10-Q 1 form10q33101.txt QUARTER ENDED MARCH 31, 2001 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------- FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2001 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 01-12208 --------------- MOTOR COACH INDUSTRIES INTERNATIONAL, INC. (Exact name of registrant as specified in its charter) Delaware 86-0706940 (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1700 East Golf Road, Schaumburg, Illinois 60173 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (847) 285-2000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- -- The number of shares outstanding of the registrant's Common Stock: 1,000 shares as of April 30, 2001. INDEX
Page Number ------ PART I FINANCIAL INFORMATION 1 Item 1. Financial Statements (Unaudited) Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 2001 and 2000 3 Condensed Consolidated Balance Sheets March 31, 2001 and December 31, 2000 4 Condensed Consolidated Statements of Cash Flows 5 for the Three Months Ended March 31, 2001 and 2000 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management's Discussion and Analysis of 18 Financial Condition and Results of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk 23 PART II OTHER INFORMATION Item 1. Legal Proceedings 24 Item 6. Exhibits and Reports on Form 8-K 25 SIGNATURES 26
1 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS The condensed consolidated financial statements included herein are presented in accordance with the requirements of Form 10-Q and consequently do not include all the disclosures required in the Motor Coach Industries International, Inc. ("MCII" or the "Company") annual report on Form 10-K. Accordingly, the Company's annual report on Form 10-K for the fiscal year ended December 31, 2000, as filed with the Securities and Exchange Commission, should be read in conjunction with the accompanying condensed consolidated financial statements. The condensed consolidated balance sheet as of December 31, 2000, included in this quarterly report on Form 10-Q, was derived from the audited consolidated financial statements in the Company's annual report on Form 10-K. In the opinion of the Company, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position as of March 31, 2001, and the results of operations and changes in cash flows for the three month periods ended March 31, 2001 and 2000. Reported interim results of operations are based in part on estimates that may be subject to year-end adjustments. In addition, these quarterly results of operations are not necessarily indicative of those expected for the full year. FORWARD-LOOKING STATEMENTS We make "forward-looking statements" throughout this Form 10-Q. Whenever you read a statement that is not simply a statement of historical fact, such as when we describe what we "believe", "expect", or "anticipate" will occur, and other similar statements, you must remember that our expectations may not be correct, even though we believe they are reasonable. You are cautioned not to put undue reliance on any forward-looking statement. You should understand that a number of factors, in addition to those discussed herein, could affect us and could cause results to differ materially from those expressed in such forward-looking statements. Among these factors are: (1) uncertainties associated with the general economic conditions in our markets, (2) our substantial leverage and uncertainties associated with servicing our debt, (3) dependence on the inter-city coach and transit bus industries, (4) increased competition in our markets, (5) interest rate fluctuations, (6) changes in product demand, (7) risks associated with Mexican operations, (8) dependence on suppliers, (9) changes in customer concentration, (10) foreign currency risks and (11) changes in laws or regulations and approvals and decisions of courts, regulators and governmental bodies. Further, we operate in an industry sector where securities' values may be volatile and may be influenced by economic and other factors beyond our control. We do not intend, and undertake no obligation, to update these forward-looking statements. 2 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
2001 2000 --------- --------- (dollars in thousands) Total revenues $ 180,449 $ 159,547 --------- --------- Operating costs and expenses: Cost of sales, exclusive of depreciation and amortization 146,632 120,985 Depreciation and amortization 7,542 6,411 Selling, general and administrative expenses 27,985 25,665 --------- --------- Total operating costs and expenses 182,159 153,061 --------- --------- Operating income (loss) (1,710) 6,486 --------- --------- Other income and (expense): Interest expense, net (14,990) (16,022) Loss on sale of notes receivable through securitization (439) -- Foreign currency gain (loss) 1,858 (185) Other income (expense) 37 (857) --------- --------- Total other income and (expense) (13,534) (17,064) --------- --------- Loss before income taxes (15,244) (10,578) Income tax benefit 3,018 2,343 --------- --------- Net loss ($ 12,226) ($ 8,235) ========= =========
The accompanying notes are an integral part of these financial statements. 3 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, December 31, 2001 2000 --------- --------- (dollars in thousands except per share info) ASSETS Current assets: Cash and cash equivalents $ 78,179 $ 41,772 Trade accounts receivable, net of allowance of $6,844 and $6,998 48,722 51,141 Current portion of notes receivable, net of allowance of $1,806 and $1,919 17,154 17,693 Inventories 228,377 226,615 Deferred income taxes 16,389 15,954 Other current assets, including amounts due from affiliates of $6,788 and $5,484 27,455 26,334 --------- --------- Total current assets 416,276 379,509 Property, plant and equipment, net 107,122 112,919 Notes receivable, non-current 42,001 39,938 Intangible assets, net 201,893 206,683 Deferred income taxes, non-current 56,168 48,658 Other non-current assets 26,946 28,033 --------- --------- Total assets $ 850,406 $ 815,740 ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current liabilities: Accounts payable $ 63,813 $ 69,869 Accrued compensation 10,250 8,099 Accrued warranties 17,094 15,112 Accrued income taxes 21,693 18,659 Self insurance reserves 4,136 3,021 Customer deposits 64,181 47,327 Other current liabilities 23,818 18,696 --------- --------- Total current liabilities 204,985 180,783 Long-term debt 485,530 453,475 Pensions and other benefits 19,142 18,454 Deferred income taxes 7,407 6,789 Other deferred items and self insurance reserves 14,172 16,137 --------- --------- Total liabilities 731,236 675,638 --------- --------- Stockholder's equity: Common stock ($.01 par value, 1,000 shares authorized, issued and outstanding) and additional capital 386,596 386,596 Accumulated deficit (232,835) (220,609) Accumulated other comprehensive income (34,591) (25,885) --------- --------- Total stockholder's equity 119,170 140,102 --------- --------- Total liabilities and stockholder's equity $ 850,406 $ 815,740 ========= ========= The accompanying notes are an integral part of these financial statements. 4 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTH PERIODS ENDED MARCH 31, 2001 AND 2000
2001 2000 -------- -------- (dollars in thousands) Cash flows provided by (used in) operating activities Net loss ($12,226) ($ 8,235) Adjustments to reconcile net loss to net cash provided by (used in) operations: Depreciation and amortization 7,542 6,411 Deferred income taxes (7,327) (5,793) Loss on sale of notes receivable through securitization 439 -- Non-cash interest expense 822 781 Foreign currency translation (gain) loss (1,858) 185 Other non-cash items 1,719 (336) All other operating activities 18,571 5,763 -------- -------- Net cash provided by (used in) operating activities 7,682 (1,224) -------- -------- Cash flows provided by (used in) investing activities Capital expenditures (1,312) (3,427) Proceeds from sale of property -- 2,968 Net proceeds from sale of notes receivable through securitization 14,186 -- Other changes in notes receivable (16,149) (16,561) Discontinued operations, net change -- 7 -------- -------- Net cash provided by (used in) investing activities (3,275) (17,013) -------- -------- Cash flows provided by (used in) financing activities Net change in bank credit facilities 32,000 20,000 Payment of term B loan principal -- (833) Net change in other long-term borrowings -- 56 -------- -------- Net cash provided by (used in) financing activities 32,000 19,223 -------- -------- Net increase (decrease) in cash 36,407 986 Cash and cash equivalents at beginning of period 41,772 15,630 -------- -------- Cash and cash equivalents at end of period $ 78,179 $ 16,616 ======== ========
The accompanying notes are an integral part of these statements. 5 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note 1. Nature of Business Motor Coach Industries International, Inc. ("MCII" or the "Company") is a leading designer, manufacturer and marketer of new inter-city coaches and related replacement parts primarily for the North American market. To support these activities, the Company also sells and services used coaches and offers a comprehensive package of leasing and financing services to its customers. The Company has manufacturing facilities in the United States, Canada and Mexico. Sales are predominately to a diversified customer base, including independent operators, national fleet operators and government agencies. Note 2. Principles of Consolidation and Presentation The accompanying unaudited consolidated financial statements include the accounts of the Company and its subsidiaries. The Company is an indirect, wholly owned subsidiary of MCII Holdings (USA), Inc. ("MCII Holdings" or "Parent Company"). All significant intercompany accounts and transactions have been eliminated. Certain reclassifications have been made to the financial statements of prior periods to conform to 2001 classifications. Note 3. Inventories Inventories as of March 31, 2001 and December 31, 2000 consisted of the following: March 31, December 31, 2001 2000 --------- --------- (dollars in thousands) Raw materials $ 42,834 $ 42,227 Work in process 65,407 68,527 Finished goods 138,985 135,499 --------- --------- 247,226 246,253 Inventory reserves (18,849) (19,638) --------- --------- $ 228,377 $ 226,615 ========= ========= Note 4. Notes Receivable Notes receivable as of March 31, 2001 and December 31, 2000 consisted of the following: March 31, December 31, 2001 2000 -------- -------- (dollars in thousands) Notes receivable, at contract amount $ 60,961 $ 59,550 Less: allowance for uncollectible contracts (1,806) (1,919) -------- -------- Notes receivable, net 59,155 57,631 Less current portion (17,154) (17,693) -------- -------- Long-term notes receivable $ 42,001 $ 39,938 ======== ======== 6 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), Continued Note 5. Long-Term Debt Outstanding debt as of March 31, 2001 and December 31, 2000 consisted of the following: March 31, December 31, 2001 2000 --------- --------- (dollars in thousands) 11.25% senior subordinated notes, due 2009 $ 152,250 $ 152,250 Borrowings under senior secured credit facility: Term loan B, due 2006 303,056 303,056 Revolving credit agreement, due 2005 32,000 -- --------- --------- 487,306 455,306 Less unamortized discount on 11.25% senior subordinated notes (1,776) (1,831) --------- --------- $ 485,530 $ 453,475 ========= ========= The senior secured credit facility contains financial covenants that the Company will not exceed certain leverage ratios or fall below certain interest coverage ratios as specified in the agreement. The Company was not able to comply with all the financial covenants of the agreement as of March 31, 2001 and, accordingly, effective May 3, 2001, it obtained an amendment to the credit facility that waived any existing conditions of non-compliance with the facility. The amendment, among other things, suspended the current financial covenants through the period ending December 31, 2001, and provided for additional financial covenants requiring minimum levels of EBITDA, adjusted EBITDA, and minimum excess cash flow, each as defined in the amended credit agreement. The revised covenants were based upon the Company's business plan for the year ending December 31, 2001. As of March 31, 2001, the Company was in compliance with the covenants in place. In addition, the amendment provides for the funding of an additional $8.5 million term loan (the "Tranche B Loan") on or prior to May 31, 2001. The Tranche B Loan will bear interest at 5% over the adjusted Eurodollar rate, which interest is payable in kind or equity. An affiliate of Parent Company's majority equity holder, an investment group led by Joseph Littlejohn & Levy Fund III L.P. ("JLL Fund III"), has agreed to purchase a 100% interest in the Tranche B Loan. As a result of the amendment, the loans (other than the Tranche B Loan) will bear interest at the adjusted Eurodollar rate plus 4% per annum, or the adjusted base rate plus 3% per annum. Additionally, the Company incurred fees of approximately $6.0 million relating to the amendment. The majority of these fees will be capitalized in the second quarter of 2001 and amortized over the remaining term of the senior secured credit facility. As of March 31, 2001, the Company had outstanding borrowings of $32.0 million and letters of credit totaling $96.6 million drawn against the revolving credit line. The Company had the ability to borrow an additional $23.4 million under the revolving line of credit at March 31, 2001. In May 2001, the Company repaid the $32.0 million of borrowings outstanding under the revolving credit line as of March 31, 2001. 7 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), Continued Note 6. Business Segment Data Data for the Company's reportable segments for the three month periods ended March 31, 2001 and 2000 was as follows: Three Months Ended March 31, ---------------------------- 2001 2000 --------- --------- (dollars in thousands) Revenues: Coach Sales $ 144,710 $ 117,509 Customer Support Business 33,415 39,740 Finance 2,324 2,298 --------- --------- $ 180,449 $ 159,547 ========= ========= Operating income (loss): Coach Sales $ (652) $ 3,092 Customer Support Business (670) 2,488 Finance (388) 906 --------- --------- $ (1,710) $ 6,486 ========= ========= Total assets as of March 31, 2001 were as follows (dollars in thousands): Coach Sales $ 529,765 Customer Support Business 237,531 Finance 83,110 --------- $ 850,206 ========= Note 7. Derivative Instruments and Hedging Activities The Company uses financial instruments to hedge or reduce its overall exposure to the effects of currency fluctuations in its cash flows. Effective January 1, 2001, the Company adopted Financial Accounting Standards Board ("FASB") Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities", as amended. This Statement requires the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through earnings. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives are either offset against the change in fair value of assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedge item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The adoption of Statement No. 133, as amended, did not have a significant effect on the results of operations or financial condition of the Company. As of March 31, 2001, the Company had recorded a charge to other comprehensive income (loss) of approximately $1.6 million, offset primarily by a current liability, to adjust the fair value of its open hedging instruments to fair value. 8 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), Continued Note 8. Comprehensive Income (Loss) The Company's comprehensive loss for the three months ended March 31, 2001 and 2000 consisted of: Three Months Ended March 31, ---------------------------- 2001 2000 -------- -------- (dollars in thousands) Net loss $(12,226) $ (8,235) Other comprehensive loss: Unrealized translation loss (7,144) (637) Unrealized loss on hedging instruments (1,562) -- -------- -------- $(20,932) $ (8,872) ======== ======== Note 9. EBITDA EBITDA represents income before income taxes, depreciation and amortization, the loss on sale of notes through securitization, and other non-operating income and expenses, each of which can significantly affect our results of operations and liquidity and should be considered in evaluating our financial performance. EBITDA is included because we understand that such information is considered to be an additional basis on which to evaluate our ability to pay interest, repay debt and make capital expenditures. EBITDA is not intended to represent and should not be considered more meaningful than, or as an alternative to, measures of performance, profitability or liquidity determined in accordance with generally accepted accounting principles. The Company's EBITDA for the three months ended March 31, 2001 and 2000 consisted of: Three Months Ended March 31, --------------------------- 2001 2000 -------- -------- (dollars in thousands) EBITDA: Operating income (loss) $ (1,710) $ 6,486 Depreciation and amortization 7,542 6,411 Non-recurring costs 1,250 -- -------- -------- $ 7,082 $ 12,897 ======== ======== 9 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), Continued Note 10. Changes in Other Operating Activities Changes in other operating activities for the three month periods ended March 31, 2001 and 2000 consisted of: Three Months Ended March 31, ---------------------------- 2001 2000 -------- -------- (dollars in thousands) Decrease (increase) in accounts receivable $ 1,119 $ 20,951 Decrease (increase) in inventories (4,146) (34,598) Increase (decrease) in accounts payable (6,056) 16,448 Increase (decrease) in accrued income taxes 3,034 2,719 Increase (decrease) in customer deposits 16,854 5,297 All other changes, net 7,766 (5,054) -------- -------- Changes in other operating activities $ 18,571 $ 5,763 ======== ======== The amounts presented in the above table are net of non-cash and non-operating changes to the related balance sheet accounts. Note 11. Commitments and Contingencies The Company and certain of its subsidiaries are plaintiffs or defendants to various actions, proceedings and pending claims. Some of the foregoing involve or may involve claims for compensatory, punitive, or other damages in material amounts. Litigation is subject to many uncertainties and it is possible that some of these legal actions, proceedings and pending claims could be decided against the Company. Although the amount of liability at March 31, 2001 with respect to these matters is not ascertainable, the Company believes that any resulting liability would not materially affect the Company's financial condition or results of operations. The Company entered into an employment agreement effective January 31, 2000 with C. Roberto Cordaro, who was chief executive officer until his resignation effective February 15, 2001. In connection with this resignation, the Company recorded a non-recurring charge of approximately $1.2 million during the first quarter of 2001 for compensation due Mr. Cordaro. Note 12. Guarantor/Non-Guarantor Financial Statements In connection with the issuance of the senior subordinated notes due 2009 (the "Notes") (see Note 5), certain of the Company's U.S. subsidiaries became guarantors of the Notes. The following tables present condensed consolidating financial information for the MCII Guarantors (U.S. entities), and Non-Guarantors (Non-U.S. entities). Each of the Guarantors is a direct or indirect wholly owned subsidiary of MCII. The Guarantors have jointly and severally and fully and unconditionally guaranteed the Notes of the Company. The following condensed consolidating financial information presents the results of operations, financial position and cash flows of MCII, Guarantors, and Non-Guarantors, and the eliminations necessary to arrive at the information for the Company on a condensed consolidated basis. 10 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (Continued) Note 12. Guarantor Condensed Unaudited Financial Statements, Continued Condensed Consolidated Statement of Operations (Unaudited)
Three Months Ended March 31, 2001 ----------------------------------------------------------- Non- MCII Guarantors Guarantors Eliminations Consolidated -------- -------- -------- -------- -------- (dollars in thousands) Revenues $ -- $161,148 $ 54,298 $(34,997) $180,449 Cost of sales (exclusive of items shown separately below) -- 126,518 55,360 (35,246) 146,632 Depreciation & amortization expense 386 4,284 2,872 -- 7,542 Tax profit allocation - MCI/MCI Ltd. -- 8,485 (8,485) -- -- Selling, general and marketing expenses 6,629 14,345 7,011 -- 27,985 -------- -------- -------- -------- -------- Operating income (loss) (7,015) 7,516 (2,460) 249 (1,710) -------- -------- -------- -------- -------- Interest expense (9,179) (6,557) 746 -- -- Loss on sale of notes receivable through securitizaton -- (439) -- -- (439) Foreign currency gain (loss) (105) 546 1,417 -- 1,858 Other expense -- (30) 67 -- 37 -------- -------- -------- -------- -------- (9,284) (6,480) 2,230 -- (13,534) -------- -------- -------- -------- -------- Income (loss) before income taxes (16,299) 1,036 (230) 249 (15,244) Income tax (provision) benefit 7,365 (1,810) (2,537) -- 3,018 -------- -------- -------- -------- -------- Net income (loss) $ (8,934) $ (774) $ (2,767) $ 249 $(12,226) ======== ======== ======== ======== ========
11 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), (Continued) Note 12. Guarantor Condensed Unaudited Financial Statements, Continued Condensed Consolidated Statement of Operations (Unaudited)
Three Months Ended March 31, 2000 ------------------------------------------------------------- Non- MCII Guarantors Guarantors Eliminations Consolidated --------- --------- --------- --------- --------- (dollars in thousands) Revenues $ -- $ 138,108 $ 64,020 $ (42,581) $ 159,547 Cost of sales (exclusive of items shown separately below) -- 105,486 58,080 (42,581) 120,985 Depreciation & amortization expense 115 2,900 3,396 -- 6,411 Tax profit allocation - MCI/MCI Ltd. -- 7,569 (7,569) -- -- Selling, general and marketing expenses 2,991 15,267 7,407 -- 25,665 --------- --------- --------- --------- --------- Operating income (loss) (3,106) 6,886 2,706 -- 6,486 --------- --------- --------- --------- --------- Interest expense (13,193) (2,911) 82 -- (16,022) Loss on sale of notes receivable through securitizaton -- -- -- -- Foreign currency gain (loss) (8) 209 (386) -- (185) Other expense -- (128) (729) -- (857) --------- --------- --------- --------- --------- (13,201) (2,830) (1,033) -- (17,064) --------- --------- --------- --------- --------- Income (loss) before income taxes (16,307) 4,056 1,673 -- (10,578) Income tax (provision) benefit 6,877 (2,121) (2,413) -- 2,343 --------- --------- --------- --------- --------- Net income (loss) $ (9,430) $ 1,935 $ (740) $ -- $ (8,235) ========= ========= ========= ========= =========
12 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), (Continued) Note 12. Guarantor Condensed Unaudited Financial Statements, Continued Condensed Consolidated Balance Sheet (Unaudited)
March 31, 2001 ------------------------------------------------------------- Non- MCII Guarantors Guarantors Eliminations Consolidated --------- --------- --------- --------- --------- (dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 65,917 $ 2,998 $ 9,264 $ -- $ 78,179 Trade accounts receivable -- 35,370 13,352 -- 48,722 Intercompany receivables (payables) 635,124 (448,141) 22,473 (209,456) -- Current portion of notes receivable -- 4,028 13,126 -- 17,154 Inventories -- 164,699 64,506 (828) 228,377 Deferred income taxes 3,523 12,498 368 -- 16,389 Other current assets 13,295 10,044 4,116 -- 27,455 --------- --------- --------- --------- --------- Total current assets 717,859 (218,504) 127,205 (210,284) 416,276 Property plant & equipment 2,320 62,333 42,500 (31) 107,122 Notes receivable -- 33,552 8,449 -- 42,001 Investments in affiliates 160,386 -- -- (160,386) -- Intangibles assets 1,667 138,738 61,488 -- 201,893 Deferred income taxes- non current 20,608 17,900 17,660 -- 56,168 Other assets 18,205 6,572 2,169 -- 26,946 --------- --------- --------- --------- --------- Total Assets $ 921,045 $ 40,591 $ 259,471 $(370,701) $ 850,406 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilites: Accounts payable $ 3,441 $ 35,064 $ 25,308 $ -- $ 63,813 Accrued compensation and other benefits 762 4,420 5,068 -- 10,250 Accrued warranties -- 14,705 2,389 -- 17,094 Accrued income taxes -- -- 21,424 269 21,693 Self insurance reserves 4,136 -- -- -- 4,136 Customer deposits -- 63,076 1,105 -- 64,181 Other current liabilities 12,698 6,086 5,034 -- 23,818 --------- --------- --------- --------- --------- Total current liabilities 21,037 123,351 60,328 269 204,985 Long-term debt 485,530 -- -- -- 485,530 Pensions and other benefits 14,241 400 4,501 -- 19,142 Deferred income taxes 3,453 -- 3,954 -- 7,407 Other deferred items & self insurance reserves 4,436 9,736 -- -- 14,172 --------- --------- --------- --------- --------- Total liabilites 528,697 133,487 68,783 269 731,236 --------- --------- --------- --------- --------- Stockholder's equity: Common stock and additional capital 623,245 124,612 120,623 (481,884) 386,596 Accumulated earnings (deficit) (230,861) (215,946) 102,789 111,183 (231,035) Accumulated other comprehensive income (36) (1,562) (32,724) (269) (37,591) --------- --------- --------- --------- --------- Total stockholder's equity 392,348 (92,896) 190,688 (370,970) 119,170 --------- --------- --------- --------- --------- Total liabilities and stockholder's equity $ 921,045 $ 40,591 $ 259,471 $(370,701) $ 850,406 ========= ========= ========= ========= =========
13 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), (Continued) Note 12. Guarantor Condensed Unaudited Financial Statements, Continued Condensed Consolidated Balance Sheet (Unaudited)
December 31, 2000 -------------------------------------------------------------- Non- MCII Guarantors Guarantors Eliminations Consolidated --------- --------- --------- --------- --------- (dollars in thousands) ASSETS Current assets: Cash and cash equivalents $ 34,924 $ 2,120 $ 4,728 $ -- $ 41,772 Trade accounts receivable -- 37,031 14,110 -- 51,141 Intercompany receivables (payables) 656,854 (478,855) 31,457 (209,456) -- Current portion of notes receivable -- 4,073 13,620 -- 17,693 Inventories -- 168,467 59,226 (1,078) 226,615 Deferred income taxes 2,301 12,943 710 -- 15,954 Other current assets 11,600 11,363 3,371 -- 26,334 --------- --------- --------- --------- --------- Total current assets 705,679 (242,858) 127,222 (210,534) 379,509 Property plant & equipment 2,267 64,903 45,780 (31) 112,919 Notes receivable -- 26,468 13,470 -- 39,938 Investments in affiliates 160,386 -- -- (160,386) -- Intangibles assets 1,679 139,862 65,142 -- 206,683 Deferred income taxes- non current 10,225 22,451 15,982 -- 48,658 Other assets 18,794 6,913 2,326 -- 28,033 --------- --------- --------- --------- --------- Total Assets $ 899,030 $ 17,739 $ 269,922 $(370,951) $ 815,740 ========= ========= ========= ========= ========= LIABILITIES AND STOCKHOLDER'S EQUITY Current Liabilites: Accounts payable $ 8,368 $ 31,994 $ 29,507 $ -- $ 69,869 Accrued compensation and other benefits 323 3,926 3,850 -- 8,099 Accrued warranties -- 12,708 2,404 -- 15,112 Accrued income taxes -- -- 18,490 169 18,659 Self insurance reserves 3,021 -- -- -- 3,021 Customer deposits -- 45,549 1,778 -- 47,327 Other current liabilities 9,165 4,989 4,542 -- 18,696 --------- --------- --------- --------- --------- Total current liabilities 20,877 99,166 60,571 169 180,783 Long-term debt 453,475 -- -- -- 453,475 Pensions and other benefits 13,947 -- 4,507 -- 18,454 Deferred income taxes 2,541 -- 4,248 -- 6,789 Other deferred items & self insurance reserves 5,408 10,729 -- -- 16,137 --------- --------- --------- --------- --------- Total liabilites 496,248 109,895 69,326 169 675,638 --------- --------- --------- --------- --------- Stockholder's equity: Common stock and additional capital 623,245 124,612 120,623 (481,884) 386,596 Accumulated earnings (deficit) (220,427) (216,768) 105,553 111,033 (220,609) Accumulated other comprehensive loss (36) -- (25,580) (269) (25,885) --------- --------- --------- --------- --------- Total stockholder's equity 402,782 (92,156) 200,596 (371,120) 140,102 --------- --------- --------- --------- --------- Total liabilities and stockholder's equity $ 899,030 $ 17,739 $ 269,922 $(370,951) $ 815,740 ========= ========= ========= ========= =========
14 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), (Continued) Note 12. Guarantor Condensed Unaudited Financial Statements, Continued Condensed Consolidated Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 2001 --------------------------------------------------------- Non- MCII Guarantors Guarantors Eliminations Consolidated -------- -------- -------- -------- -------- (dollars in thousands) Cash flows provided by (used in) operating activities: Net income (loss) ($ 8,934) ($ 774) ($ 2,767) $ 249 ($12,226) Adjustments to reconcile net income (loss) to net cash provided by (used in) operations: Depreciation and amortization 386 4,284 2,872 -- 7,542 Deferred income taxes (10,693) 4,996 (1,630) -- (7,327) Loss on sale of notes receivable through securitization -- -- -- -- Loss on sale of notes receivable through securitization -- 439 -- -- 439 Non-cash interest expense 822 -- -- -- 822 Foreign currency (gain) loss 105 (546) (1,417) -- (1,858) Other non-cash items (175) (739) 2,633 -- 1,719 All other operating activities 17,733 1,224 (137) (249) 18,571 -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities (756) 8,884 (446) -- 7,682 -------- -------- -------- -------- -------- Cash flows provided by (used in) investing activities Capital expenditures (251) (528) (533) -- (1,312) Net proceeds from sale of notes receivable through securitization -- 14,186 -- -- 14,186 Other changes in notes receivable notes receivable through securitization -- -- -- -- Other changes in notes receivable -- (21,664) 5,515 -- (16,149) -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (251) (8,006) 4,982 -- (3,275) -------- -------- -------- -------- -------- Cash flows provided by (used in) financing activities Net change in bank credit facilities 32,000 -- -- -- 32,000 -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities 32,000 -- -- -- 32,000 -------- -------- -------- -------- -------- Net increase (decrease) in cash 30,993 878 4,536 -- 36,407 Cash and cash equivalents at beginning of period 34,924 2,120 4,728 41,772 -------- -------- -------- -------- -------- Cash and cash equivalents at end of period $ 65,917 $ 2,998 $ 9,264 $ -- $ 78,179 ======== ======== ======== ======== ========
15 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), (Continued) Note 12. Guarantor Condensed Unaudited Financial Statements, Continued Condensed Consolidated Statement of Cash Flows (Unaudited)
Three Months Ended March 31, 2000 --------------------------------------------------------- Non- MCII Guarantors Guarantors Eliminations Consolidated -------- -------- -------- -------- -------- (dollars in thousands) Cash flows provided by (used in) operating activities: Net income (loss) ($ 9,430) $ 1,935 ($ 740) $ -- ($ 8,235) Adjustments to reconcile net income (loss)to net cash provided by (used in) operations: Depreciation and amortization 115 2,900 3,396 -- 6,411 Deferred income taxes (6,599) 967 (161) -- (5,793) Loss on sale of notes receivable through securitization -- -- -- -- Foreign currency (gain) loss 8 (209) 386 -- 185 Non-cash interest expense 781 -- -- -- 781 Other non-cash items -- (1,011) 948 -- (63) All other operating activities 11,964 4,920 (11,394) -- 5,490 -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities (3,161) 9,502 (7,565) -- (1,224) -------- -------- -------- -------- -------- Cash flows provided by (used in) investing activities Capital expenditures (9) (2,219) (1,199) -- (3,427) Proceeds from sale of property and investments -- 2,968 -- 2,968 Net proceeds from sale of notes receivable through securitization -- -- -- -- Change in notes receivable -- (16,561) -- (16,561) Other -- 7 -- -- 7 -------- -------- -------- -------- -------- Net cash provided by (used in) investing activities (9) (15,805) (1,199) -- (17,013) -------- -------- -------- -------- -------- Cash flows provided by (used in) financing activities Payment of term B loan principal (833) -- -- -- (833) Net change in other long-term borrowings 56 -- -- -- 56 Net change in related party receivables/payables (16,226) 6,642 9,584 -- Net change in line of credit facility 20,000 -- -- -- 20,000 -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities 2,997 6,642 9,584 -- 19,223 -------- -------- -------- -------- -------- Net increase (decrease) in cash (173) 339 820 -- 986 Cash and cash equivalents at beginning of period 4,163 2,204 9,263 15,630 -------- -------- -------- -------- -------- Cash and cash equivalents at end of period $ 3,990 $ 2,543 $ 10,083 $ -- $ 16,616 ======== ======== ======== ======== ========
16 MOTOR COACH INDUSTRIES INTERNATIONAL, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED), Continued Note 13. Subsequent Event Subsequent to March 31, 2001, the Company, Parent Company, Consorcio G Grupo Dina, S.A. de C.V. ("Grupo Dina"), JLL Fund III and others entered into a Settlement Agreement and Release, dated as of April 24, 2001 (the "Settlement Agreement"), pursuant to which, among other things, the parties settled certain disputes among them. Pursuant to the Settlement Agreement, the parties terminated the Master Purchase and Supply Agreement, dated as of June 16, 1999, pursuant to which certain affiliates of Grupo Dina were providing parts and other supplies to the Company. In addition, the Company paid to Grupo Dina $1.6 million, primarily for assets and services provided by Grupo Dina, which funds, along with approximately $250,000 due to the Company's former Chairman, Rafael Gomez Flores, were placed in escrow as security for Grupo Dina's obligation to transfer certain parcels of land to the Company or one of its affiliates. In connection with such Settlement, Parent Company issued additional shares to certain of its stockholders, including JLL Fund III and cancelled a like number of shares held by Grupo Dina. The Settlement Agreement further provided for a mutual release of all claims arising out of the operation and ownership of the Parent Company and the Company, subject to certain specified exceptions. 17 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion supplements the information found in our historical financial statements and related notes. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 2001, we had long-term debt outstanding of approximately $485.5 million and an additional $23.4 million available under our senior secured credit facility. Principal on the term loans issued under our senior secured credit facility is required to be repaid in quarterly installments through March 31, 2006, with a final payment due on June 30, 2006. We made an optional $5.0 million prepayment on the term loan in December 2000 and elected, in accordance with provisions of the senior secured credit facility, to apply this prepayment against quarterly payments due in 2001. Our intention is to fund future quarterly payments through the senior secured credit facility. Our principal liquidity requirements are for debt service requirements under the Notes and our senior secured credit facility, and for working capital and capital expenditures. Historically, we have funded our capital and operating requirements with a combination of cash on hand, operating cash flow, proceeds from asset sales, and proceeds from credit facilities and other debt borrowings. We expect to rely on internally generated funds and, to the extent necessary, borrowings under our senior secured credit facility to meet our liquidity needs in the foreseeable future. See discussion on "Status of Credit Facilities" below for recent developments relating to our senior secured credit facility. Our cash and cash equivalents increased $36.4 million to $78.2 million at March 31, 2001. Operating activities and financing activities provided cash flows of $7.7 million and $32.0 million, respectively. Investing activities used $3.3 million of cash flows. Cash Flows Operating Activities During the three months ended March 31, 2001, our operating activities provided cash flows of $7.7 million. Cash provided by increases in customer deposits was offset by our net loss. Investing Activities We realized $14.2 million in proceeds from the securitization of our qualifying notes receivable and invested proceeds of $16.1 million, net of collections, to finance customer coach purchases during the three months ended March 31, 2001. Our capital expenditures during 2001 totaled $1.3 million. Financing Activities We borrowed $32.0 million under our revolving credit facility during the three months ended March 31, 2001, which was repaid in May 2001. Our working capital increased to $211.3 million at March 31, 2001 from $198.7 million at December 31, 2000. The working capital increase is primarily due to an increase in cash resulting from borrowings under our senior secured credit facility's revolving line of credit, less cash used to fund our operations. Status of Credit Facilities As of March 31, 2001, we had outstanding borrowings of $335.1 million under our senior secured credit facility consisting of $303.1 million on a term loan due in 2006 and $32.0 million on a revolving credit facility due in 2005. Additionally, we had letters of credit totaling $96.6 million drawn against the revolving credit line and had the 18 ability to borrow an additional $23.4 million under the revolving line of credit. We also had outstanding approximately $152.0 million of 11.25% senior subordinated notes due 2009. The senior secured credit agreement contains financial covenants that do not permit us to exceed certain leverage ratios or fall below certain interest coverage ratios as specified in the agreement. We were not able to comply with all the financial covenants of the agreement as of March 31, 2001and, accordingly, effective May 3, 2001, we obtained an amendment to the credit facility that waived any existing conditions of non-compliance with the facility. The amendment, among other things, suspended the current financial covenants through the period ending December 31, 2001, and provided for additional financial covenants requiring minimum levels of EBITDA, adjusted EBITDA, and minimum excess cash flow, each as defined in the amended credit agreement. The revised covenants were based upon our business plan for the year ending December 31, 2001. As of March 31, 2001, we were in compliance with the covenants in place. In addition, the amendment provides for the funding of an additional $8.5 million term loan (the "Tranche B Loan") on or prior to May 31, 2001. The Tranche B Loan will bear interest at 5% over the adjusted Eurodollar rate, which interest is payable in kind or equity. An affiliate of Parent Company's majority equity holder, an investment group led by JLL Fund III, has agreed to purchase a 100% interest in the Tranche B Loan. As a result of the amendment, the loans (other than the Tranche B Loan) will bear interest at the adjusted Eurodollar rate plus 4% per annum or the adjusted base rate plus 3% per annum. Securitization Transaction During the second quarter of 2000, we completed the asset securitization transaction permitted under terms of the amendments to our senior secured credit facility. We executed several agreements in conjunction with this asset securitization transaction (together referred to as "Asset Securitization Agreement"), allowing us to sell qualifying receivables and financing leases to a qualified securitization entity up to an aggregate outstanding amount of $250 million. Under the terms of the Asset Securitization Agreement, we sold a substantial portion of our portfolio to MCII Funding II, Inc., an unconsolidated affiliated company, at 97% of the remaining principal balance. MCII Funding II, Inc., then sold these receivables and leases at 100% of the remaining principal balance to the Special Purpose Accounts Receivable Cooperative Corporation ("SPARC"). We recognized losses on the sale of notes to MCII Funding II, Inc. while MCII Funding II, Inc. recognized gains on the sale of the notes to SPARC. During the three months ended March 31, 2001, we recognized net proceeds from securitization transactions of $14.2 million. 19 RESULTS OF OPERATIONS Three Months Ended March 31, 2001 as Compared to Three Months Ended March 31, 2000 OVERVIEW Revenues Revenues for the three months ended March 31, 2001were $180.4 million, an increase of $20.9 million, or 13.1% from $159.5 million for the comparable period of 2000. Revenues from coach sales during the three months ended March 31, 2001 increased $27.2 from the comparable period of 2000, primarily due to an overall increase in unit deliveries. Revenues from our Customer Support business during the three months ended March 31, 2001 decreased $6.3 million from the comparable period of 2000, primarily due to product availability issues. Gross Profit Gross profit for the three months ended March 31, 2001 was $33.8 million, a decrease of $4.8 million, or 12.3% from $38.6 million for the comparable period of 2000. Our gross profit margin decreased to 18.7% in the three months ended March 31, 2001, as compared to 24.2% in the comparable period of 2000. The decrease in gross profit margin is primarily due to the impact of new product startup costs and soft market conditions which restricted our ability to pass our normal labor and other cost increases along to our customers. Operating Expenses Depreciation and amortization expense for the three months ended March 31, 2001 of $7.5 million increased $1.1 million, or 17.6%, over the comparable period of 2000. The increase is primarily due to the effect of capital expenditures during 2000. Selling, general and administrative expenses for the three months ended March 31, 2001 of $28.0 million increased $2.3 million, or 9.0%, from $25.7 million for the comparable period of 2000. The increase is due to a non-recurring compensation charge of approximately $1.2 million relating to an employment agreement with our former chief executive officer, who resigned in February 2001, and costs related to increased revenue. Operating Income (Loss) Operating loss for the three months ended March 31, 2001 totaled $1.7 million, as compared to operating income of $6.5 million during the comparable period of 2000. The decrease in operating income is primarily due to the reduction in gross profit and increased operating expenses as discussed above. Other Income (Expense) Interest expense for the three months ended March 31, 2001 of $15.0 million decreased $1.0 million, or 6.4%, from $16.0 million for the comparable period of 2000 due to a reduction in our overall level of borrowings as well as lower average interest rates. During the second quarter of 2000, we entered into a series of asset securitization transactions and realized losses on the securitization of notes receivable of $0.4 million during the three months ended March 31, 2001. These losses arise from the sale of receivables to an unconsolidated affiliated company at 97% of the principal. Foreign currency gains were $1.9 million for the three months ended March 31, 2001 as compared to a foreign currency loss of $0.2 million loss for the comparable period of 2000. During the three months ended March 31, 2001 we experienced transaction gains at our Canadian subsidiary, Motor Coach Industries Limited. Other expense of $0.9 million for the three months ended March 31, 2000 was primarily attributable to losses on disposal of equipment at our Mexican manufacturing facility. 20 Income Taxes Our loss before income taxes increased to $15.2 million during the three months ended March 31, 2001, as compared to a loss before income taxes of $10.6 million during the comparable period of 2000. The income tax benefit for the three months ended March 31, 2001 was $3.0 million as compared to an income tax benefit of $2.3 million for the comparable period of 2000. The income tax benefit increase between the two comparable periods was the result of the increase in our loss before income taxes, partially offset by an increase in the operating loss of our Mexican subsidiary and the effect of expenses that are not deductible for income tax purposes. SEGMENT RESULTS The following table presents revenues and operating income (loss) for each of the Company's business segments for the three month periods ended March 31, 2001 and 2000. Three Months Ended March 31, ---------------------------- 2001 2000 --------- --------- (dollars in thousands) Revenues: Coach sales $ 144,710 $ 117,509 Customer Support Business 33,415 39,740 Finance 2,324 2,298 --------- --------- $ 180,449 $ 159,547 ========= ========= Operating income (loss): Coach sales $ (652) $ 3,092 Customer Support Business (670) 2,488 Finance (388) 906 --------- --------- $ (1,710) $ 6,486 ========= ========= Coach Sales Revenues from coach sales of $144.7 million for the three months ended March 31, 2001 increased by $27.2 million, or 23.1%, from $117.5 million during the comparable period of 2000. Revenue from sales of new coaches increased by $24.1 million, or 21.8%, as compared to the comparable period of 2000. An overall increase in coach deliveries to the public sector was partially offset by decreased coach deliveries to national coach fleet operators and independent tour and charter operators. Pre-owned coach revenue during the three months ended March 31, 2001 increased $3.1 million, or 43.3%, over the comparable period of 2000. Our average selling price of used coaches increased significantly during the three months ended March 31, 2001, as compared to the prior year period due to a more favorable sales mix. Our gross profit margin from coach sales decreased to 17.2% during the three months ended March 31, 2001 as compared to 22.9% in the comparable period of 2000. The decrease in gross profit margin is primarily due to the impact of new product startup costs, unabsorbed fixed costs at our Mexican manufacturing facility, and soft market conditions which restricted our ability to pass our normal labor and other cost increases along to our customers. Our operating loss from coach sales was $0.7 million for the three months ended March 31, 2001 as compared to operating income of $3.1 million during the comparable period of 2000. The decrease in operating income is primarily due to the reduction in gross profit margin and increased selling and administrative costs. 21 Customer Support Business Revenues from our Customer Support Business of $33.4 million for the three months ended March 31, 2001 decreased by $6.3 million, or 15.9%, from $39.7 million during the comparable period of 2000. The revenue decrease is due to a number factors. During the three months ended March 31, 2001, we continued to experience product availability problems due to the acquisition of a component parts supplier by a major competitor. See also Legal Proceedings. Additionally, during the three months ended March 31, 2001, Customer Support Business revenue decreased due to lower service income from external customers. The gross profit margin from our Customer Support Business for the three months ended March 31, 2001 decreased to 20.3% in 2001 from 23.6% during the comparable period of 2000. The decrease in the gross margin percentage is attributable to soft market conditions which restricted our ability to pass our normal labor and other cost increases along to our customers. Our operating loss from our Customer Support Business was $0.7 million for the three months ended March 31, 2001, as compared to operating income of $2.5 million during the comparable period of 2000. Our operating loss is due primarily to the revenue decline and to the decrease in gross margin. Finance Operations Revenues from our Finance Operations of $2.3 million for the three months ended March 31, 2001 were unchanged from the comparable period of 2000. Our operating loss from our Finance Operations for the three months ended March 31, 2001 was $0.4 million, as compared to operating income of $0.9 during the comparable period of 2000. The operating loss was due primarily to a provision for a doubtful account with a significant customer. 22 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market risk represents the risk of loss that may impact the financial position, results of operations or cash flows due to adverse changes in financial and commodity market prices and rates. We are exposed to market risk in the area of change in U.S. interest rates and foreign exchange currency rates. This exposure is directly related to our normal operating and funding activities. Additionally, coach purchases by certain customers are adversely affected by increases in interest rates and fuel costs. Our obligations under the senior secured credit facility include interest at floating rates, based on certain quoted rates. We are sensitive to changes in prevailing interest rates. An increase of 1% in the applicable base interest rates, based upon $335.1 million of borrowings under the facility as of March 31, 2001, would result in additional annual interest expense of approximately $3.4 million ($2.1 million after tax) to us and would not be material to our cash flow or financial position. As a company with multi-national operations, certain of our transactions are denominated in foreign currencies. We use financial instruments to hedge or reduce our overall exposure to the effects of currency fluctuations in our cash flows. These derivative instruments are used for firmly committed or forecasted transactions. These transactions allow us to further reduce our overall exposure to exchange rate movements, since the gains and losses on these contracts offset losses and gains on the transactions being hedged. Our policy is not to speculate in such financial instruments for profit or gain. At March 31, 2001, we had open hedging instruments, expiring at various dates through December 2001, to purchase approximately $77.5 million Canadian dollars for approximately $50.5 million US dollars. 23 PART II---OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In the ordinary course of business, we are party to various employment and other legal actions as plaintiff or defendant. We are also subject to various product liability lawsuits in the United States and Canada for personal injuries and property damage, allegedly relating to the use of products manufactured or sold by us. We consider litigation of this nature to be in the ordinary course of business and, while we maintain product liability insurance in customary amounts to cover such matters, we cannot be assured that insurance will be available in the future or on terms acceptable to us. While we cannot determine with certainty the ultimate outcome of such lawsuits, we believe that we are not involved in any current litigation or arbitration proceedings which, if determined adversely to us, either individually or in the aggregate, would have a material adverse effect on our financial condition or results of operations. We have filed a complaint in arbitration against Novabus of America, Inc. and Novabus Parts, Inc. (collectively "Novabus") in which we contend, among other things, that Novabus breached its agreement with us by instructing third-party suppliers of RTS aftermarket parts to discontinue selling such parts to us. The arbitration hearing on the liability phase of our claims was recently completed and we anticipate receiving the arbitrators' decision before the end of June 2001. Subsequent to March 31, 2001, the Company, Parent Company, Consorcio G Grupo Dina, S.A. de C.V. ("Grupo Dina"), JLL Fund III and others entered into a Settlement Agreement and Release, dated as of April 24, 2001 (the "Settlement Agreement"), pursuant to which, among other things, the parties settled certain disputes among them. Pursuant to the Settlement Agreement, the parties terminated the Master Purchase and Supply Agreement, dated as of June 16, 1999, pursuant to which certain affiliates of Grupo Dina were providing parts and other supplies to the Company. In addition, the Company paid to Grupo Dina $1.6 million, primarily for assets and services provided by Grupo Dina, which funds, along with approximately $250,000 due to the Company's former Chairman, Rafael Gomez Flores, were placed in escrow as security for Grupo Dina's obligation to transfer certain parcels of land to the Company or one of its affiliates. In connection with such Settlement, Parent Company issued additional shares to certain of its stockholders, including JLL Fund III and cancelled a like number of shares held by Grupo Dina. The Settlement Agreement further provided for a mutual release of all claims arising out of the operation and ownership of the Parent Company and the Company, subject to certain specified exceptions. 24 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits None. b) Reports on Form 8-K None. 25 SIGNATURES Pursuant to the requirement of the Securities Exchange Act of 1934, the registrant has duly caused this 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized. MOTOR COACH INDUSTRIES INTERNATIONAL, INC. May 15, 2001 By: /s/ HORST O. SIEBEN ------------------------ Horst O. Sieben Chief Financial Officer 26