Laidlaw Transportation, Inc. and Subsidiaries - Page 45

                                        - 45 -                                        
          long period of time without hurting their business or possibly              
          going out of business.                                                      
               Petitioners were thinly capitalized and heavily leveraged              
          during the years in issue largely because they borrowed large               
          amounts from LIIBV before and during the years in issue.                    
               2. Petitioners' Cash-Flow During the Years in Issue                    
               Petitioners' free cash-flow (earnings before interest,                 
          taxes, depreciation, and amortization (EBITDA) - capital                    
          expenditures (CAPEX)) for the years in issue17 was negative as              
          follows:                                                                    
                         1986           1987           1988                           
                   LTI ($63,490,919) ($351,973,233) ($109,555,409)                    
                   LII  ($3,177,391) ($294,312,141)  ($67,858,322)                    

               On August 31, 1988, petitioners did not have enough free               
          cash-flow to pay (a) principal and interest due on the LIIBV                
          advances unless petitioners stopped buying other companies and              
          reduced other capital expenses by 20 percent, and (b) principal             
          due over 7 years even if they stopped making all capital                    
          expenditures.                                                               
               Petitioners and their companies did not have enough cash-              
          flow during the years in issue to repay LIIBV's advances to them            
          that are at issue here.  LII had negative free cash-flows during            
          the years in issue largely because it and its subsidiaries were             
          expanding.  Petitioners could not repay in installments or pay              

               17 LII's free cash-flow was a positive $3,888,281 for its              
          1985 fiscal year.                                                           



Page:  Previous  35  36  37  38  39  40  41  42  43  44  45  46  47  48  49  50  51  52  53  54  Next

Last modified: May 25, 2011