3) a bus purchase facility of up to $30.0 million (the "Bus Purchase Facility"); and (4) a real estate line of up to $10.0 million. The Revolving Credit Facility limits letters of credit and letters of Credit guarantees to $35.0 million. Borrowings under the Revolving Credit Facility mature on June 30, 1999, although the availability under the Fixed Asset Advances will be subject to quarterly reductions commencing January 1998, unless additional collateral is pledged. The Revolving Credit Facility is secured by liens on substantially all the assets of the Company, and new bus purchases that are specifically pledged to support borrowings under the Bus Purchase Facility and real property pledged to support borrowings under the real estate line. The Revolving Credit Facility allows the Company to dispose of certain non-core real estate properties. In addition, capital expenditures, excluding bus purchases, are limited to $30.0 million annually. 39 40 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Senior Notes The Company's 10% Senior Notes due 2001 (the "Senior Notes") bear interest at the rate of 10% per annum, payable each January 31 and July 31. The Senior Notes had an original stated principal amount of $165.0 million, of which $1.7 million had been held by the Company prior to December 1995. During December 1995, the Company repurchased (the "Senior Note Repurchase") an additional $10.7 million aggregate principal amount of the Senior Notes pursuant to a put/call agreement with one of the Company's principal stockholders. The Senior Note Repurchase resulted in a $1.2 million gain which is included in other operating expenses in the Company's Consolidated Statement of Operations for the year ended December 31, 1995. The Senior Notes are reflected net of unamortized discount in the Consolidated Statements of Financial Position to reflect an imputed interest rate of 13.5%, and also net of any Senior Notes held by consolidated subsidiaries. At the Company's option, the Senior Notes may be redeemed at any time as a whole, or from time to time in part, initially at a redemption price equal to 110% of the principal amount thereof, declining ratably on each July 31, commencing July 31, 1992, to 101% of the principal amount thereof on July 31, 2000, in each case together with accrued and unpaid interest to the redemption date. The Senior Notes are subject to mandatory redemption pursuant to a sinking fund that commenced July 31, 1996, and on each July 31 thereafter through July 31, 2000, calculated to retire approximately 65% of the original principal amount of the Senior Notes prior to maturity. The 1996 sinking fund payment of $8.0 million has been met through the Senior Note Repurchase 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, $4.3 million, will be applied to the July 1997 sinking fund payment. In addition, the Senior Notes are subject to mandatory redemption from the proceeds of certain sales of assets not used for capital expenditures or to reduce the obligations under the revolving bank loans. Any Senior Notes not theretofore redeemed mature on July 31, 2001. Convertible Debentures During 1992, the Company issued $98.9 million of 8.5% Convertible Subordinated Debentures ("Convertible Debentures"). Interest on the Convertible Debentures is payable semiannually (each March 31 and September 30). The Convertible Debentures are convertible at the option of the holder at any time prior to maturity, unless previously redeemed, into Common Stock at the conversion price of $12.375 per share (equivalent to a conversion rate of approximately 80.81 shares per $1,000 principal amount of Convertible Debentures), subject to adjustment in certain events. During the fourth quarter of 1994, the Company made an offer (the "Tender Offer") to convert the entire $98.9 million in aggregate principal amount of the Company's Convertible Debentures into shares of Common Stock at a conversion rate of approximately 256 shares of Common Stock for each $1,000 principal amount of Convertible Debentures. On December 22, 1994, the Company announced the completion of the Tender Offer with approximately $89.0 million, or 90.0%, of the $98.9 million issue being tendered and converted into 22.8 million shares resulting in a $41.9 million extraordinary gain in the accompanying Consolidated Statement of Operations for the year ended December 31, 1994. Other Under the most restrictive provisions of all its debt agreements, the Company may not incur additional indebtedness, is limited on the payment of dividends on its Common Stock, and may not enter into certain mergers, or acquire or dispose of any assets (except in the ordinary course of business). Covenants under the Revolving Credit Facility restrict the Company's ability to prepay the Convertible Debentures. The Revolving Credit Facility is subject to financial covenants, including maintenance of a minimum net worth and an agreed ratio of cash flow to interest expense. The Revolving Credit Facility also limits the Company's capital expenditures. At December 31, 1996, the Company was in compliance with all covenants. 40 41 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) During March 1994, the Company ordered 151 new buses from MCII for an aggregate cost of $34.8 million. The Company took delivery of all of the new buses as of September 30, 1994. As delivery was taken, the new buses were 90% financed through a ten-year installment note with Motor Coach Industries ("MCI"), which is secured by the purchased buses and which bears interest at a rate of prime plus 1.5 percent. MCI subsequently transferred the financing for 50 of the buses to another lender and assigned the financing on the remaining 101 buses to MCI Acceptance Corp. ("MCIAC"), a wholly owned subsidiary of MCII. In connection with the Rights Offering (see Note 17), the Company made a prepayment on the amount owed to MCIAC of $12.9 million during February 1995 (see Note 19). During 1993, the Company executed three interest rate swap agreements whereby fixed interest rates were swapped for variable interest rates. The purpose of these agreements was to hedge the interest rates related to the Company's Senior Notes and the Convertible Debentures. The five-year swap transactions totaled $150.0 million, and a deposit of $10.0 million was provided to secure the transaction. When the Company entered into a previous bank credit facility in December 1993, the deposit was returned to the Company. The net interest expense during 1995 and 1996 resulting from the interest rate swap agreements was $0.7 million and $1.5 million, respectively. During January 1994, the Company terminated a $75.0 million interest rate swap agreement. The gain resulting from the termination was $1.6 million and is being recognized evenly over the remaining term of the five-year agreement. The Company amended its two remaining interest rate swap agreements during October 1994, to lock in the future payments under the agreements until maturity in July 1998. The net result of the amendments is to ensure that these swaps will not be subject to interest rate risk. Consequently, should interest rates increase, the Company's payments under the agreements will not be adversely affected. Conversely, should interest rates decline, the Company would not receive any benefit. Under the amendments, the Company will be required to pay $4.1 million in total from December 31, 1996, through the remaining term of the five-year agreements. The Company has collateralized its payment obligations under the terminated agreements with a $1.1 million letter of credit and liens on six parcels of Company-owned real property. In January 1997, liens on the real property began to be released, and in January, 1998, all real estate collateral will be fully released. At December 31, 1996, maturities of long-term debt for the next five fiscal years ending December 31 and all years thereafter, are as follows (in thousands): 1997........................................................ $ 11,662 1998........................................................ 21,139 1999........................................................ 31,578 2000........................................................ 57,488 2001........................................................ 47,281 2002 and thereafter......................................... 35,095 -------- $204,243 ========
41 42 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 13. INCOME TAXES Income Tax Provision The income tax provision consisted of the following (in thousands):
YEARS ENDED DECEMBER 31, ------------------------- 1994 1995 1996 ------- ---- ---- Current Federal................................................. $ -- $312 $-- State................................................... (138) 62 62 ------- ---- --- Total current................................... (138) 374 62 ------- ---- --- Deferred Federal................................................. 17,000 -- -- State................................................... -- -- -- ------- ---- --- Total deferred.................................. 17,000 -- -- ------- ---- --- Income tax provision............................ $16,862 $374 $62 ======= ==== ===
Effective Tax Rate The differences, expressed as a percentage of income before taxes and extraordinary items, between the statutory and effective federal income tax rates are as follows:
YEARS ENDED DECEMBER 31, --------------------------- 1994 1995 1996 ----- ----- ----- Statutory tax rate...................................... (34.0)% (34.0)% (34.0)% Dividends received deduction............................ -- (0.1) (0.5) Non-compliance fees..................................... 0.1 0.3 (0.3) State income taxes...................................... (0.1) 0.4 1.0 Unrecognized current year benefit....................... 33.8 32.4 31.0 Reversal of recognition of deferred tax assets.......... 17.2 -- -- Other................................................... -- 3.1 3.8 ----- ----- ----- Effective tax rate.................................... 17.0% 2.1% 1.0% ===== ===== =====
42 43 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Deferred Tax Assets Significant components of deferred income taxes at December 31, 1995 and 1996, were as follows (in thousands):
DECEMBER 31, --------------------- 1995 1996 -------- -------- Deferred Tax Assets Federal and state NOL carryforwards....................... $ 23,556 $ 30,624 Reserve for injuries and damages.......................... 19,447 17,840 Book over tax depreciation and amortization............... 1,621 1,358 Other accrued expenses and reserves....................... 5,838 5,487 Other deferred tax assets................................. 666 358 -------- -------- Total deferred tax assets......................... 51,128 55,667 -------- -------- Deferred Tax Liabilities Tax over book depreciation and amortization............... 10,583 12,131 Pension cost for tax purposes in excess of books.......... 7,491 8,322 Other deferred tax liabilities............................ 192 245 -------- -------- Total deferred tax liabilities.................... 18,266 20,698 -------- -------- Net deferred tax assets..................................... 32,862 34,969 Valuation allowance......................................... (32,862) (34,969) -------- -------- Deferred tax assets, net of valuation allowance... $ -- $ -- ======== ========
A valuation allowance must be provided when it is more likely than not that the deferred income tax asset will not be recognized. As of December 31, 1993, the Company believed that a sufficient history of earnings had been established to make realization of a $17.0 million deferred income tax asset more likely than not. In the third quarter of 1994, due to the uncertainty created by the Financial Restructuring and the ongoing strategic and operational reorganization, the Company increased the valuation allowance to reserve for the $17.0 million deferred income tax asset as the Company believed it no longer met the "more likely than not" realization criteria. Future use of the deferred tax asset would normally reflect the recognition of tax expense and an equal benefit due to the reversal of the reduction of the valuation allowance, resulting in no net impact to the Company's net earnings. However, $4.9 million of the deferred tax asset arose prior to the fresh start date and, as a result, the reversal of the related valuation allowance will be used to increase capital in excess of par, rather than reduce tax expense. 43 44 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Availability and Amount of NOL's The Financial Restructuring resulted in an ownership change, as defined under Section 382 of the Internal Revenue Code (the "Code"). The provisions of the Code, as they apply to the Company, require that an annual limitation be placed on the amount of net operating loss ("NOL") carryforwards which may be utilized. Consequently, the Company's NOL carryforwards from 1994 are now subject to an annual limitation of $2.1 million. Any unused portion of the current annual limitation may be carried forward to the following year. The Company incurred a taxable loss in 1995 of $29.8 million, and estimates a 1996 taxable loss of $17.2 million. Neither the 1995 nor 1996 loss is subject to limitation under Section 382. The Company will also carry forward the unused 1995 and 1996 annual limitation of $2.1 million from the 1994 NOL carryforward. As a result, the Company will carryforward available NOL's of $78.5 million, $27.3 million of which is subject to the annual $2.1 million limitation. The NOL carryforwards expire as follows (in thousands): 2006........................................................ $ 1,100 2007........................................................ 2,900 2008........................................................ 9,800 2009........................................................ 17,700 2010........................................................ 29,800 2011........................................................ 17,200 ------- $78,500 =======
14. FAIR VALUES OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments" ("SFAS No. 107"), requires disclosure of the fair value of financial instruments. The following methods and assumptions were used by the Company in estimating the fair value disclosures for its financial instruments. For cash and cash equivalents, accounts receivable, and the revolving bank loans, the carrying amounts reported in the Consolidated Statements of Financial Position approximate fair value. The fair values of the interest rate swaps, short-term deposits and long-term insurance deposits are based upon quoted market prices at December 31, 1995 and 1996, where available. For the portion of short-term deposits and long-term insurance and security deposits where no quoted market price is available, the carrying amounts are believed to approximate fair value. For the other secured indebtedness, real estate mortgages, note payable and other long-term debt, the fair values are estimated using discounted cash flow analysis, based upon the Company's incremental borrowing rates for similar types of borrowing arrangements. The fair values of the Senior Notes and the Convertible Debentures were based upon quoted market prices at December 31, 1995 and 1996. 44 45 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) The carrying amounts and fair values of the Company's financial instruments at December 31, 1995 and 1996, are as follows (in thousands):
DECEMBER 31, 1995 DECEMBER 31, 1996 --------------------- --------------------- CARRYING FAIR CARRYING FAIR AMOUNT VALUE AMOUNT VALUE --------- --------- --------- --------- Other current assets Deposits on insurance................ $ 7,505 7,505 $ 7,090 $ 7,090 Deposits on business combinations.... -- -- 900 900 Insurance and security deposits Insurance deposits................... 41,713 41,713 40,481 40,481 Security deposits.................... 34,679 34,679 35,314 35,314 Long-term debt Interest rate swaps.................. (666) (5,346) (857) (3,929) Real estate mortgages................ (2,066) (1,333) (1,685) (1,074) Note payable......................... (15,588) (10,981) (13,452) (10,096) Senior Notes......................... (135,561) (141,980) (138,679) (146,946) Convertible Debentures............... (9,804) (9,118) (9,804) (9,730) Other long-term debt................. (417) (417) (354) (354)
15. LEASE COMMITMENTS The Company leases buses and terminals from various parties pursuant to capital and operating leases expiring at various dates through 2065. At December 31, 1996, scheduled future minimum payments for the next five fiscal years ending December 31, under the capital leases and noncancelable operating leases are as follows (in thousands):
CAPITAL OPERATING LEASES LEASES ------- --------- 1997........................................................ $ 6,710 $ 43,457 1998........................................................ 6,698 37,261 1999........................................................ 6,652 34,530 2000........................................................ 7,003 31,987 2001........................................................ 3,513 31,475 Thereafter.................................................. 10,112 105,538 ------- -------- Total minimum lease payments...................... 40,688 $284,248 ======== Amounts representing interest.......................... 11,084 ------- Present value of minimum lease payments........... $29,604 =======
For the years ended December 31, 1994, 1995 and 1996, rental expenses for operating leases (net of sublease rental income of approximately $1.7 million, $1.9 million and $2.2 million, respectively) amounted to $48.0 million, $47.8 million, and $52.4 million, respectively. Rental expenses for bus operating leases, excluding casual rents and other short term leases during peak periods, amounted to $27.5 million in 1996 and are scheduled at $31.5 million for 1997. 45 46 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 16. STOCK OPTION PLANS The Company's five stock option plans have authorized the grant of options to employees and outside directors for up to 7,939,446 shares of the Company's Common Stock. All options granted have five to 10 year terms and vest over a three to four year period of continued employment or service on the Company's board of directors. The Company has elected to continue to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" (APB 25) and related Interpretations in accounting for its employee stock options. However, pro forma information regarding net income and earnings per share is required by FASB Statement No. 123 "Accounting for Stock-Based Compensation" (SFAS 123), and has been determined as if the Company had accounted for its employee stock options under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1995 and 1996: risk-free interest rates of 6.0% and 7.0%; dividend yield of zero; volatility factor of the expected market price of the Company's Common Stock of 0.35; and a weighted-average expected life of the options of 5.7 years. The Black-Scholes option valuation model (the "Black-Scholes Model") was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. Had compensation cost for these plans been determined consistent with SFAS 123, the Company's net loss and earnings per share would have been reduced to the following:
1995 1996 -------- ------- Pro forma net loss.......................................... $(19,379) $(8,647) Pro forma earnings per share................................ $ (0.35) $ (0.15)
46 47 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) A summary of the Company's stock option activity and related information for the years ended December 31 follows:
OPTIONS OUTSTANDING SHARES ---------------------------- WEIGHTED AVERAGE AVAILABLE EXERCISE PER SHARE VALUE OF FOR GRANT SHARES PRICE PER SHARE OPTIONS GRANTED (1) ---------- ---------- --------------- ------------------- Balance, December 31, 1993........... 1,381,136 2,070,245 $9.81-$20.63 New shares authorized.............. 20,000 -- -- Options granted.................... (1,380,700) 1,380,700 $2.06-$10.50 N/A(2) Options exercised.................. -- (1,370) $9.81 Terminated or canceled............. 1,537,324 (1,537,324) $2.84-$20.63 ---------- ---------- Balance, December 31, 1994........... 1,557,760 1,912,251 $2.06-$20.63 New shares authorized.............. 4,365,810 -- -- Options granted.................... (3,892,186) 3,892,186 $1.66-$4.19 $1.16 Options exercised.................. -- (9,400) $2.84 Terminated or canceled............. 673,650 (683,650) $1.66-$20.63 ---------- ---------- Balance, December 31, 1995........... 2,705,034 5,111,387 $1.66-$20.63 New shares authorized.............. -- -- -- Options granted.................... (1,352,000) 1,352,000 $0-$4.25 $1.52 Options exercised.................. -- (100,450) $1.66-$3.09 Terminated or canceled............. 418,000 (418,000) $1.66-$20.63 ---------- ---------- Balance, December 31, 1996........... 1,771,034 5,944,937 $0-$20.63 ========== ==========
- --------------- (1) Value determined as of date of issue using the Black-Scholes Model and the stated assumptions. (2) SFAS 123 does not require any options granted before January 1, 1995 to be valued. The table below details the Company's options outstanding by related option exercise price.
OPTIONS RANGE OF OUTSTANDING EXERCISE PRICE ----------- -------------- 2,523,366 $ 0 - 3.00 3,176,020 3.09 - 5.44 245,551 9.81 - 20.625 --------- 5,944,937 =========
Of the options outstanding at year-end, 2,150,515 were exercisable at December 31, 1996. 17. STOCKHOLDERS' EQUITY An amendment to the Company's Certificate of Incorporation was approved at a special meeting of stockholders on December 21, 1994. The amendment increases the number of shares of Common Stock of the Company authorized for issuance from 50,000,000 shares to 100,000,000 shares. The amendment was sought principally to permit the consummation of the Financial Restructuring of the Company involving an offer (the "Tender Offer") to convert the Company's Convertible Debentures, into Common Stock of the Company at an increased conversion rate and offer (the "Rights Offering") pursuant to which the existing holders of Common Stock had the right to subscribe for and purchase, in the aggregate, $35.0 million of Common Stock, as well as to provide for future flexibility to take advantage of business or financial opportunities. On December 22, 1994, the Company announced the completion of the Tender Offer for its Convertible Debentures with $89.0 million, or 90.0%, of the outstanding Convertible Debentures being tendered and converted into approximately 22.8 million shares of the Company's Common Stock. At December 31, 1994, the Rights Offering for approximately 16.3 million shares of Common Stock was fully committed and 47 48 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) $19.9 million of the related proceeds had been received. The Company received the balance of the proceeds of the Rights Offering in January 1995. In connection with the Financial Restructuring, the Company incurred approximately $6.8 million in professional fees and prepaid $12.9 million in debt owed to MCIAC (see Note 19). The Company is authorized to issue 10,000,000 shares of $.01 par value preferred stock. The Board of Directors may designate and issue one or more series of preferred stock from the authorized and unissued shares of preferred stock. During 1994, the Company designated 500,000 shares of preferred stock as "Series A" junior preferred stock in connection with the stockholders rights plan discussed below. No preferred stock had been issued as of December 31, 1996. On March 22, 1994, the Company's Board of Directors adopted a stockholder rights plan (the "Rights Plan"). The Rights Plan provides for a dividend distribution of a Preferred Stock Purchase Right (the "Rights") for each share of Common Stock held by stockholders of record at the close of business on April 4, 1994. The Rights will become exercisable only in the event that, with certain exceptions, an acquiring party accumulates 15% or more of the Company's voting stock. The Rights have no voting rights and are not entitled to receive dividends. The Rights will expire on March 22, 2004. Each Right will entitle the holder to buy 1/100th of a share of Series A preferred stock at a price of $35. The Series A preferred stock would also have one vote, voting together with the Common Stock upon issuance. In addition, upon the occurrence of certain events, holders of the Rights will be entitled to purchase either Common Stock or shares in an acquiring entity at 50% of the market value. The Company will be entitled to redeem the Rights at $.01 per Right at any time through the tenth day following the acquisition of a 15% position in its voting stock. In October 1995, the Company completed a sale of 10,004,144 shares of Common Stock. 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. The Company used $9.7 million of the net proceeds it received for the Senior Note Repurchase. 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. 18. COMMITMENTS AND CONTINGENCIES 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 against the Company and certain of its former officers and directors. The suits sought unspecified damages for securities laws violations as a result of statements made in public reports and press releases and to securities analysts during 1993 and 1994 that were 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) were 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 were pending under a case styled In re Greyhound Securities Litigation, Civil Action 3-94-CV-1793-G. A joint pretrial order was entered in the class action litigation which consolidated 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 the Company, Frank J. Schmieder, J. Michael Doyle, Phillip W. Taff, Robert R. Duty, Don T. Seaquist, Charles J. Lee, Charles A. Lynch and Smith Barney 48 49 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Incorporated as defendants. Messrs. Lee, Lynch and Taff 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. On October 3, 1996, the Court ruled in favor of the Company and all other defendants, granting defendants' motions to dismiss. Pursuant to the Court's order, the complaints were dismissed, with leave granted to the plaintiffs to refile amended complaints within 20 days thereafter. On October 23, 1996, an amended complaint was tendered to the Court. All seven class representatives involved in the prior complaints were dropped from the case. A new purported class plaintiff, John Clarkson, was named and a motion was filed seeking leave to permit Mr. Clarkson to intervene as the new class representative. The amended complaint alleges a class period of May 4, 1993 to October 26, 1993 and has been brought only on behalf of holders of Common Stock. The amended complaint names the same defendants involved in the dismissed cases (the Company, Messrs. Schmieder, Doyle, Duty and Seaquist and Smith Barney Incorporated); no new defendants were added and none were dropped. In December 1996, the defendants filed responses to plaintiff's motion for intervention. In January 1997, the plaintiff filed a reply brief. Therefore, all briefing regarding the intervention has been completed. The Court has advised the parties that no responsive pleading need be filed to the amended complaint until such time as the Court rules on the motion for intervention filed by Mr. Clarkson. 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 laws 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, was 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 was pending. In September 1995, the defendants' motion was granted, and the matter was transferred and was consolidated into the class action litigation described above. On October 29, 1996, a purported class action lawsuit was brought by a purported holder of Common Stock against the Company, certain of its former officers and directors and Smith Barney and Morgan Stanley & Company, Inc. The suit seeks unspecified damages for alleged federal and Texas state securities laws violations in connection with a Common Stock offering made by the Company in May 1993. The suit, filed in the 44th Judicial District Court of Dallas County, Texas, is styled John Clarkson v. Greyhound Lines, Inc., Frank Schmieder, J. Michael Doyle, Robert R. Duty, Don T. Seaquist, Smith Barney, Inc. and Morgan Stanley & Company, Inc., Case No. 96-11329-B. Plaintiff, John Clarkson, is the same individual who seeks to intervene in the Federal Court litigation described above, and the same law firms have appeared for the plaintiff in both cases. On December 20, 1996, the defendants filed their answers to the lawsuit and pleas in abatement asking the Court to stay all proceedings pending resolution of the federal intervention motion and 49 50 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) federal class action lawsuit. The defendants have also filed motions to quash and motions for protective order in response to plaintiff's requests for production of documents. On February 28, 1997, the suit was transferred to a different judge in the 68th Judicial District 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 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 is conducting a formal, non-public investigation into possible securities laws violations allegedly involving the Company and certain of its former officers, directors and employees and other persons. The Commission's Order of Investigation (the "Order of Investigation") states that the Commission 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 Commission 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 Commission 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 Commission served a document subpoena on the Company requiring the production of documents, most of which the Company voluntarily produced to the Commission in late 1994. The Company has fully cooperated with the Commission's investigation of these matters. The Company has had no contact with the Commission in connection with the investigation since January 1996. The probable outcome of this investigation cannot be predicted at this stage in the proceeding. INSURANCE COVERAGE The STB has granted the Company authority to self-insure its automobile liability exposure for interstate passenger service up to a maximum level of $5.0 million per occurrence. To maintain self-insurance authority, the Company is required to maintain a tangible net worth of $10.0 million (as of December 31, 1996, the Company's tangible net worth was $119.9 million) and to maintain a $15.0 million trust fund (currently fully funded) to provide security for payment of claims. Subsequent to the self-insurance grant by the STB, 38 states granted the Company the authority to self-insure its intrastate automobile liability exposure. The Company maintains comprehensive automobile liability and general liability insurance to insure its assets and operations subject to a $1.5 million self-insured retention per occurrence. The Company also maintains property insurance subject to a $0.1 million deductible per occurrence, and maintains workers compensation insurance, subject to a $1.0 million deductible per occurrence. Insurance coverage and risk management expense are key components of the Company's cost structure. The loss of self-insurance authority from the STB or a decision by the Company's insurers to modify the Company's program substantially, by either increasing cost, reducing availability or increasing collateral, could have a materially adverse effect on the Company's financial condition. 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, 78 locations have been identified as sites 50 51 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) requiring potential clean-up and/or remediation as of December 31, 1996. The Company has estimated the clean-up and/or remediation costs of these sites to be $3.8 million of which approximately $0.5 million is indemnifiable by the predecessor owner of Greyhound's domestic bus operations now known as Viad Corp. The Company has no reason to believe that Viad Corp will not fulfill its indemnification obligations to the Company. However, if Viad Corp does not fulfill such obligations, the Company could have liability with respect to those matters. Additionally, the Company has a potential liability with respect to two Superfund sites where the Company and other parties face exposure for costs related to the clean-up of those sites. Based on the EPA's 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 total environmental reserve of $3.5 million, at December 31, 1996, a portion of which has also been recorded as a receivable from Viad Corp for indemnification. The environmental reserve relates to sites identified for potential clean-up and/or remediation and represents the present value of estimated cash flows discounted at 8.0%. Management believes that adequate accruals have been made related to all known environmental matters. At December 31, 1996, clean-up and/or remediation costs under the plan are as follows (in thousands): 1997........................................................ $1,403 1998........................................................ 1,065 1999........................................................ 673 2000........................................................ 424 Thereafter.................................................. 185 ------ Total environmental expenditures.................. 3,750 ------ Amounts representing interest............................... 281 ------ Reserve for environmental expenditures...................... $3,469 ======
POTENTIAL PENSION PLAN FUNDING REQUIREMENTS The Company maintains five defined benefit pension plans, the most significant of which (the "ATU Plan") covers approximately 16,500 current and former employees, fewer than 1,300 of which are active employees of the Company. The ATU Plan was closed to new participants in 1983 and, as a result, over 80% of its participants are over the age of 50. For financial reporting and investment planning purposes, the Company currently uses an actuarial table that closely matches the actual experience related to the existing participant population. As a result of legislation enacted in 1994 by the United States Congress, the Company may be required to begin measuring its funding obligation under the ATU Plan utilizing an actuarial table prescribed by such legislation. If so required, the Company currently estimates, based on assumed rates of return on the ATU Plan's investments, that it would be required to begin making contributions to the ATU Plan beginning no earlier than 1998 in an aggregate amount over the next five years ranging from approximately $6.0 million to approximately $30.0 million. If the ATU Plan is unable to attain such assumed rates of return, such contributions could be higher. Although the Company is exploring whether it may be able to obtain relief from this requirement, there is no assurance that the Company will be able to obtain such relief, that the ATU Plan will be able to obtain the assumed rates of return or that contributions to the ATU Plan will not be significant. 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 and employment-related claims. Although these lawsuits involve a variety of different facts and theories of 51 52 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 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. 19. RELATED PARTY TRANSACTIONS Motor Coach Industries International, Inc. In connection with the Rights Offering, Transportation Manufacturing Operations, Inc. ("TMO"), a wholly owned subsidiary of MCII, agreed to act as a standby purchaser. MCI, a subsidiary of TMO, is the Company's principal supplier of new motor coaches. TMO assigned its standby purchase obligations to Motor Coach Industries Limited, which purchased 6,004,144 shares in the Rights Offering in January 1995, thus becoming a beneficial owner of greater than 5% of the Company's Common Stock. This stock was sold, in its entirety, in October 1995. As an inducement to serve as a standby purchaser, the Company paid TMO fees of approximately $524,000. In addition, the Company extended the term of the Bus Purchase Requirements Agreement dated March 18, 1987 between the Company, MCI and Transit Bus International, Inc., which also is a subsidiary of MCII, from March 18, 1997 to March 18, 1998. The Company must purchase at least 75% of its new bus requirements pursuant to that agreement. The Company also agreed to prepay debt owed to MCI Acceptance Corp. ("MCIAC"), a wholly owned subsidiary of MCII. This pre-payment, in the amount of $12.9 million, was made in February 1995. The Company's President and Chief Executive Officer, Craig R. Lentzsch, previously served as Executive Vice President and Chief Financial Officer of MCII where he had been employed from 1992 to November 1994. Universal Coach Parts, Inc. Universal Coach Parts, Inc. ("UCP") is a nationwide distributor of service parts and since December 1992 has provided inventory and inventory management services for the Company. UCP is also a wholly owned subsidiary of MCII. For the years ended December 31, 1994, 1995 and 1996, the Company paid $11.5 million, $15.2 million, and $15.0 million, respectively, to UCP for the purchase of inventory and inventory management services. Additionally, at December 31, 1995 and 1996, the Company included in its Consolidated Statements of Financial Position net amounts payable to UCP of $1.4 million and $1.3 million, respectively. Connor, Clark & Company, Ltd. Connor, Clark & Company, Ltd. ("Connor Clark"), formerly the Company's largest shareholder, agreed to act as a standby purchaser in the Rights Offering with respect to up to 650,000 shares, all of which were purchased by it upon the conclusion of the Rights Offering. As an inducement to serve as a standby purchaser, the Company paid Connor Clark fees of approximately $84,000. Connor Clark and certain of its affiliates tendered an aggregate of $1,338,000 principal amount of Convertible Debentures in the Tender Offer on the same basis as the other holders of the Convertible Debentures. 52 53 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) Herbert Abramson, Director and Vice President of Connor Clark, served on the Company's Board of Directors from September 21, 1994 until his resignation on October 26, 1995. Snyder Capital Management, Inc. In connection with the Rights Offering, Snyder Capital Management, Inc., on behalf of 49 accounts managed by it (the "SCM Accounts"), committed to oversubscribe for up to an aggregate of 2,181,977 shares in the Rights Offering. In consideration for the committed oversubscription, the Company paid each SCM Account fees of approximately $282,000. Put/Call Agreement with Certain Shareholder In June 1995, the Company entered into a Put/Call agreement with a certain shareholder in which the shareholder was to purchase, on the market, up to $15.0 million face amount of the Company's Senior Notes. In December 1995, the Company exercised its option to purchase the $10.7 million aggregate principal of its Senior Notes held by the shareholder for the purchase price of $9.7 million, as specified under the terms of the agreement. The completion of this transaction satisfied each party's obligations under the agreement, and it has been terminated. Frederick F. Richards Frederick F. Richards has been engaged by the Company as an independent management consultant on an at-will basis since November 1994, supplying consulting services to the Company on a variety of operational and technology issues. Mr. Richards received $160,000 and $180,000 for these services in 1995 and 1996, respectively, from the Company. Mr. Richards is the son-in-law of A. A. Meitz, a director of the Company since November 21, 1995. 20. SUBSEQUENT EVENT (UNAUDITED) Subsequent to December 31, 1996, the Company signed a definitive agreement to acquire all the stock of ASI Associates, Inc. (Carolina Trailways), a regional bus company serving the mid-Atlantic. The purchase price will be $20.3 million and will be paid in cash or a combination of cash and Common Stock. The transaction will require approval of the STB. The purchase will be accounted for using the purchase method of accounting. The Company is currently in the process of offering $150.0 million of senior notes due 2007 and 2.4 million shares of convertible exchangeable preferred stock, with an aggregate liquidation preference of $60.0 million (the "Offerings"). The Company plans to use the net proceeds from the Offerings to (i) retire the Company's Senior Notes and interest rate swap agreements; (ii) fund the acquisition of Carolina Trailways; and (iii) acquire four bus terminals (currently leased by the Company). The remaining proceeds will be used to repay borrowings under the Revolving Credit Facility. 53 54 GREYHOUND LINES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED) 21. QUARTERLY FINANCIAL DATA (UNAUDITED) Selected unaudited quarterly financial data for the years ended December 31, 1995 and 1996 are as follows (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH YEAR ENDED DECEMBER 31, 1995 QUARTER QUARTER QUARTER QUARTER ---------------------------- -------- -------- -------- -------- Operating revenues................................. $131,513 $161,035 $198,587 $165,986 Operating expenses................................. 143,360 163,879 176,623 163,896 -------- -------- -------- -------- Operating income (loss)............................ (11,847) (2,844) 21,964 2,090 Interest expense................................... 6,868 7,013 6,606 6,320 Income tax provision............................... 2 26 25 321 -------- -------- -------- -------- Net income (loss).................................. $(18,717) $ (9,883) $ 15,333 $ (4,551) ======== ======== ======== ======== Net income (loss) per share of Common Stock: Primary.......................................... $ (0.36) $ (0.18) $ 0.27 $ (0.08) ======== ======== ======== ======== Fully diluted.................................... $ (0.36) $ (0.18) $ 0.27 $ (0.08) ======== ======== ======== ========
FIRST SECOND THIRD FOURTH YEAR ENDED DECEMBER 31, 1996 QUARTER QUARTER QUARTER QUARTER ---------------------------- -------- -------- -------- -------- Operating revenues................................. $141,643 $172,256 $208,046 $178,913 Operating expenses................................. 156,499 171,104 181,659 170,792 -------- -------- -------- -------- Operating income (loss)............................ (14,856) 1,152 26,387 8,121 Interest expense................................... 6,626 6,637 6,955 7,128 Income tax provision (benefit)..................... 63 48 34 (83) -------- -------- -------- -------- Net income (loss).................................. $(21,545) $ (5,533) $ 19,398 $ 1,076 ======== ======== ======== ======== Net income (loss) per share of Common Stock: Primary.......................................... $ (0.37) $ (0.10) $ 0.33 $ 0.02 ======== ======== ======== ======== Fully diluted.................................... $ (0.37) $ (0.10) $ 0.33 $ 0.02 ======== ======== ======== ========
54 55 SCHEDULE II GREYHOUND LINES, INC. AND SUBSIDIARIES(a) VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1994, 1995 AND 1996 (IN THOUSANDS)
ADDITIONS ADDITIONS BALANCE AT CHARGED TO CHARGED TO BALANCE BEGINNING COSTS AND OTHER AT END CLASSIFICATION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD -------------- ---------- ---------- ---------- ---------- ---------- December 31, 1994: Allowance for Doubtful Accounts... $ 707 $ 926 $ -- $ (793)(b) $ 840 Inventory Reserves................ -- 61 -- -- 61 Accumulated Amortization of Intangible Assets.............. 5,533 4,777 -- (666)(c)(e) 9,644 Reserves for Injuries and Damages........................ 41,770 66,355 -- (35,782)(d) 72,343 ------- ------- ------- -------- ------- Total Reserves and Allowances................ $48,010 $72,119 $ -- $(37,241) $82,888 ======= ======= ======= ======== ======= December 31, 1995: Allowance for Doubtful Accounts... $ 840 $ 975 $(1,011) $ (587)(b) $ 217 Inventory Reserves................ 61 48 -- -- 109 Accumulated Amortization of Intangible Assets.............. 9,644 5,790 (533) -- 14,901 Reserves for Injuries and Damages........................ 72,343 33,788 -- (40,470)(d) 65,661 ------- ------- ------- -------- ------- Total Reserves and Allowances................ $82,888 $40,601 $(1,544) $(41,057) $80,888 ======= ======= ======= ======== ======= December 31, 1996: Allowance for Doubtful Accounts... $ 217 $ 585 $ (155) $ (406)(b) $ 241 Inventory Reserves................ 109 (14) -- -- 95 Accumulated Amortization of Intangible Assets.............. 14,901 5,613 -- (1,409)(c) 19,105 Reserves for Injuries and Damages........................ 65,661 23,443 -- (29,141)(d) 59,963 ------- ------- ------- -------- ------- Total Reserves and Allowances................ $80,888 $29,627 $ (155) $(30,956) $79,404 ======= ======= ======= ======== =======
- --------------- (a) This schedule should be read in conjunction with the Company's audited consolidated financial statements and related notes thereto. (b) Write-off of uncollectible receivables net of recovery of bad debt. (c) Write-off of other assets and deferred costs. (d) Payments of settled claims. (e) Write-off of software. 55 56 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 57 57 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth certain information regarding the directors and executive officers of the Company as of March 7, 1997. All executive officers hold office at the pleasure of the Board of Directors.
NAME AGE OFFICE ---- --- ------ Craig R. Lentzsch................. President, Chief Executive Officer and Director 48 (Class I) Jack W. Haugsland................. Executive Vice President and Chief Operating 57 Officer Steven L. Korby................... Executive Vice President and Chief Financial 51 Officer J. Floyd Holland.................. 61 Senior Vice President -- Operations Thomas G. Plaskett................ 53 Chairman of the Board and Director (Class I) Richard J. Caley.................. 70 Director (Class III) Linda Chavez...................... 49 Director (Class III) A. A. Meitz....................... 59 Director (Class III) Frank L. Nageotte................. 70 Director (Class I) Alfred E. Osborne, Jr............. 52 Director (Class II) Stephen M. Peck................... 62 Director (Class II) Ernest P. Werlin.................. 52 Director (Class II)
Craig R. Lentzsch was elected to the Board of Directors on August 26, 1994. Effective November 15, 1994, Mr. Lentzsch became President and Chief Executive Officer of the Company. Mr. Lentzsch also served as Chief Financial Officer of the Company from November 22, 1994 to April 10, 1995. Mr. Lentzsch previously served as Executive Vice President and Chief Financial Officer of Motor Coach Industries International, Inc. where he had been employed from 1992 to 1994; as President and Chief Executive Officer of Continental Asset Services, Inc. from 1991 to 1992; as a private consultant to, and investor in, Storehouse, Inc. from 1983 to 1991 and Communications Partners, Ltd. from 1989 to 1991; as Vice Chairman, Executive Vice President and a Director of the Company from March 1987 to December 1989; and as Co-founder and President of BusLease, Inc. from 1980 to 1989. Mr. Lentzsch also serves as a director of Hastings Entertainment, Inc. and Enginetech, Inc. Jack W. Haugsland joined the Company on May 15, 1995 as Executive Vice President and Chief Operating Officer. From 1992 to 1995 Mr. Haugsland was President and Chief Executive Officer of Gray Line Worldwide. From 1990 to 1992 Mr. Haugsland held the position of Senior Vice President of Operations for the Company; and from 1986 to 1990 Mr. Haugsland served as President of Greyhound Travel Services, Inc., a former subsidiary of the Company. Mr. Haugsland began employment with the Company's predecessor in 1964. Steven L. Korby joined the Company as Executive Vice President and Chief Financial Officer effective April 13, 1995. From April 13, 1995 to May 23,1996, Mr. Korby also served as Treasurer for the Company. Prior to joining the Company, Mr. Korby was President of Armstrong Capital Corporation from 1994 to 1995 and served as Executive Vice President, Chief Financial Officer and Chief Technology Officer of Neodata Corporation and its predecessors from 1983 to 1993. J. Floyd Holland has served as Senior Vice President -- Operations since September 1994 and is responsible for equipment maintenance, engineering, driver and bus operations and customer service. From October 1992 to September 1994, he served as Vice President -- Maintenance of the Company. From July 1987 to September 1992, he was Vice President -- Fleet Operations and was responsible for fleet planning and allocation. From October 1979 to July 1987, Mr. Holland served as Vice President of Operations and Transportation of Trailways. Mr. Holland held various management positions with predecessor companies since he began employment in 1958 with Trailways Lines, Inc. Mr. Holland has been a member of the Board of Directors and Executive Committee of the National Bus Traffic Association since 1991. 58 58 Thomas G. Plaskett was elected to the Board of Directors on May 10, 1994. From August 9, 1994, to November 14, 1994, Mr. Plaskett served as Interim President and Chief Executive Officer of the Company, and from October 19, 1994 to November 22, 1994, served as Acting Chief Financial Officer of the Company. On February 27, 1995, Mr. Plaskett was elected as the Company's Chairman of the Board. Since 1991, Mr. Plaskett has served as Managing Director of Fox Run Capital Associates, a privately held advisory firm. On September 16, 1996, Mr. Plaskett was elected Chairman of the Board of Neostar Retail Group, which filed for bankruptcy in September 1996 and is in the process of being liquidated. Previously, Mr. Plaskett served as President and Chief Executive Officer of Pan Am Corporation from 1988 to 1991 and as President and Chief Executive Officer of Continental Airlines from 1986 to 1987. Mr. Plaskett also serves as a director of Tandy Corporation, Neostar Retail Group, Probex Corporation and Smart and Final, Inc. Richard J. Caley was appointed a Director of the Company on October 31, 1991. From 1978 to 1982, Mr. Caley served as President of Wilson Sporting Goods Co., a division of PepsiCo Inc. From 1971 to 1978, Mr. Caley served as President of the PepsiCo Transportation Division and Chairman of the Board and Chief Executive Officer of North American Van Lines. Mr. Caley retired in 1982, although from May 15, 1989, to November 15, 1989, Mr. Caley served as President, Chief Operating Officer and Director of HEM Pharmaceuticals. Linda Chavez was elected to the Board of Directors on November 21, 1995. Ms. Chavez has been President of the Center for Equal Opportunity since 1995. From 1988 to 1995, Ms. Chavez was a Senior Fellow at the Manhattan Institute for Policy Research. Ms. Chavez, a political commentator, writes a syndicated newspaper column and has contributed articles to USA Today, The Wall Street Journal, The New Republic and the Washington Post. Ms. Chavez has appeared on The McLaughlin Group and NewsHour with Jim Lehrer. In 1985, Ms. Chavez was appointed Director of the Office of Public Liaison for the White House and from 1983 to 1985 was Director of the U.S. Commission on Civil Rights. A.A. Meitz was elected to the Board of Directors on November 21, 1995. Mr. Meitz is a retired Senior Vice President of Booz Allen & Hamilton where he was employed from 1965 to 1994. From 1981 to 1983 Mr. Meitz served as a member of that firm's board of directors. Mr. Meitz also serves as a director of: Banctec, Inc., Associated Materials Corporation, and Northern Trust Bank of Texas. He is a member of the Executive Board of the Cox School of Business at Southern Methodist University. Mr. Meitz was also the Chairman of the Texas Senate Advisory Committee on Business, Technology and Education from 1984 to 1985. Frank L. Nageotte was elected to the Board of Directors on February 27, 1995. Mr. Nageotte was a director of Motor Coach Industries International, Inc. from 1993 to 1995, and Greyhound Lines, Inc. from 1987 to 1990 and currently serves as a director of Citizens Auto Stages. From 1982 to 1987 Mr. Nageotte served as President and Chief Operating Officer of The Greyhound Corporation, where he was the Chief Executive Officer of the Company's predecessor from 1978 to 1982. Mr. Nageotte worked for the Company's predecessor for 40 years. Alfred E. Osborne, Jr. was elected to the Board of Directors on May 10, 1994. Since 1987, Dr. Osborne has served as Director of the Harold Price Center for Entrepreneurial Studies Center and Associate Professor of Business Economics in the John E. Anderson Graduate School of Management at the University of California at Los Angeles. Dr. Osborne formerly served as Director of the MBA Program, Assistant Dean and Associate Dean at UCLA. Dr. Osborne is also an independent general partner of Technology Funding Venture Partners V, a trustee of the Sierra Trust Funds, and a director of Nordstrom, Inc., SEDA Specialty Packaging Corporation, The Times Mirror Company and United States Filter Corporation. Stephen M. Peck was elected to the Board of Directors on May 31, 1995. Mr. Peck is currently a money manager at Gilder, Gagnon, Home & Co. From March 1989 to December 1994, Mr. Peck was a General Partner of SMP Associates, L.P., an investment partnership. Formerly he was a Managing and Special Partner of Weiss, Peck & Greer and participated in its founding in 1970. From 1986 to mid-1988 he served as Chief Investment Officer and a director of Reliance Insurance Company. From May 1985 to January 1988, Mr. Peck served as a director of Tiger International. He was elected a Governor of the New York Stock Exchange, Inc. in 1969, served as Vice Chairman of the Board of Governors from May 1971 to July 1972, and 59 59 served as Chairman of its Surveillance Committee from December 1974 to May 1978. Mr. Peck served as a member of the Audit Committee of the City of New York from February 1979 to February 1981. Mr. Peck is currently Chairman of the Boards of Trustees of the Mount Sinai Hospital and School of Medicine, a member of the Board of Trustees of the Manhattan Institute for Policy Research, and a member of the Board of the Jewish Theological Seminary of America. Ernest P. Werlin was elected to the Board of Directors on May 31, 1995. Mr. Werlin is currently President of High View Capital. He also served as Co-Chairman of the Board of Jamesway Corporation from 1995 to November 1996. From 1992 to March 1995, Mr. Werlin was employed by Steinhardt Management. From April 1990 to 1992, Mr. Werlin was a private investor. From January 1989 to April 1990, Mr. Werlin was Managing Director of Stamford Capital. From August 1988 to December 1988, Mr. Werlin was an Associate Managing Director of Bear, Stearns & Company. He was employed by Morgan Stanley & Company from April 1980 to May 1988 as the Chairman of the Fixed Income New Product Development Committee and as Managing Director, Manager of Corporate Bond Trading desk and Special Situations. From April 1978 to April 1980, Mr. Werlin served as Co-Manager of the Corporate Bond Department of Donaldson, Lufkin & Jenrette. He also served as Senior Administrator to the President of Lehman Brothers from June 1976 to April 1978. Additionally, from July 1991 to June 1992, Mr. Werlin was a director of Todd Shipyards. There is no family relationship between any of the directors or nominees for director and executive officers of the Company. SECTION 16(a) DELINQUENT FILER DISCLOSURE Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than 10% of the Company's Common Stock, to file with the Securities and Exchange Commission (the "SEC") initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock and other equity securities of the Company. Officers, directors and greater than 10% beneficial owners of the Company are required by SEC regulation to furnish the Company with copies of all Section 16(a) reports they file. To the Company's knowledge, based solely on a review of the copies of such reports furnished to the Company and written representations that no other reports were required, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% beneficial owners were complied with for the year ended December 31, 1996. ITEM 11. EXECUTIVE COMPENSATION "Executive Compensation" in the definitive proxy statement is incorporated herein by reference. 60 60 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth the ownership of the outstanding shares of Common Stock as of February 28, 1997 (except as otherwise noted below), held by persons believed by the Company to beneficially own more than 5% of the outstanding shares of the Common Stock, by directors of the Company, by the Chief Executive Officer and four other most highly compensated executive officers of the Company (the "Named Executive Officers") during 1996 and by all the directors, Named Executive Officers and executive officers of the Company as a group, and the percentage of the outstanding shares of Common Stock represented thereby. Except as otherwise noted below, each of the directors, Named Executive Officers, executive officers and 5% stockholders has sole voting and investment power with respect to all shares beneficially owned by them.
AMOUNT NAME AND ADDRESS BENEFICIALLY PERCENT OF BENEFICIAL OWNER OWNED OF CLASS ------------------- ------------ -------- Snyder Capital Management, Inc.............................. 8,747,001 15.0% 350 California Street Suite 1460 San Francisco, California 94104(a)
AMOUNT BENEFICIALLY PERCENT NAME OF BENEFICIAL OWNER OWNED OF CLASS ------------------------ ------------ -------- Named Executive Officers and Directors(b): Thomas G. Plaskett........................................ 110,666 * Richard J. Caley.......................................... 62,023 * Linda Chavez.............................................. 3,333 * Craig R. Lentzsch......................................... 739,109 1.3% A. A. Meitz............................................... 3,333 * Frank L. Nageotte......................................... 17,776 * Alfred E. Osborne, Jr..................................... 23,661 * Stephen M. Peck........................................... 58,066 * Ernest P. Werlin.......................................... 6,666 * Jack W. Haugsland......................................... 183,333 Steven L. Korby........................................... 145,000 * Bradley T. Harslem(c)..................................... 140,000 * J. Floyd Holland.......................................... 174,879 * All directors, Named Executive Officers and other executive officers of the Company as a group (26 persons)(b)............................................ 2,195,884 3.6%
- --------------- * Less than 1%. (a) The information is as of February 28, 1997 based on information reported to the Company by Snyder Capital Management, Inc. As of that date, Snyder Capital Management, Inc. reported that it had shared power to vote 526,262 shares, no voting power for 816,697 shares and shared power to dispose of 526,262 shares. 61 61 (b) The following table sets forth, as of February 28, 1997, the details of Common Stock deemed beneficially owned by each of the directors and Named Executive Officers of the Company and by all directors, Named Executive Officers and executive officers of the Company as a group:
COMMON COMMON STOCK STOCK BENEFICIALLY OPTIONS OWNED EXERCISABLE TOTAL ------------ ------------ --------- Thomas G. Plaskett.......................................... -- 110,666 110,666 Richard J. Caley............................................ 5,000 57,023 62,023 Linda Chavez................................................ -- 3,333 3,333 Craig R. Lentzsch........................................... 57,109 682,000 739,109 A. A. Meitz................................................. -- 3,333 3,333 Frank L. Nageotte(1)........................................ 10,000 7,776 17,776 Alfred E. Osborne, Jr.(1)................................... 6,328 17,333 23,661 Stephen M. Peck............................................. 51,400 6,666 58,066 Ernest P. Werlin............................................ -- 6,666 6,666 Jack W. Haugsland........................................... 20,000 163,333 183,333 Steven L. Korby............................................. -- 145,000 145,000 Bradley T. Harslem.......................................... 12,500 127,500 140,000 J. Floyd Holland(2)......................................... 4,229 170,650 174,879 All directors, Named Executive Officers and other executive officers of the Company as a group (26 persons)........... 176,155 2,019,729 2,195,884
- --------------- (1) Beneficial ownership of shares is disclaimed by the following named persons in the amounts indicated: Mr. Nageotte -- 10,000 shares; Dr. Osborne -- 3,164 shares. (2) The named person disclaims beneficial ownership of 2,120 shares currently held by the Greyhound Lines 401(k) trust. (c) Mr. Harslem resigned as the Company's Senior Vice President -- Information Services and Chief Information Officer effective December 31, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Motor Coach Industries International, Inc. In connection with a rights offering completed in January 1995, Transportation Manufacturing Operations, Inc. ("TMO"), a wholly owned subsidiary of MCII, agreed to act as a standby purchaser. Motor Coach Industries, Inc. ("MCI"), a subsidiary of TMO, is the Company's principal supplier of new motor coaches. TMO assigned its standby purchase obligations to Motor Coach Industries Limited, which purchased 6,004,144 shares in the rights offering in January 1995, thus becoming a beneficial owner of greater than 5% of Common Stock. This stock was sold, in its entirety, in October 1995. As an inducement to serve as a standby purchaser, the Company paid TMO fees of approximately $524,000. In addition, the Company extended the term of the Bus Purchase Requirements Agreement dated March 18, 1987 between the Company, MCI and Transit Bus International, Inc., which also is a subsidiary of MCII, from March 18, 1997 to March 18, 1998. The Company must purchase at least 75% of its new bus requirements, if any, pursuant to that agreement. The Company also agreed to prepay debt owed MCI Acceptance Corp. ("MCIAC"), a wholly owned subsidiary of MCII. This pre-payment in the amount of $12.9 million was made in February 1995. The Company's President and Chief Executive Officer, Craig R. Lentzsch, previously served as Executive Vice President and Chief Financial Officer of MCII where he had been employed from 1992 to November 1994. 62 62 Universal Coach Parts, Inc. Universal Coach Parts, Inc. ("UCP") is a nationwide distributor of service parts and since December 1992 has provided inventory and inventory management services for the Company. UCP is also a wholly owned subsidiary of MCII. For the years ended December 31, 1994, 1995 and 1996, the Company paid $11.5 million, $15.2 million and $15.0 million, respectively, to UCP for the purchase of inventory and inventory management services. Additionally, at December 31, 1995 and 1996, the Company included in its Consolidated Statements of Financial Position, net amounts payable to UCP of $1.4 million and $1.3 million, respectively. Connor, Clark & Company, Ltd. Connor, Clark & Company, Ltd. ("Connor Clark"), formerly the Company's largest shareholder, agreed to act as a standby purchaser in the January 1995 rights offering with respect to up to 650,000 shares, all of which were purchased by it upon the conclusion of the Rights Offering. As an inducement to serve as a standby purchaser, the Company paid Connor Clark fees of approximately $84,000. Connor Clark and certain of its affiliates tendered an aggregate of $1,338,000 principal amount of Convertible Debentures in the financial restructuring completed in December 1994 on the same basis as the other holders of the Convertible Debentures. Herbert Abramson, Director and Vice President of Connor Clark, served on the Company's Board of Directors from September 21, 1994 until his resignation on October 26, 1995. Snyder Capital Management, Inc. In connection with the January 1995 rights offering, Snyder Capital Management, Inc., on behalf of 49 accounts managed by it (the "SCM Accounts"), committed to oversubscribe for up to an aggregate of 2,181,977 shares in the rights offering. In consideration for the committed oversubscription, the Company paid each SCM Account fees of approximately $282,000. Put/Call Agreement with Certain Shareholders In June 1995, the Company entered into a Put/Call agreement with a certain shareholder in which the certain shareholder was to purchase, on the market, up to $15.0 million face amount of the Company's Senior Notes. In December 1995, the Company exercised its option to purchase the $10.7 million aggregate principal of its Senior Notes held by the shareholder for the purchase price of $9.7 million, as specified under the terms of the agreement. The completion of this transaction satisfied each party's obligations under the agreement and it has been terminated. Frederick F. Richards Frederick F. Richards has been engaged by the Company as an independent management consultant on an at will basis since November 1994, supplying consulting services to the Company on a variety of operational and technology issues. Mr. Richards received $160,000 and $180,000 for these services in 1995 and 1996, respectively, from the Company. Mr. Richards is the son-in-law of A. A. Meitz, a Director of the Company since November 21, 1995. 63 63 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) CERTAIN DOCUMENTS FILED AS PART OF THE FORM 10-K 1. AND 2. FINANCIAL STATEMENTS AND FINANCIAL STATEMENTS SCHEDULES The following financial statements and financial statements schedules are set forth in Item 8 of the Form 10-K Annual Report. Financial Statement Schedules not included in this Form 10-K Annual Report have been omitted because they are not applicable or the required information is shown in the financial statements or notes thereto. Fifty percent or less owned companies accounted for by the equity method have been omitted because, considered in the aggregate, they have not been considered to constitute a significant subsidiary.
PAGE NO. -------- Management Report on Responsibility for Financial Reporting................................................. 26 Report of Independent Public Accountants.................... 27 Consolidated Statements of Financial Position at December 31, 1995 and 1996......................................... 28 Consolidated Statements of Operations for the Years Ended December 31, 1994, 1995 and 1996.......................... 29 Consolidated Statements of Stockholders' Equity for the Years Ended December 31, 1994, 1995 and 1996.............. 30 Consolidated Statements of Cash Flows for the Years Ended December 31, 1994, 1995 and 1996.......................... 31 Notes to Consolidated Financial Statements.................. 32 Schedule II -- Valuation and Qualifying Accounts............ 55
3. EXHIBITS 3.1 -- Restated Certificate of Incorporation of Greyhound Lines, Inc.(4) 3.2 -- Restated Bylaws of Greyhound Lines, Inc.(4) 3.3 -- Article Fourth of the Restated Certificate of Incorporation of the Registrant relating to its capital stock.(7) 3.4 -- Certificate of Amendment in the Restated Certificate of Incorporation of the Registrant amending Article Fourth thereof.(8) 3.5 -- Certificate of Amendment in the Restated Certificate of Incorporation of the Registrant amending Article Eighth thereof.(13) 3.6 -- Certificate of Designations of Series A Junior Preferred Stock of the Registrant.(13) 3.7 -- Form of Certificate of Amendment to Certificate of Incorporation.(15) 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.(5) 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.(2) 4.3 -- First Supplemental Indenture to the Indenture between the Registrant and LaSalle National Bank, as Trustee.(5) 4.4 -- Form of First Supplemental Indenture to the Indenture between the Registrant and Shawmut Bank Connecticut, N.A., as Trustee.(16)
64 64 4.5 -- Rights Agreement, dated as of March 22, 1994, between the Registrant and Mellon Securities Trust Company, as Rights Agent.(11) 4.6 -- Second Amended and Restated Loan and Security Agreement dated as of June 5, 1995 by and between Greyhound Lines, Inc. and Foothill Capital Corporation.(19) 4.7 -- 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.(22) 4.8 -- Amendment Number Two to Second Amended and Restated Loan and Security Agreement dates as of December 20, 1996 by and between Greyhound Lines, Inc. and Foothill Capital Corporation.(23) 10.1 -- Acquisition Agreement dated December 22, 1986, among The Greyhound Corporation, Greyhound Lines, Inc., the Registrant, GLI Holding Company, GLI Bus Operations Holding Company and GLI Merger Company.(1) 10.2 -- First Amendment to Acquisition Agreement dated January 31, 1987.(1) 10.3 -- Second Amendment to Acquisition Agreement dated March 18, 1987.(1) 10.4 -- Third Amendment to Acquisition Agreement dated March 18, 1987.(1) 10.5 -- Fourth Amendment to Acquisition Agreement dated September 18, 1987.(1) 10.6 -- Trademark License Agreement dated March 18, 1987, between The Greyhound Corporation, GLI Holding Company and the Registrant.(1) 10.7 -- Assignment of Exhibit B Trademarks dated March 18, 1987, executed by The Greyhound Corporation.(1) 10.8 -- Bus Purchase Requirements Agreement dated March 18, 1987, among the Registrant, Greyhound Lines, Inc., Transportation Manufacturing Corporation and Motor Coach Industries, Inc.(1) 10.9 -- Amendment to Bus Purchase Requirements Agreement.(21) 10.10 -- Master Lease dated March 18, 1987, between Greyhound Lines, Inc. and GLI Realty Company.(1) 10.11 -- Contested Claim Pool Trust Agreement to be entered into as of October 31, 1991, by and between the Registrant and Smith Barney Trust Company, as trustee.(4) 10.12 -- Claims Treatment Agreement dated August 23, 1991, by and among Eagle Bus Manufacturing, Inc., the Registrant, Trailways Commuter Transit, Inc., GLI Bus Operations Holding Company, GLI Food Services, Inc., Southern Greyhound Lines Co., GLI Holding Company, Central Greyhound Lines Co., Greyhound Travel Services, Inc., Eastern Greyhound Lines, Co., and Western Greyhound Lines Co., on the one hand, and The Dial Corp, on the other.(4) 10.13 -- Memorandum of Agreement, dated as of October 1, 1996, between Greyhound Lines, Inc. and District No. 9, International Association of Machinists, AFL-CIO.(23) 10.14 -- Memorandum of Agreement, dated as of October 1, 1996, between Greyhound Lines, Inc. and the International Association of Machinists and Aerospace Workers covering garage employees at Miami, Florida; St. Petersburg, Florida; Columbia, South Carolina; Orlando, Florida; Charleston, West Virginia and Tallahassee, Florida.(23) 10.15 -- Memorandum of Agreement, dated as of October 1, 1996, between Greyhound Lines, Inc. and the International Association of Machinists and Aerospace Workers covering garage employees at Dallas, Texas, Houston, Texas, Kansas City, Missouri, San Antonio, Texas, Brownsville, Texas and Grand Junction, Colorado.(23)
65 65 10.16 -- Interest Rate Swap Transaction Confirmations dated as of July 12, 1993, between the Registrant and Bankers Trust Company.(9) 10.17 -- Memorandum of Agreement, dated as of May 25, 1993, between the Registrant and the Amalgamated Council of Greyhound Local Unions.(10) 10.18 -- Lease Agreement No. 1, dated as of December 29, 1993, between Wilmington Trust Company and the Registrant.(10) 10.19 -- Lease Agreement No. 2, dated as of December 29, 1993, between Wilmington Trust Company and the Registrant.(10) 10.20 -- Lease Agreement No. 3, dated as of December 29, 1993, between Wilmington Trust Company and the Registrant.(10) 10.21 -- Lease Supplement No. 1-1, dated as of December 30, 1993, between Wilmington Trust Company and the Registrant.(10) 10.22 -- Lease Supplement No. 2-1, dated as of December 30, 1993, between Wilmington Trust Company and the Registrant.(10) 10.23 -- Lease Supplement No. 3-1, dated as of December 30, 1993, between Wilmington Trust Company and the Registrant.(10) 10.24 -- Tax Indemnification Agreement, dated as of December 29, 1993, between Nationsbanc Lease Investments, Inc. and the Registrant.(10) 10.25 -- Pledge Agreement, dated as of December 29, 1993, among the Registrant, Wilmington Trust Company and Nationsbanc Lease Investments, Inc.(10) 10.26 -- Participation Agreement, dated as of December 29, 1993, among Nationsbanc Lease Investments, Inc. and the Registrant.(10) 10.27 -- Greyhound Lines, Inc. 1991 Management Incentive Stock Option Plan.(4) 10.28 -- Greyhound Lines, Inc. 1993 Management Incentive Stock Option Plan.(8) 10.29 -- Greyhound Lines, Inc. 1993 Non-Employee Director Stock Option Plan.(10) 10.30 -- Greyhound Lines, Inc. Supplemental Executive Retirement Plan.(21) 10.31 -- Amendment to the Greyhound Lines, Inc. Supplemental Executive Retirement Plan.(23) 10.32 -- Coach Purchase Agreement, dated as of December 31, 1993, between the Registrant and Motor Coach Industries, Inc.(12) 10.33 -- Lease Agreement, dated as of March 28, 1994, between Wilmington Trust Company and the Registrant.(12) 10.34 -- Lease Supplement No. 1, dated as of March 28, 1994, between Wilmington Trust Company and the Registrant.(12) 10.35 -- Pledge Agreement, dated as of March 28, 1994, among the Registrant, Wilmington Trust Company and Cargill Leasing Corporation.(12) 10.36 -- Participation Agreement, dated as of March 28, 1994, among Cargill Leasing Corporation and the Registrant.(12) 10.37 -- Bill of Sale, dated as of March 28, 1994, between the Registrant and Wilmington Trust Company.(12) 10.38 -- Tax Indemnification Agreement, dated as of March 28, 1994, between Cargill Leasing Corporation and the Registrant.(12) 10.39 -- Lease Agreement, dated as of March 29, 1994, between Wilmington Trust Company and the Registrant.(12) 10.40 -- Lease Supplement No. 1, dated as of March 29, 1994, between Wilmington Trust Company and the Registrant.(12)
66 66 10.41 -- Pledge Agreement, dated as of March 29, 1994, among the Registrant, Wilmington Trust Company and Cargill Leasing Corporation.(12) 10.42 -- Participation Agreement, dated as of March 29, 1994, among Cargill Leasing Corporation and the Registrant.(12) 10.43 -- Bill of Sale, dated as of March 29, 1994, between the Registrant and Wilmington Trust Company.(12) 10.44 -- Tax Indemnification Agreement, dated as of March 29, 1994, between Cargill Leasing Corporation and the Registrant.(12) 10.45 -- First Amendment to the Registrant 1993 Non-Employee Director Stock Option Plan.(14) 10.46 -- Amendments to Interest Rate Swap Agreement, dated as of October 6, 1994 between the Registrant and Bankers Trust Company.(14) 10.47 -- Form of Letter Agreements with various holders of Convertible Debentures relating to, among other things, the Conversion.(16) 10.48 -- Employment Agreement dated November 15, 1994, between Registrant and Craig R. Lentzsch.(17) 10.49 -- Amendment Number Two to Bus Purchase Requirements Agreement dated December 21, 1994 by and between Greyhound Lines, Inc. and Motor Coach Industries.(17) 10.50 -- Second Amendment to Greyhound Lines, Inc. 1993 Non-Employee Director Stock Option Plan.(18) 10.51 -- Greyhound Lines, Inc. 1995 Long Term Stock Incentive Plan.(19) 10.52 -- Greyhound Lines, Inc. 1995 Director's Stock Incentive Plan.(19) 10.53 -- Employment Agreement dated July 25, 1995 between Registrant and Steven L. Korby.(19) 10.54 -- Employment Agreement dated September 18, 1995 between Registrant and John Werner Haugsland.(20) 10.55 -- 1995 Bus Purchase Agreement.(21) 10.56 -- Fourth Amendment to Interest Rate Swap Agreement, dated as of April 25, 1996, between the Registrant and Banker's Trust Company.(22) 11 -- Computation of Registrant's earnings per share for the year ended December 31, 1994.(17) 11.1 -- Computation of Registrant's earnings per share for the year ended December 31, 1995.(21) 11.2 -- Computation of Registrant's earnings per share for the year ended December 31, 1996.(23) 22 -- Subsidiaries of the Registrant.(23) 23.1 -- Consent of Arthur Andersen LLP.(23) 27 -- Financial Data Schedule as of and for the year ended December 31, 1996.(23)
- --------------- (1) Incorporated by reference from the Annual Report Form 10-K/A for the year ended December 31, 1994. (2) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991. (3) Incorporated by reference to the Company's Registration Statement on Form 10 (File No. 1-10841) relating to the Common Stock and Senior Notes. 67 67 (4) 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. (5) 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. (6) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1992. (7) Incorporated by reference from the Company's Registrant Statement on Form S-3 (File No. 33-61044). (8) Incorporated by reference from the Company's Registrant Statement on Form S-8 (File No. 33-63506) regarding the Registrant's 1991 and 1993 Management Stock Option Plans. (9) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1993. (10) Incorporated by reference from the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993. (11) Incorporated by reference from the Registrant's Quarterly Report on Form 8-K regarding the Rights Agreement dated March 22, 1994. (12) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. (13) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994. (14) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994. (15) Incorporated by reference from the Registration Statement on Form S-1 (File No. 33-56131) regarding the Registrant's Common Stock. (16) Incorporated herein by reference from the Registrant's Issuer Tender Offer Statement on Schedule 13E-4 (File No. 5-41800). (17) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1994. (18) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995. (19) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995. (20) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995. (21) Incorporated by reference to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1995. (22) Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996. (23) Filed herewith. 68 68 (b) REPORTS ON FORM 8-K The Company filed no current reports on Form 8-K with the Securities and Exchange Commission during the quarter ended December 31, 1996, nor was it required to do so. 69 69 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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 in the City of Dallas and the State of Texas, on March 19, 1997. GREYHOUND LINES, INC. By: /s/ CRAIG R. LENTZSCH ---------------------------------- Craig R. Lentzsch President and Chief Executive Officer (Principal Executive Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE --------- ----- ---- /s/ THOMAS G. PLASKETT Chairman of the Board of March 19, 1997 - ----------------------------------------------------- Directors Thomas G. Plaskett /s/ RICHARD J. CALEY Director March 19, 1997 - ----------------------------------------------------- Richard J. Caley /s/ LINDA CHAVEZ Director March 19, 1997 - ----------------------------------------------------- Linda Chavez /s/ CRAIG R. LENTZSCH Director, President and Chief March 19, 1997 - ----------------------------------------------------- Executive Officer Craig R. Lentzsch Director - ----------------------------------------------------- A. A. Meitz /s/ FRANK L. NAGEOTTE Director March 19, 1997 - ----------------------------------------------------- Frank L. Nageotte /s/ ALFRED E. OSBORNE, JR. Director March 19, 1997 - ----------------------------------------------------- Alfred E. Osborne, Jr. /s/ STEPHEN M. PECK Director March 19, 1997 - ----------------------------------------------------- Stephen M. Peck Director - ----------------------------------------------------- Ernest P. Werlin /s/ STEVEN L. KORBY Executive Vice President and March 19, 1997 - ----------------------------------------------------- Chief Financial Officer Steven L. Korby (Principal Financial and Accounting Officer)
70 70 INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION ------- ----------- 4.8 -- Amendment Number Two to Second Amended and Restated Loan and Security Agreement dates as of December 20, 1996 by and between Greyhound Lines, Inc. and Foothill Capital Corporation. 10.13 -- Memorandum of Agreement, dated as of October 1, 1996, between Greyhound Lines, Inc. and District No. 9, International Association of Machinists, AFL-CIO. 10.14 -- Memorandum of Agreement, dated as of October 1, 1996 between Greyhound Lines, Inc. and the International Association of Machinists and Aerospace Workers covering garage employees at Miami, Florida, St. Petersburg, Florida, Columbia, South Carolina, Orlando, Florida, Charleston, West Virginia, and Tallahassee, Florida. 10.15 -- Memorandum of Agreement, dated as of October 1, 1996, between Greyhound Lines, Inc. and the International Association of Machinists and Aerospace Workers covering garage employees at Dallas, Texas, Houston, Texas, Kansas City, Missouri, San Antonio, Texas, Brownsville, Texas, and Grand Junction, Colorado. 10.31 -- Amendment to the Greyhound Lines, Inc. Supplemental Executive Retirement Plan. 11.2 -- Computation of Registrant's earnings per share for the year ended December 31, 1996. 22 -- Subsidiaries of the Registrant. 23.1 -- Consent of Arthur Andersen LLP. 27 -- Financial Data Schedule as of and for the year ended December 31, 1996.
EX-4.10 2 AMEND NO.2 - 2 AMEND/RESTATED LOAN & SECURITY AGMT 1 EXHIBIT 4.10 AMENDMENT NUMBER TWO TO SECOND AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT This Amendment Number Two to Second Amended and Restated Loan and Security Agreement ("Amendment") is entered into as of December 20, 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, as amended by Amendment Number One dated as of April 12, 1996 (the "Agreement"). FACT TWO: Borrower and Foothill desire to further 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 "Fixed Asset Sublimit" is hereby amended to read as follows: "`Fixed Asset Sublimit' means,at any given time of measurement, the sum of the Tranche A Borrowing Base, the Tranche B Borrowing Base and the Tranche C Borrowing Base, as each is then in effect pursuant to the terms of Section 2.1(a)." (b) The definition of "Maximum Credit" is hereby amended to read as follows: "`Maximum Credit' means at any given time, the lower of (i) $105,000,000, and (ii) the sum of (a) the Current Asset Sublimit plus (b) the amount of the Tranche A Borrowing Base, plus (c) the Maximum Tranche B Maximum Credit, plus (d) the amount of the Tranche C Borrowing Base." 1 2 (c) The following definitions are hereby added to the Agreement: "`Non-Core Real Property' means the Real Property listed on Schedule N-1 to the Agreement, owned by Borrower in fee." "`Real Property Held for Sale' means the Real Property listed on Schedule R-3 to the Agreement, owned by Borrower in fee." "`Tranche C Borrowing Base' has the meaning set forth in Section 2.1(a)(iv)." "`Tranche C Collateral' means the Real Property listed on Schedule T-1 to the Agreement, owned by Borrower in fee, secured by first priority Mortgages as to which Foothill has obtained title insurance policies in amounts and on terms and conditions acceptable to Foothill, and as to which Foothill has received acceptable Phase I environmental reports." (d) The definition of "Required Parcels" is hereby deleted, and all references in the Agreement to "Required Parcels" shall now refer to "Core Real Property Collateral" instead. (e) 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) 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 30 calendar day period; and (z) the Current Asset Sublimit; plus (ii) the lesser of: (x) 85% of the bulk wholesale value of Collateral comprising the Tranche A Borrowing Base, as determined by Foothill; and (y) $62,500,000, 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) $2,232,143 per quarter (the "Quarterly Reduction"), commencing January 1, 1998 and continuing on the first day of each January, April, July and October thereafter; (2) the higher of (x) 100% of the net 2 3 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) 100% of the net proceeds received from the sale of any of the Core Real Property Collateral (other than Tranche C Collateral) after the date of this Agreement and (y) the minimum release price for the Core Real Property Collateral (other than Tranche C Collateral) to be established by Foothill in its reasonable credit judgment; and (4) 10% of the net proceeds of Non-Core Real Property (other than Tranche C Collateral), which exceed an aggregate total of $15,000,000, from the sale, subsequent to December 1, 1996. In lieu of making the dollar reductions of the Tranche A Borrowing Base scheduled for January 1, 1998 and thereafter, 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 117.65% 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 117.65% 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 80% 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, the Tranche B Borrowing Base (the product thereof being (a) rounded down to the nearest $1,000,000 if the amount over a $1,000,000 increment is equal to or less than $250,000, (b) rounded up to the nearest $500,000 if the amount over a $1,000,000 increment is greater than $250,000 but less than or equal to $500,000, (c) rounded up to the nearest $750,000 if the amount over a $1,000,000 increment is greater than $500,000 but less than or equal to $750,000 or (d) rounded up to the nearest $1,000,000 if the amount over a $1,000,000 increment is greater than $750,000 but less than or equal to such $1,000,000 increment) 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 any increase of the Tranche B Borrowing Base, Borrower shall have taken such actions with respect to such Tranche B Collateral 3 4 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 3.6% 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 the lesser of (i) 80% of Borrower's actual cost (excluding costs of acquisition and transportation) of the Tranche B Collateral or (ii) the Tranche B Borrowing Base attributable to such Tranche B Collateral (if subject to the 3.6% quarterly reduction), 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 $500,000 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. plus (iv) such amount as shall be made available in accordance with the terms of this Section 2.1(a)(iv) (the "Tranche C Borrowing Base"). The amount of the Tranche C Borrowing Base shall be equal to the lower of: (a) 25% of the appraised Fair Market Value of the Tranche C Collateral and (b) $10,000,000 which amount shall be reduced quarterly by $250,000 commencing on January 1, 1998 and continuing thereafter on the first day of each subsequent April, July, October and January. The Tranche 4 5 C Borrowing Base shall be reduced by an amount equal to the higher of (x) 100% of the net proceeds received from the sale of any of the Tranche C Collateral and (y) the minimum release price for the Tranche C Collateral to be established by Foothill in its reasonable credit judgment. As soon as Foothill has recorded first priority liens against portions of the Tranche C Collateral, an amount equal to the Tranche C Borrowing Base then in effect shall be advanced by Foothill. Except for scheduled payments and payments resulting from the sale of Tranche C Collateral, Borrower shall not prepay its Obligations under the Tranche C Borrowing Base until all Obligations under the Tranche A Borrowing Base and Tranche B Borrowing Base have been paid in full." (f) Section 2.5(a) and (b) of the Agreement are hereby amended to read as follows: "(a) Interest Rate. All Obligations, except for undrawn L/Cs and L/C Guarantees and Obligations under the Tranche C Borrowing Base, shall bear interest, on the average Daily Balance, at a per annum rate equal to the Reference Rate plus the Applicable Margin then in effect. All Obligations under the Tranche C Borrowing Base shall bear interest as provided in the preceding sentence plus .25% per annum. (b) Default Rate. All Obligations, except for undrawn L/Cs and L/C Guarantees and Obligations under the Tranche C Borrowing Base, shall bear interest from and after the occurrence and during the continuance of an Event of Default, at a per annum rate equal for 4 percentage points above the Reference Rate. From and after the occurrence and during the continuance of an Event of Default, the Obligations under the Tranche C Borrowing Base shall bear interest at a per annum rate equal to 4.25 percentage points above the Reference Rate, and the fee provided in Section 2.2(d) shall be increased to a fee equal to 4% per annum times the average Daily Balance of the undrawn L/Cs and L/C Guarantees that were outstanding during the immediately preceding month." (g) Section 2.8(e) of the Agreement is hereby amended by changing 1.25% to 1.00% of the increase in the Maximum Credit. (h) Section 3.3 is hereby amended by deleting the date "January 15, 1999" and replacing it with the date "June 30, 1999." (i) Section 6.13 of the Agreement is hereby amended to read as follows: "6.13 FINANCIAL COVENANTS. Borrower shall maintain: 5 6 (a) Net Worth. Net Worth from the date hereof through June 30, 1997, equal to or greater than $105,000,000, and at September 30, 1997 and at all times thereafter equal to or greater than $125,000,000. Net Worth shall be measured at the end of each of Borrower's fiscal quarters. (b) Operating Ratio. An Operating Ratio of not less than 1.25-1.0 through March 31, 1998, and at June 30, 1998 and at all times thereafter of not less than 1.50-1.0. Operating Ratio shall be measured at the end of each of Borrower's fiscal quarters on a rolling 4 quarter basis." (j) Section 6.20 of the Agreement is hereby amended to add the following sentence: "Borrower shall grant to Foothill a first priority lien on the Real Property covered by the BT Mortgages within a reasonable period of time following the release or reconveyance of each of such mortgages, and such Real Property shall be then added to Core Real Property Collateral." (k) Section 7.4(i) of the Agreement is hereby amended to read as follows: "(i) so long as no Event of Default has occurred and is continuing, Borrower may make: (a) Permitted Note Redemptions, (b) sales of Real Property or Vehicles so long as the proceeds of such sales are applied in accordance with Section 2.1(a)(ii) or (iv), as applicable, (c) sales of real estate and buses that do not constitute Real Property or Vehicles, (d) sales of Equipment (other than buses) for up to $5,000,000 in the aggregate in any fiscal year, and (e) sale/leasebacks of hereafter acquired buses;" (l) The following schedules to the Agreement are attached hereto; if such schedules are already schedules by the Agreement, then they are hereby replaced: Schedule C-1 Tranche A and Tranche B Collateral Schedule C-2 Core Real Property Collateral Schedule N-1 Non-Core Real Property Schedule R-1 Real Property Schedule R-3 Real Property Held for Sale Schedule T-1 Tranche C Collateral
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. 6 7 4. WAIVER OF SECTION 7.10; NO DEFAULTS. For the fiscal year ending December 31, 1996 only, Foothill hereby waives Section 7.10 of the Agreement. After giving effect to the waiver contained in the preceding sentence, 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) Payment by Borrower to Foothill of an amendment fee in the aggregate amount of $40,000, such fee to be charged to Borrower's loan account pursuant to Section 2.5(d) of the Agreement; (b) Payment by Borrower to Foothill of a facility increase fee in the aggregate amount of $250,000, such fee to be charged to Borrower's loan account pursuant to Section 2.5(d) of the Agreement; (c) Receipt by Foothill of an executed copy of this Amendment and any required mortgages and amendments to the Mortgages (which shall be properly executed and acknowledged) or other Loan Documents; and (d) Receipt by Foothill of: (i) an executed participation agreement with The First National Bank of Boston, and (ii) executed amendments to the participation agreements with all existing participants. 6. COSTS AND EXPENSES. Borrower shall pay to Foothill all of Foothill's out-of-pocket costs and expenses (including, without limitation, the reasonable 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 Mortgages on the Tranche C Collateral, the amendments to the Mortgages and any policies of title insurance or 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 7 8 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: ------------------------------------- Title: ---------------------------------- GREYHOUND LINES, INC., a Delaware corporation By: ------------------------------------- Title: ---------------------------------- 8 9 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: ------------------------------------- Name: ----------------------------------- Title: ---------------------------------- 9 10 SCHEDULE C-1 Tranche A and Tranche B Collateral [TO BE PROVIDED BY FOOTHILL POST CLOSING] 10 11 SCHEDULE C-2 Core Real Property Collateral Albany, NY, 34 Hamilton Albany, NY, 27 Dallius Atlanta, GA, 830 Jefferson Street, NW Atlanta, GA, 218 and 232 Forsythe Street Austin, TX, 916 E. Koenig Bakersfield, CA, 1820 18th Street Baton Rouge, LA 1253 Florida Baton Rouge, LA, 1253 Florida Street Beaumont, TX, 650 Magnolia Street Biloxi, MS, 322 Main Street Birmingham, AL, 619 N. 19th Street Boston, MA 571 E 1st Boston, MA, 672-674 E. 2nd Street Boston, MA, 585-587-591 E. 1st Street Brownsville, TX, 1134 East St. Charles Chicago, IL, 630 W. Harrison Chicago, IL, 901 N. Halsted Cincinnati, OH, 1005 Gilbert Avenue Cleveland, OH, 1465 Chester Avenue Columbus, GA, 818 4th Columbus, OH, 111 East Town Street Corvallis, OR, 153 N. 4th Dallas, TX, 315 Continental Dallas, TX, 205 S. Lamar Daytona Beach, FL, 138 S. Ridgewood Dothan, AL, 213 S. Foster El Paso, TX, 200 W. San Antonio El Paso, TX, 201 W. Main Eugene, OR, 987 Pearl Evansville, IN, 100 N.W. 3rd Everett, WA, 1503 Pacific Flagstaff, AZ, 399 S. Malpais Florence, SC, 611 S. Irby Fresno, CA 1033 Broadway Hollywood, CA, 1409 N. Vine Houma, LA, 200 E. Park Houston, TX, 2121 Main Kansas City, MO, 1111 Troost Klamath Falls, OR, 1200 Klamath Lafayette, LA, 315 N. Lee Lincoln, NE, 940 P. Street 11 12 Los Angeles, CA 1614 E. 7th Los Angeles, CA, 1716 East 7th Street Los Angeles, CA, Atlantic & Lawrence Street Louisville, KY, 720 Muhammad Ali Louisville, KY, 830 S. 13th Street Medford, OR, 212 North Bartlett Medford, OR, 4th & Apple Street Memphis, TN, 203 Union Miami, FL, 51 NW 11th Midland, TX, 1308 W. Front Missoula, MT, 1660 W. Broadway Mobile, AL, 2545 Government Oakland, CA, 2103 San Pablo Olympia, WA 107 E. 7th Omaha, NE 604 S. 16th Orangeburg, SC, 129 Lowman Orlando, FL, 2750 West Business Ctr. Blvd. Paducah, KY, 301 N. 4th Pittsburgh, PA, 1101 Liberty Avenue Raleigh, NC, 314 W. Jones Redding, CA, 1321 Butte Richmond, VA, 2709 Hermitage Richmond, VA, 2910 North Boulevard San Francisco, CA, 1140 7th Santa Fe, NM, 858 St. Michael's Savannah, GA, 610 W. Oglethorpe Avenue Shreveport, LA, 408 Fannin St. Louis, MO, 1515 N. 11th St. Louis, MO, 1009-23 Cass Avenue Tallahassee, FL, 112 W. Tennessee Tampa, FL, 610 East Polk Tampa, FL, Morgan & Cass Streets Topeka, KS, 200 S.E. 3rd Tupelo, MS, 201 Commerce Tuscaloosa, AL, 2520 9th Tyler, TX, 303 N. Bois D'Arc Valdosta, GA, 200 N. Oak Washington, D.C., 1005 First Street N.E. 12 13 SCHEDULE N-1 Non-Core Real Property Abilene, TX, 535 Cedar Albuquerque, NM, 300 Second Amarillo, TX, 703 S. Harrison Appleton, WI, 506 N. Oneida Ashland, KY, 2001 Greenup Billings, MT, 2502 First Avenue North Binghampton, NY, 81 Chenango Boise, ID, 1212 Bannock Brunswick, GA, 1101 Gloucester Street Camden, NJ, 701 Cooper Charlotte, NC, 601 W. Trade Charlottesville, VA, 310 W. Main Chicago, IL, 921 N. Branch Street Cleveland, OH, Krause Court, N.E. Cleveland, OH, 1256-1296 E. 26 Street Delhi, LA, 306 W. First Denver, CO, 1055 19th Denver, CO, 2450 Curtis Street El Centro, CA, 460 State Fort Wayne, IN, 929 Lafayette Fredericksburg, VA, U.S. Route 1 Bypass Goldsboro, NC, 410 N. John Harlingen, TX, 518 S. Commerce Indio, CA, 45-524 Oasis Islip, NY, 1684 Expressway South Knoxville, TN, 100 Magnolia La Crosse, WI, 600 S. 4th Lansing, MI, 511 S. Washington Laurel, MS, 460 N. Magnolia Leesville, LA, 503 S. 4th Lufkin, TX, 115 E. Shepherd Marshall, TX, 201 S. Bolivar McAllen, TX, 100 N. Broadway Nashville, TN, 711 5th Ogden, UT, 2501 Grant Portland, ME, 946 Congress Rayville, LA, 212 Bernadetta Ruston, LA, 118 W. Louisiana San Diego, CA, 539 First Seattle, WA, 1250 Denny Syracuse, NY, 815 Erie Boulevard East 13 14 Wichita, KS, 312 S. Broadway Winston-Salem, NC, 250 Greyhound Yakima, WA, 602 E. Yakima 14 15 SCHEDULE R-1 Real Property Abilene, TX, 535 Cedar Albany, NY, 34 Hamilton Albany, NY, 27 Dallius Albuquerque, NM, 300 Second Alexandria, LA, 425 Bolton Avenue Amarillo, TX, 703 S. Harrison Appleton, WI, 506 N. Oneida Ashland, KY, 2001 Greenup Atlanta, GA, 830 Jefferson Street, NW Atlanta, GA, 218 and 232 Forsythe Street Austin, TX, 916 E. Koenig Bakersfield, CA, 1820 18th Street Baton Rouge, LA 1253 Florida Baton Rouge, LA, 1253 Florida Street Beaumont, TX, 650 Magnolia Street Billings, MT, 2502 First Avenue North Biloxi, MS, 322 Main Street Birmingham, AL, 619 N. 19th Street Binghampton, NY, 81 Chenango Boise, ID, 1212 Bannock Boston, MA 571 E 1st Boston, MA, 672-674 E. 2nd Street Boston, MA, 585-587-591 E. 1st Street Boston, MA, 651-661 E. 2nd Street Brownsville, TX, 1134 East St. Charles Brunswick, GA, 1101 Gloucester Street Camden, NJ, 701 Cooper Charlotte, NC, 601 W. Trade Charlottesville, VA, 310 W. Main Chicago, IL, 921 N. Branch Street Chicago, IL, 630 W. Harrison Chicago, IL, 901 N. Halsted Cincinnati, OH, 1005 Gilbert Avenue Cincinnati, OH, 1130 Kenner Street Cleveland, OH, 1465 Chester Avenue Cleveland, OH, Krause Court, N.E. Cleveland, OH, 1256-1296 E. 26 Street Cleveland, OH, 2600 Hamilton Avenue Columbus, GA, 818 4th Columbus, OH, 111 East Town Street Corvallis, OR, 153 N. 4th 15 16 Dallas, TX, 315 Continental Dallas, TX, 205 S. Lamar Dallas, TX, 1100 S. Lamar Street Daytona Beach, FL, 138 S. Ridgewood Delhi, LA, 306 W. First Denver, CO, 2450 Curtis Street Denver, CO, 1055 19th Dothan, AL, 213 S. Foster El Centro, CA, 460 State El Paso, TX, 200 W. San Antonio El Paso, TX, 201 W. Main Eugene, OR, 987 Pearl Evansville, IN, 100 N.W. 3rd Everett, WA, 1503 Pacific Flagstaff, AZ, 399 S. Malpais Florence, SC, 611 S. Irby Fort Wayne, IN, 929 Lafayette Fredericksburg, VA, U.S. Route 1 Bypass Fresno, CA 1033 Broadway Goldsboro, NC, 410 N. John Grand Rapids, MI, 1441 Godfrey Avenue S.W. Harlingen, TX, 518 S. Commerce Hollywood, CA, 1409 N. Vine Houma, LA, 200 E. Park Houston, TX, 1710 Delano Street Houston, TX, 1710 Delano Street Houston, TX, 2121 Main Indio, CA, 45-524 Oasis Islip, NY, 1684 Expressway South Jackson, MS, 1785 U.S. Highway 80 W. Kansas City, MO, 1111 Troost Klamath Falls, OR, 1200 Klamath Knoxville, TN, 100 Magnolia La Crosse, WI, 600 S. 4th Lafayette, LA, 315 N. Lee Lansing, MI, 511 S. Washington Laurel, MS, 460 N. Magnolia Leesville, LA, 503 S. 4th Lincoln, NE, 940 P. Street Los Angeles, CA 1614 E. 7th Los Angeles, CA, 1716 East 7th Street Los Angeles, CA, Atlantic & Lawrence Street Louisville, KY, 720 Muhammad Ali Louisville, KY, 830 S. 13th Street Lufkin, TX, 115 E. Shepherd McAllen, TX, 100 N. Broadway 16 17 Marshall, TX, 201 S. Bolivar Medford, OR, 212 North Bartlett Medford, OR, 4th & Apple Street Memphis, TN, 527 N. Main Street Memphis, TN, 498 N. Front Street Memphis, TN, 80 E. Sycamore Street Memphis, TN, 203 Union Miami, FL, 51 NW 11th Midland, TX, 1308 W. Front Missoula, MT, 1660 W. Broadway Mobile, AL, 2545 Government Nashville, TN, 711 5th Oakland, CA, 2103 San Pablo Ogden, UT, 2501 Grant Olympia, WA 107 E. 7th Omaha, NE 604 S. 16th Orangeburg, SC, 129 Lowman Orlando, FL, 2750 West Business Ctr. Blvd. Paducah, KY, 301 N. 4th Parkersburg, WV, 531 5th Street Petersburg, VA, 214 E. Washington Street Pittsburgh, PA, 1101 Liberty Avenue Portland, ME, 946 Congress Raleigh, NC, 314 W. Jones Rayville, LA, 212 Bernadetta Redding, CA, 1321 Butte Richmond, VA, 2709 Hermitage Richmond, VA, 2910 North Boulevard Ruston, LA, 118 W. Louisiana Salinas, CA, Stanton Place & Market St. Alley San Antonio, TX, 1505 E. Houston Street San Antonio, TX, 200 Brown Street San Diego, CA, 539 First San Francisco, CA, 1140 7th Santa Fe, NM, 858 St. Michael's Savannah, GA, 610 W. Oglethorpe Avenue Seattle, WA, 1250 Denny Shreveport, LA, 408 Fannin St. Louis, MO, 1515 N. 11th St. Louis, MO, 1009-23 Cass Avenue Stockton, CA, 121 South Center Street Syracuse, NY, 815 Erie Boulevard East Syracuse, NY, 701 Hiawatha Boulevard East Tallahassee, FL, 112 W. Tennessee Tampa, FL, 610 East Polk Tampa, FL, Morgan & Cass Streets 17 18 Topeka, KS, 200 S.E. 3rd Tupelo, MS, 201 Commerce Tuscaloosa, AL, 2520 9th Tyler, TX, 303 N. Bois D'Arc Valdosta, GA, 200 N. Oak Washington, D.C., 1005 First Street N.E. Washington, D.C., 1345 New York Avenue, N.E. Washington, D.C., 2020 Kendall Street Wenatchee, WA, 301 First Street Wichita, KS, 312 S. Broadway Winston-Salem, NC, 250 Greyhound Yakima, WA, 602 E. Yakima 18 19 SCHEDULE R-3 Real Property Held For Sale Alexandria, LA, 425 Bolton Avenue Boston, MA, 651-661 E. 2nd Street Cincinnati, OH, 1130 Kenner Street Cleveland, OH, 2600 Hamilton Avenue Dallas, TX, 1100 S. Lamar Street Grand Rapids, MI, 1441 Godfrey Avenue S.W. Houston, TX, 1710 Delano Street Houston, TX, 1710 Delano Street Jackson, MS, 1785 U.S. Highway 80 W. Memphis, TN, 527 N. Main Street Memphis, TN, 498 N. Front Street Memphis, TN, 80 E. Sycamore Street Parkersburg, WV, 531 5th Street Petersburg, VA, 214 E. Washington Street Salinas, CA, Stanton Place & Market St. Alley San Antonio, TX, 1505 E. Houston Street San Antonio, TX, 200 Brown Street Stockton, CA, 121 South Center Street Syracuse, NY, 701 Hiawatha Boulevard East Washington, D.C., 1345 New York Avenue, N.E. Washington, D.C., 2020 Kendall Street Wenatchee, WA, 301 First Street 19 20 SCHEDULE T-1 Tranche C Collateral Atlanta, GA, 830 Jefferson Street, NW Boston, MA, 571 East First Street Chicago, IL, 901 North Halstead Street Chicago, IL, 630 West Harrison Street Columbus, OH, 111 East Town Street Dallas, TX, 315 Continental Avenue El Paso, TX, 201 West Main Drive El Paso, TX, 200 West San Antonio Avenue Los Angeles, CA, 1614 East 7th Street Los Angeles, CA, 1716 East 7th Street Miami, FL, 51 NW 11th Street Oakland, CA, 21103 San Pablo Avenue Pittsburgh, PA, 1101 Liberty Avenue Richmond, VA, 2709 Hermitage Road San Francisco, CA, 1140 7th Street St. Louis, MO, 1515 North 11th Street Tallahassee, FL, 112 West Tennessee Street Tampa, FL, 610 East Polk Street 20 EX-10.13 3 MEMORANDUM OF AGMT BETWEEN GREYHOUND & DISTRICT 9 1 EXHIBIT 10.13 A G R E E M E N T Between GREYHOUND LINES, INC. And DISTRICT NO. 9, INTERNATIONAL ASSOCIATION OF MACHINISTS, AFL-CIO Covering ST. LOUIS GARAGE EMPLOYEES MEMORANDUM OF AGREEMENT - This Agreement, effective October 1, 1996, and expiring October 1, 1999, is entered into by and between Greyhound Lines, Inc. and its successors and assigns, hereinafter called the "Company," and the District No. 9, International Association of Machinists, AFL-CIO, hereinafter called the "Union." The parties recognize that the assets of Greyhound Lines, Inc. are under new ownership. No contract language, award, adjustment, interpretation letter, practice, or right agreed to between the Union and the previous owners, or made binding between them through arbitration or otherwise, shall remain in effect unless expressly agreed to herein, or as later agreed by the parties. This Agreement may be modified only by formal amendment signed by the parties. The titles used in this Agreement are for reference purposes only and are not to be considered as a part of this operative language. As used herein, whenever "he" or "his" or their related pronouns appear, they have been used for literary purposes and are meant in their generic sense to include both female and male sexes. If the Company, or any portion thereof, is sold, there shall be included in the documents relating to such a sale a requirement that the purchaser accept and be bound by this Agreement and all its terms for the duration of this Agreement. ARTICLE I Section 1 - Recognition The Company recognizes the Union as the exclusive representative for purposes of collective bargaining of all employees of the Maintenance Department of the Company at its St. Louis, Missouri garage, excluding office clerical employees, guards, professional employees, and all other employees and supervisors as defined in the National Labor Relations Act, as amended. 2 Section 2 - Definition, Journeymen Mechanics Journeymen Mechanics shall have served as apprenticeship or otherwise have acquired the knowledge, experience and ability to perform work assigned them, within a reasonable time and in a satisfactory manner. Section 3 - Definitions, Apprentice Mechanics Apprentices are those employees primarily engaged in learning the trade of the Journeyman Mechanic through working under the supervision of a Journeyman Mechanic and also working as needed as a Greaser. One (1) Apprentice may be employed for each five (5) Journeymen employed in each Shop, but in any event, one (1) Apprentice may be employed in each shop. Apprentices presently employed shall continue their apprenticeship training. If new Apprentices are employed, the Company and the Union shall negotiate in respect to the establishment of an apprenticeship training plan under which such new Apprentices shall be trained. Section 4 - Definitions, Working Foremen Working Foremen shall be considered as a supervisory position and appointed by the Company. However, the Company agrees to interview and give every consideration to the senior employee at the location where the vacancy exists, but will not be required to post the Working Foreman's position for general bid provided for by this Agreement. Working Foremen shall remain members of the Union. ARTICLE II - MANNING OF MAINTENANCE WORK It will be the Company's policy to have maintenance work historically performed in its garages on Company operated vehicles continue to be performed at Company garages, however, in cases of road failure, the Company may have emergency temporary repairs made in order to operate the bus to a Company facility for repairs. ARTICLE III - UNION SHOP All full and part-time employees covered by any portion of this Agreement must become and remain members of the Union not later than the thirty-first (31st) day following their date of employment as a condition of their continued employment with the Company. 2 3 ARTICLE IV - SENIORITY Section 1 - Rosters A Seniority roster of Machinists members who are employees at the St. Louis garage shall be maintained and posted on the bulletin boards annually. A copy of the seniority roster will be furnished to the Union. Protests to posting on the seniority roster must be made within thirty days of posting, otherwise the seniority roster will stand as issued, indisputable errors excepted. Section 2 - Definition Seniority as established shall be, after qualifying, the date of employment in the St. Louis garage either by the Company or, if prior to March 19, 1987, by Greyhound Lines, Inc. Section 3 - Probational Employment Employees will be given a probationary period of sixty (60) calendar days from date of employment in which to properly demonstrate the ability to carry on the duties of their position and unless notified to the contrary within the sixty (60) calendar day period, it will be understood that the application has been approved unless it later develops that false information materially affecting the acceptance of the application for employment was given, in which event such employee would be subject to dismissal by the Company. Grievance procedure is not applicable to employees dismissed by the Company during the first thirty-one (31) calendar days of the probationary period. Section 4 - Reduction and Restoration of Forces When forces are reduced, employees will be laid off in reverse order of seniority starting with junior employee. When forces are restored, employees will be recalled in seniority order, subject to employee's qualifications to perform the work as determined by the Company, with the most senior furloughed qualified employee being the first recalled. Recall notice shall be sent by certified mail or telegram to the last address filed by the employee in writing with the Company. Employees recalled to work shall return to work within seven (7) days after recall notice is sent. Employees who fail to report for work within the seven (7) day period shall forfeit all seniority rights and be considered as voluntarily terminating their service with the Company. Employees who are furloughed and who are not recalled by the Company within one year following the date of furlough will lose all seniority rights after the one year period and will no longer be subject to recall by the Company. Employees to be laid off shall be given seven (7) days notice of such layoff. The Company agrees that for the duration of the labor agreement, that it will not layoff (furlough) journeymen mechanics at the St. Louis garage who were hired prior to January 1, 1993. 3 4 Section 5 - Transfer to Supervisory Status Employees covered by this Agreement who are transferred to supervisory positions in the Company's employ shall retain their seniority for a period of sixty (60) days. If they do not return to the bargaining unit within sixty (60) days, they will forfeit all accrued seniority. Section 6 - Leaves of Absence Employees who are granted leaves of absence by the Company shall retain and accrue seniority during such leaves, provided same do not exceed ninety (90) days in any one (1) year. Seniority shall not accrue during leaves in excess of said period, excepting only in the case of leaves due to illness or injury, in which event, seniority shall continue to accrue. Section 7 - Shift Preference Employees shall be given preference according to their seniority rank in selecting a regular work shift and days off. The Company shall determine the number of employees of each shift and in manning shifts, shall assign junior employees, in the classification involved, to shifts, if such shifts are not manned, in keeping with the Company's requirements as a result of the selection of shifts by the employees as above provided. The Company shall assign probational employees to such hours and days off as it may determine during their probational period, provided that, in so doing, employees regularly assigned shall not be displaced. Section 8 - Loss of Seniority An employee's seniority rights shall terminate if he: (1) Quits. (2) Is discharged. (3) Is laid off for a period of one (1) year or more. (4) After having been laid off, fails to report to work within seven (7) days after recall notice is sent to him. (5) Fails to report to work upon expiration of leave of absence. (6) Is absent from work, without authorization of the Company, for three (3) consecutive working days for any cause other than personal illness or injury. (7) Is furloughed and is not recalled by the Company within one (1) year following the date of the furlough. (8) Becomes a supervisor and does not return to the bargaining unit as stated in Article 4, Section 5. 4 5 ARTICLE V - HOURS, OVERTIME AND HOLIDAYS Section 1 - Work Day and Work Week The regular work week shall be 40 hours, consisting of either five (5) consecutive eight (8) hour days or four (4) consecutive ten (10) hour days. The Company shall have the right twice per year to determine the percentage of each after consultation with the Union, provided that no more than 25% of the employees covered by this Agreement on March 19, 1987, shall be compelled to work shifts of ten hour days without the consent of the Union. Work performed in excess of these limits shall be overtime and will be paid at the rate of time and one-half. Section 2 - Overtime There shall be no pyramiding or duplicate payment of overtime or premium pay for the same hours worked. Section 3 - Distribution of Overtime Work Overtime work will be divided as nearly equal as practicable among the employees in the classifications involved who normally perform such work. Section 4 - Call Backs Employees who are called back to work after having left the Company premises following the completion to the regular day's work, or on their assigned days off, shall be paid for such work at the applicable overtime rate and shall be paid a minimum of four (4) hours at such applicable overtime rate. This minimum shall not apply to employees who continue to work beyond the quitting time of their regular assignment. Section 5 - Holdovers Employees who are required to work beyond the regular quitting time of their shift shall be given as much advance notice thereof as circumstances will permit, with the understanding that they shall be given at least two (2) hours notice, except in cases of emergency. Section 6 - Shifts The present shift hours are as follows: 1st shift - 7:00 a.m. to 3:30 p.m. 2nd shift - 3:30 p.m. to Midnight 3rd shift - 10:30 p.m. to 7:00 a.m. 5 6 If the starting time of any job is changed by more than one (1) hour, that job will be posted for bid. Section 7 - Holidays For employees with ten (10) or more years seniority there shall be eight (8) paid holidays composed of New Year's Day; Martin Luther King, Junior's Birthday; Washington's Birthday; Easter Sunday; Fourth of July; Labor Day; Thanksgiving; and Christmas. For employees with more than ninety (90) days but less than (10) years seniority there shall be five (5) paid holidays composed of New Year's Day, Fourth of July, Labor Day, Thanksgiving, and Christmas. On his tenth anniversary date of employment, an employee will be entitled to all subsequent holidays in that calendar year to which employees with ten (10) or more years seniority are entitled. In order to receive holiday pay, an employee must work the last scheduled work day prior to the holiday and also the first scheduled work day immediately after the holiday. Employees shall be paid at their regular hourly rate of pay for the number of hours of their regular shift on the day of the holiday. When a paid holiday falls within the employee's vacation period, the employee shall receive an extra day off, with pay, for such holiday. Section 8 - General Bid There shall be one (1) general bid per year unless otherwise agreed between the parties. Employees may not change classifications at the general bid. ARTICLE VI - WAGES Section 1 - Hourly Wage Rate Hourly Rates of Pay - Maintenance Employees
Effective Effective Effective Classification 10/1/96 10/1/97 10/1/98 - -------------- --------- --------- --------- Working Foremen - --------------- - - Regular Hourly Rate $15.42 $15.88 $16.36 Mechanic - -------- - - Regular Hourly Rate $15.11 $15.56 $16.03 Partsmen - -------- - - Regular Hourly Rate $13.60 $14.00 $14.42
6 7 Employees who ordinarily are classified and carried in a lower-rated classification, but who are assigned by the Company, from time to time, to work in a higher-rated classification shall be paid, while working in a higher-rated classification, at the starting rate for that classification for four (4) hours for assignments of four (4) hours or less, and for eight (8) hours for assignments of more than four (4) hours and up to an including eight (8) hours. Employees who are classified and carried in a higher-rated classification, but who are required by the Company to work in a lower-rated classification when work is available for them in their regular classification shall be paid for such work in the lower-rated classification, at their regular rate of pay. Employees who are offered and elect to take available work in a lower-rated classification, in preference to being laid off on account of reduction of force, shall be paid for such work at rates for the classification in which the work is performed. Section 2 - No Reduction, etc. No employee shall have his wages reduced as the result of the signing of this Agreement. Nothing herein shall prohibit the paying of a higher rate of pay at the discretion of the Company. Section 3 - Pay Days Employees will be paid on a bi-weekly payroll. In addition, the Company reserves the right to name the day of the week that the bi-weekly payroll would be paid on and reserves the right to set up a reasonable lead time for payroll cutoff. Section 4 The Company shall have the right to increase wages on a location basis to meet market concerns. Such increase will not be on an individual basis, but must cover all employees in the classification. The Company will meet with the Union prior to announcing such increases. ARTICLE VII - SICK LEAVE Section 1 (a) Any sickness or injury which prevents an employee from performing the duties of his regular job with the Company shall be considered as sickness under this Article, provided, however, that no employee shall receive benefits thereunder whose sickness is caused by venereal diseases, intoxication, or any injury which may be the result of any intoxication by alcohol or drug addition, or any condition occurring while violating any criminal law or resulting therefrom. (b) Employees having one (1) year of seniority shall be eligible for sick leave for each assigned work day off not in excess of five (5) days per year. A work day shall be at the regular hourly rate for the number of hours of the employee's regular shift on the day missed. 7 8 Employees who did not use the sick leave they are entitled to, as outlined above, shall be entitled to up to two (2) weeks (ten (10) working days) accumulated sick leave, in addition to the annual sick leave allowance provided for above. This same procedure shall be applicable to the application and granting of accumulation of sick leave for the remaining years of the contract. The maximum sick leave allowance shall not exceed three (3) weeks (fifteen (15) working days) in any one year. All employees shall be permitted to carry over all sick leave accumulated and outstanding with Greyhound Lines, Inc. as of March 18, 1987. (c) There shall be a three (3) day waiting period, in respect to each sickness, for and during which no sick leave benefits shall be due or payable. This waiting period shall begin on the day on which the employee visits or is visited by a doctor and shall include days off, as well as scheduled work days. If an employee is disabled during his regular working hours and has worked less than four (4) hours, the preceding day shall be considered as the date last worked. If he has worked four (4) hours or more, that day shall be considered as the date last worked. Following the completion of said waiting period, the employee shall receive sick leave pay for each regular assigned work day lost because of such sickness, up to the maximum sick leave credit to which he is then entitled. In the event the loss of time from work, on account of sickness, is compensable under any present or future state or federal compensation act or claims against a third party, then only the difference between the sick leave allowance and the amount paid under such compensation act or third party suit or settlement for such loss of time shall be payable hereunder. When payment is made for the difference in earnings, such payment will be considered as payment for a full day of sick leave. Sick leave claims involving Workmen's Compensation will not be paid until the employee returns to work and his rights under the Workmen's Compensation Act are fully determined. In the event the employee terminates his employment with the Company without returning to work, such sick leave claims will be honored when his rights under the Workmen's Compensation Act have been fully determined. Sick leave claims, involving injuries sustained outside the course of employment, where an employee has a claim or suit pending against a third party for such injuries and resulting damages, will not be paid until the employee returns to work and his claim against the third party has been disposed of by trial or settlement. (d) No employee shall be entitled to receive benefits under this plan for any time lost by reason of sickness while on vacation. However, if an employee should become sick while on vacation and is unable to return to work at the end of his vacation, his three (3) day waiting period shall commence on the first regular scheduled work day following the conclusion of his vacation. 8 9 (e) In order to receive benefits under this plan, the employee shall submit to the Company medical evidence of his disability from a Company physician or other bona fide, licensed medical doctor, and if requested, on forms to be provided by the Company. The expense of this medical evidence shall not be borne by the Company. The Company, as its option, may require a special examination of the employee by a doctor to be designated by the Company. This shall be done without cost to the employee. Notification of absence on account of sickness shall be given to the employee's immediate supervisor as soon as possible. Application for sick leave benefits shall be filed with his supervisor within five (5) days after return of the employee to duty. (f) Any employee found to have abused the sickness benefit privilege by falsification or misrepresentation shall thereupon be subject to disciplinary action and reduction or elimination of sickness benefits, and shall further restore to the Company amounts paid to him for period of such absence. ARTICLE VIII - BENEFIT PLANS Section - 1 (a) Employees currently in the Amalgamated Council of Greyhound Local Unions pension plan will remain in such plan and in addition the Company, effective October 1, 1996, will contribute on behalf of those employees twenty-five dollars ($25.00) per month for the life of the contract for regular full-time employees to the Automotive Industries Plan. (b) Effective October 1, 1996, the employer will make a maximum combined contribution to the health and welfare and pension funds of $495.00 per month per regular full-time employees. Said contributions will be increased to $535.00 per month on October 1, 1997 and to $575.00 per month on October 1, 1998. (c) For those employees in (a) above, the contributions in (b) will be used for health and welfare premiums only. (d) For all other employees, the contributions will be used for both Health and Welfare and Pension contributions. (e) The health and welfare benefit plans will be determined by the Union and the Union will notify the Company where to send the required payments. (f) The employer agrees to accept the provisions of the various Trust Agreements and agrees to sign and be bound by the terms of said Agreements. 9 10 Section 2 Employees will be permitted to participate in the Greyhound Lines, Inc. Cash or Deferred Retirement Plan for Represented Employees with the understanding that the Company is not obligated to make any matching contributions on behalf of such employee. The Union agrees to accept and abide by the terms of the Plan and the related Trust and the Union agrees to waive its rights to participate in any discussions regarding the administration, amendment or terminating of the Plan or the related Trust. ARTICLE IX - UNION DUES The Company agrees to check-off and remit to the financial officer of the respective District or Local Union monthly from the pay of each employee who is a member of the Union, and who has so authorized the Company in writing, all dues, initiation fees, regular assessments as may be assessed against such member, and such voluntary contributions to the Union as may be separately authorized by the employee. Requests for check-off of assessments will be signed by the financial officer of the District or Local Union. ARTICLE X - VACATIONS Section 1 Vacations shall be granted in the following manner: (a) Employees who complete one (1) year but less than fifteen (15) years of continuous employment shall be granted a vacation of two (2) weeks with pay. (b) Employees who complete fifteen (15) years but less than twenty-five (25) years of continuous employment shall be granted a vacation of three (3) weeks with pay. (c) Employees who complete twenty-five (25) years of continuous employment but less than twenty-seven (27) years of continuous employment shall be granted a vacation of four (4) weeks with pay. (d) Employees who complete twenty-seven (27) years of continuous employment or more shall be granted a vacation of five (5) weeks with pay, effective with the 1997 vacation bid. ("Week", as used herein, shall mean forty (40) hours). The annual posting date of vacations shall be during November, with vacations to be taken during the following calendar year. The number of weeks vacation to be bid in November will be determined by the employee's seniority during the calendar year in which the vacation is taken. The Company will post a vacation schedule, on or before the 1st day of November of each year, listing each week separately for the twelve (12) month period, commencing on January 1 next following such posting and will designate how many employees can be released for vacation purposes each week. Twenty (20) days, after such schedule has been 10 11 posted, all employees eligible or who will become eligible during such vacation period shall then immediately express their choice of vacation period, in accordance with seniority ranking, on a bid sheet presented to the employee for that purpose. Vacation bidding will be completed by December 1. An employee who does not express his choice when the bid sheet is presented to him shall be passed up and not entitled to express his choice until after the bid sheet has been presented to all other eligible employees. The Company will cooperate with the Union in attempting to allow as many employees as possible to take vacation during the months of May through October. All vacations must be taken within the period designated by the employee's bid, or if no bid, within the period designated by the Company. Employees who are on furlough, leave of absence, or otherwise absent and are not reached by the bid sheet shall, upon return to work, select a vacation period from those then remaining open for bid. Employees who fail to bid must take vacations at a time designated by the Company. Employees who are absent from work during their regular assigned work period, in any service year, shall forfeit one-twelfth (1/12) of the vacation allowance due them for that service year for each aggregate of 173 hours not worked during said year. A period of time not worked of less than four (4) consecutive hours, shall not be taken into account in computing such aggregate. No deduction shall be made from the vacation allowance for absence due to bona fide illness or disability for the first 519 hours of such absence in any service year. For each aggregate of 173 hours worked by an employee as overtime during his service year, he shall receive an allowance of one-twelfth (1/12) of his vacation allowance which shall be applied only as a credit against an equal amount of deduction assessed because of absence. Penalties or credits shall not be extended beyond the period in which assessed. Employees who have completed earning an annual vacation and who leave the service for any cause, prior to taking such earned vacation, shall be paid an amount of money equal to such earned vacation. Employees who are discharged for cause, at any time, during their service year and those who voluntarily leave the service of the Company, prior to having worked six (6) months of their service year, for which, if completed, they would be entitled to a vacation shall receive no vacation allowance for that service year. Employees whose service entitled them to qualify for a vacation and who voluntarily leave the service of the Company, after having worked six (6) months of their service year, for which, if completed, they would be entitled to a vacation shall be paid their vacation allowance, pro-rata, for the time so worked. Employees leaving the service of the Company will be charged the number of days vacation not earned for which they have been paid. 11 12 ARTICLE XI -GRIEVANCE PROCEDURE Section 1 Should any difference or dispute arise involving the interpretation or application of any of the terms or provisions of this Agreement or the discipline or discharge of any employee covered hereby, it shall be settled in the following manner: (1) The aggrieved party or his Union representative shall give a clear, written statement of the grievance to the Superintendent or his designated representative within ten (10) days from the date of the occurrence causing such grievance. In cases of discharge, the grievance must be filed within five (5) days of the date of the discharge. The Superintendent shall make his written decision within ten (10) days after such grievance has been so presented, the employee affected, if any, may present such grievance with the Shop Steward. (2) If the Superintendent's decision is not satisfactory, appeal therefrom may be taken to the Regional Manager of Maintenance, provided written Notice of Appeal is given within ten (10) working days of the date of the Superintendent's decision; otherwise, the latter decision shall be final. If such appeal is taken, the Regional Manager of Maintenance or his designated representative shall render his written decision within ten (10) working days after the appeal is presented to him. Section 2 If the foregoing grievance procedure does not result in the satisfactory disposition of the grievance, it may be submitted to arbitration for settlement in accordance with the following procedure: (1) Notice of Arbitrate shall be given, in writing, to the Industrial Relations Department of the Company within ten (10) working days of the date of the decision of the Regional Manager of Maintenance or his designated representative; otherwise, the latter decision shall be final. (2) If such notice is given, the Union shall appoint an Arbitrator and the Company shall appoint an Arbitrator, within ten (10) working days after the Notice to Arbitrate is received by the Company. The two Arbitrators so appointed shall meet within ten (10) working days for the purpose of attempting to decide the grievance. Should they fail to agree upon a decision and upon a mutually acceptable third Arbitrator within ten (10) working days, the party involving Arbitration shall request the Federal Mediation and Conciliation Service to nominate five (5) persons to serve as the third Arbitrator. 12 13 The party requesting such nominations shall strike the names of two (2) such nominees and refer the list of the three (3) remaining nominees to the other party, who shall strike two (2) names therefrom and the remaining nominee shall be the third Arbitrator. The Arbitrator so selected shall proceed to hear and decide the matter expeditiously. Each party shall bear the fees and expenses of the Arbitrator selected by it and the witnesses called by it and the two shall share equally the fees and expenses of the third Arbitrator, as well as the other costs of the Arbitration proceeding. The decision of the majority of such Arbitrators made within their jurisdiction shall be final and binding on the Union and the Company. The Arbitrators shall not have authority to change or add to any of the provisions of this Agreement or to pass upon any matter not submitted to them. Failure of either party to adhere to the time limits will result in forfeiture. The time limits set forth in this Article may be enlarged by written agreement of the parties. Section 3 Discipline charged to an employee's record, which is over eighteen (18) months old will not be considered by the Company, providing there is no other discipline within the eighteen month period. Section 4 Prior to arbitration the Automotive Coordinator, or his designee will meet with the Company's Labor Relations representative, or his designee with the authority to resolve the dispute. ARTICLE XII - NO STRIKE - NO LOCKOUT There shall be no lockout by the Company, and there shall be no strikes or other work stoppages of any variety called by the Union, for the duration of this Agreement. Where a labor dispute arises with another Union recognized by the Company and a legal picket line is established at or around a Company terminal, garage, or other facility, our employees, who are members of the International Association of Machinists, will be permitted to honor such a legal picket line only at the facility where work of the other Union local is or was being performed at the time of the dispute as a regular job or bid shift. 13 14 ARTICLE XIII - UNION REPRESENTATIVES Section 1 - Shop Steward The Company agrees that the members of the Union may choose from the regular employees in such shop a representative or steward to act in behalf of the members of the Union in such shop, in any capacity assigned to such representative or steward by the Union, provided, however, that such activity on the part of such representative or steward shall not interfere with the normal and regular shop operations. Section 2 - No Discrimination Against The Company agrees that officers, business representatives of the Union and shop stewards shall not be discriminated against on account of their activities. There shall be no discrimination against any man who may be elected to serve as shop steward. ARTICLE XIV - PICKET LINES Section 1 When work in progress on equipment of the Company, at its St. Louis Garage, is sent out to a commercial shop, equal opportunity shall be given to such commercial shops. ARTICLE XV - MANAGEMENT OF OPERATIONS It is not the intent of this Agreement to include matters of management herein, and the Company reserves to itself the management, conduct and control of the operations of its business, including: (1) the determination of the type, kind, make and size of equipment and when, how and where such equipment shall be used; (2) the prescribing of rules, instructions and regulations for the safe, proper and effective conduct of its business in a competitive environment; (3) the number and qualifications of employees employed by it and their reasonable standards of conduct; (4) the assignment of work to the extent not specified herein; and (5) except as limited by the Article titled "Manning of Maintenance Work," the use of leased operations and independent contractors. The Company also reserves the right to change decisions within the scope of this Article at any time. 14 15 ARTICLE XVI - PHYSICAL EXAMINATIONS Section 1 All employees covered herein, upon request of the Company, must submit to a physical examination, by competent medical authority, approved by the Company. Employees will be accorded a reasonable amount of time during regular working hours, at regular rates, for such examination. It will be the policy of the Company to request only one (1) examination a year, except in special instances where a re-examination is necessary to determine whether or not recommendations for corrections for an infirmity have been made. Employees failing to pass such examination shall be disqualified from service. If written request therefore is made within ten (10) days after such disqualification, the employee may obtain an examination by two (2) physicians, one of whom shall be selected and paid by him or his representatives, and the other shall be selected and paid by the Company. If the two physicians so selected cannot agree, they shall select a third physician who shall be paid by the employee and the Company, share and share alike, and the decision of the majority of such physicians shall be final. If, in such examination, disqualifications are found which, in the judgment of such physicians, can be corrected by treatment, the employee will be given a reasonable time in which to effect such correction. If such employee is able to work, he will be permitted to do so upon certification to that effect by the examining physician or physicians. Failure of such employee to request further examinations, as above provided, or failure to effect required corrections, within a reasonable time, will terminate his employment. Employees who pass such examination, but who are requested or required to correct physical defect or infirmities shall be furnished with a copy of the Company Physician's Report. If such request or requirement is not disputed, it shall be complied with in a reasonable time. If same is disputed further, examination may be had and the matter decided in the manner above provided. An employee may be suspended for failure or refusal to comply with recommendations or requirements for the correction or repair of any correctable infirmity until he has complied therewith. 15 16 ARTICLE XVII - LEAVES OF ABSENCE Section 1 A leave of absence may be granted on written application from employee stating reason for the leave. A leave of absence will not exceed ninety (90) days in a calendar year wherein there will be no loss of seniority. An extension of the leave beyond the ninety (90) days may be granted upon proof of medical necessity or explanation acceptable to the Company. An employee on sick leave must report to the Company, at intervals of not to exceed ninety (90) days each, concerning his condition and the probable duration of his illness or disability. Section 2 - Overstaying Leaves An employee overstaying his leave of absence, unless detained by conditions beyond his control, will automatically sever his connection with the Company. Section 3 - Permission to be Absent An employee desiring to be absent from work must personally obtain permission from his foreman, preferably in writing, but if sickness or other unavoidable causes prevent him from reporting for work, he shall notify his foreman as early as possible. The Company may require an employee who claims to have been off duty because of illness to furnish a statement from a reputable physician with respect to such illness. Section 4 - Military Leaves Employees enlisting or entering the military or naval service of the government, pursuant to the provisions of the Selective Service and Training Act of 1940, as amended, shall be granted all rights and privileges provided by that Act and, particularly, by Section 8 thereof. And, in addition thereto, it is understood and agreed that all employees referred to in the foregoing sentence shall retain and accumulate seniority rights during their tour of military or naval service. ARTICLE XVIII - MISCELLANEOUS Section 1 - Drinking Fountains, etc. Sanitary drinking fountains shall be provided in or convenient to the garage and proper heating, lighting and ventilation of the garage for the comfort of the employees shall be maintained. The Company shall furnish employees hand towels, bath towels, and soap, with proper quarters for washing and dressing. Anyone losing, damaging or destroying towels will be required to pay for same. 16 17 Section 2 - Health and Safety The Company agrees that any conditions detrimental to the health or safety of employees will be corrected after being brought to its attention. Employees will be required to use safety devices provided by the Company in accordance with posted instructions. Employee representatives will be appointed to a safety committee and periodic meetings of the safety committee will be held as required. The Company will work with the Union to insure a safe workplace and the Company shall furnish all maintenance employees, when exposed to foul weather proper foul weather gear which shall consist of rainsuits and individual boots where the shoeless type is used. The Company will attempt to get as many employees as possible involved in the safety committee by rotating the employee representative on a periodic basis. Section 3 - Tools Special tools for use on Company equipment shall be furnished for the use of the employees. Employees will be required to carry such first class hand tools as the work of their classification requires. The Company will furnish, if obtainable, not more than (2) flashlights per year to each employee whose work requires such equipment and will also furnish all such flashlight batteries as are necessary to such work. Section 4 - Insurance on Tools The Company's present fire insurance coverage in respect to employees' tools and personal effects shall be continued in force. Section 5 - Bulletin Board A bulletin board will be provided, in a suitable place, in the garage for the exclusive use of the Union. Section 6 - Union Emblem Union members will be permitted to wear the emblem of the Union on service uniforms in a position designated by uniform regulations of the Company. Section 7 - Passes Employees, and those dependent upon them for support, will be given the same consideration in the issuing of free or reduced rate transportation over the Company's lines and its connecting carriers as is granted other employees of the Company. 17 18 Section 8 - Work Away From Garage When employees are assigned to perform work away from the St. Louis garage facilities, they shall be paid for time necessarily spent in traveling to and from the place where such work is to be performed and for time spent working. Employees so used shall be paid at the applicable overtime rate for all work performed in excess of their regular daily scheduled hours. Overtime will be paid only for actual overtime worked. Such employees will not be relieved from duty for the purpose of avoiding the payment of overtime when continuous work would complete the assignment. Employees on such assignments shall be reimbursed for actual, reasonable expenses for meals and lodging incurred while on such assignments, as well as for necessary cost of transportation, if same is not furnished by the Company. Proper receipts covering such expenses shall be furnished to the Company to support claims for reimbursement. Upon request, the Company will furnish such employees with a cash advance to cover such expenses, in which event, the employee will account to the Company for such advance promptly following the completion of each such assignment. Section 9 - Employees' Current Address Each employee covered by this Agreement shall keep the Company promptly and currently advised, in writing, of his residence address. Section 10 Non-bargaining unit employees including supervisory employees shall not perform bargaining unit work except for instruction or training, testing materials or products, or in emergency situations, including those caused by production difficulties or the unavailability of qualified personnel. Section 11 Employees at service islands will have the option to substitute insulated coveralls for one set of uniforms. ARTICLE XIX - JURY SERVICE Section 1 Employees who are required to serve on juries shall be made whole in pay for the time necessarily lost from their regular work assignment on account of such jury service. ARTICLE XX - FUNERAL LEAVE Employees will receive up to three (3) days paid leave per occurrence for loss of a parent, spouse or child. Pay will be only for scheduled time missed. The Company reserves the right to request written proof. 18 19 ARTICLE XXI - LEGALITY Section 1 (a) In the event that any part or provision of this Agreement shall be rendered or declared invalid by reason of any law, regulation, order or decree of any court or board, then only that part of provision rendered or declared invalid shall be considered null and void, and the remainder of this Agreement shall remain in full force and effect, according to the original terms; provided, however, that in such event, the parties agree to negotiate, in good faith, for such modified provision as will be valid on the subject matter. ARTICLE XXII Section 1 There shall be no discrimination in hiring, promotions, or other aspects of employment because of race, creed, color, national origin, age or sex. ARTICLE XXIII - EFFECTIVE DATE AND DURATION This Agreement shall be in effect from October 1, 1996, until and including October 1, 1999, and shall remain in effect from year to year thereafter unless changed or terminated as herein provided. Either party desiring to make any changes or modifications in this Agreement to become effective at the end of the initial term or any annual extension thereof, or desiring to terminate this Agreement at the expiration thereof, shall notify the other party in writing of its desire either to enter into negotiations for the purpose of making changes or modifications herein or of its desire to terminate this Agreement at least sixty (60) days prior to the expiration of the initial term or any extension hereof. In the event that any change or modification so requested by either party is not mutually agreed upon prior to the expiration date of this Agreement or any renewal thereof, the Agreement shall terminate at such expiration date unless the same shall be extended by mutual consent. After receipt of notification requesting changes or modifications in the Agreement, the parties agree to set a mutually satisfactory date to meet and discuss same. The foregoing is the complete collective bargaining Agreement entered into by and on behalf of the parties signatory hereto, indisputable errors and/or omissions accepted. 19 20 Signed this day of , 1996. ------- ---------------- GREYHOUND LINES, INC. DISTRICT NO. 9, INTERNATIONAL ASSOCIATION OF MACHINISTS, AFL-CIO BY: /s/ J. FLOYD HOLLAND BY: /s/ MERRILL FROST ---------------------------- ---------------------------- BY: /s/ BOB TANCOS BY: /s/ LARRY A. SMITH ---------------------------- ---------------------------- BY: ---------------------------- 20 21 [GREYHOUND LINES, INC. LETTERHEAD] October 8, 1996 Mr. Merrill Frost Automotive Coordinator I.A.M. 9000 Machinists Place Upper Marlboro, Maryland 20772-2687 Dear Mr. Frost: During contract negotiation, the parties discussed the alcohol policy as outlined in rule 12 of the Maintenance Rule Book. Effective with the ratification of a new labor agreement, the Company agrees to change the existing rule by deleting the last paragraph and substituting the following: "An employee who is in violation of this rule will be terminated, however he will be reinstated upon completion of an approved rehabilitation program, provided he applies for reinstatement within sixty (60) days from date of discharge. Such employee will be subject to random testing for a period of one (1) year from date of reinstatement. The Company will pay for such testing. A second violation of this rule will result in termination. Please confirm your understanding and acceptance of the above. Very truly yours, /s/ BOB TANCOS Bob Tancos Senior Director, Industrial Relations Agreed: /s/ MERRILL FROST ----------------------------- Merrill Frost 10-9-96 22 LETTER OF UNDERSTANDING RE: TRAINING - APPLIES TO ALL I.A.M. LOCATIONS The Company and the Union are committed to enhancing the skills of employees. It is the intent of the parties that the Company will provide and the employees will participate in training. Not withstanding any language in the various labor agreements, it is agreed that an employee's shift and/or days off may be changed to allow them to attend training sessions. If such a change is made, the employee will be notified of such change at least fourteen (14) days prior to the change. If a change is made to an employee's shift and/or day off, the employee will be paid at his regular straight time hourly rate for the time necessary to attend such training. /s/ RICHARD M. COTE 10-9-96 /s/ ROBERT J. TANCOS 10/9/96 - ---------------------------- ----------------------------- For the Union: For the Company: /s/ LARRY A. SMITH /s/ J. FLOYD HOLLAND 10/9/96 - ---------------------------- ----------------------------- /s/ MERRILL FROST 10/9/96 /s/ ILLEGIBLE 10/9/96 - ---------------------------- ----------------------------- /s/ MICHAEL L. DAY 10/9/96 /s/ ILLEGIBLE 10/9/96 - ---------------------------- ----------------------------- /s/ ILLEGIBLE - ---------------------------- EX-10.14 4 AGMT BTWN GREYHOUND & INTL ASSOC. OF MACHINISTS 1 EXHIBIT 10.14 AGREEMENT BETWEEN GREYHOUND LINES, INC. AND THE INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS COVERING GARAGE EMPLOYEES AT MIAMI, FLORIDA ST. PETERSBURG, FLORIDA FAYETTEVILLE, NORTH CAROLINA COLUMBIA, SOUTH CAROLINA ORLANDO, FLORIDA CHARLESTON, WEST VIRGINIA (AT TERMINAL) TALLAHASSEE, FLORIDA EXPIRES OCTOBER 1, 1999 1 2 AGREEMENT Between GREYHOUND LINES, INC. AND THE INTERNATIONAL ASSOCIATION OF MACHINISTS and AEROSPACE WORKERS Expires October 1, 1999 MEMORANDUM OF AGREEMENT -- This Agreement effective October 1, 1996, and expiring October 1, 1999, is entered into by and between Greyhound Lines, Inc. and its successors and assigns, hereinafter called the "Company," and the International Association of Machinists and Aerospace Workers, hereinafter called the "Union." The parties recognize that the assets of Greyhound Lines, Inc. are under new ownership. No contract language, award, adjustment, interpretation letter, practice, or right agreed to between the Union and the previous owners, or made binding between them through arbitration or otherwise, shall remain in effect unless expressly agreed to herein, or as later agreed by the parties. This Agreement may be modified only by formal amendment signed by the parties. The titles used in this Agreement are for reference purposes only and are not to be considered as a part of this operative language. As used herein, whenever "he" or "his" or their related pronouns appear, they have been used for literary purposes and are meant in their generic sense to include both female and male sexes. If the Company, or any portion thereof, is sold, there shall be included in the documents relating to such a sale a requirement that the purchaser accept and be bound by this Agreement and all its terms for the duration of this Agreement. P R E A M B L E The intention of this Agreement is to promote and maintain harmonious relations and cooperation between the Company and the International Association of Machinists and Aerospace Workers, acting as sole 2 3 collective bargaining agency for all maintenance employees covered by this Agreement. The Union recognizes that the Company is engaged in public service as a common carrier, and that the success and welfare of the business necessitates the utmost efficiency and courtesy among employees and management in order to build up and maintain the respect and good will of the public. Article I BARGAINING UNIT 1.0 The Company recognizes the Union as the duly authorized representative, for the purpose of collective bargaining on wages, hours, and working conditions of all maintenance employees employed as Working Foremen, Mechanics, Storekeepers and Service Workers (Steam Cleaners, Fuelers and Cleaners) at the Company's garages at the following locations: Miami, Florida; St. Petersburg, Florida; Fayetteville, North Carolina; Columbia, South Carolina; Orlando, Florida; and Charleston, West Virginia (employed at terminal), and Tallahassee, Florida. 1.1 The Company recognizes the right of its employees to become members of and to participate fully in the activities and affairs of the Union, and to bargain with the Company and its representatives through the Union and its representatives without fear of discrimination or intimidation. 1.2 The Union and the Company agree that their representatives will cooperate to the mutual benefit of both. The Union agrees that its representatives and members will conduct its activities in an orderly manner so as not to interfere with the duties of the employees or disrupt the maintenance of discipline essential to the continuance of the public services of the Company. 3 4 Article II MANNING OF MAINTENANCE WORK 2.0 It will be the Company's policy to have maintenance work historically performed in its garages on Company operated vehicles continue to be performed at Company garages, however, in cases of road failure, the Company may have emergency temporary repairs made in order to operate the bus to a Company facility for repairs. The Company may have warranty work performed on GLI property by the manufacturers representative. Notwithstanding this provision or any other provision of this contract, if a service worker changes classifications or leaves the employ of the Company, the Company shall have the right, in its sole discretion, to have the service work of that employee performed through subcontracting or through hiring part-time employees not subject to this Agreement. Article III MANAGEMENT OF OPERATIONS 3.0 It is not the intent of this Agreement to include matters of management herein, and the Company reserves to itself the management, conduct and control of the operations of its business including: (1) the determination of the type, kind, make and size of equipment and when, how and where such equipment shall be used; (2) the prescribing of rules, instructions and regulations for the safe, proper and effective conduct of its business in a competitive environment; (3) the number and qualifications of employees employed by it and their reasonable standards of conduct; (4) the assignment of work to the extent not specified herein; and (5) except as limited by the Article titled "Manning of Maintenance Work", the use of leased operations and independent 4 5 contractors. The Company also reserves the right to change decisions within the scope of this Article at any time. Article IV UNION SECURITY 4.0 All full and part-time employees covered by any portion of this Agreement must become and remain members of the Union not later than the thirty-first (31st) day following their date of employment as a condition of their continued employment with the Company. Article V CHECK-OFF 5.0 The Company agrees to check-off and remit to the financial officer of the respective District or Local Union monthly from the pay of each employee who is a member of the Union, and who has so authorized the Company in writing, all dues, initiation fees, regular assessments as may be assessed against such member, and such voluntary contributions to the Union as may be separately authorized by the employee. Requests for check-off of assessments will be signed by the financial officer of the District or Local Union. Article VI PROBATIONARY PERIOD 6.0 (a) A new employee will be given a trial period of sixty (60) calendar days from his seniority date in which to demonstrate his ability to properly perform the duties for which he was hired. It is understood that during the above sixty (60) calendar day period, none of the provisions of this Agreement covering discharge will apply. (b) New employees and employees upgraded to mechanic position will be assigned the day shift during the probationary or qualifying period even though the shift bid is not a day shift position. Such assignments will be without penalty. 5 6 Article VII HOURS OF WORK 7.0 (a) The regular work week shall be forty (40) hours, consisting of either five (5) consecutive eight (8) hour days or four (4) consecutive ten (10) hour days. The Company shall have the right twice per year to determine the percentage of each at each location after consultation with the Union, provided that no more than 25% of the employees covered by this Agreement on March 19, 1987, shall be compelled to work shifts of ten hour days without the consent of the Union. Work performed in excess of these limits shall be overtime and will be paid at the rate of time and one-half. (b) Changing Shifts: Any employee changing shifts at the convenience of the Company shall be paid time and one-half his regular rate for the first shift on the new job and also time and one-half for the first day he returns to the old job. This will not apply to employees who have bid on jobs or shifts other than their own. (c) Consecutive Hours: No employee shall be permitted to work in excess of sixteen (16) hours consecutively and after having worked sixteen (16) hours shall not be recalled to duty without first having been accorded eight (8) consecutive hours of relief. Article VIII OVERTIME 8.0 All work performed by an employee on his regularly scheduled days off shall be considered overtime and shall be paid for at time and one-half his established regular rate; provided that an employee must work a minimum of forty (40) regular hours during the same work week. 8.1 A record of overtime at each location will be kept and made available to the employees and posted on Company bulletin boards after each pay period and a copy of such records shall be furnished to the Maintenance Manager. 6 7 8.2 Overtime work necessary within the garage is to be divided as equally as possible. If the available overtime is offered to the senior employee with the least amount of overtime and he is unwilling to perform the work he will be credited with the overtime hours he would have worked for purposes of this paragraph. An employee who is not qualified for the work will not be credited with the overtime hours. 8.3 No employee will be compelled to lose time in place of any overtime worked or time worked beyond forty (40) hours per week or for time worked on his day or days off. Article IX HOLIDAYS 9.0 For employees with ten (10) or more years seniority there shall be eight (8) paid holidays composed of New Year's Day; Martin Luther King, Junior's Birthday; Washington's Birthday; Easter Sunday; Fourth of July; Labor Day; Thanksgiving, and Christmas. For employees with more than ninety (90) days but less than ten (10) years seniority there shall be five (5) paid holidays composed of New Year's Day, Fourth of July, Labor Day, Thanksgiving, and Christmas. On the tenth anniversary date of employment, an employee will be entitled to all subsequent holidays in the calendar year to which employees with ten (10) or more years seniority are entitled. In order to receive holiday pay, an employee must work the last scheduled work day prior to the holiday and also the first scheduled work day immediately after the holiday. If an employee is scheduled to work on the holiday, they must work their entire shift on the holiday to receive holiday pay. 9.1 Pay on holidays shall be at the employee's regular hourly rate for the number of hours of the employee's regular shift on the day of the holiday. 7 8 9.2 A holiday not worked shall be counted as a day worked for the purpose of computing weekly overtime. 9.3 There shall be no duplication of premium pay hereunder. 9.4 A sheet will be posted and signed by employees desiring Fourth of July, Thanksgiving Day, Christmas, and New Year's Day off. The Company will decide the number employees who will be granted the day off and seniority will prevail. Article X CALL-IN PAY 10.0 Employees called by the Company and asked to report for work during their off period will be allowed a minimum of four (4) hours pay. It is understood that should an employee be required to begin work before his regular scheduled shift, without one (1) hour prior notice, and continue to work on into his regular scheduled shift, he will be allowed a minimum of four (4) hours pay for the emergency call. Article XI WAGE SCALE 11.0 HOURLY RATES OF PAY -- MAINTENANCE EMPLOYEES --
Eff. Eff. Eff. 10/1/96 10/1/97 10/1/98 ----------------------------------------------- Miami, Florida - -------------- Working Foreman $14.12 $14.54 $14.98 Journeyman Mechanic $13.86 $14.28 $14.71 Partsmen $12.47 $12.85 $13.23 Service Workers Regular Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Rate $ 7.41 $ 7.63 $ 7.86 Orlando, Florida - ---------------- Working Foreman $13.33 $13.73 $14.14 Journeyman Mechanic $13.07 $13.46 $13.87
8 9 Service Workers Regular Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Rate $ 7.41 $ 7.63 $ 7.86 St. Petersburg, - --------------- Florida - ------- Working Foreman $14.10 $14.52 $14.96 Journeyman Mechanic $13.84 $14.26 $14.69 Service Workers Regular Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Rate $ 7.41 $ 7.63 $ 7.86 Tallahassee, - ------------ Florida - ------- Working Foreman $13.61 $14.01 $14.43 Journeyman Mechanic $13.35 $13.75 $14.16 Service Workers Regular Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Rate $ 7.41 $ 7.63 $ 7.86 Fayetteville, - ------------- North Carolina - -------------- Working Foreman $12.75 $13.13 $13.53 Journeyman Mechanic $12.49 $12.87 $13.25 Service Workers Regular Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Rate $ 7.41 $ 7.63 $ 7.86 Columbia, - --------- South Columbia - -------------- Working Foreman $13.15 $13.55 $13.95 Journeyman Mechanic $12.90 $13.28 $13.68 Service Workers Regular Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Rate $ 7.41 $ 7.63 $ 7.86 Charleston, - ------------ West Virginia - ------------- Working Foreman $13.41 $13.81 $14.23 Journeyman Mechanic $13.15 $13.55 $13.95
9 10 The Company shall have the right to increase wages on a location basis to meet market concerns. Such increases will not be on an individual basis but must cover all employees in the classification. The Company will meet with the Union prior to announcing such increases. **An employee hired at this rate is entitled to the regular hourly rate at the end of twenty-four(24) months of continuous full-time employment Article XII WORKING FOREMAN 12.0 Working Foreman shall be considered as a supervisory position and appointed by the Company. However, the Company agrees to interview and give every consideration to the senior employee at the location where the vacancy exists, but will not be required to post the Working Foreman's position for general bid provided for by this Agreement. Working Foremen shall remain members of the Union. 12.1 When three (3) or more employees on the same shift are exclusively and regularly employed in rebuilding or servicing air conditioning equipment, one of them will be assigned as Working Foreman. Article XIII APPRENTICES The current apprenticeship program will remain until a new program is developed. The Company/IAM in house apprenticeship program to be developed and then implemented at garages having 30 or more mechanics. Apprenticeship program, including apprentice wage rates to be applied to all mechanics having a service date after October 1, 1985. No mechanic hired prior to October 1, 1989 will take any pay or benefit reduction below December 1989 levels as a result of apprenticeship program and will receive the minimum wage increases. Article XIV MECHANICS 14.0 The work of a Journeyman Mechanic is described as follows: General inspection, fitting connecting rods and main bearings, fitting pistons 10 11 and rings, rebuilding transmissions, general motor overhaul, rebuilding generators, air compressors, diesel motor blowers, fuel injectors, starters, air conditioning equipment, all machining and lathe work and first class sheet metal work as well as first class body work. 14.1 The foregoing paragraph is only intended to describe in part the work performed by Journeyman Mechanic, but does not include other work being performed by a Journeyman Mechanic. Article XV TEMPORARY ASSIGNMENTS 15.0 The senior qualified employees assigned temporarily to classifications paying higher rate than their own shall receive the minimum higher rate on such classification upon performing such duties. 15.1 Any employee assigned to work in a classification paying a higher rate of pay than that which he receives, except as otherwise provided for in this Agreement, will receive the minimum higher rate in the higher classification while performing such duties. 15.2 No employee will be transferred from his department for a period in excess of five (5) accumulative days. Transfer will be by rotation of employees in each department of classification and by reversed seniority. For the purpose of taking inventory, an employee may be assigned for five (5) consecutive days. The Union agrees to keep the records. Article XVI ROAD CALLS 16.0 Road Failures - Mechanical road failure work on buses will be handled as follows: 1. Where parts are sent to make repairs, a Journeyman Mechanic from the line will be sent out. 2. Where delay to passengers would be increased by sending a Journeyman Mechanic, such repair work may be performed by other than a Journeyman Mechanic. 11 12 3. Where repairs on non-revenue equipment requires a Journeyman Mechanic more than one half (1/2) hour to complete, even though parts are not sent or purchased locally, Journeyman Mechanics from the line will be sent except in case of Number 2 above. 4. Parts will not be stored for the purpose of making repairs under this section at points other than Company garages in order to evade the application intended in Number 1 above. 5. Employees so used shall not be relieved from such work in order to prevent the accumulation of overtime when continuous duty would complete same but may be relieved for proper rest. Employees will not be paid for time during which they are relieved for rest. Reasonable expenses for meals and lodging will be paid by the company. Reasonable expenses for purchase of fuel, oil, and/or parts will be advanced to employees on road calls if the situation warrants. All reports made on the cause of the road failure shall be substantiated by facts, and will be made available to the Union on request, although any supervising maintenance official may include his opinion in said report. Bills for outside work will be forwarded to the garage location having jurisdiction of work in the area by the billing concern and a copy will be given to the Shop Steward. 16.1 The Company may have towing performed by outside towing companies. 16.2 It is not the intention of the Company to abuse the practice of performing repairs or maintenance work outside of Company garages. 16.3 A road call board (if desired by the Journeyman Mechanics involved) will be established and 12 13 when it is necessary to call a Journeyman Mechanic who is off duty to service a road call, those Journeyman Mechanics who have placed themselves on the board and are qualified to do the road failure work will be called in rotation. If the Journeyman Mechanic does not accept the call, he shall be dropped to the bottom of the board and be placed behind the man who accepted the call. All service calls within service call boundaries shall be serviced by the bottom man on the road call board, who is on duty. Article XVII SENIORITY 17.0 (a) There will be a seniority roster posted indicating garage seniority and job classification. When a reduction of forces is made in a work location, employees subject to furlough must exercise their garage seniority within their current classifications before bidding into another classification, qualifications being sufficient. In case of reduction in forces, employees to be furloughed will be given seven (7) days notice. Employees who have been on furlough status continuously for three (3) years shall no longer be entitled to recall. (b) There will be a common system seniority date of December 16, 1968, in accordance with the following: FURLOUGHS: An employee displaced or furloughed because of a reduction in forces shall first exhaust his garage seniority in his classification at the location where displacement occurs. If no job is available within his classification at his location such employee will, within ten (10) days, exercise his seniority date of December 16, 1968. This does not preclude an employee from exercising his garage seniority in a lower classification or his standby furlough rights as provided in the Labor Agreement. 13 14 When an employee bumps into another location as outlined above and later there is an opening at the location from which he was furloughed or displaced, he will have a right to exercise his garage seniority on any vacancy in his classification at his former location. Employees who bump into other locations or are furloughed shall be given first preference for recall to his former location on a garage seniority basis when a permanent vacancy occurs. BIDDING: The common seniority date of December 16, 1968, may be used for the purpose of bidding on vacancies at other locations for which there were no bidders. In the event vacancy cannot be filled, the vacancy will be offered to the senior employee on furlough in the Company. (c) Seniority as used herein shall mean service seniority, consisting of all time worked for the Company, or in the Service of Greyhound Lines, Inc. before March 19, 1987, in all classifications at the employee's work location, including all seniority retained after a transfer or recall from furlough as provided in the Article. (d) Employees moving to another garage under provisions of Article 15.0 and who were either on vacation, sick leave or personal leave during the entire posting period will establish seniority at the new location effective with the date of the awarding of the job the same as though such employee had been the original bidder. (e) Employees transferring under Article 15.0 will have up to fourteen (14) days from assignment of position to relocate. 17.1 A seniority list will be kept posted and stand as correct, indisputable errors excepted. A copy of the seniority list will be furnished the Chairman of the Local Committee. The reduction and restoration of forces, bidding on 14 15 shifts, vacations, and days off in each classification at each work location shall be governed by garage seniority, qualifications being sufficient. 17.2 If it is found necessary to reduce forces, the Company will eliminate overtime, except in emergencies. The possibility of reduction of the work week will be discussed between representatives of the Union and the Company. Before the work week is reduced, it is understood that any agreement reached on the reduction of the work week must have the approval of the membership involved. 17.3 Each city where Company garages are operated shall constitute a single seniority district and the exercise of seniority shall be confined to such district, except when qualified help is not available at a location. 17.4 When at the request of the Company, an employee consents to transfer or is recalled from furlough to another location, he will retain and accumulate seniority at his original location and will accumulate seniority at the new location from date of transfer only. Any employee transferred at the request of the Company will be paid necessary and reasonable living expenses and transportation. 17.5 When two (2) or more employees are employed on the same date, the employee having the highest last two numerals in his Social Security number will be ranked first. 17.6 Annual Posting of Jobs - It is hereby agreed that for at least seven (7) days prior to November 7 of each year, the Company will post in each seniority location as herein defined, a notice specifying the number of jobs, the number of employees in each work classification to be employed on each shift, and the scheduled hours of work and days off for each job; such notice to be posted on the bulletin board with the understanding that each individual has the right to make his own selection and will make such selection on his first regular work shift after the 7th of November posting. No job will be bid prior to November 7. At such time each employee shall be permitted to bid on jobs within his classification and in his present 15 16 seniority location. In considering such bids, seniority will govern the choice of jobs; all changes to become effective the first pay period in December of each year. The Company may at any time, as conditions warrant, change the number of employees in any classification on any shift. Whenever any such change is made or any vacancy occurs on a shift the provisions of Article XVIII shall apply. It is not the intention of the parties that the present method of handling general bid will be changed by this provision. The annual posting of jobs is only for the purpose of selecting shifts, days off and jobs within the classification and is not for the purpose of changing classifications. 17.7 (a) Except in cases of promotion due to sickness or other emergencies and after the completion of a ninety (90) day trial period, no employee above Working Foreman shall be scaled back to a lower classification regardless of whether or not his classification is in or out of the bargaining unit. (b) Employees covered by this Agreement who are transferred to supervisory positions in the Company's employ shall retain their seniority for a period of sixty (60) days. If they do not return to the bargaining unit within sixty (60) days, they will forfeit all accrued seniority. 17.8 Employees who are furloughed from their home garage may, if they so notify the Company and keep with the Company a correct mailing address, be recalled for work in another garage covered by this Agreement, such notice shall be by Certified Mail to his home address. 17.9 The Company shall furnish all local divisions copies of all seniority rosters twice a year. 17.10 An employee being recalled from furlough shall have at least two (2) weeks notice prior to returning in order to give his employer proper notice of leaving. The employee must return within fifteen (15) days after receipt of 16 17 notice by Certified Mail or seniority will be forfeited and his employment terminated. Employees will be given permission to reject recall without loss of seniority if sufficient employees are available within the classification. Article XVIII POSTING NEW JOBS AND VACANCIES 18.0 All vacancies and new jobs will be posted on the bulletin board within five (5) days for a three (3) day period. The senior qualified employee in the garage where the vacancy or new job occurs, bidding for same, shall be assigned to the job within five (5) days of the results of the bids are known. Except for disqualification, the successful bidder will not be able to rebid his own vacancy for minimum of thirty (30) days. 18.1 An employee bidding on a vacancy or new job shall be given reasonable time in which to acquaint himself with and qualify to fill the position. Thirty (30) days will be considered a reasonable length of time, except on general bid which will be fifteen (15) days. 18.2 Should the employee fail to qualify in filling the vacancy or new job, he will revert automatically to the job eventually left vacant as a result of his bidding on the job for which he failed to qualify, even though this vacancy may be on a different shift. 18.3 He will not be eligible to rebid on the job for which he failed to qualify for ninety (90) days. 18.4 An employee wishing to bid on a vacancy posted during his absence on vacation or leave of absence may do so upon his return, except for general bid. An employee who will be on vacation during general bid shall leave his choices in writing with the Company. 18.5 If the Company deems it necessary to post the job of an employee on sick leave for thirty (30) calendar days or more, his job will be posted for bid temporarily. He will return to work to his job upon termination of sick leave. For the purposes of this paragraph, temporary 17 18 is defined as until general bid or until the employee's return to work whichever is earlier. The employee who bids a temporary opening will return to his old job it if still exists, otherwise, he will exercise his garage seniority, qualifications being sufficient. An employee on sick leave will contact the shop Steward for his choice on general bid. The Shop Steward will see that the Company is properly notified. 18.6 Shift changes of more than one (1) hour will be posted for rebids. Article XIX LEAVE OF ABSENCE 19.0 An employee may, at his request, be granted a leave of not more than thirty (30) days without loss of seniority. 19.1 Upon written request, an employee may be granted leave of absence of thirty-one (31) days or more without loss of seniority, limited to a maximum of three (3) months cumulative in any calendar year. The Company may, upon request, grant an additional leave of absence of not more than ninety (90) days during slack periods of work. 19.2 Leave of absence due to sickness will not be limited under this Article nor will seniority in such cases be affected, provided that a Company physician certifies to the necessity for such sick leave. However, such employee may be required to be examined by a designated physician at the request and expense of either party at the end of each ninety (90) days of absence from duty to substantiate illness. In the event an employee fails to make himself available for such examinations, or upon such examination is found to be fit for duty and fails to report immediately thereafter, his employment is terminated. 19.3 (a) The Company agrees upon written request that the officers of the Union, employees of the Company, shall be granted the necessary leaves of absence for Union business; provided reasonable notice shall be given. The Union agrees that its members covered above will not abuse the rights set forth herein. 18 19 (b) Employees of the Company being used in the service of the Union will, while in such service, retain and accumulate all seniority rights and benefits enjoyed by other employees. (c) No limitations as to the length of leave of absence will apply to an employee who is an officer of the Union or to a Union member accepting official position with the Union or International Association. 19.4 In order to retain his insurance, health benefits, and retirement annuity, the employee must arrange to pay all costs in connection with same during such leave. 19.5 An employee on leave of absence under provisions of this Article may accept employment elsewhere without loss of seniority except that they shall not accept employment with any other passenger motor carrier without written consent of the Company. Article XX GRIEVANCE PROCEDURE 20.0 A Shop Committee selected by the employees in each garage location, who are members of the Union and duly certified in writing to the Company, shall be recognized as having authority to handle all grievances with the Company that may arise pertaining to the rights of the employees and the interpretation of this Agreement. No more than three (3) members of a Shop Committee shall participate at any one time in handling grievances with the Company. The aggrieved employee will be present at all hearings if he so desires. 20.1 No employee will be discriminated against or intimidated in any way whatsoever for acting as Committeeman to represent members of the Union. 20.2 When it becomes necessary to discipline an employee, the supervisor will make a record thereof within five (5) days, furnishing one (1) copy to the Shop Committee and one (1) copy to the employee. A Shop Steward may be present at the time the discipline is issued when request is made by the employee. 19 20 20.3 Grievances should be handled immediately during working hours, if possible, without loss of time to employees and in the following manner: (a) Employees believing they have a grievance shall report same to the Shop Steward within five (5) days, who, with the aggrieved employee or employees may take the matter up with the Company's designated representative within twenty (20) days an a hearing shall be held within fifteen (15) days and the Company shall render a decision within five (5) days, from the date of the conclusion of the meeting of the parties. However, in the event a Company disciplinary form is issued, there will be no need to return such Company disciplinary form to the person issuing same. (b) Failing to settle the grievance at the above step, the Shop Committee or Union Representative may appeal the matter in writing to the Regional Manager of Maintenance within seven (7) days. The Regional Manager of Maintenance or his designated representative, shall set a date for the hearing of the matter within seven (7) days of receipt of the appeal. The Regional Manager of Maintenance, or his designated representative, shall render his decision in writing within five (5) days from the date of the conclusion of the hearing. 20.4 (a) In any of the steps on appeal hereinbefore provided for, if the transcript of the evidence introduced at the hearing is requested to be made by either party, arrangements shall be made by the party requesting such a transcript to be made. If the transcript is made by a Company employee, a copy will be furnished the 20 21 Union. If the transcript is made by an outside person and a copy is requested by either party, the party requesting same will pay one-half (1/2) of the total cost of the transcript. (b) Discipline and discharge Cases - If, as a result of the investigation or upon appeal, the discipline or discharge is revised, the record of the employee will be corrected accordingly and in the event the employee is cleared, he well be paid for any loss of earnings in accordance with the decision rendered. In the event the Company sets such investigation or hearing at a point other than the home garage of the employee involved, such employee will be allowed reasonable expenses for his travel and meals. 20.5 Arbitration - Failing to arrive at a settlement within twenty (20) days by procedure set forth in Paragraph 20.4 (b) above; either party may, in writing, request that the matter be referred to a Board of Arbitration to be selected in the following manner: (a) The party requesting arbitration will give written notice to the other party and in such notice will name its arbitrator. The party receiving such notice will have six (6) days following the receipt thereof in which to appoint its arbitrator. The two arbitrators thus selected will meet in not to exceed ten (10) days for the purpose of deciding the case. If the two arbitrators are unable to reach an agreement within ten (10) days after their meeting, they will attempt to select a third arbitrator. If they fail to agree on his selection within ten (10) days thereafter, the Federal Mediation and Conciliation Service will be requested to nominate five (5) persons to act as such third arbitrator. The names of the five (5) nominees will be submitted 21 22 first to the party requesting arbitration, who will strike the names of two (2) of the nominees and thereupon refer such list to the other party who will strike the names of two (2) of the remaining nominees, and the nominee whose name has been stricken will serve as the third arbitrator. (b) A record will be made of the proceedings and a stenographic transcript will be made of all testimony and evidence offered. The parties will be given a full opportunity to present the case. (c) If the dispute involves interpretation of the Agreement, place for the hearing shall be agreed upon by the parties, failing to agree, at the point where the original grievance arose. (d) If the dispute involves discipline or discharge of any employee, the place for arbitration shall be in the city in which the Division Office is located wherein the matter to be arbitrated arose. (e) The Board so constituted shall weigh all the evidence and arguments on the points in dispute and the written decision of the majority of the members of the Board of Arbitration, based upon the record before them, shall be final and binding upon the parties thereto. The parties hereto shall each pay the arbitrator of their own selection. They shall jointly pay the third arbitrator and his expenses together with the cost of reporter fee and transcript. In case the hearing is held at a place other then the Company office, the cost thereof shall be borne equally. Each party will take care of all other expenses incurred by them, including witness fee and expenses for witnesses called by them. The Board of Arbitration shall not have the authority to change, modify, or amend the provisions of this agreement. 22 23 (f) The neutral arbitrator shall render his decision within ten (10) days of receipt of briefs from the parties. 20.6 Extension of Time - Forfeiture of the Case - In the event additional time is required to handle grievances properly under this Article, an additional fifteen (15) days will be automatically granted on any step if requested in writing; additional time may be granted by mutual agreement between the parties. It is understood that if either party fails to meet the time limits specified in this Article, they will forfeit the case and such forfeiture will not decide the merits or establish a precedent in the matter. 20.7 In connection with the provisions of the Article, it is understood that all time limits established shall exclude Saturdays and Sundays. 20.8 A grievance processed through the steps will be heard by progressively higher Company officials at each step. 20.9 In all cases where written notices are required under the provisions of this Article, the deposit of such notice in U.S. Mail shall constitute due notice. 20.10 All differences, disputes and grievances between the parties arising out of or by virtue of the within collective labor agreement shall, by request of either party in writing, be disposed of under the machinery provided for in this Article, but the express terms of this Agreement shall not be changed except by written agreement between the parties. 20.11 In cases involving the interpretation of the Agreement only, the first step shall be with the President of the Company, or his designated representative, and from there on follow the Grievance Procedure as above set out. 23 24 20.12 In case the Company is aggrieved, it shall file written notice with an official of the Union, and if the grievance cannot be satisfactorily disposed of by the President of the Company, or his designated representative, and the Official of the Union; the grievance shall then be handled in the manner above set out, starting with the call of a Grand Lodge Representative to join the proceeding. 20.13 Nothing in this Article shall be deemed to prevent an individual employee from discussing his working conditions with his supervisor. After a grievance has been filed through the Grievance Committee, management acknowledges the right of a member of the Grievance Committee, or Steward to be present during any discussion of the grievance with the person who filed the grievance. 20.14 When an employee reports for work at his regular shift time and is issued discipline for an act which occurred on a prior day, the discipline will not commence until the following day, except in cases of discharge. 20.15 Prior to arbitration the Automotive Coordinator, or his designee will meet with the Company's Labor Relations representative, or his designee with the authority to resolve the dispute. Article XXI STRIKES AND LOCKOUTS 21.0 NO STRIKE, LOCKOUT - There shall be no lockouts by the company, and there shall be no strikes or other work stoppages of any variety called by the Union, for the duration of this Agreement. Where a labor dispute arises with another Union recognized by the Company and a legal picket line is established at or around a Company terminal, garage or other facility, our employees, who are members of the International Association of Machinists, will be permitted to honor such a legal picket line only at the facility where work of the other Union local is or was being performed at the time of the dispute as a regular job or bid shift. 24 25 Article XXII MILITARY SERVICE 22.0 Employees serving in the armed forces of the United States shall retain their seniority and, upon their return, if physically qualified, will be reinstated to their old jobs within the same classification they were in before leaving, but at the rate of pay within such classifications to which they would have been entitled had they not entered the armed services. It is further agreed that nothing herein shall be construed to deny to any employee serving in the armed forces or who has served in the armed forces, any rights to which he is entitled under the Selective Service and Training Act or any other applicable statue. Article XXIII VACATION 23.0 Wishing to encourage employees to remain in its service, the Company agrees to the following vacations with pay at his regular rate: (a) Employees who complete one (1) year but less than fifteen (15) years of continuous employment shall be granted a vacation of two (2) weeks with pay. (b) Employees who complete fifteen (15) years but less than twenty-five (25) years of continuous employment shall be granted a vacation of three (3) weeks with pay. (c) Employees who complete twenty-five (25) years of continuous service shall be granted a vacation of four (4) weeks with pay. (d) Employees who complete twenty-seven (27) years of continuous service or more shall be granted a vacation of five (5) weeks with pay, effective with the 1997 vacation bid. "Week," as used herein, shall mean forty (40) hours. 25 26 23.1 The General Bid and Vacation Bid will be simultaneously conducted and the employee will bid vacation immediately upon selecting his work shift. Vacations will be bid on the basis of garage seniority within each classification. 23.2 The date of employment of each employee will govern in computing years of service under this Article and no vacation shall be considered earned until the employee has competed his full years service. Employees who become entitled to vacation may take their vacation only after they have completed their first full year of service. Thereafter, employees who become entitled to a vacation in each succeeding calendar year will take their vacations with pay at any time between January 1 and December 31. However, any employee who takes his vacation prior to the completion of his full service year and who leaves the employ of the Company for any reason before completing his service shall have deducted from his pay any vacation pay unearned within the calendar year. All vacation days shall run consecutively and at least nine (9) months shall elapse between vacations for each employee except that; 1) employees who are entitled to vacation of (10) or more days will be permitted to take their vacations in not to exceed two (2) periods; 2) employees entitled to fifteen (15) days may take their vacation in three (3) periods; and 3) employees entitled to twenty (20) days may take their vacation in four (4) periods. Vacations may not be accumulated from year to year. It is understood that the Company maintains the right to designate how many employees from each location, department and classification may be on vacation at any one time. An employee may schedule his vacation to start or end with his scheduled off days and at his election, may take his off days as part of his paid vacation. 23.3 Employees leaving the Company's service and not having received their entire earned vacation allowance will receive the amount of vacation pay which they are entitled at the rate of one-twelfth (1/12) for each month worked since their last anniversary date. 26 27 23.4 The above vacation allowance shall be reduced one-twelfth (1/12) for each thirty (30) day's absence due to leave of absence or furlough and will be further proportionately reduced for each ten (10) days additional period of such absence. 23.5 Employees who have a bona fide illness, where such illness exceeds one hundred and eighty (180) days in any anniversary year, will have the time in excess of one hundred and eighty (180) days deducted from their vacation allowance. An employee must return to work after illness before another one hundred and eighty (180) days will be allowed. 23.6 In the event an employee is terminated, his vacation period will be posted for bid, time permitting. It is understood that any vacation period vacated as a result of this will not be reposted. Article XXIV PASSES 24.0 (a) Employees who have passed their probationary period will be supplied with an annual pass over the lines of the Company. (b) Spouses of employees shall be granted an annual pass over the lines of the Company on the same basis as the employee, except spouses' passes shall not be good for transportation in commutation service. (c) Retired and physically disqualified employees with ten (10) or more years of accumulated service and their spouses will, upon request, be granted an annual pass over the lines of the Company. (d) An employee shall be granted twelve (12) round trip passes per year over the lines of the Company for each member of his immediate family who is the employee's dependent. (e) Spouses of deceased employees and deceased retired employees with ten (10) or more years of accumulated service shall be granted, upon request, an annual pass and 27 28 their dependent children four (4) trip passes over the lines of the Company, until such time as the spouse remarries. (f) It is understood that passes are subject to load capacity at all times. In no event shall a pass rider occupy a seat to the exclusion of a pay passenger. (g) In emergencies, passes will be issued by the employee's Regional Office, otherwise by the Headquarters Office. Article XXV HEALTH AND WELFARE 25.0 (a) Employees currently in the Amalgamated Council of Greyhound Local Unions pension plan will remain in such plan and in addition the Company, effective October 1, 1996, will contribute on behalf of those employees twenty-five dollars ($25.00) per month for the life of the contract for regular full-time employees to the Automotive Industries Plan. (b) Effective October 1, 1996, the employer will make a maximum combined contribution to the health and welfare and pension funds of $495.00 per month per regular full-time employees. Said contributions will be increased to $535.00 per month on October 1, 1997 and to $575.00 per month on October 1, 1998. (c) For those employees in (a) above, the contributions in (b) will be used for health and welfare premiums only. (d) For all other employees, the contributions will be used for both Health and Welfare and Pension contributions. (e) The health and welfare benefit plans will be determined by the Union and the Union will notify the Company where to send the required payments. (f) The employer agrees to accept the provisions of the various Trust Agreements and agrees to sign and be bound by the terms of said Agreements. 28 29 Article XXVI SICK LEAVE 26.0 Sick leave will be paid in accordance herewith in cases of both injury and illness subject to the exclusion set out below. 26.1 Eligibility of Employees - All employees who have competed one (1) year of service according to the system seniority roster shall be eligible for benefits under this plan. If claims arising under Workmen's Compensation are not fully determined, then such sick leave claims shall be paid during the pendency of such claims. Should such claims eventually be allowed under Workmen's Compensation, then the employee shall refund that portion of sick leave benefits paid by the Company. the Company shall have the option of determining the most expeditious methods of recovering such monies. In the event the employee terminates his employment with the Company without returning to work, such sick leave claims will be honored when his rights under the Workmen's Compensation Act have been fully determined. Sick leave will be paid in accordance with the provision of this section in cases of both injury and illness, provided, however, that in the case of sick leave is claimed for a day on which compensation is paid under any present or future State or Federal Compensation Act then only the difference between the sick leave allowance and the amount paid under such Compensation Act will be allowed. In such event the payment so made will be considered as payment for a full day of sick leave under the terms of the contract. Payments of sick leave will be made as expeditiously as possible, bearing in mind that the Company must be sure at all times that duplicate payments are not made. 26.2 Exclusions - No employees shall receive benefits under this plan whose sickness is caused by venereal diseases, drug addiction, intoxication or any injury which may be the result of any intoxication by alcohol or drug addiction or any condition occurring or resulting while violating criminal laws. 29 30 26.3 Waiting Period - No employee shall receive benefits under this plan because of being off work on account of sickness for three consecutive days. No benefits shall be paid for time lost during the waiting period. Days which are paid for at the overtime rate shall not be considered regular work days. In the event an employee is hospitalized during the three (3) day waiting period, sick benefits shall commence as of the first day of hospitalization. 26.4 Sickness while on Vacation - No employee shall be entitled to receive benefits under this plan for any time lost by reason of sickness while on vacation. However, if any employee should become sick while on vacation, the three (3) day waiting period can apply during vacation period. 26.5 Rate and Time of Benefits - Maintenance employees as covered by this Agreement having one (1) year of service according to system seniority roster, shall be eligible for sick leave for each assigned work day off not in excess of five (5) days per year. A work day shall be at the regular hourly rate for the number of hours of the employee's regular shift on the day missed. 26.6 An employee after having exhausted his or her sick leave in their service year, including their accumulated sick leave, will not be entitled to sick leave the succeeding service year unless they performed service for the Company in that year. In the event in the succeeding service year previously referred to, the sickness occurs prior to the employee performing service for the Company in that year, payment of such sick leave will not be made until after the employee performs such service. 26.7 An employee may accumulate one-half (1/2) of his unused sick leave toward increasing the period of sick leave to which he is entitled, up to an additional four (4) weeks of sick leave. All employees shall be permitted to carryover all sick leave accumulated and outstanding with Greyhound Lines, Inc. as of March 18, 1987. 30 31 26.8 The determination of accumulation of sick leave provided for above shall be on the service date of an employee beginning with employee's first service date falling after November 1, 1962. This same procedure shall be done after November 1 of any subsequent year. 26.9 All sick leave provisions mentioned above to be changed where necessary so as to provide that sick leave shall be received on a service date basis in all departments. As stated above, employees shall also accumulate sick leave on a service date basis. Service date, as here used, shall mean seniority date. 26.10 Evidence of Disability - In order to receive benefits under this plan the employee shall submit to the Company medical evidence of his disability from a bona fide licensed medical doctor, or other satisfactory evidence, and if requested, on forms to be provided by the Company. The expense of this medical evidence shall not be borne by the Company. 26.11 Company at its option may require a special examination of employee by a doctor to be designated by the Company. This shall be without cost to the employee. Notification of absence on account of sickness shall be given to the employee's immediate Supervisor when possible on the first day of absence. Application for sick leave benefits shall be filed with the proper supervisor of the Company within five (5) days after return of the employee to duty. 26.12 Employee Responsibility - Any employee found to have abused the sickness benefit privilege by falsification or misrepresentation shall thereupon be subject to disciplinary action and reduction or elimination of sickness benefits, and shall further restore to the Company amounts paid to him for period of such absence. 26.13 Local management will furnish proper sick leave forms to employees when requested. Payment of sick leave will be made as expeditiously as possible bearing in mind that the company must be sure at all times that duplicate payments are not made. If the sick leave to which an employee is entitled is not 31 32 paid in the pay period in which due, through no fault of the employee, payment of sick leave will be by separate check, if requested. Article XXVII 401(k) 27.0 Employees will be permitted to participate in the Greyhound Lines, Inc. Cash or Deferred Retirement Plan for represented employees, with the understanding that the Company is not obligated to make any matching contributions on behalf of such employees. The Union agrees to accept and abide by the terms of the Plan and the related Trust and the Union agrees to waive its right to participate in any discussions regarding the administration, amendment or termination of the Plan and the related Trust. Article XXVIII BULLETIN BOARD 28.0 The Union will be granted the use of a separate bulletin board in each garage only for purpose of posting notices. Article XXIX JURY DUTY 29.0 Employees excused from work for jury duty will be allowed the difference between the compensation they would have earned had they remained on their assignment and the daily amount paid for jury duty. 29.1 Employees covered hereunder shall report back for work when released if by so reporting they could still perform duties during their regular assignment. Employees from the second and third shift will be, if they request, temporarily assigned to the first shift when requested to appear in Court or Jury Duty. Such assignment will be the day before such appearance is scheduled. Article XXX GENERAL PROVISIONS 30.0 All maintenance work regularly taken care of in a Company garage shall be done by employees of the Maintenance Department, as will also the 32 33 transportation of motors or parts, wherever practical when done by Company trucks. Supervisory employees shall not be permitted to do any work performed by employees covered by this Agreement. 30.1 (a) It is recognized that garage employees have the right to follow their work from one Company garage to another Greyhound garage. In exercising this right it is understood when the work is transferred from one Company garage to another Greyhound garage, the number of employees eligible for transfer will be determined by the work requirements at the new location. (b) Employees with five (5) or more years of seniority as of December 16, 1968, will, except in cases of discharge for cause, be guaranteed employment at a garage of the Company for the life of the Agreement. It is understood that employment is not guaranteed at any specific garage and it may require the employee to move in order to have this guarantee available. This guarantee will be reviewed by the parties in the event that there is any major change in the miles operated during this same period in previous years. (c) The Company agrees that for the duration of the labor agreement, that it will not layoff (furlough) journeymen mechanics at the Miami garage who were hired prior to January 1, 1993. 30.2 The Company will provide adequate lockers for all employees and will keep them in good condition. 30.3 All defect cards will be signed by the Foreman or Working Foreman. The employees will be held responsible for the workmanship for all work which they have signed for as having completed. 30.4 The Company will make available for issue overshoes or boots for use by employees on the wash and steam pits, and work gloves for the Partsmen's use in handling heavy units. Replacements will not be issued until the old equipment has been returned. 33 34 30.5 At the termination of service with the Company, an employee, upon request, will be given promptly a letter showing his term of service and the capacity in which employed. 30.6 Disciplinary action charged on the personnel record of an employee shall be physically removed after a period of two (2) years from date in the event no similar disciplinary action has been charged to such record. 30.7 Flashlights, batteries, and rubber gloves will be furnished on a custody receipt to those employees whose work requires such equipment. Employees will be required to turn in used or worn out flashlights, batteries, and rubber gloves to the stockroom and/or toolroom before securing replacements. When leaving the employ of the Company, equipment will be returned or paid for, reasonable wear and tear excepted. 30.8 Maintenance employees shall be furnished each year, five (5) sets of coveralls by the Company. An employee may elect a jacket, with liner, in lieu of the fifth uniform. The company will select a jacket to be used. The employee will bear the cost, if any, of the difference between the jacket and the uniform. Employees at service islands will have the option to substitute insulated coveralls for one set of uniforms. The Company will work with the Union to insure a safe workplace and the Company shall furnish all maintenance employees, when exposed to foul weather proper foul weather gear which shall consist of rainsuits and individual boots where the shoeless type is used. 30.9 In the event employees are moved by the Company from one garage to another on account of work being moved to that particular garage, financial assistance will be allowed to married employees in the amount of $300.00 and unmarried employees in the amount of $150.00, such amount to be payable at the time the employee reports for work at the new location. In addition, the employees so moved will be 34 35 allowed up to five (5) working days (40) hours loss of earnings in effecting their relocation. Such employees shall report for work at the new location upon the completion of the five (5) days referred to above. 30.10 Employees will receive up to three (3) days paid leave per occurrence for loss of a parent, spouse or child. Pay will only be for scheduled time missed. The Company reserves the right to request written proof. 30.11 When new employees are required by the Company, disabled employees and employees who have been furloughed due to lack of work and who are applicants for employment, shall be given preference in employment over new outside applicants, if qualified to perform the available work. Such employees, employed in other departments, upon becoming physically qualified in the case of disability and upon work becoming available in their own department in the case of furloughed employees shall be required. to make a choice between continuing in their new work or returning to their old work. 30.12 The Company agrees to notify the Union by forms prepared covering the employment, classification, discharge, resignation, transfer, and layoff of each employee who is covered by the terms of this Agreement within forty-eight (48) hours where possible. 30.13 The tool storage areas will be locked except during shift changes when employees are removing or returning their tool boxes. 30.14 An employee involved in an accident while engaged in the performance of his assigned duties with the Company shall promptly be furnished bond by the Company, when such is required. Any employee shall also have the legal assistance of the Company in any legal proceedings brought jointly against the employee and the Company, or brought against the employee as a result of carrying out specific orders of the Company. 30.15 For the purpose of this contract the terms "Garage Seniority" or "Work Location Seniority" are synonymous. 35 36 30.16 The Company will continue its present practice of supplying certain tools, which will be properly maintained by the Company. 30.17 Each employee shall be allowed two (2) rest periods of ten (10) minutes each during his tour of duty for which the Company will prescribe the time that such rest shall be taken. One rest shall be during the first half of the tour of duty and the second will be during the second half of said tour of duty. There shall be no abuse of this privilege by the employee. Article XXXI HEALTH & SAFETY 31.0 A safety committee will be maintained in accordance with OSHA regulations. 31.1 The Company shall maintain a fully equipped first aid kit in all shops. 31.2 Employees will not allow greasy clothes, gloves, rags, waste, or anything of that nature to accumulate in their lockers. 31.3 The Company agrees that it will not create an unnecessary burden upon any employee by requiring him to do heavy work alone. 31.4 Employees slightly injured while at work yet needing medical attention will be allowed time to secure such attention without loss of pay on that day provided he returns to work immediately. Transportation will also be furnished. If employee is required to report for further treatment during working hours, he shall receive time lost for such treatment. 31.5 All Company garages will be properly heated, ventilated, and kept in a sanitary condition for the comfort of the employees. 31.6 Employees will not be unduly exposed to paint from spray guns and those operating same will be furnished proper protection for eyes and lungs. However, this is not intended to prevent small paint jobs from being done within the shops and garages. 36 37 31.7 The Company with the cooperation of the employees, will keep all machinery and tools in a safe and proper condition. 31.8 Proper shields will be provided to protect employees from the rays of electric welders. The Company will provide exhaust adapters to be used in controlling exhaust fumes. 31.9 Welders will be furnished hoods and goggles to protect their eyes and glasses. A pair of welding gloves and welding jacket will be furnished for the use of employees who occasionally weld. 31.10 The parties will meet once each year, between September 1 and December 1, to discuss matters of general interest to the parties. 31.11 Employees who witness or are involved in an accident while on duty, and as a result are required to make a report of the same to the Company and who are later required to attend court or an inquest by subpoena, or employees who at the direction of the Company are required to attend court, and inquest or an investigation called by the Company attorney, or employees who are subpoenaed and are required to attend court or an inquest as a result of an action arising out of carrying out the specific orders of the Company, shall be paid on the following basis: Their regular rate of pay for all such time which in no event shall be less than the amount of actual time lost plus reimbursement for any expenses incurred while making such appearance. Employees will not be required to report for duty for any portion of their shift on the day of making such appearance when such appearance occurs during their shift. If an employee would not be able to get reasonable rest before the start of his shift he will not be required to report for work on such shift. The reverse shall apply where the employee by working his shift would not receive reasonable rest before his required appearance in court. If, however, the employee is already on his shift at time of notice to appear he will continue with his shift. 37 38 Employees will be paid for all time so spent at their hourly rate with a minimum of eight (8) hours. When court, inquest or investigation is held at a point other than the employee's home terminal, he/she shall be provided with transportation and reasonable expenses. Witness fees will be returned to the Company. If the above occurs while on vacation, this will be in addition to vacation pay. Article XXXII DURATION 32.0 This Agreement shall be in effect from October 1, 1996, until and including October, 1 1999, and shall remain in effect from year to year thereafter unless changed or terminated as herein provided. Either party desiring to make any changes or modifications in this Agreement to become effective at the end of the initial term or any annual extension thereof, or desiring to terminate this Agreement at the expiration thereof, shall notify the other party in writing of its desire either to enter into negotiations for the purpose of making changes or modifications herein or of its desire to terminate the Agreement at least sixty (60) days prior to the expiration of the initial term or any extension hereof. In the event that any change or modification so requested by either party is not mutually agreed upon prior to the expiration date of this Agreement or any renewal thereof, the Agreement shall terminate at such expiration date unless the same shall be extended by mutual consent. After receipt of notification requesting changes or modifications in the Agreement, the parties agree to set a mutually satisfactory date to meet and discuss same. The foregoing is the complete collective bargaining Agreement entered into by and on behalf of the parties signatory hereto indisputable errors and/or omissions accepted. 38 39 Signed this Day of , 1996. ------------ ----------------- GREYHOUND LINES, INC. INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS BY: /s/ J. FLOYD HOLLAND BY: /s/ MERRILL FROST ------------------------- ------------------------ BY: /s/ BOB TANCOS BY: /s/ ILLEGIBLE ------------------------- ------------------------ BY: ------------------------- 39 40 [GREYHOUND LINES, INC. LETTERHEAD] October 8, 1996 Mr. Merrill Frost Automotive Coordinator I.A.M. 9000 Machinists Place Upper Marlboro, Maryland 20772-2687 Dear Mr. Frost: During contract negotiation, the parties discussed the alcohol policy as outlined in rule 12 of the Maintenance Rule Book. Effective with the ratification of a new labor agreement, the Company agrees to change the existing rule by deleting the last paragraph and substituting the following: "An employee who is in violation of this rule will be terminated, however he will be reinstated upon completion of an approved rehabilitation program, provided he applies for reinstatement within sixty (60) days from date of discharge. Such employee will be subject to random testing for a period of one (1) year from date of reinstatement. The Company will pay for such testing. A second violation of this rule will result in termination. Please confirm your understanding and acceptance of the above. Very truly yours, /s/ BOB TANCOS Bob Tancos Senior Director, Industrial Relations Agreed: /s/ MERRILL FROST ----------------------------- Merrill Frost 10-9-96 41 LETTER OF UNDERSTANDING RE: TRAINING - APPLIES TO ALL I.A.M. LOCATIONS The Company and the Union are committed to enhancing the skills of employees. It is the intent of the parties that the Company will provide and the employees will participate in training. Not withstanding any language in the various labor agreements, it is agreed that an employee's shift and/or days off may be changed to allow them to attend training sessions. If such a change is made, the employee will be notified of such change at least fourteen (14) days prior to the change. If a change is made to an employee;s shift and/or day off, the employee will be paid at his regular straight time hourly rate for the time necessary to attend such training. /s/ RICHARD M. COTE 10/9/96 /s/ ROBERT J. TANCOS 10/0/96 - ------------------------------------- -------------------------------------- For the Union: For the Company: /s/ LARRY A SMITH /s/ J. FLOYD HOLLAND 10/9/96 - ------------------------------------- -------------------------------------- /s/ MERRILL FROST 10/9/96 /s/ ILLEGIBLE 10/9/96 - ------------------------------------- -------------------------------------- /s/ MICHAEL L. DAY 10/9/96 /s/ ILLEGIBLE 10/9/96 - ------------------------------------- -------------------------------------- /s/ ILLEGIBLE - ------------------------------------- EX-10.15 5 AGRMT BTWN GREYHOUND & INTL ASSOC. OF MACHINISTS 1 EXHIBIT 10.15 AGREEMENT between GREYHOUND LINES, INC. --------------------- and the INTERNATIONAL ASSOCIATION OF MACHINISTS --------------------------------------- and AEROSPACE WORKERS ----------------- covering Garage Employees At Dallas, Texas Houston, Texas Kansas City, Missouri San Antonio, Texas Brownsville, Texas Grand Junction, Colorado Expires October 1, 1999 1 2 A G R E E M E N T between GREYHOUND LINES, INC. and INTERNATIONAL ASSOCIATION OF MACHINISTS AND AEROSPACE WORKERS MEMORANDUM OF AGREEMENT -- This Agreement, effective October 1, 1996 and expiring October 1, 1999, is entered into by and between Greyhound Lines, Inc. and its successors and assigns, hereinafter called the "Company", and the International Association of Machinists and Aerospace Workers, hereinafter called the "Union". The parties recognize that the assets of Greyhound Lines, Inc. are under new ownership. No contract language, award, adjustment, interpretation letter, practice, or right agreed to between the Union and the previous owners, or made binding between them through arbitration or otherwise, shall remain in effect unless expressly agreed to herein, or as later agreed by the parties. This Agreement may be modified only by formal amendment signed by the parties. The titles used in this Agreement are for reference purposes only and are not to be considered as a part of this operative language. As used herein, whenever "he" or "his" or their related pronouns appear, they have been used for literary purposes and are meant in their generic sense to include both female and male sexes. If the Company, or any portion thereof, is sold, there shall be included in the documents relating to such a sale a requirement that the purchaser accept and be bound by this Agreement and all its terms for the duration of this Agreement. P R E A M B L E The welfare of the Company and its employees is dependent largely upon the service which the Company renders to the public. Improvement in this service and economy in operating and maintenance expenses are promoted by willing cooperation between the management and the voluntary organizations of its employees. When the groups responsible for better service and greater efficiency share fairly in the benefits which follow their joint efforts, improvements in the conduct and efficiency of the Company's business are greatly encouraged. The Parties to this Agreement recognize the foregoing principles and agree to be governed by them in their relations. 2 3 ARTICLE I UNION RECOGNITION SECTION 1. - The Company recognizes the International Association of Machinists and Aerospace Workers, A.F.L. - C.I.O. as the exclusive, authorized representative for the purpose of collective bargaining with respect to wages, rates of pay, hours of employment and other conditions of employment of all employees covered by this Agreement. SECTION 2. - This Agreement covers and is limited to the Employees in the following classifications who are employed in the bargaining unit for which the Union is the certified Bargaining Agent, which embraces and is confined to the shops in the garages owned by the Company in the following locations: Dallas, Texas; Houston, Texas; and Kansas City, Missouri; San Antonio, Texas; Brownsville, Texas; and Grand Junction, Colorado. - Working Foremen - Journeymen - Apprentices - Partsmen - Coach Servicers Employees not regularly assigned to work in the above classifications will not be permitted to perform work in any of the above classifications where Company Shops are maintained, except that the Company may assign employees as they may desire to the taking of inventory. ARTICLE II MANNING OF MAINTENANCE WORK It will be the Company's policy to have Maintenance work historically performed in its garages on Company operated vehicles continue to be performed at Company garages, however, in cases of road failure, the Company may have emergency temporary repairs made in order to operate the bus to a Company facility for repairs. Notwithstanding this provision or any other provision of this contract, if a service worker changes classifications or leaves the employ of the Company, the Company shall have the right, in its sole discretion, to have the service work of that employee performed through subcontracting or through the hiring of part-time employees not subject to this Agreement. ARTICLE III JOB DEFINITION SECTION I. - Except as hereinafter provided, Working Foremen, for the purpose of this Agreement, are those employees who are assigned by the Company to work at the point where and in the classification in which employed, with authority to direct the work of other 3 4 employees on the same shift, but without authority to hire or discharge. Working Foremen are appointed by the Company and the work schedule and days off of working foremen will be assigned by the Company. Working Foremen will not come under the provisions of Article III, Sections 1, 2, 3, and 4. At small Shop points, where five (5) or less Journeymen, including the Working Foreman, are regularly employed, the Working Foreman may be assigned from any point and such Working Foreman, at such small Shop points, shall have such supervisory duties and authority as may be delegated by the Company. Working Foremen shall retain their seniority positions in the respective classifications and shall be subject to the provisions of Article IV, Section 2, in the reduction and restoration of forces. Journeymen are those skilled craftsmen who have learned their trade through the completion of a recognized apprenticeship or equivalent training and experience and who are capable of performing the work requirements of the Company. Apprentices are those employees primarily engaged in learning the trade of the Journeyman Mechanic through working under the supervision of a Journeyman Mechanic and also working as needed as a Greaser and Fueler. Partsmens' duties consist of receiving, shipping and dispensing of Maintenance Department parts and materials, stock inventories, stock room clerical work, tool room attending, and such other duties incidental to the orderly and proper handling of Maintenance parts, materials and tools, including the dismantling of junk parts. The primary duties of Coach Servicers shall be: - Steam Cleaning - Shop Cleaning - Washing and Fueling - Hostling - Parts Cleaning - Interior Special Cleaning of Coaches - Interior Regular Cleaning of Coaches. ARTICLE IV SENIORITY SECTION 1. - Seniority of employees covered by this Agreement shall be confined to the point where and to the classification in which employed, except as hereinafter provided. 4 5 SECTION 2. - When it becomes necessary to reduce the forces in any classification at any shop, excepting the Apprentice classification, master seniority at that point shall govern, the employee affected to take the rate and assigned hours of the job to which assigned. In reduction of force in the Apprentice classification at any Shop, length of service in that classification at that Shop shall govern. Seven (7) working days notice shall be given the employee affected before the reduction is made, and layoffs on account of force reduction shall be made effective upon the completion of the work week of the laid-off employees, provided however that this provision shall not be effective if the force reduction is because of strikes, picketing or circumstances beyond the control of the Company. Employees laid off as a result of force reduction, who desire to remain in the service of the Company, will supply the Vice- President/Maintenance and the Shop Committee with their addresses and will immediately advise them, in writing, concerning any changes in "address". In the restoration of forces in a classification, at any point, the furloughed employees in that classification, at that point, will be recalled in the reverse order in which they were laid off provided, however, that employees who have been on layoff status continuously for three (3) years shall no longer be entitled to recall. The Company will notify each employee recalled by registered United States mail or by telegraph. Copy of such recall notice will be given to the Shop Committee. An employee receiving recall notice shall, within twenty-four (24) hours from receipt of such notice, advise the Company by registered United States mail or telegraph of acceptance or rejection of recall and the time of reporting. Employees recalled to service at their home points shall, within fifteen (15) days following receipt of notice, report for duty or arrange for a leave of absence as provided in Article XXI hereof. While forces are reduced, if employees are needed at another point, furloughed employees in the classification in which employees are needed shall be given preference, in order of seniority, to transfer to such point with the privilege of returning to home point when forces are permanently increased at home point, such transfer to be made without expense to the Company. Failure to accept the first opportunity to return to his home point on a permanent job shall forfeit all previous home point seniority at that point and new home point seniority shall be established at the point to which he transferred as of the first day worked at that point. Furloughed employees offered employment at an outside point shall advise the Company of acceptance of the job within twenty-four (24) hours "after" receipt of notice; otherwise, the next eligible employee shall be notified. The Company notice shall state the time the employee will be required to report for work if he accepts the position. 5 6 SECTION 3. - When an employee is displaced, he shall exercise his master seniority in placing himself in his classification at that point. If a displaced employee, by reason of lack of seniority, cannot place himself at his home point, he may displace the youngest employee having lesser master seniority in his classification at another point of his designation, on the condition that he shall, within seventy-two (72) hours, pursuant to the receipt of notice by him of his displacement, give written notice to the official in charge and to the Shop Committee at the point of his designation. Failure to accept the first opportunity to return to his home point on a permanent job shall forfeit all previous home point seniority at that point and new home point seniority shall be established at the point to which he transferred as of the first day worked at that point. An employee whose job is discontinued shall be given not less than three (3) days written notice thereof. "Permanent jobs" as used in this Article shall mean and include jobs known to be of sixty (60) days or more duration. SECTION 4. - Employees who transfer under the provisions of Sections 2 and 3 of this Article will carry seniority with them and may exercise same at point to which transferred prior to such time as a permanent vacancy occurs at home point. SECTION 5. - Employees in the same classification, but in different Shops, may trade jobs if such trade is mutually agreed to by the Company and the Union. Both employees shall have seniority equal to that of the employee having the least seniority. SECTION 6. - Employees covered by this Agreement who are transferred to supervisory positions in the Company's employ shall retain their seniority for a period of sixty (60) days. If they do not return to the bargaining unit within sixty (60) days, they will forfeit all accrued seniority. An employee who transfers from a job not covered to one that is covered by this agreement shall establish seniority as a new employee. SECTION 7. - In the event of the acquisition of any additional lines by the Company, Maintenance Department employees of such lines performing work covered by this Agreement who are taken into employment by the Company shall come under this Agreement. Such employees will be permitted to bring with them seniority status in an amount not exceeding thirty (30) days time prior to acquisition by the Company and further will hold, as between themselves, their former seniority ranking accruing to them while employed by the acquired line. 6 7 SECTION 8. - The seniority of all full-time employees shall be measured from the hour and date of first work performed in the department to which they are assigned either in the service of the Company or in the service of Greyhound Lines, Inc. before March 19, 1987, whichever occurred first. Should two or more employees commence service on the same date and hour, the date and hour of the application for employment shall determine the order of their seniority. Seniority lists shall be posted as of July 1st of each year thereafter. The employees who were employed since the posting of the last preceding list and whose seniority dates are posted for the first time shall have thirty (30) days after such first posting in which to protest the posted date; otherwise, same shall be considered permanently established and no longer subject to protest. SECTION 9. - Employees on leave of absence to serve as Union Officers or employees promoted to supervisor positions from a job covered by this Agreement shall retain and continue to accumulate seniority. SECTION 10. - The Company agrees that for the duration of the labor agreement, that it will not layoff (furlough) journeymen mechanics at the Dallas garage who were hired prior to January 1, 1993. ARTICLE V BIDDING PROCEDURES SECTION 1. - All new jobs created and all known permanent vacancies occurring in the respective classifications, excepting Working Foremen who are appointed and assigned by the Company, will be bulletined within seven (7) calendar days in the affected shop for a period of three (3) working days, provided however, that apprentice jobs will be bulletined simultaneously for a period of three (3) working days in all shops covered by this agreement. Employees working at points, other than the Shop where the vacancy exists, who desire to bid on Apprentice jobs, may make application, in writing, forwarding by United States mail, to the official in charge of the Shop where the vacancy exists, furnishing a copy to the Vice President/Maintenance. All bulletins shall define the job (i.e., engine overhaul, painting, bodywork, etc.) regular working days and hours of assignment. Bulletined jobs will be awarded to senior eligible employees making written application therefor. Employees, excepting those who completed an apprenticeship training, who have not had previous Journeyman experience with the Company, will not be eligible to bid on Journeyman jobs. 7 8 Nothing herein shall prevent temporary assignment to work within the employee's classification, assigned hours and days off. After a trial period of not more than fifteen (15) calendar days in a new position, employees who have been found incapable of qualifying for the position shall be returned to their vacated position without loss of seniority. SECTION 2. - There shall be one (1) general bid per year unless otherwise agreed between the parties. Employees may not change classifications at the general bid. SECTION 3. - Vacancies and new positions in the classification of Partsmen shall be filled on the basis of seniority by employees employed in that classification in the affected Shop, whenever possible. Such vacancies and new positions shall be offered to the Partsmen in the affected Shop in the order of their classification seniority. When necessary to go outside that classification in filling such positions, Coach Servicers whose education and previous experience indicate aptitude to perform the work required shall be given preference over outside applicants. Coach Servicers who become Partsmen under the foregoing provisions shall have seniority rights in such new classification, based upon their length of service in such new classification only, any other provisions of this Agreement to the contrary notwithstanding. An employee, bidding outside of his regular classification on such position, if the successful bidder, shall be on probation during the first thirty (30) days worked on the new job, and if disqualified by the Company during such probationary period, shall return to his former job. SECTION 4. - An employee, bidding on jobs under the provisions of this Agreement, shall furnish a copy of each such bid to his Local Committee and, if the job on which he bids is another Shop point, he shall also furnish a copy of such bid to the Local Committee at that point. SECTION 5. - When a vacancy exists, and which is to be continued in the Journeyman classification, the Shop Committee may meet with Company supervision to assist in screening other employees in other classifications who may be capable of performing Journeyman's work. If, in the judgment of supervision, an employee of another classification is to be given a probationary period, not to exceed ninety (90) days, as a Journeyman, the employee shall have the right to retain his original seniority until the probationary period is ended, at which time, he will have the right to exercise 8 9 his original seniority in his former position, or forfeit his original seniority if he elects to remain classified as a Journeyman. If he elects to remain as a Journeyman at the conclusion of his probationary period, his seniority date as a Journeyman shall be the date his probationary period started; however, his original employment date with the Company shall be used to determine his benefits such as vacation, pension, etc. ARTICLE VI UNION SECURITY AND CHECK-OFF All full and part-time employees covered by any portion of this Agreement must become and remain members of the Union not later than the thirty-first (31st) day following their date of employment as a condition of their continued employment with the Company. The Company agrees to check-off and remit to the financial officer of the respective District or Local Union monthly from the pay of each employee who is a member of the Union, and who has so authorized the Company in writing, all dues, initiation fees, regular assessments as may be assessed against such member, and such voluntary contributions to the Union as may be separately authorized by the employee. Requests for check-off of assessments will be signed by the financial officer of the District or Local Union. ARTICLE VII MANAGEMENT OF OPERATIONS It is not the intent of this Agreement to include matters of management herein, and the Company reserves to itself the management, conduct and control of the operations of its business, including: (1) the determination of the type, kind, make and size of equipment and when, how and where such equipment shall be used; (2) the prescribing of rules, instructions and regulations for the safe, proper and effective conduct of its business in a competitive environment; (3) the number and qualifications of employees employed by it and their reasonable standards of conduct; (4) the assignment of work to the extent not specified herein; and (5) except as limited by the Article titled "Manning of Maintenance Work", the use of leased operations and independent contractors. The Company also reserves the right to change decisions within the scope of this Article at any time. 9 10 ARTICLE VIII SECTION 1. - Hourly Rates of Pay -- Maintenance Employees
Effective Effective Effective WAGE RATES 10/1/96 10/1/97 10/1/98 - ---------- ------- ------- ------- Dallas, Texas - ------------- Working Foreman $15.13 $15.58 $16.05 Journeyman $14.87 $15.32 $15.78 Partsmen $13.39 $13.79 $14.21 Coach Servicers Regular Hourly Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Hourly Rate $ 7.41 $ 7.63 $ 7.86 HOUSTON, TEXAS - -------------- Working Foreman $15.32 $15.76 $16.25 Journeyman $15.06 $15.51 $15.98 Partsmen $13.55 $13.96 $14.38 Coach Servicers Regular Hourly Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Hourly Rate $ 7.41 $ 7.63 $ 7.86 SAN ANTONIO, TEXAS - ------------------ Working Foreman $14.38 $14.81 $15.25 Journeyman $14.12 $14.54 $14.98 Coach Servicers Regular Hourly Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Hourly Rate $ 7.41 $ 7.63 $ 7.86 BROWNSVILLE, TEXAS - ------------------ Working Foreman $12.76 $13.14 $13.54 Journeyman $12.50 $12.88 $13.27 Coach Servicers Regular Hourly Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Hourly Rate $ 7.41 $ 7.63 $ 7.86 GRAND JUNCTION - -------------- Working Foreman $14.49 $14.93 $15.37 Journeyman $14.23 $14.66 $15.10 Coach Servicers Regular Hourly Rate $ 7.92 $ 8.16 $ 8.40 **New Hire Hourly Rate $ 7.41 $ 7.63 $ 7.86 KANSAS CITY - ----------- Working Foreman $16.11 $16.59 $17.09 Journeyman $15.85 $16.33 $16.82 Coach Servicers Regular Hourly Rate $ 8.18 $ 8.42 $ 8.68 **New Hire Hourly Rate $ 7.66 $ 7.89 $ 8.13
The Company shall have the right to increase wages on a location basis to meet market concerns. Such increases will not be on an individual basis, but must cover all employees in the classification. The Company will meet with the Union prior to announcing such increases. **An employee hired at this rate is entitled to the regular hourly rate at the end of twenty-four (24) months of continuous full-time employment. 10 11 SECTION 2. - Vacation Relief Jobs: Vacation relief positions may be created as needed. If the relief assignment contains work of his own classification and lower classification, he shall receive his own rate of pay for work performed in the lower classification. Whenever there are no vacations to relieve, the vacation relief employee will work the day shift Monday through Friday, with Saturday and Sunday off. When performing vacation relief, the vacation relief employee will assume the complete work schedule of the employee he is relieving, both work days and days off. The employee will have at least sixteen (16) hours off between shifts. If Apprentices, prior to becoming indentured, had worked one (1) year or more as a Coach Servicer, at the rate applicable to steam cleaning and greasing, they shall retain the highest rate for greasing and steam cleaning until their length of service as an Apprentice entitles them to a higher rate. Jobs may be set up as Greaser, which shall cover greasing coaches on the grease rack or pit, and as Parts Cleaner, which shall cover cleaning parts. If such jobs, or either of them, are set up, they should be bulletined and bid by the Coach Servicers at the shop point involved. Coach Servicers who are assigned to such jobs and those who are temporarily assigned to such work for four (4) or more hours in any work day, shall be paid a differential of ten cents ($.10) per hour, in addition to their regular Coach Servicers' rate for time so worked. This differential shall not apply in the case of any employee assigned to such work whose regular rate of pay is higher than that of Coach Servicer. Effective March 1, 1977, the classification of Stripper is added and will come under all provisions of this paragraph. SECTION 3. - Except as expressly stated herein, no employee shall have his rate of pay reduced as a result of the signing of this Agreement. Nothing herein shall prohibit the paying of a higher rate of pay at the discretion of the Company. 11 12 ARTICLE IX VACATIONS SECTION 1. - Vacations will be granted in the following manner: (a) Employees who complete one (1) year but less than fifteen (15) years of continuous employment shall be granted a vacation of two (2) weeks with pay. (b) Employees who complete fifteen (15) years but less than twenty-five (25) years of continuous employment shall be granted a vacation of three (3) weeks with pay. (c) Employees who complete twenty-five (25) years of continuous employment but less than twenty-seven (27) years of continuous employment shall be granted a vacation of four (4) weeks with pay. (d) Employees who complete twenty-seven (27) years of continuous employment or more shall be granted a vacation of five (5) weeks with pay, effective with the 1997 vacation bid. "Week" as used herein shall mean forty (40) hours. The Company will post a vacation schedule on or before December 1st of each year, listing each week separately and will designate how many employees can be released for vacation purposes each week. Ten (10) days after such schedule has been posted all employees eligible, or who will become eligible during such vacation period, shall then express their choice of vacation period, in accordance with seniority ranking, on a bid sheet presented to the employees for that purpose. The annual posting of vacations shall be during December, with vacations to be taken the following calendar year. The number of weeks vacation to be bid in December will be determined by the employees seniority during the calendar year in which the vacation is taken. Employees leaving the service of the Company will be charged the number of days vacation not earned for which they have been paid. No vacation will be allowed until an employee has completed one (1) year of service. Employees may set one week of their vacation aside at bid time to be used on a day-by-day basis. If this is done, the days must be approved in advance by supervision. Employees with three (3) weeks vacation shall be entitled to bid for a one (1) or two (2) week vacation, and employees with four (4) week vacations should be entitled to bid for up to two (2) weeks vacation on the first round of vacation bidding, and up to three 12 13 (3) weeks on the second round of vacation bidding and the balance, if any, will be bid on the third round of vacation bidding for periods then available. All vacations must be taken within the period designated by employee's bid. Employees who fail to make bid or who are on furlough or absent, due to illness, and cannot be reached by the bid sheet must take vacation at a time designated by the Company. Employees who are absent from work during their regular assigned work period in any service year shall forfeit one-twelfth (1/12) of the vacation allowance due them for that service year for each aggregate of 173 hours not worked during said year. A period of time not worked of less than four (4) consecutive hours shall not be taken into account in computing such aggregate. No deduction shall be made from the vacation allowance for absence due to bona fide illness or disability for the first 519 hours of such absence in any service year. For each aggregate of 173 hours worked by an employee as overtime during his service year, he shall receive an allowance of one-twelfth (1/12) of his vacation allowance, which shall be applied only as credit against an equal amount of deduction assessed because of absence. Penalties or credits shall not be extended beyond the period in which assessed. Employees who have completed earning an annual vacation and who leave the service for any cause prior to taking such earned vacation shall be paid an amount of money equal to such earned vacation. Employees whose service entitles them to, at any time during their service year, and those who voluntarily leave the service of the Company, (except those leaving the service of the Company under the provisions of the Pension Program), prior to having worked six (6) months of their service year for which, if completed, they would be entitled to a vacation, shall receive no vacation allowance for that service year. Employees who are discharged for cause qualify for a vacation and who voluntarily leave the service of the Company after having worked six (6) months of their service year, for which, if completed, they would be entitled to a vacation, shall be paid their vacation allowance pro-rata for the time so worked. The Company will, upon request of an employee, review any vacation periods that become open after the December bid, and operating conditions permitting, will consider an employees request for any open vacation periods. Such requests will be considered on a first come basis. 13 14 ARTICLE X HOURS OF WORK AND OVERTIME SECTION 1. - The regular work week shall be forty (40) hours, consisting of either five (5) consecutive eight (8) hour days or four (4) consecutive ten (10) hour days. The Company shall have the right twice per year to determine the percentage of each at each location after consultation with the Union, provided that not more than 25% of the employees covered by this Agreement on March 19, 1987 shall be compelled to work shifts of ten hour days without the consent of the Union. Work performed in excess of these limits shall be overtime and will be paid at the rate of time and one-half. SECTION 2. - The Company will post on the bulletin board in each Shop a correct schedule showing the regular hours and days to be worked by each employee. In the event it becomes necessary to change the scheduled hours of any job to the extent of one (1) hour or more, or change days off, then those jobs so changed shall be termed "vacancies" and shall be bulletined in accordance with the requirements of Article V, Section 1. SECTION 3. - All work performed outside and in excess of bulletined hours will be paid for at the rate of time and one-half, except as otherwise provided herein. Excepting when it is a result of the employee's exercise of his seniority rights, work performed on the sixth (6th) and seventh (7th) consecutive days worked, in a work week, shall be paid for at one and one-half (1-1/2) times the employee's regular rate of pay. SECTION 4. - Overtime work will be divided as nearly equally as possible among the employees in the classification involved who are qualified to do the particular work required and who have made written application to the Company to participate therein. Such employees who pass up overtime shall have their time record charged therewith. Employees who do not make such application shall not be entitled to share equally, and shall not be assigned to work overtime, if an employee, who has made such application, is available for such work. SECTION 5. - Employees who are called back to work, after having left the Company premises following the completion of the regular day's work or on their assigned days off, shall be paid for such work at the applicable overtime rate and shall be paid a minimum of four (4) hours at such applicable overtime rate. Employees who are required to work beyond the regular quitting time of their shift shall be given as much advance notice thereof as circumstances will permit, with the understanding that they shall be given at least two (2) hours notice, except in case of emergency. 14 15 ARTICLE XI HOLIDAY ALLOWANCE SECTION 1. - For Employees with ten (10) or more years seniority there shall be eight (8) paid holidays composed of New Year's Day, Martin Luther King, Jr's Birthday, Washington's Birthday, Easter Sunday, Fourth of July, Labor Day, Thanksgiving and Christmas. For employees with more than ninety (90) days but less than ten (10) years seniority there shall be five (5) paid holidays composed of New Year's Day, Fourth of July, Labor Day, Thanksgiving and Christmas. On his tenth anniversary date of employment, and employee will be entitled to all subsequent holidays in that calendar year to which employees with ten (10) or more years seniority are entitled. In order to receive holiday pay, an employee must work the last scheduled work day prior to the holiday and also the first scheduled work day immediately after the holiday. Employees shall receive holiday pay for the holidays set forth above at their regular hourly rate of pay for the number of hours of their regular shift on the date of the holiday. In those cases where a shift involves two (2) calendar days, the entire shift should be applied to the day on which the shift commences. When a paid holiday falls within an employee's vacation period, the employee shall receive an extra day's pay, but his vacation period shall not be extended. Should he so desire, he may be given an extra day off as a leave of absence. Premium pay for holiday work shall not be charged to the overtime record under Section 4 of Article IX, unless the employee was not regularly scheduled to work such holiday. ARTICLE XII APPRENTICESHIP SECTION 1 See new Greyhound/IAM apprentice program. ARTICLE XIII PROBATIONARY EMPLOYMENT SECTION 1. - Applicants for employment shall fill out and sign application forms supplied by the Company, and employment shall be considered temporary until such application is approved by the proper official of the Company. If the employee is not notified to the contrary, prior to the expiration of forty-five (45) work days, his application shall be considered to have been approved unless it 15 16 is later found that false information materially affecting acceptance of application was given, in which event, if the employee is dismissed from service on account thereof, he shall be given a hearing thereof, provided he makes written request therefore within ten (10) days from date of dismissal notice. SECTION 2. - New employees shall be on probation for and during the first forty-five (45) work days of their employment. The provisions of Article XIV shall not apply to probational employees whose services are terminated during their probationary period. The Company shall assign probational employees to such work, hours and days off as it may determine during their probationary period, without regard to the provisions of this Agreement in respect to advertising and bidding jobs. Such probational employees may be assigned overtime work at the discretion of the Company, without regard to Article X, Section 4, but in no event, more than that accorded regular employees thereunder. When an employee satisfactorily completes his probation, he shall be charged with the average amount of overtime worked by the group to which he is then assigned in effectuating Article X, Section 4, with respect to him thereafter. ARTICLE XIV GRIEVANCE PROCEDURE SECTION 1. - No employee, who has been in the service of the Company sixty (60) days or more, shall be dismissed without just and sufficient cause. In the event of discipline or dismissal, the employee affected and his Shop Committee shall be given prompt, written notice thereof, and if requested in writing of the supervisor in charge of the Shop involved, within ten (10) days after such notice, shall be given a fair and impartial investigation and an opportunity to obtain and present witnesses. Such investigation, if so requested, shall be conducted by the supervisor. Prior to holding such investigation, the employee and his duly-authorized representative shall be apprised in writing of the precise charge or charges. If a stenographic report of the investigation is made by a Company stenographer, the Committee shall be provided a copy thereof promptly. The supervisor shall make his written decision on the matter within ten (10) days from the close of the investigation. SECTION 2. - Discipline charged to an employees record which is over eighteen (18) months old will not be considered by the Company providing there is no other discipline within the eighteen (18) month period. SECTION 3. - The presentation and handling of grievances shall be according to the following procedure: (a) Any employee covered by this Agreement who has a 16 17 complaint shall discuss the complaint with this supervisor within ten (10) days from the date of the occurrence in an effort to resolve the complaint without resort to the formal grievance procedure. Any disposition at this step shall be non-procedential and many not be relied upon by the Union or the Company in any grievance hearing for any purpose. This procedure shall not extend the time limits for filing a written grievance. (b) The aggrieved employee or the Union Steward shall present same, in writing, to the supervisor in charge of the Shop in which it arises within fifteen (15) days after it first comes to the attention of the complaining party. Any matter that is not so presented shall be waived and no longer subject to handling as a grievance. (c) If such supervisor is requested, in writing, to do so, he shall, within five (5) days after receipt of such request, arrange a hearing at which the Company, employee and Chairman of the Shop Committee, or his designee shall have full opportunity to present all evidence that they desire to have considered in the matter. The Supervisor shall render his written decision within fifteen (15) days after the receipt of the request for hearing. (d) Appeal may be taken from the Supervisor's decision to the Regional Manager-Maintenance or his designated representative, provided written notice of appeal is filed within ten (10) days after the date of the Supervisor's decision. The written decision of the Regional Manager Maintenance or his representative shall be rendered within fifteen (15) days after receipt of notice of appeal, unless written request for conference is made within five (5) days from date of such notice, in which event, the time for such conference shall be fixed by agreement and the time for making decisions shall run from the close of the conference. (e) The provisions of (b) and (c) above shall not apply to discipline or dismissal cases which shall be handled according to the provisions of Section 1 of this Article. If, after being so handled, the aggrieved employee desires to appeal from the results of the investigation, he may do so by following the procedure provided in (d) above. (f) The time limits specified in (c) and (d) for holding conferences may be extended by agreement and, in the event of extension, the management representative shall give his written decision within five (5) days after the conference is concluded. (g) Failure to file notice of appeal in the manner and within the time above provided shall render final the last decision made. 17 18 (h) Failure of management representative to make decisions as above provided shall result in forfeiture of the Company's case. (i) The foregoing grievance procedure shall not prevent an aggrieved employee or the Shop Committee or both from attempting to adjust any grievance through informal conference with the Foreman involved. If it is found that an employee has been unjustly suspended or dismissed from the service, such employee shall be reinstated with his seniority and service rights unimpaired and compensated at his regular rate for any time lost resulting from the suspension or dismissal less any earnings received by him during the period of such suspension or dismissal. SECTION 4. - Grievances with respect to the interpretation or application of any of the terms or provisions of this Agreement which are not satisfactorily settled under the foregoing grievance procedure may be submitted to arbitration in the following manner: The party desiring Arbitration shall give written notice to arbitrate to the other party within ten (10) days following the decision of the Regional Manager-Maintenance or his representative provided for in subsection (c) of Section 2 of this Article. Such notice will be given to the Industrial Relations Department of the Company. In the event a grievance is submitted to Arbitration, an Arbitrator shall be selected according to and governed by the following procedure: - The representative of the Union and the Company shall meet within five (5) working days after Notice of Appeal to Arbitration. The representative shall request the Federal Mediation and Conciliation Service to provide a panel of five (5) Arbitrators from which they shall select the Arbitrator. The Arbitrator shall be chosen from the list of such nominees by alternately striking names until one (1) remains, and he shall be notified immediately. The question as to which party shall strike first shall be determined by the toss of a coin. - A record shall be made of the proceedings had before the Arbitrator, including a stenographic transcript of all testimony and evidence offered. The parties shall be given a full opportunity to present their case. - A written decision of the Arbitrator shall be final and binding upon the parties. The Arbitration Award shall not, in any case, change or add to any of the terms or provisions of this Agreement. The parties shall jointly share the fee and expenses of the Arbitrator, as well as 18 19 the costs of the Hearing, including the making and preparing of the Record and Transcript. SECTION 5. - Prior to arbitration the Automotive Coordinator, or his designee will meet with the Company's Labor Relations representative, or his designee, with the authority to resolve the dispute. ARTICLE XV UNION COMMITTEE SECTION 1. - The Union may choose, from regular employees in each Shop, a number of representatives to act on behalf of employees covered by this Agreement in any capacity assigned to such representatives by the Union. In event grievance hearings are conducted during regular working hours of the Local Committeemen, or any of them, they will not lose time as a result thereof. ARTICLE XVI TEMPORARY TRANSFERS SECTION 1. - An employee sent out by the Company on a temporary transfer to an outlying shop or point, or sent to temporarily fill a vacancy at an outlying shop, will be paid at his regular straight time rate of pay for time necessarily spent in traveling from his home shop to and from such outlying shop or point. While at such outside shop or point, he will be paid straight time and overtime the same as at his home shop and will be guaranteed not less than eight (8) hours work for each of his regularly assigned days. Reasonable necessary living expenses will be allowed. The employee shall furnish receipts covering all such expenses, excepting only expenses for meals. ARTICLE XVII ROAD CALLS SECTION 1. - A list of employees capable of taking care of road calls will be posted in each shop. Road call work will be given to those qualified employees, if available, who have made application for overtime work as provided in Article X, Section 4, and road call and shop overtime will be consolidated in computing overtime record. SECTION 2. - When an employee is sent out on a road call, he shall be paid at overtime rates for time necessarily spent outside of the hours comprising his regular assignment in making preparation for the work to be done on such call. He shall be paid at his regular straight time rate of pay for time necessarily spent in traveling from his home shop to and from the place of work for all hours comprising his regular assignment, in any case, and for all time so spent on calls over 100 road miles from his home shop whether 19 20 within or outside of his regular assignment. For time so spent outside of his regular assignment on calls 100 road miles or less from his home shop, he shall be paid at overtime rates of pay. After reaching and while at the place of work, he shall be paid at his regular straight time rate of pay for the hours comprising his regular assignment and at overtime rate of pay for such hours on his regular days off, whether worked or not, and at overtime rate of pay for hours actually worked outside of his said regular assignment. If such employee is required by the Company to stay with the coach, such time so spent shall be considered as work in applying this provision. SECTION 3. - An employee on road call shall be reimbursed for reasonable and necessary traveling and other expenses incurred while so engaged, provided proper receipts are furnished the Company covering same, excepting only receipts for meals. SECTION 4. - The failure of a coach on the road to the extent the driver cannot continue his trip automatically takes the coach from the jurisdiction of the Transportation Department and places it under the jurisdiction of the Maintenance Department where it will remain until it is okayed for service. ARTICLE XVIII INJURIES SECTION 1. - Employees injured while at work will not be required to make an accident report before receiving necessary medical attention, but are required to make such report within forty-eight (48) hours after being injured, if possible. Necessary and competent first aid medical attention will be given injured employees at the earliest possible time. The Company will not be obligated to furnish further medical attention than that as required by the applicable compensation law. SECTION 2. - Employees injured while at work and who require medical attention will be given necessary time during working hours, without loss of time, to see the doctor. SECTION 3. - Employees injured on the job shall be paid for time necessarily lost from regular assignment on the day on which injured. ARTICLE XIX PHYSICAL EXAMINATIONS SECTION 1. - All employees covered herein must submit to a physical examination on the request of the Company, the cost of such examination to be borne by the Company. It will be the policy of 20 21 the Company to request only one (1) examination a year, except in such instances where a re-examination is deemed necessary to determine whether or not recommendations for correction of infirmities have been met. The Company will make every reasonable effort to have examination given at a time and place that will cause least inconvenience to employees who cannot be given examination during their regular working hours. When employees are required to take such examinations during their regular working hours, they will be paid for such time necessarily lost from work. When correction of infirmities is requested, the employee will be furnished with a copy of the Company physician's report. SECTION 2. - If the recommendation of the Company's doctors are not disputed, they shall be complied with within a reasonable time. In the event there is a dispute, the employee involved or the Union may, within fifteen (15) days after the employee is notified by the Company of such recommendations, have such employee examined by a doctor of his or its choice. If the two (2) doctors fail to agree, a third examination will be had by a doctor mutually agreed upon, and the majority opinion of the three (3) doctors will be govern. An employee may be suspended for failure to comply with the recommendations agreed upon for the repair of any correctable infirmity. SECTION 3. - Employees who are required by the Company to take physical examinations outside their regular working hours, to comply with DOT Regulations, shall be paid two (2) hours pay at their regular rate. ARTICLE XX ATTENDING COURT - JURY DUTY SECTION 1. - Employees required by the Company to attend Court or Coroner's Inquest will be paid for the time necessarily lost from work while so assigned. Reasonable expenses will be allowed. The Company will be entitled to the mileage and witness fees. SECTION 2. - Employees on Jury Duty will be allowed the difference between the compensation they would have earned had they remained on their assignment and the daily amount paid for Jury Duty. No compensation shall be paid for serving on Juries on relief days. ARTICLE XXI LEAVES OF ABSENCE SECTION 1. - A leave of absence may be granted on written application from employee stating reason for the leave. A leave of absence will not exceed ninety (90) days in a calendar year wherein there will be no loss of seniority. An extension of the leave beyond the ninety (90) days may be granted upon proof of medical necessity or explanation acceptable to the Company. 21 22 SECTION 2. - An employee overstaying his leave of absence, unless detained by conditions beyond his control, will automatically sever his connections with the Company. SECTION 3. - Upon the completion of a leave of absence, sixty (60) days must elapse before another leave will be granted, unless by mutual agreement between the Company and Union. SECTION 4. - Special arrangements will be made between proper officials of the Company and the Union for leaves of employees acting in an official capacity for the Union. SECTION 5. - An employee desiring to be absent from work must personally obtain permission from his Foreman, preferably in writing, but if sickness or other unavoidable causes prevent him from reporting for work, he shall notify his Foreman as early as possible. SECTION 6. - Employees entering military or naval service of the government, pursuant to the provisions of the Selective Service and Training Act of 1940, as amended, shall be granted all rights and privileges provided by that Act. ARTICLE XXII SICK LEAVE SECTION 1. - (a) Any sickness or injury which prevents an employee from performing the duties of his regular job with the Company shall be considered as sickness under this Article, provided, however, that no employee shall receive benefits thereunder whose sickness is caused by venereal diseases, intoxication, or any injury which may be the result of any intoxication by alcohol or drug addition, or any condition occurring while violating any criminal law or resulting therefrom. (b) Employees having one (1) year of seniority shall be eligible for sick leave for each assigned work day off not in excess of five (5) days per year. A work day shall be at the regular hourly rate for the number of hours of the employee's regular shift on the day missed. All employees shall be permitted to carryover all sick leave accumulated and outstanding with Greyhound Lines, Inc. as of March 18, 1987. Any employee who established a sick leave period, and who does not use same, will be allowed to accumulate two weeks of such unused sick leave. The maximum amount of sick leave, consisting of both the allowance as referred to in this paragraph, and the two (2) weeks accumulation, shall be one hundred twenty (120) hours to be taken in any one year. (c) There shall be a three (3) day waiting period in respect to each sickness for and during which no sick leave benefits shall be due or payable. This waiting period shall begin on the day on 22 23 which the employee visits or is visited by a doctor and shall include days off, as well as scheduled work days. In the event the employee is hospitalized, sick benefits shall commence as of the first day of sickness. If an employee is disabled during this regular working hours and has worked less than four (4) hours, the preceding day shall be considered as the date last worked. If he has worked four (4) hours or more, that day shall be considered as the date last worked. Following the completion of said waiting period, the employee shall receive sick leave pay for each regular assigned work day lost because of such sickness, up to the maximum sick leave credit to which he is then entitled. In the event the loss of time from work on account of sickness is compensable, under any present or future state of federal compensation act or claims against a third party, then only the difference between the sick leave allowance and the amount paid under such compensation act or third party suit or settlement for such loss of time shall be payable hereunder. Sick leave claims involving Workmen's Compensation will not be paid until the employee returns to work and his rights, under the Workmen's Compensation Act, are fully determined. In the event the employee terminates his employment with the Company, without returning to work, such sick leave claims will be honored when his rights, under the Workmen's Compensation Act have been fully determined. Sick leave claims involving injuries sustained outside the course of employment, where an employee has a claim or suit pending against a third party for such injuries and resulting damages, will not be paid until the employee returns to work and his claim against the third party has been disposed of by trial or settlement. (d) No employee shall be entitled to receive benefits under this plan for any time lost by reason of sickness while on vacation. However, if an employee should become sick while on vacation and is unable to return to work at the end of his vacation, his three (3) day waiting period shall commence on the first regularly scheduled work day following the conclusion of his vacation. (e) In order to receive benefits under this plan, the employee shall submit to the Company medical evidence of his disability from a Company physician or other bona fide licensed medical doctor and, if requested, on forms to be provided by the Company. The expense of this medical evidence shall not be borne by the Company. The Company, at its option, may require a special examination of the employee by a doctor to be designated by the Company. This shall be done without cost to the employee. Notification of absence on account of sickness shall be given to the employee's immediate supervisor as soon as possible. Application for sick leave benefits shall be filed with the employee's supervisor within five (5) days after return of the employee to duty. 23 24 (f) Any employee found to have abused the sickness benefit privilege by falsification or misrepresentation shall thereupon be subject to disciplinary action and reduction or elimination of sickness benefits, and shall further restore to the Company amounts paid to him for period of such absence. ARTICLE XXIII INSURANCE AND PENSION SECTION 1. (a) Employees currently in the Amalgamated Council of Greyhound Local Unions pension plan will remain in such plan and in addition the Company, effective October 1, 1996, will contribute on behalf of those employees twenty-five dollars ($25.00) per month for the life of the contract for regular full-time employees to the Automotive Industries Plan. (b) Effective October 1, 1996, the employer will make a maximum combined contribution to the health and welfare and pension funds of $495.00 per month per regular full-time employees. Said contributions will be increased to $535.00 per month on October 1, 1997 and to $575.00 per month on October 1, 1998. (c) For those employees in (a) above, the contributions in (b) will be used for health and welfare premiums only. (d) For all other employees, the contributions will be used for both Health and Welfare and Pension contributions. (e) The health and welfare benefit plans will be determined by the Union and the Union will notify the Company where to send the required payments. (f) The employer agrees to accept the provisions of the various Trust Agreements and agrees to sign and be bound by the terms of said Agreements. SECTION 2. - Employees will be permitted to participate in the Greyhound Lines, Inc. Cash or Deferred Retirement Plan for Represented Employees with the understanding that the Company is not obligated to make any matching contributions on behalf of such employee. The Union agrees to accept and abide by the terms of the Plan and the related Trust and the Union agrees to waive its rights to participate in any discussions regarding the administration, amendment or terminating of the Plan or the related Trust. 24 25 ARTICLE XXIV LEGALITY SECTION 1. - Anything contained in this Agreement, in violation of any Federal, State or Municipal Law now in effect, or that is passed, will become null and void. ARTICLE XXV MISCELLANEOUS SECTION 1. - Space for a Bulletin Board shall be provided in a suitable place in each Shop for the exclusive use of the employees. SECTION 2. - Time spent by employees attending Maintenance Service Meetings called by Officials of the Company shall be paid for at the regular rate of pay, when in excess of one (1) meeting per month. SECTION 3. - No employee shall be coerced to contribute to any charity or social agency. SECTION 4. - Employees and those dependent upon them for support will be given the same consideration in the issuing of free or reduced rate transportation over the Company's lines and its connecting carriers as is granted other employees of the Company. SECTION 5. - Sanitary drinking fountains shall be provided in or convenient to all garages and proper heating and lighting of the garages for comfort of the employees shall be maintained. The Company shall furnish each employee two (2) towels per year, and soap, with proper quarters for washing and dressing. SECTION 6. - The Company agrees that any conditions detrimental to the health or safety of employees will be corrected when brought to their attention. Employees will be required to use safety devices provided by the Company in accordance with posted instructions. The Company will work with the Union to insure a safe workplace and the Company shall furnish all maintenance employees, when exposed to foul weather proper foul weather gear which shall consist of rainsuits and individual boots where the shoeless type is used. SECTION 7. - Special first-class tools for use on Company equipment shall be furnished for the use of the employees. Employees will be required to carry such first-class hand tools as the work of their classification requires. SECTION 8. - Funeral Leave - Employees will receive up to three (3) days paid leave per occurrence for loss of a parent, spouse or child. Pay will be only for scheduled time missed. The Company reserves the right to request written proof. 25 26 SECTION 9. - The Shop Steward will be allowed the use of the Company telephone during working hours for Union business only and only when permission is granted by a Company supervisor. If this privilege is found to be abused, the Company will notify the Union and the practice will be discontinued. SECTION 10. - A key to the first aid kit will be furnished to the Shop Steward. The Shop Steward will be held accountable for supplies that are maintained by the Company in the first aid kit. SECTION 11. - Employees shall be paid bi-weekly. The Company will designate the day of the week that the pay day will be made on and will designate a reasonable payroll cut off or lead time which shall be no less than ten (10) days. SECTION 12. - Employees at service islands will have the option to substitute insulated coveralls for one set of uniforms. ARTICLE XXVI NO STRIKE, LOCKOUT SECTION 1. - There shall be no lockouts by the Company, and there shall be no strikes or other work stoppages of any variety called by the Union, for the duration of this Agreement. Where a labor dispute arises with another Union recognized by the Company and a legal picket line is established at or around a Company terminal, garage or other facility our employees, who are members of the International Association of Machinists, will be permitted to honor such a legal picket line only at the facility where work of the other Union local is or was being performed at the time of the dispute as a regular job or bid shift. ARTICLE XXVII TERMINATION OF AGREEMENT This Agreement shall be in effect from October 1, 1996, until and including October 1, 1999, and shall remain in effect from year to year thereafter unless changed or terminated as herein provided. Either party desiring to make any changes or modifications in this Agreement to become effective at the end of the initial term or any annual extension thereof, or desiring to terminate this Agreement at the expiration thereof, shall notify the other party in writing of its desire either to enter into negotiations for the purpose of making changes or modifications herein or of its desire to terminate this Agreement at least sixty (60) days prior to the expiration of the initial term or any extension hereof. In the event that any change or modification so requested by either party is not mutually agreed upon prior to the expiration date of this Agreement or any renewal thereof, the Agreement shall terminate at such expiration date unless the same shall be extended by mutual 26 27 consent. After receipt of notification requesting changes or modifications in the Agreement, the parties agree to set a mutually satisfactory date to meet and discuss same. The foregoing is the complete collective bargaining Agreement entered into by and on behalf of the parties signatory hereto, indisputable errors and/or omissions accepted. Signed this ____ day of _______________, 1996. GREYHOUND LINES, INC. By: -------------------------------- By: -------------------------------- By: -------------------------------- INTERNATIONAL ASSOCIATION OF MACHINISTS & AEROSPACE WORKERS A.F.L. - C.I.O. By: -------------------------------- By: -------------------------------- By: -------------------------------- 27 EX-10.31 6 AMENDMENT TO SUPPLEMENTAL RETIREMENT PLAN 1 EXHIBIT 10.31 AMENDMENT TO SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN This Amendment to the Greyhound Lines, Inc. (the "Company") Supplemental Executive Retirement Plan is made as of December 9, 1996. WHEREAS, the Company previously adopted the Greyhound Lines, Inc. Supplemental Executive Retirement Plan, as restated effective January 1, 1994 (the "Plan"); and WHEREAS, the Company, having sought the approval of the Compensation and Organization Committee of the Board of Directors of the Company, desires to amend the Plan and modify the listing of the Participants in the Plan. NOW, THEREFORE, the Plan shall be amended as follows. 1. Section 6.1(c) of the Plan shall be renumbered as Section 6.1(d) and the following shall be added as Section 6.1(c): "(c) 20 percent for the Participants that: (i) hold the position of a Senior Vice President with Sponsor or (ii) any other Participants that, as of the first day of a Plan Year beginning on or after January 1, 1996, have completed a minimum of 84 months of Service with Sponsor; and" 2. The Participants in the Plan shall be those individuals listed on Appendix A hereto; that the Service Start Date, contribution level and the contribution effective date for each such Participant shall be as set forth on Appendix A hereto. 3. Capitalized terms used herein without definition shall have the meaning ascribed to such terms as set forth in the Plan. GREYHOUND LINES, INC. By: ---------------------------------- Daniel R. Weston Vice President - Human Resources 2 APPENDIX A SERP PARTICIPANTS - EFFECTIVE 12/9/96 ================================================================================
- -------------------------------------------------------------------------------- SERVICE CO. CONTRIB CONTRIB EXECUTIVE START EFF DATE % - -------------------------------------------------------------------------------- Craig Lentzsch 11/15/94 11/15/94 20% - -------------------------------------------------------------------------------- Jack Haugsland 5/15/95 5/15/95 20% - -------------------------------------------------------------------------------- Steve Korby 4/1/95 4/1/95 20% - -------------------------------------------------------------------------------- Floyd Holland 11/25/58 1/1/94 20% - -------------------------------------------------------------------------------- Ralph Borland 6/18/72 1/1/94 20% - -------------------------------------------------------------------------------- John Taylor 12/27/88 1/1/94 20% - -------------------------------------------------------------------------------- Ted Burk 11/20/70 4/15/95 10%/20% * - -------------------------------------------------------------------------------- Mark Southerst 7/1/88 1/24/95 10%/20% * - -------------------------------------------------------------------------------- John Como 3/14/88 1/1/97 20% ** - -------------------------------------------------------------------------------- Scott Kirksey 6/12/95 6/12/95 10% - -------------------------------------------------------------------------------- Stuart Robinson 11/15/94 11/15/94 10% - -------------------------------------------------------------------------------- Martha Smither 5/16/94 5/16/94 10% - -------------------------------------------------------------------------------- Dan Weston 2/1/94 2/1/94 10% - -------------------------------------------------------------------------------- Ken Wilkinson 5/23/94 11/15/96 10% - -------------------------------------------------------------------------------- George Graveley 11/1/96 11/1/96 10% - -------------------------------------------------------------------------------- Ray McQueen 11/4/96 11/4/96 10% - -------------------------------------------------------------------------------- * 10% prior to 1/1/96; 20% on/after 1/1/96 - -------------------------------------------------------------------------------- ** 20% as of 1/1/97 - --------------------------------------------------------------------------------
EX-11.2 7 COMPUTATION OF EARNINGS PER SHARE 1 EXHIBIT 11.2 PAGE 1 OF 1 GREYHOUND LINES, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER SHARE
YEAR ENDED DECEMBER 31, 1996 -------------------- PRIMARY LOSS PER SHARE Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (6,604,000) ============= Shares Weighted average number of common shares issued . . . . . . . . . . . . . . . 58,372,519 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 . . . . . . 58,263,327 ------------- Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.11) ============= FULLY DILUTED LOSS PER SHARE Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ( 6,604,000) Plus interest expense on Convertible Debentures . . . . . . . . . . . . . . . . . --- ** ------------- Adjusted net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ ( 6,604,000) ============= Shares Weighted average number of common shares issued . . . . . . . . . . . . . . . 58,372,519 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 . . . . . . 58,263,327 ------------- Net loss per share . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (0.11) =============
* 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-22 8 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 22 CONFIDENTIAL GREYHOUND LINES, INC. | --------------------------------------------------------------------------------------------------- | | | | | | | | Amarillo Trailways | Sistema Internacional de | Eagle Bus Manufacturing, Greyhound de Mexico | Wilmington Union Bus Bus Center, Inc. | Transporte de Autobuses, | Inc. (100%) S.A. de C.V. | Station Corporation (75%) | Inc. (S.I.T.A.) (100%) | *Sold 10/18/91 (99.9%) | (24.6%) | | | | | | | | Atlantic Greyhound Lines | Continental Panhandle GLI Holding Company Union Bus Station of of Virginia, Inc. | Lines, Inc. Oklahoma City, Oklahoma (100%) | (50%) (100%) (40%) | | | | | FCA Insurance | -- Limited | Grupo Centro, Inc. | (99.9%) -- | | (100%) | | | | | T & V Holding | -- Company | Los Buenos (100%) -- Leasing Co., Inc. | | (100%) | | | Texas, New Mexico | -- & Oklahoma Coaches, Inc. | Los Rapidos, Inc. | (100%) -- | (100%) | | T.N.M.& O. -- Tours, Inc. | (100%) | | Vermont Transit Co., Inc. -- (100%)
*Dissolution in Process March 1, 1997 EX-23.1 9 CONSENT OF ARTHUR ANDERSEN LLP 1 EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report included in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 No. 33-63506 and No. 33-63507. ARTHUR ANDERSEN LLP Dallas, Texas, March 18, 1997 EX-27 10 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 898 0 33,085 241 3,840 61,314 416,355 101,901 500,282 118,449 192,581 0 0 585 140,296 500,282 0 700,858 0 493,733 0 0 27,346 (6,542) 62 (6,604) 0 0 0 (6,604) (0.11) (0.11)
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