<PAGE>   1
                UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q

              [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
                  FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998

                                       OR

              [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934
              For the transition period from _______ to ___________

                         Commission file number 1-10841

                              GREYHOUND LINES, INC.
              and its Subsidiaries identified in Footnote (1) below
             (Exact name of registrant as specified in its charter)

                  DELAWARE                         86-0572343
      (State or other jurisdiction of           (I.R.S. employer
       incorporation or organization)          identification no.)

     15110 N. DALLAS PARKWAY, SUITE 600
                DALLAS, TEXAS                         75248
  (Address of principal executive offices)         (Zip code)

                                 (972) 789-7000
              (Registrant's telephone number, including area code)

                                      NONE
              (Former name, former address and former fiscal year,
                         if changed since last report)

     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange Act
     of 1934 during the preceding 12 months (or for such shorter period
     registrant was required to file such reports), and (2) has been subject to
     such filing requirements for the past 90 days.
                             YES   X          NO
                                  ---             ---

                      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.

<TABLE>
<CAPTION>
     CLASS OF COMMON STOCK                 OUTSTANDING AT AUGUST 7, 1998
     ---------------------                 -----------------------------

<S>                                              <C>               
        $.01 PAR VALUE                           60,120,700  SHARES
</TABLE>

(1)  This Form 10-Q is also being filed by the co-registrants specified under
     the caption "Co-Registrants", each of which is a wholly-owned subsidiary of
     Greyhound Lines, Inc. and each of which has met the conditions set forth in
     General Instructions H(1)(a) and (b) of Form 10-Q for filing Form 10-Q in a
     reduced disclosure format.

<PAGE>   2

CO-REGISTRANTS

This Form 10-Q is also being filed by the following entities. Except as set
forth below, each entity has the same principal executive offices, zip code and
telephone number as that set forth for Greyhound Lines, Inc. on the cover of
this report:

<TABLE>
<CAPTION>
                                                                                 I.R.S. EMPLOYER
                                                            COMMISSION            IDENTIFICATION       STATE OF
NAME                                                          FILE NO.                 NO.             INCORP.
----                                                        ----------           ----------------      --------

<S>                                                         <C>                  <C>                   <C>
Atlantic Greyhound Lines of Virginia, Inc.                  333-27267-01             58-0869571         Virginia

FCA Insurance Limited                                       333-27267-03                None            Islands of
                                                                                                        Bermuda

GLI Holding Company                                         333-27267-04             75-2146309         Delaware

Greyhound de Mexico S.A. de C.V.                            333-27267-05                None            Republic
                                                                                                        of Mexico

Grupo Centro, Inc.                                          333-27267-06             75-2692522         Delaware

Los Buenos Leasing Co., Inc.                                333-27267-07             85-0434715         New Mexico

Sistema  Internacional  de  Transporte  de Autobuses,       333-27267-08             75-2548617         Delaware
Inc.

Texas, New Mexico & Oklahoma Coaches, Inc.                  333-27267-10             75-0605295         Texas
1313 13th Street
Lubbock, Texas 79408
(806) 763-5389

T.N.M. & O. Tours, Inc.                                     333-27267-11             75-1188694         Texas
(Same as Texas, New Mexico & Oklahoma 
Coaches, Inc.)

Vermont Transit Co., Inc.                                   333-27267-12             03-0164980         Vermont
106 Main Street
Burlington, Vermont 05401
(802) 862-9671
</TABLE>

As of June 30, 1998, Atlantic Greyhound Lines of Virginia, Inc. had 150 shares
of common stock outstanding (at a par value of $50.00 per share); FCA Insurance
Limited had 120,000 shares of common stock outstanding (at a par value of $1.00
per share); GLI Holding Company had 1,000 shares of common stock outstanding (at
a par value of $0.01 per share); Greyhound de Mexico S.A. de C.V. had 10,000
shares of common stock outstanding (at a par value of $0.10 Mexican currency per
share); Grupo Centro, Inc. had 1,000 shares of common stock outstanding (at a
par value of $0.01 per share); Los Buenos Leasing Co., Inc. had 1,000 shares of
common stock outstanding (at a par value of $1.00 per share); Sistema
Internacional de Transporte de Autobuses, Inc. had 1,000 shares of common stock
outstanding (at a par value of $0.01 per share); Texas, New Mexico & Oklahoma
Coaches, Inc. had 1,000 shares of common stock outstanding (at a par value of
$0.01 per share); T.N.M. & O. Tours, Inc. had 1,000 shares of common stock
outstanding (at a par value of $1.00 per share); and Vermont Transit Co., Inc.
had 505 shares of common stock outstanding (no par value). Each of the above
named co-registrants (1) have filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period such co-registrant was required to file such
reports), and (2) have been subject to such filing requirements for the past 90
days.







                                       2
<PAGE>   3

                     GREYHOUND LINES, INC. AND SUBSIDIARIES

<TABLE>
<CAPTION>
                                                                                                      PAGE NO.
                                                                                                      --------

<S>      <C>                                                                                         <C>
PART I.  FINANCIAL INFORMATION

  Item 1. Financial Statements:
            Interim Consolidated Statements of Financial Position as of
              June 30, 1998 (Unaudited) and December 31, 1997......................................       5
            Interim Consolidated Statements of Operations for the
              Three and Six Months Ended June 30, 1998 and 1997 (Unaudited)........................       6
            Condensed Interim Consolidated Statements of Cash Flows for the
              Six Months Ended June 30, 1998 and 1997 (Unaudited)..................................       7
            Notes to Interim Consolidated Financial Statements (Unaudited).........................       8

  Item 2. Management's Discussion and Analysis of Financial Condition and
                Results of Operations..............................................................      14


PART II. OTHER INFORMATION

  Item 1. Legal Proceedings........................................................................      22

  Item 4. Submission of Matters to a Vote of Security Holders......................................      23

  Item 6. Exhibits.................................................................................      24


SIGNATURES ........................................................................................      25
</TABLE>




                                       3
<PAGE>   4
























                          PART I. FINANCIAL INFORMATION

                          ITEM 1. FINANCIAL STATEMENTS





                                       4
<PAGE>   5

                     GREYHOUND LINES, INC. AND SUBSIDIARIES

              INTERIM CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                                                      JUNE 30,       DECEMBER 31,
                                                                                        1998             1997
                                                                                     -----------     ------------
                                                                                     (UNAUDITED)
<S>                                                                                   <C>             <C>      
Current Assets
    Cash and cash equivalents ..................................................      $   2,494       $   2,052
    Accounts receivable, less allowance for doubtful accounts
       of $226 and $268 ........................................................         43,420          35,364
    Inventories ................................................................          5,293           4,658
    Prepaid expenses ...........................................................          6,633           4,949
    Assets held for sale .......................................................          3,439           3,889
    Buses held for sale and leaseback ..........................................         27,502            --
    Other current assets .......................................................         13,804           9,694
                                                                                      ---------       ---------
       Total current assets ....................................................        102,585          60,606

Prepaid Pension Plans ..........................................................         25,378          25,378
Property, Plant and Equipment, net of accumulated depreciation
    of $138,519 and $124,374 ...................................................        340,810         341,292
Investments in Unconsolidated Affiliates .......................................          5,726           6,076
Insurance and Security Deposits ................................................         73,045          72,693
Goodwill, net of accumulated amortization of $1,242 and $499 ...................         39,821          30,215
Intangible Assets, net of accumulated amortization of $24,521 and $22,188 ......         30,938          30,333
                                                                                      ---------       ---------
       Total assets ............................................................      $ 618,303       $ 566,593
                                                                                      =========       =========

Current Liabilities
    Accounts payable ...........................................................      $  26,912       $  32,731
    Accrued liabilities ........................................................         57,544          62,237
    Unredeemed tickets .........................................................         12,701          10,325
    Current portion of reserve for injuries and damages ........................         21,374          21,374
    Current maturities of long-term debt .......................................          6,025           4,469
                                                                                      ---------       ---------
       Total current liabilities ...............................................        124,556         131,136
Reserve for Injuries and Damages ...............................................         38,840          36,591
Long-Term Debt .................................................................        268,432         207,953
Other Liabilities ..............................................................         17,531          11,314
                                                                                      ---------       ---------
       Total liabilities .......................................................        449,359         386,994
                                                                                      ---------       ---------

Commitments and Contingencies (Note 5)
Stockholders' Equity
    Preferred stock (10,000,000 shares authorized; par value $.01) 
       8 1/2% Convertible Exchangeable Preferred Stock (2,760,000 shares
           authorized and 2,400,000 shares issued as of  June 30, 1998 and
           December 31, 1997; aggregate liquidation preference $60,000) ........         60,000          60,000
       Series A junior preferred stock (1,500,000 shares authorized as of
           June 30, 1998 and December 31, 1997; none issued) ...................           --              --
    Common stock (100,000,000 shares authorized; par value $.01; 60,225,879
       and 59,437,514 shares issued as of June 30, 1998 and December 31,
       1997 respectively) ......................................................            602             594
    Capital in excess of par value .............................................        231,793         229,365
    Retained deficit ...........................................................       (114,900)       (101,809)
    Less: Unfunded accumulated pension obligation ..............................         (7,513)         (7,513)
    Less: Treasury stock, at cost (109,192 shares) .............................         (1,038)         (1,038)
                                                                                      ---------       ---------
       Total stockholders' equity ..............................................        168,944         179,599
                                                                                      ---------       ---------
           Total liabilities and stockholders' equity ..........................      $ 618,303       $ 566,593
                                                                                      =========       =========
</TABLE>




                                       5
<PAGE>   6

                     GREYHOUND LINES, INC. AND SUBSIDIARIES

                  INTERIM CONSOLIDATED STATEMENTS OF OPERATIONS
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)


<TABLE>
<CAPTION>
                                                              THREE MONTHS ENDED               SIX MONTHS ENDED
                                                                   JUNE 30,                        JUNE 30,
                                                              1998           1997            1998            1997
                                                              ----           ----            ----            ----
                                                                  (UNAUDITED)                       (UNAUDITED)

<S>                                                         <C>            <C>             <C>             <C>      
OPERATING REVENUES
   Transportation Services
       Passenger services ............................      $ 180,611      $ 154,068       $ 334,270       $ 291,401
       Package express ...............................          8,816          8,146          16,789          15,483
   Food services and related .........................          7,863          7,262          14,896          13,922
   Other operating revenues ..........................         13,957         12,054          26,012          21,872
                                                            ---------      ---------       ---------       ---------
           Total operating revenues ..................        211,247        181,530         391,967         342,678
                                                            ---------      ---------       ---------       ---------

OPERATING EXPENSES
   Maintenance .......................................         20,655         18,919          40,535          37,819
   Transportation ....................................         51,302         47,316          97,426          89,482
   Agents' commissions and station costs .............         38,378         34,160          73,552          65,840
   Marketing, advertising and traffic ................          6,865          6,483          13,906          13,518
   Insurance and safety ..............................         12,799         10,478          24,442          20,239
   General and administrative ........................         26,360         21,765          50,962          43,752
   Depreciation and amortization .....................          9,403          7,425          17,842          14,967
   Operating taxes and licenses ......................         14,164         12,792          27,666          25,251
   Operating rents ...................................         16,133         13,899          31,897          27,785
   Cost of goods sold - food services and related ....          5,136          4,767           9,905           9,255
   Other operating expenses ..........................            613            762           1,290           1,509
                                                            ---------      ---------       ---------       ---------
           Total operating expense ...................        201,808        178,766         389,423         349,417
                                                            ---------      ---------       ---------       ---------

OPERATING INCOME (LOSS) ..............................          9,439          2,764           2,544          (6,739)
Interest Expense .....................................          7,305          6,526          13,959          14,112
                                                            ---------      ---------       ---------       ---------
INCOME (LOSS) BEFORE INCOME TAXES ....................          2,134         (3,762)        (11,415)        (20,851)
Income Tax Provision (Benefit) .......................            179             86            (917)            165
                                                            ---------      ---------       ---------       ---------
NET INCOME (LOSS) BEFORE EXTRAORDINARY ITEM ..........          1,955         (3,848)        (10,498)        (21,016)
Extraordinary Item ...................................           --           25,323            --            25,323
                                                            ---------      ---------       ---------       ---------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
 STOCKHOLDERS BEFORE PREFERRED DIVIDENDS .............          1,955        (29,171)        (10,498)        (46,339)
Preferred Dividends ..................................          1,296          1,063           2,592           1,063
                                                            ---------      ---------       ---------       ---------
NET INCOME (LOSS) ATTRIBUTABLE TO COMMON
 STOCKHOLDERS ........................................      $     659      $ (30,234)      $ (13,090)      $ (47,402)
                                                            =========      =========       =========       =========

Net Income (Loss) Per Share of Common Stock:
   Basic
       Net Income (Loss) Attributable to Common Stock-
           holders Before Extraordinary Item .........      $    0.01      $   (0.08)      $   (0.22)      $   (0.38)
       Extraordinary Item ............................           --            (0.43)           --             (0.43)
                                                            ---------      ---------       ---------       ---------
       Net Income (Loss) Attributable to Common
           Stockholders ..............................      $    0.01      $   (0.51)      $   (0.22)      $   (0.81)
                                                            =========      =========       =========       =========

   Diluted
       Net Income (Loss) Attributable to Common Stock-
           holders Before Extraordinary Item .........      $    0.01      $   (0.08)      $   (0.22)      $   (0.38)
       Extraordinary Item ............................           --            (0.43)           --             (0.43)
                                                            ---------      ---------       ---------       ---------
       Net Income (Loss) Attributable to Common
           Stockholders ..............................      $    0.01      $   (0.51)      $   (0.22)      $   (0.81)
                                                            =========      =========       =========       =========
</TABLE>





                                       6
<PAGE>   7

                     GREYHOUND LINES, INC. AND SUBSIDIARIES

             CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 (IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                            SIX MONTHS ENDED
                                                                                JUNE 30,
                                                                          1998            1997
                                                                       ---------       ---------
                                                                              (UNAUDITED)

<S>                                                                    <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss .....................................................      $ (10,498)      $ (46,339)
   Extraordinary Items ..........................................           --            25,323
   Non-cash expenses and gains included in net loss .............         14,919          16,374
   Net change in certain operating assets and liabilities .......        (19,928)        (25,158)
                                                                       ---------       ---------
       Net cash used for operating activities ...................        (15,507)        (29,800)
                                                                       ---------       ---------

CASH FLOWS FROM INVESTING ACTIVITIES
   Capital expenditures .........................................        (10,750)         (5,228)
   Buses purchased for sale and leaseback .......................        (27,502)         (8,651)
   Proceeds from assets sold ....................................            240           1,414
   Payments for business acquisitions, net of cash acquired .....         (1,484)           --
   Other investing activities ...................................           (301)         (2,283)
                                                                       ---------       ---------
       Net cash used for investing activities ...................        (39,797)        (14,748)
                                                                       ---------       ---------

CASH FLOWS FROM FINANCING ACTIVITIES
   Payments on debt and capital lease obligations ...............         (2,952)        (15,402)
   Proceeds from issuance of 11 1/2% Senior Notes and
     8 1/2% Convertible Exchangeable Preferred Stock ............           --           203,399
   Redemption of 10% Senior Notes ...............................           --          (161,022)
   Proceeds from exercise of options ............................          2,437           1,067
   Payment of quarterly preferred dividends .....................         (2,592)           --
   Retirement of interest rate swap .............................           --            (3,010)
   Net change in revolving credit facility ......................         58,853          19,930
                                                                       ---------       ---------
       Net cash provided by financing activities ................         55,746          44,962
                                                                       ---------       ---------

NET INCREASE IN CASH AND CASH EQUIVALENTS .......................            442             414
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ..................          2,052             898
                                                                       ---------       ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD ........................      $   2,494       $   1,312
                                                                       =========       =========
</TABLE>




                                       7
<PAGE>   8

                     GREYHOUND LINES, INC. AND SUBSIDIARIES
               NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
                                  JUNE 30, 1998
                                   (UNAUDITED)


1.  INTERIM CONSOLIDATED FINANCIAL STATEMENTS

In the opinion of management, the unaudited Interim Consolidated Financial
Statements of Greyhound Lines, Inc. and Subsidiaries (the "Company") include all
adjustments, consisting of only normal recurring adjustments, necessary to
present fairly the Company's financial position as of June 30, 1998, the results
of its operations for the three and six months ended June 30, 1998 and 1997 and
cash flows for the six months ended June 30, 1998 and 1997. Due to the
seasonality of the Company's operations, the results of its operations for the
interim period ended June 30, 1998 may not be indicative of total results for
the full year. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
promulgated by the Securities and Exchange Commission. The unaudited Interim
Consolidated Financial Statements should be read in conjunction with the audited
Consolidated Financial Statements of Greyhound Lines, Inc. and Subsidiaries and
accompanying notes for the year ended December 31, 1997.

2.  SIGNIFICANT ACCOUNTING POLICIES

Certain Reclassifications

Certain reclassifications have been made to the prior period statements to
conform them to the June 30, 1998 and December 31, 1997 classifications.

Earnings/Loss Per Share

Basic earnings (loss) per common share is calculated by dividing net income
(loss) attributable to common stockholders by the weighted average shares of
common stock of the Company ("Common Stock"). The calculation of diluted
earnings (loss) per share of Common Stock considers the effect of Common Stock
equivalents outstanding during the period, the conversion of the Company's 8
1/2% Convertible Subordinated Debentures due 2007 (the "Convertible Debentures")
and 8 1/2% Convertible Exchangeable Preferred Stock (the "Preferred Stock").
Common Stock equivalents represent the dilutive effect of the assumed exercise
of certain outstanding stock options. For the six months ended June 30, 1998 and
the three and six months ended June 30, 1997, the assumed exercise of
outstanding in-the-money stock options and conversion of Convertible Debentures
and Preferred Stock have an anti-dilutive effect. As a result, these shares are
excluded from the final determination of the weighted average shares
outstanding. For the three months ended June 30, 1998, the assumed exercise of
outstanding in-the-money stock options is dilutive and thus the shares have been
included in the weighted average shares below.

The earnings per share calculation reflects earnings (loss) attributable to
common shareholders after payment of preferred dividends. The following tables
detail the components utilized to calculate earnings per share for the three and
six months ended June 30, 1998 and 1997.

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED JUNE 30, 1998       SIX MONTHS ENDED JUNE 30, 1998
                                           --------------------------------       ------------------------------
                                                                   PER-SHARE                              PER-SHARE
                                          NET INCOME     SHARES      AMOUNT      NET LOSS       SHARES      AMOUNT
                                          ----------     ------      ------      --------       ------      ------

<S>                                        <C>         <C>           <C>      <C>             <C>          <C>     
     BASIC EARNINGS PER SHARE
       Net Income (Loss) attributable
          to common stockholders.......    $ 659,000   59,905,542    $ 0.01   $ (13,090,000)  59,668,804   $ (0.22)
                                           =========   ==========    ======   =============   ==========   =======
     DILUTED EARNINGS PER SHARE
       Net Income (Loss) attributable
          to common stockholders.......    $ 659,000   62,658,296    $ 0.01   $ (13,090,000)  59,668,804   $ (0.22)
                                           =========   ==========    ======   =============   ==========   =======
</TABLE>




                                       8
<PAGE>   9


<TABLE>
<CAPTION>

                                           THREE MONTHS ENDED JUNE 30, 1997      SIX MONTHS ENDED JUNE 30, 1997
                                           --------------------------------      ------------------------------
                                                                   PER-SHARE                              PER-SHARE
                                                                   ---------                              ---------
                                           NET LOSS      SHARES      AMOUNT      NET LOSS       SHARES      AMOUNT
                                           --------      ------      ------      --------       ------      ------

<S>                                      <C>           <C>          <C>       <C>             <C>          <C>     
     BASIC AND DILUTED EARNINGS PER
     SHARE
       Net Income (Loss) attributable
          to common stockholders.......  $(30,234,000) 58,815,097   $ (0.51)  $ (47,402,000)  58,629,789   $ (0.81)
                                         ============= ==========   =======   =============   ==========   =======
</TABLE>

Accounting Changes

The Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS
No. 130"), "Reporting Comprehensive Income", effective for the Company's fiscal
year beginning January 1, 1998. SFAS No. 130 established standards for the
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. Comprehensive income is defined as the
total of net income and all other non-owner changes in equity. For the six
months ended June 30, 1998, the Company had no non-owner changes in equity.

In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 ("SFAS No. 133"), "Accounting for
Derivative Instruments and Hedging Activities," to establish accounting plan and
reporting standards for derivatives. This new standard is effective for fiscal
years beginning after June 15, 1999 (January 1, 2000 for the Company) and
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are to be recorded
each period in current earnings or other comprehensive income, depending upon
the intended use of the derivative. Due to the Company's minimal use of
derivatives, the new standard is expected to have no material impact on its
financial position or results of operations.

3.  ACQUISITION

On February 9, 1998, the Company completed its acquisition of a 51% interest in
Gonzalez, Inc., d/b/a Golden State Transportation ("Golden State"), a Southern
California bus carrier. This purchase was accounted for using the purchase
method of accounting, accordingly, the acquired company's results of operations
are included in the consolidated financials from the date of acquisition. The
amount of the purchase price in excess of net assets has been recorded as
goodwill and is being amortized over a 20 year period.

4.  INCOME TAXES

Income Tax Provision

The income tax provision (benefit) consisted of the following (in thousands):

<TABLE>
<CAPTION>
                                                                                 THREE MONTHS ENDED           SIX MONTHS ENDED
                                                                                 ------------------           ----------------
                                                                                      JUNE 30,                    JUNE 30,
                                                                                      --------                    --------
                                                                                 1998          1997          1998          1997
                                                                                 ----          ----          ----          ----

<S>                                                                            <C>           <C>          <C>           <C>  
       Current
         Federal ........................................................      $  --         $  --        $  --         $  --
         State ..........................................................          151            86          239           165
                                                                               -------       -------      -------       -------
            Total Current ...............................................          151            86          239           165

       Deferred
         Federal ........................................................          115          --           (588)         --
         State ..........................................................          (87)         --           (568)         --
                                                                               -------       -------      -------       -------
            Total Deferred ..............................................           28          --         (1,156)         --
                                                                               -------       -------      -------       -------

            Income Tax provision (benefit) ..............................      $   179       $    86      $  (917)      $   165
                                                                               =======       =======      =======       =======
</TABLE>



                                       9
<PAGE>   10

Effective Tax Rate

The differences, expressed as a percentage of income before taxes, between the
statutory and effective federal income tax rates for the years ended December
31, 1998 and 1997 are as follows (1998 amounts are projected):

<TABLE>
<CAPTION>
                                                                     YEARS ENDED
                                                                     DECEMBER 31,
                                                                     ------------
                                                                  1998          1997
                                                                  ----          ----

<S>                                                               <C>           <C>  
       Statutory tax rate..................................       34.0%         34.0%
       State income taxes..................................        2.9           6.1
       Recognition of previously unrecognized deferred
        tax assets.........................................      (32.4)        (31.0)
       Other...............................................        3.5           2.0
                                                                 -----         -----
         Effective tax rate                                        8.0%         11.1%
                                                                 =====         =====
</TABLE>

For the three months ended June 30, 1998, the Company recorded income tax
expense of $0.2 million. Income tax expense has been recognized based on the
income for the second quarter of 1998 in accordance with the interim financial
reporting guidelines of generally accepted accounting principles. For the six
months ended June 30, 1998, the Company's results of operations have reflected
the historical pattern and seasonal nature of its business. The income tax
(benefit) expense has been provided based on the Company's 1998 estimated annual
effective tax rate of 8.0%.

The year to date benefit resulted in a corresponding increase in the deferred
tax asset by $0.9 million. Since the Company believes that it is more likely
than not that this increase in the deferred tax asset will be realized in the
current year, no offsetting valuation allowance has been recorded. The Company
did not provide an income tax benefit on the year to date loss for 1997 because
the Company did not believe it was more likely than not that the loss would be
offset by current income in that year, and an offsetting valuation allowance was
recorded.

5.  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 10% Senior Notes retired in May 1997 ("10% 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 (the "Federal Court Action"). A joint pretrial order was
entered in the 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 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. A motion was filed seeking leave to
permit Mr. Clarkson to 



                                       10
<PAGE>   11

intervene as the new class representative. The amended complaint alleged a class
period of May 4, 1993 to October 26, 1993 and was brought only on behalf of
holders of Common Stock. The amended complaint named 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. The Court advised the parties that no responsive pleading needed
to be filed to the amended complaint until such time as the Court ruled on the
motion for intervention filed by Mr. Clarkson. In December 1996, the defendants
filed responses to plaintiff's motion for intervention. In January 1997, the
plaintiff filed a reply brief.

On August 15, 1997, the Court denied Mr. Clarkson leave to intervene and
dismissed the litigation, noting that all claims asserted had been adjudicated.
On September 12, 1997, a notice of appeal was filed by counsel for the original
seven plaintiffs, seeking a review of the Court's ruling of October 3, 1996. On
February 9, 1998, plaintiffs dismissed their appeal, without prejudice, with a
right to re-file the appeal within six months.

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 (the "Delaware Action"). Pursuant to a stipulation, the time
for all defendants to answer, move or otherwise plead with respect to the
complaint in the Delaware Action 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 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 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 Theodore 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 United States District Court for the Northern
District of Texas where the Federal Court Action was pending. In September 1995,
the defendants' motion was granted, and the matter was transferred and was
consolidated into the Federal Court Action.

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 sought to intervene in the Federal Court Action 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 intervention motion
and Federal Court Action. On February 28, 1997, the suit was transferred to a
different judge in the 68th Judicial District Court in Dallas. On March 28,
1997, the Court denied the defendants' pleas in abatement requesting the stay.
On September 12, 1997, plaintiff filed a motion seeking to certify the class of
plaintiffs.

On June 22, 1998, the parties to the State Court Action entered into a
Stipulation and Agreement of Compromise and Settlement (the "Stipulation").
Pursuant to the Stipulation, persons who purchased Common Stock on or in
connection with a stock offering made by the Company on May 4, 1993 and who
continued to hold the Common Stock through September 22, 1993, will be entitled
to share, on a claims-made basis, in a settlement fund of up to $3.0 million
plus interest, less attorneys' fees and costs. On June 22, 1998, the Court
preliminarily approved the Stipulation, conditionally certified the plaintiff
class for purposes of settlement and directed plaintiffs' counsel to provide
notice to the class of the terms of the settlement. The Court has set a hearing
for November 2, 1998 to consider final approval of the Stipulation. If
consummated, this settlement would resolve the State Court Action 



                                       11
<PAGE>   12

and the Federal Court Action. For this settlement to be completed, the
settlement of the Texas Derivative Action and Delaware Action must also become
final.

Effective June 22, 1998, the parties to the Delaware Action entered into a
settlement stipulation whereby the derivative claims would be dismissed in
return for the payment of $50,000 in attorneys' fees for the plaintiff. To
facilitate a global settlement of the Federal Court Action, the State Court
Action and the Delaware Action, on May 20, 1998, plaintiff re-filed the
derivative action in the same court in which the State Court Action is pending.
This case is captioned 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 and
Charles J. Lee, Civil Action No. DV 98-03990-C (the "Texas Derivative Action").
On August 6, 1998, the Court preliminarily approved the settlement and directed
plaintiffs' counsel to notify shareholders of the terms of the settlement. The
Court has set a hearing for November 2, 1998 to consider final approval of this
settlement. If consummated, this settlement would resolve all of the claims
asserted in the derivative litigation. For this settlement to be completed, the
settlement of the State Court Action and Federal Court Action must also become
final.

If consummated, the foregoing settlements would be funded entirely by the
Company's directors' and officers' liability insurance carrier and, thus, would
not have a material adverse effect on the Company's business, financial
condition, results of operations and liquidity. Should the settlements not be
consummated, based on a review of the litigation, a limited investigation of the
underlying facts and discussions with internal and outside legal counsel, the
Company does not believe that the ultimate outcome of the above described
lawsuits would have a material adverse effect on its business, financial
condition, results of operations and liquidity. If the settlements are not
completed and the litigation were to continue, the Company would 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 had 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 limited
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.

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 solely by Company personnel or its experts, 47 locations have
been identified as remaining sites requiring potential clean-up and/or
remediation as of June 30, 1998. The Company has estimated the clean-up and/or
remediation costs of these sites to be $3.4 million, of which approximately $0.4
million is indemnifiable by Viad Corp ("Viad").

The Company has potential liability with respect to two locations which the
Environmental Protection Agency ("EPA") has designated Superfund sites. The
Company, as well as other parties designated by the EPA as potentially
responsible 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
minimal involvement, 



                                       12
<PAGE>   13

the Company has been negotiating to be released from liability in return for the
payment of immaterial settlement amounts. Additionally, there are 12 Superfund
sites that Viad had initially assumed responsibility and liability for
addressing under the indemnity provisions of the 1987 acquisition agreement, as
amended in 1991. All of these locations involve alleged disposal of hazardous
wastes occurring years prior to the Company's corporate existence. In late 1997,
Viad notified the Company, and asserted that the Company was responsible for any
liabilities at such sites. The Company is contesting Viad's assertions and
believes that the acquisition agreement, as amended, requires Viad to bear these
liabilities. Viad had previously acknowledged in writing to the Company its
responsibility for certain of the sites; in some cases, Viad has been managing
the liability since mid-1991. Viad has advised the Company that, to date, it has
incurred approximately $0.2 million in clean-up costs at these sites. At this
point, the Company is unable to assess on-going or future potential liabilities
at such sites should it be determined that the Company, and not Viad, will
assume the liabilities at some or all of the 12 locations.

The Company has recorded a total environmental reserve of $2.9 million at June
30, 1998, a portion of which has also been recorded as a receivable from Viad
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%. As of the date of this filing, the
Company is not aware of any additional sites to be identified, and management
believes that adequate accruals have been made related to all known
environmental matters.

OTHER LEGAL PROCEEDINGS

In addition to the litigation discussed above, the Company is a defendant in
various lawsuits arising in the ordinary course of business, primarily cases
involving personal injury and property damage claims 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 internal and outside
legal 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.




                                       13
<PAGE>   14

ITEM 2.      MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
             RESULTS OF OPERATIONS

GENERAL

Greyhound is the only nationwide provider of scheduled intercity bus
transportation services in the United States. The Company's primary business
consists of scheduled passenger service, package express service and food
services at certain terminals, which accounted for 85.5%, 4.2% and 3.7%,
respectively, of the Company's total operating revenues for the three months
ended June 30, 1998 and 85.3%, 4.3% and 3.8%, respectively, for the six months
ended June 30, 1998. The Company's operations include a nationwide network of
terminal and maintenance facilities, a fleet of approximately 2,500 buses and
approximately 1,650 sales outlets.

RESULTS OF OPERATIONS

The following table sets forth the Company's results of operations as a
percentage of total operating revenue for the three and six months ended June
30, 1998 and 1997:

<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED JUNE 30,       SIX MONTHS ENDED JUNE 30,
                                                        1998             1997             1998            1997
                                                        ----             ----             ----            ----

<S>                                                      <C>              <C>              <C>              <C>  
Operating Revenues
  Transportation services
       Passenger services.....................           85.5%            84.9%            85.3%            85.0%
       Package express........................            4.2              4.5              4.3              4.5
  Food services and related...................            3.7              4.0              3.8              4.1
  Other operating revenues....................            6.6              6.6              6.6              6.4
                                                      -------          -------          -------          -------
           Total operating revenues...........          100.0            100.0            100.0            100.0
Operating Expenses
  Maintenance.................................            9.8             10.4             10.3             11.1
  Transportation..............................           24.3             26.1             24.9             26.1
  Agents' commissions and station costs.......           18.2             18.8             18.8             19.2
  Marketing, advertising and traffic..........            3.2              3.6              3.5              3.9
  Insurance and safety........................            6.1              5.8              6.2              5.9
  General and administrative..................           12.5             12.0             13.0             12.8
  Depreciation and amortization...............            4.5              4.1              4.6              4.4
  Operating taxes and licenses................            6.7              7.0              7.1              7.4
  Operating rents.............................            7.6              7.7              8.1              8.1
  Cost of goods sold - food services and 
   related....................................            2.4              2.6              2.5              2.7
  Other operating expenses....................            0.2              0.4              0.4              0.4
                                                      -------          -------          -------          -------
           Total operating expenses...........           95.5             98.5             99.4            102.0
                                                       ------           ------           ------            -----
Operating Income (Loss).......................            4.5              1.5              0.6             (2.0)
Interest Expense..............................            3.5              3.6              3.5              4.1
                                                      -------          -------          -------          -------
Income (Loss) Before Income Taxes.............            1.0             (2.1)            (2.9)            (6.1)
Income Tax Provision (Benefit)                            0.1              0.0             (0.2)             0.0
                                                      -------          -------         ---------         -------
Net Income (Loss) Before Extraordinary Item...            0.9             (2.1)            (2.7)            (6.1)
Extraordinary Item............................            0.0             14.0              0.0              7.4
                                                      -------           ------          -------          -------
Net Income (Loss) Attributable to Common
Stockholders Before Preferred Dividends.......            0.9            (16.1)            (2.7)           (13.5)
Preferred Dividends...........................            0.6              0.6              0.6              0.3
                                                      -------          -------          -------           ------
Net Income (Loss) Attributable to Common
Stockholders..................................            0.3            (16.7)            (3.3)           (13.8)
                                                      =======            =====          =======            =====
</TABLE>





                                       14
<PAGE>   15

The following table sets forth certain consolidated operating data for the
Company for the three and six months ended June 30, 1998 and 1997. Certain
statistics have been adjusted and restated from that previously published to
provide consistent comparisons.

<TABLE>
<CAPTION>
                                           THREE MONTHS ENDED                        SIX MONTHS ENDED 
                                                 JUNE 30,            PERCENTAGE            JUNE 30,            PERCENTAGE
                                           1998           1997         CHANGE         1998          1997         CHANGE
                                           ----           ----         ------         ----          ----         ------

<S>                                    <C>            <C>                <C>      <C>            <C>               <C>  
Regular Service Miles (000's) .....         78,178         68,076        14.8         147,236        130,759       12.6
Total Bus Miles (000's) ...........         80,581         70,179        14.8         151,748        134,119       13.1
Passenger Miles (000's) ...........      2,003,082      1,684,266        18.9       3,694,981      3,218,090       14.8
Passengers Carried (000's) ........          5,607          4,585        22.3          10,582          8,911       18.8
Average Trip Length (passenger
   miles/ passengers carried) .....            357            367        (2.7)            349            361       (3.3)
Load (avg. number of passengers per
   regular service mile) ..........           25.6           24.7         3.6            25.1           24.6        2.0
Load Factor (% of available seats
   filled) ........................           54.5           52.8         3.2            53.5           52.5        1.9
Yield (regular route
   revenue/passenger miles) .......    $    0.0902    $    0.0915        (1.4)    $    0.0905     $   0.0906       (0.1)
Total Revenue Per Total Bus Mile ..           2.31           2.26         2.2            2.27           2.23        1.8
Operating Income (Loss) Per Total
   Bus Mile .......................           0.12           0.04       200.0            0.02         (0.05)        n/m
Cost Per Total Bus Mile:
   Maintenance ....................    $     0.256    $     0.270        (5.2)    $     0.267     $    0.282       (5.3)
   Transportation .................          0.637          0.674        (5.5)          0.642          0.667       (3.7)
</TABLE>

THREE AND SIX MONTHS ENDED JUNE 30, 1998 AND 1997 RESULTS OF OPERATIONS

The Company's results of operations include the operating results of Carolina
Coach Company, and affiliates ("Carolina"), Valley Transit, Inc., and affiliates
("Valley") and Golden State collectively referred to as "the acquisitions". The
results for the acquisitions are included as of their respective purchase dates.
The purchases of Carolina and Valley both occurred during the third quarter of
1997 and the purchase of Golden State was completed in February 1998.

Operating Revenues. Total operating revenues increased $29.7 million (up 16.4%)
for the quarter and $49.3 million (up 14.4%) for the six months ended June 30,
1998, compared to the same period in 1997. Increases in all operating revenue
categories were achieved for both the quarter and year to date periods.

Transportation services revenues increased $27.2 million (up 16.8%) and $44.2
million (up 14.4%) for the three and six months ended June 30, 1998 compared to
1997. The increased revenues are primarily due to a $26.5 million (up 17.2%) and
$42.9 million (up 14.7%) increase in regular route revenues for the three and
six months ended June 30, 1998 (including $9.3 million and $16.1 million related
to the acquisitions). Package express revenues accounted for the remaining
increase in transportation services with increases of $0.7 million (up 8.2%) and
$1.3 million (up 8.4%) for the three and six months ended June 30, 1998. The
increases in regular route revenues reflect the consolidated impact of a 22.3%
and 18.8% increase in the number of passengers carried, for the three and six
months, partially offset by a 1.4% and 0.1% decrease in yield and a 2.7% and
3.3% decrease in average trip length for the three and six months ended June 30,
1998. The decrease in yield and average trip length in the Company's
consolidated operating statistics, as compared to the prior year, reflect the
impact of the acquisitions who carry passengers traveling on much shorter trip
lengths at lower yields.

Excluding the impact of the acquisitions, the Company realized an 11.2% and a
9.2% increase in regular route revenues and a 14.3% and 10.6% increase in
passenger miles for the three and six months ended June 30, 1998. This growth
reflected a 6.8% and a 4.8% increase in passengers carried and a 6.9% and 5.3%
increase in average trip length per passenger, slightly offset by decreases in
yield of 2.7% and 1.2% for the three and six months ended June 30, 1998. The
longer trip lengths and slightly lower yield reflects significant growth in
long-haul traffic (passengers traveling more than 450 miles) as the Company
promoted and priced this product for growth.



                                       15
<PAGE>   16

Food Services and related revenues increased $0.6 million (up 8.3%) and $1.0
million (up 7.0%) for the three and six months ended June 30, 1998 compared to
1997. Food Services and related revenues have been reclassified to include sales
of retail products. Previously, sales of retail products were included in other
operating revenues. Food Services and related revenues, as reclassified,
increased over the prior year due primarily to the increase in passenger traffic
discussed above. Food Services and related revenues decreased slightly as a
percentage of total operating revenues for the three and six months ended June
30, 1998 compared to 1997.

Other operating revenues, consisting primarily of revenue from charter and other
in-terminal sales and services, increased $1.9 million (up 15.8%) and $4.1
million (up 18.9%) for the three months and six months ended June 30, 1998,
compared to the same period in 1997. The increase was primarily attributable to
the $1.4 million (up 43.0%) and $2.7 million (up 53.5%) increase in charter
service revenue for the three and six months ended June 30, 1998, as well as
increases in revenues from other in-terminal services, reflecting the increase
in passenger volume.

Operating Expenses. Total operating expenses increased $23.0 million (up 12.9%)
and $40.0 million (up 11.4%) for the three and six months ended June 30, 1998,
compared to the same period in 1997. The increase is due primarily to an
increase in bus miles operated (14.8% and 13.1% for the three and six months
ended June 30, 1998 compared to 1997), higher driver wages and training costs,
increased terminal salaries, increased ticket and express commissions due to
higher sales, and an increase in the number of buses operated under operating
leases. Also, expenses attributable to the operations of the recent acquisitions
were $8.5 million and $15.3 million for the three and six months ended June 30,
1998.

Maintenance costs increased $1.7 million (up 9.2%) and $2.7 million (up 7.2%)
for the three and six months ended June 30, 1998, compared to the same period in
1997 due to increased bus miles and the inclusion of the acquisitions. Despite
these increases, maintenance costs decreased on a cost per bus mile basis.

Transportation expenses increased $4.0 million (up 8.4%) and $7.9 million (up
8.9%) for the three and six months ended June 30, 1998, compared to the same
period in 1997 due to increased bus miles operated, a contractual driver wage
increase, training of additional drivers to prepare for anticipated growth, and
the inclusion of the acquisitions. The increased expenses were partially offset
by a decrease in the cost per gallon of diesel fuel for the first half of 1998
as compared to the same period in 1997. The average cost per gallon of fuel
decreased to $0.55 and $0.56 per gallon for the three and six months ended June
30, 1998 compared to $0.66 and $0.69 per gallon during 1997. The lower fuel
prices resulted in a reduction in fuel costs of $1.5 and $3.5 million for the
three and six months ended June 30, 1998 compared to 1997. On a cost per bus
mile basis, transportation expenses decreased slightly due primarily to the
impact of the lower fuel prices partially offset by driver wage increases and
higher training costs.

Agents' commissions and station costs increased $4.2 million (up 12.3%) and $7.7
million (up 11.7%) for the three and six months ended June 30, 1998, compared to
the same period in 1997 primarily due to commissions associated with increased
ticket and express sales, pay increases for terminal staff and the inclusion of
the acquisitions.

Marketing, advertising and traffic expenses increased $0.4 million (up 5.9%) and
$0.4 million (up 2.9%) for the three and six months ended June 30, 1998
primarily due to an increase in direct advertising partially offset bus wrap
trade credits.

Insurance and safety costs increased $2.3 million (up 22.2%) and $4.2 million
(up 20.8%) for the three and six months ended June 30, 1998, compared to the
same period in 1997 due primarily to increased bus miles and the inclusion of
the acquisitions.

General and administrative expenses increased $4.6 million (up 21.1%) and $7.2
million (up 16.5%) for the three and six months ended June 30, 1998 compared to
the same period in 1997 due primarily to higher health and welfare expenses
associated with the increase in drivers and terminal employee head-counts and
the inclusion of the acquisitions.

Depreciation and amortization increased by $2.0 million (up 26.6%) and $2.9
million (up 19.2%) for the three and six months ended June 30, 1998, compared to
the same period in 1997 due primarily to depreciation and goodwill amortization
attributable to the acquisitions.



                                       16
<PAGE>   17

Operating taxes and licenses expense increased $1.4 million (up 10.7%) and $2.4
million (up 9.6%) for the three and six months ended June 30, 1998, compared to
the same period in 1997. This increase results from higher payroll taxes due to
increased salaries and head-counts related to higher business volume, as well as
increased fuel and oil taxes resulting from an increase in total bus miles.

Operating rents increased $2.2 million (up 16.1%) and $4.1 million (up 14.8%)
for the three and six months ended June 30, 1998, compared to the same period in
1997 due to an increase in fleet size as the Company financed most of its new
buses near the end of 1997 under operating leases. The increase in bus operating
leases reflects the Company's growth strategy to add resources to accommodate
growth in the passenger business during the peak periods and generate additional
charter revenues during the off-peak periods utilizing those added resources
when available.

Food Services and related cost of goods sold increased $0.4 million (up 7.7%)
and $0.7 million (up 7.0%) for the three and six months ended June 30, 1998,
compared to the same periods in 1997, primarily due to the 8.3% and 7.0%
increase in Food Services and related sales for the same period. Food Services
and related cost of goods sold have been reclassified to include the costs
associated with sales of retail products. Previously those costs were recorded
in other operating expenses.

Interest expense increased $0.8 million (up 11.9%) and decreased $0.2 million
(down 1.1%) for the three and six months ended June 30, 1998, compared to the
same periods in 1997. The increase during the quarter reflects a higher average
balance outstanding on the Revolving Credit Facility related primarily to the
Company's purchase of buses for sale-leaseback and the acquisitions which were
funded during the last half of 1997, partially offset by the lower interest
rates negotiated under the Revolving Credit Facility. For the six months ended
June 30, 1998, interest expense decreased primarily due to the lower interest
rates on the Revolving Credit Facility, the lower effective interest rates
associated with the 11 1/2% Senior Notes issued in April 1997 ("11 1/2% Senior
Notes") compared to the 10% Senior Notes retired in May 1997, the termination of
the interest rate swap agreements and the retirement of a bus obligation.

For the three months ended June 30, 1998, the Company recorded an income tax
provision of $0.2 million bringing the year to date total net benefit to $0.9
million compared to an income tax provision of $0.1 million and $0.2 million for
the three and six months ended June 30, 1997. An income tax benefit
has been provided for the six months ended June 30, 1998 in accordance with the
interim financial reporting guidelines of generally accepted accounting
principles. The income tax benefit has been provided based upon the Company's
1998 estimated annual effective tax rate of 8.0%.

This benefit resulted in a corresponding increase in the deferred tax asset by
$0.9 million. Since the Company believes that it is more likely than not that
this increase in the deferred tax asset will be realized in the current year, no
offsetting valuation allowance has been recorded. The Company did not provide an
income tax benefit on the year to date loss through June of 1997 because the
Company did not believe it was more likely than not that the loss would be
offset by net income in that year, and an offsetting valuation allowance was
recorded.

LIQUIDITY AND CAPITAL RESOURCES

The Company's principal liquidity requirements are working capital, capital
expenditures, including bus acquisitions, debt service requirements, including
the payment of principal and interest on borrowings under the Revolving Credit
Facility and interest on the 11 1/2% Senior Notes, and dividends on the
Preferred Stock. 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 used for operating activities decreased $14.3 million, or 48.0%, to
$15.5 million in 1998 from $29.8 million in 1997. The decrease in cash used for
operating activities is primarily due to the decreased net loss, adjusted for
the prior year extraordinary item. Net cash used for investing activities
increased $25.0 million, to $39.8 million in 1998 from $14.7 million in 1997,
principally due to an $18.9 million increase in buses purchased for sale
leaseback, and a $5.5 million increase in capital expenditures due mainly to the
purchase of a bus terminal. Net cash provided by financing activities increased
$10.8 million, or 24.0%, to $55.7 million in 1998 from $45.0 


                                       17
<PAGE>   18

million in 1997. This increase can be attributed to increased bus purchases and
other capital expenditures, partially offset by the reduced need to finance
seasonal operating cash outflows.

As a part of its operating strategy, 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 maintaining and upgrading its computer systems. 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
over the last three years. The Company accepted delivery of 89 new buses during
the first quarter, 79 new buses in the second quarter and expects deliveries of
65 new buses for the remainder of the year. The first and second quarter
deliveries were, and future deliveries will be, temporarily financed by the
vendor or one of its affiliates and/or by the Revolving Credit Facility. The
Company intends to seek permanent operating lease financing for a substantial
portion of these buses prior to the end of the year.

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 Company requires significant cash flows to meet its debt service and other
continuing obligations. As of June 30, 1998, the Company had $274.5 million of
long-term indebtedness outstanding, including $84.6 million of borrowings under
the Revolving Credit Facility and $150.0 million of 11 1/2% Senior Notes. In
addition, as of June 30, 1998, the Company had total availability of $46.5
million under the Revolving Credit Facility.

The Company is a party to a Revolving Credit Facility which was amended on April
20, 1998. The amended facility increased the borrowing availability from $125.0
million to $150.0 million. The amended Revolving Credit Facility consists of (i)
a revolving facility providing for advances of up to $117.5 million based on the
liquidation value of certain bus collateral, (ii) a revolving facility providing
for advances of up to $2.5 million based on a formula of eligible accounts
receivable and (iii) a real estate facility providing for borrowings of up to
$35.0 million based on fair market value of certain core real property
collateral (the "Real Estate Facility") with a maximum combined borrowing base
of $150.0 million. The Revolving Credit Facility has two interest rate options,
prime and LIBOR. As of July 31, 1998, the Company had borrowings under the
Revolving Credit Facility bearing interest at LIBOR plus 2.00% and Prime plus
0.50% (weighted average of 7.7578%). Borrowings under the Revolving Credit
Facility mature on May 21, 2002, although availability under the Real Estate
Facility will be subject to yearly reductions commencing in November 1999. 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 consolidated net
worth, ratio of total indebtedness to cash flow 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 June 30,
1998, the Company was in compliance with all such covenants.

The Company has entered into three advance purchase commitments for fuel. Under
these agreements the Company agrees to take delivery of fuel at a specific
location at a fixed price at a specific date in the future. The agreements have
been entered into, with three suppliers, for approximately 23% of projected fuel
needs through July 1999, at an average price per gallon of $0.55. Management
believes that this strategy is a conservative method to hedge against fuel price
fluctuations.

UNION NEGOTIATIONS

The Amalgamated Transit Union ("ATU") represents certain of the Company's
employees including drivers, telephone information agents in the Omaha location,
terminal workers in certain locations and about one-half of the Company's
mechanics. The Company's largest ATU agreement, which covers approximately 4,500
drivers and 350 mechanics expires on January 31, 1999. In January 1998, the
Company and the executive board of the National Local 1700 of the ATU reached a
tentative agreement for a new labor contract. The agreement was submitted to the
ATU membership for ratification and on March 14, 1998, the ATU membership
rejected this agreement.

On July 22, 1998, the Company and the ATU's executive board reached a new
tentative agreement for a labor contract. However, the contract must be
ratified by the union members, for which voting is expected to be completed by
September 1, 1998. If ratified, this contract would become effective October 1,
1998, and continue until January 31, 2004. 



                                       18
<PAGE>   19

ACQUISITION

On February 9, 1998, the Company completed its acquisition of a 51% interest in
Golden State, a Southern California bus carrier. This purchase was accounted for
using the purchase method of accounting; accordingly, the acquired company's
results of operations are included in the consolidated financials from the date
of acquisition. The amount of the purchase price in excess of net assets has
been recorded as goodwill and is being amortized over a 20 year period.

SUBSTANTIAL LEVERAGE

The Company has consolidated indebtedness that is substantial in relation to its
stockholders' equity. As of June 30, 1998, the Company had outstanding
consolidated long-term indebtedness (including current portions) of
approximately $274.5 million and total stockholders' equity of approximately
$168.9 million. The seasonal fluctuations in the Company's cash flows can be
significant. The second quarter of each year typically represents the Company's
greatest period of leverage. The first quarter and most of the second quarter
are loss periods requiring the financing of substantial cash outflows for
operations. However, the last half of the year (primarily the third quarter)
provides substantial positive cash flows and, as a result, the Company is at its
least leveraged point at year end.

HISTORY OF LOSSES

The Company reported a net loss in each of its last four fiscal years. Although
the Company has implemented strategic and operational initiatives intended to
enhance revenues and operating income, the Company's operations generally are
subject to economic, financial, competitive, seasonal and other factors, many of
which are beyond its control.

COMPETITION

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.

SELF INSURANCE

The Company maintains cash deposits that secure insurance claims and bus leases,
which as of June 30, 1998 aggregated approximately $77.5 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 U.S. Department of
Transportation's ("DOT") approval of such program. Additionally, as of June 30,
1998, the Company had pledged $31.7 million in cash and $10.1 million in letters
of credit to secure its other liability insurance obligations. Depending on the
Company's future claims history and the policies of its insurance carriers, the
amount of collateral that the Company is obligated to pledge to secure its
liability insurance obligations may vary. As of June 30, 1998 the Company also
has deposits of $23.2 million (at market value) pledged as collateral in
connection with the sale and leaseback of 319 buses. Additionally, the Company
has a deposit of $8.4 million (at market value) pledged as collateral in
connection with a sale and leaseback agreement for 125 buses.

Insurance coverage and risk management expense are key components of the
Company's cost structure. The DOT is currently studying whether to continue or
modify the self-insurance program available to the motor carrier industry. The
loss of self-insurance authority from the DOT 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 material
adverse effect on the Company's liquidity, financial condition, and results of
operations.

PENSION PLAN FUNDING

The Company maintains nine defined benefit pension plans, the most significant
of which (the ATU Plan) covers approximately 16,400 current and former
employees, fewer than 1,500 of which are active employees of the Company. The
ATU Plan was closed to new participants in 1983 and, as a result, over 85% of
its participants are over the age of 50. For financial reporting and investment
planning purposes, the Company currently uses an 



                                       19
<PAGE>   20

actuarial mortality table that closely matches the actual experience related to
the existing participant population. Based upon the application of this table
and other actuarial and investments assumptions, the Company believes that the
ATU Plan is adequately funded.

For funding purposes, legislation passed by the United States Congress in 1994,
and amended in 1997, mandates the use of a prescribed actuarial mortality table
and discount rates that differ from those used by the Company for financial
reporting and investment planning purposes. Nevertheless, based upon the
application of the actuarial mortality table, discount rates and funding
calculations prescribed by the legislation, as amended, the Company does not
anticipate that it will be required to make any contributions to the ATU Plan in
the foreseeable future. However, there is no assurance 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.

COMPUTER SYSTEMS/YEAR 2000 READINESS

Many existing computer systems, communications equipment, control devices and
software products, including several used by the Company, are coded to accept
only two digit entries in the date code field. Beginning in the year 2000, these
date code fields will need to accept four digit entries to distinguish 21st
century dates from 20th century dates. As a result, the Company's date critical
functions related to the year 2000 and beyond, such as scheduling, dispatch,
sales, purchasing, planning and financial systems may be materially adversely
affected unless these systems are or become year 2000 compliant.

During the past three years, the Company has been replacing and enhancing its
computer systems to gain operational efficiencies and through some of these
efforts, year 2000 compliant applications or systems have been installed. In
addition, management initiated an enterprise-wide program in 1997 to prepare the
Company's computer systems and applications for the year 2000. The program
consists of three main phases.

The first phase is an assessment of the Company's systems with respect to year
2000 compliance and the formulation of an action plan. During the assessment
phase, the Company has been reviewing individual applications, as well as the
entire hardware and network infrastructure which may support one or more
specific applications. The assessment for many of the Company's mission critical
systems is complete. The assessment will also include non-"information
technology" (IT) systems, such as fax machines, time clocks and bus maintenance
test equipment. A comprehensive review and inventory of non-IT,
technology-enabled equipment and functions will be completed in the third
quarter of 1998. This phase also involves an assessment of the readiness of
third party vendors and suppliers. The Company has already issued year 2000
readiness questionnaires to some vendors and will continue this effort; however,
responses to these inquiries has been limited. The assessment of the Company's 
IT and non-IT systems, and an action plan for remediation is expected to be
complete by the end of the third quarter of 1998.

The second phase of the Company's program will be the implementation and testing
of the remediations required, based upon the conclusions reached from the
assessments completed during the first phase. The Company's IT environment is
comprised of two distinct layers of technology: infrastructure and applications.
The infrastructure layer contains the computer platforms and the
telecommunications network. The application layer is the set of computer
applications that run on the computers and exchange data across the network.
Together, the two layers provide IT services to the enterprise. Because of the
complexity of the relationships within and between the two layers, deliberate
and methodical testing is required. During this second phase, the Company will
perform a series of tests. Unit testing will confirm the readiness of the
individual components of the infrastructure and of the applications for the year
2000. System testing ensures that a specific application is year 2000 compliant
in conjunction with its supporting infrastructure. Finally, integration testing
determines whether a set of applications and the infrastructure, when operated
on a combined basis, deliver services that are year 2000 ready. As an example,
the Company's dispatching and bus and driver planning application has been unit
tested and is believed to be year 2000 ready. However, it has not been system
tested to ensure accurate year 2000 date handling within the infrastructure, nor
has it been integration tested across the enterprise. Such testing awaits the
remediation of some infrastructure components which are not currently year 2000
compliant.

It may not be economically or technically feasible for the Company to fully test
certain systems, and it is possible that not all IT and non-IT systems can be
prepared for the year 2000. Therefore, the readiness plan will provide priority
to those applications and infrastructures that provide mission critical
functionality to the business and will identify contingency plans that need to
be in place for functions which could be adversely impacted. The Company already
has, as a matter of course, many



                                       20
<PAGE>   21
contingency plans and processes to provide continuation of mission critical
business functions in the event that systems become unavailable for any reason;
including for example, system failures, power outages or phone network outages.

The third phase of the Company's plan is termed "clean management." This is a
screening process whereby new software, hardware, or other date-dependent
systems (e.g., security systems or phone systems) are verified to be year 2000
compliant before being introduced into the Company's systems.

It is difficult for the Company to estimate the costs incurred to date related
specifically to remediating year 2000 issues since the Company has been 
replacing and enhancing its computer systems in the ordinary course of
business. Estimated future costs of remediation are not currently known but the
Company expects to have a cost estimate by the end of the third quarter of 1998
when the assessment phase of the Company's year 2000 readiness plan is
completed.

The Company recognizes that the scope of effort to fully execute its year 2000
readiness plan is significant. The Company is utilizing internal resources and,
where appropriate, external resources to provide the tools and resources to
complete the plan. Despite these efforts there can be no assurance that the
Company's systems will be timely remediated or that any such failure by the
Company's vendors or suppliers to be year 2000 ready would not have an adverse
effect on the Company's systems.

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.

GOVERNMENT REGULATION

The Company is subject to regulation under the Americans with Disabilities Act
(the "ADA"). Under proposed final regulations issued by DOT in March 1998,
beginning with a proposed effective date of October 2000, all new buses received
by the Company for its fixed route operations would have to be equipped with
wheelchair lifts. Additionally, by October 2006, one-half of the Company's fleet
involved in fixed route operations would be required to be lift-equipped, and by
October 2012, such fleet would need to be entirely lift-equipped. The proposed
regulations do not require the retrofitting of existing buses with lift
equipment. Nor would the regulations require the purchase of accessible used
buses. Moreover, beginning in 2002, until the fleet is fully equipped, the
Company would be required to provide an accessible bus to any disabled passenger
who provides at least 48 hours notice. For larger charter/tour operators,
beginning in October 2002, ten percent of their fleet would need to be
accessible. As well, charter/tour operators would be required to provide an
accessible bus to any disabled passenger who provides at least 48 hours notice.
If the proposed regulations become final, the Company currently estimates that a
built-in lift device will add $20,000 to $40,000 to the cost of a new bus and
that maintenance and employee training costs will increase. The Company does not
expect such maintenance and training costs to be materially higher than the
costs currently incurred in complying with the interim bus access regulations
promulgated under the ADA. Passenger revenues could also be impacted by the loss
of seating capacity when wheelchair passengers are on the bus, offset by
potentially increased ridership by disabled persons. The Company, as well as the
rest of the bus industry, have substantial concerns regarding the regulations as
they have been proposed and have submitted comments responsive to the proposed
regulations. The DOT has announced that it expects to finalize the regulations
in September 1998.

LITIGATION

The Company is a party to various lawsuits the outcome of which, if adverse to
the Company, could have a material adverse effect on the business, financial
condition, results of operations and liquidity. See "Part II, Item 1-Legal
Proceedings."




                                       21
<PAGE>   22

                           PART II. OTHER INFORMATION


ITEM 1.  LEGAL PROCEEDINGS

SECURITIES AND DERIVATIVE LITIGATION; SEC INVESTIGATION

Between August 1994 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 seek unspecified damages for securities law
violations. In November 1994, a shareholder derivative lawsuit was filed against
present directors and former officers and directors of the Company and the
Company as a nominal defendant. In October 1996, a purported class action
lawsuit was filed by a purported owner of the Company's Common Stock in the
State Court of Texas. The parties have entered into settlement agreements, which
are not yet final, to resolve the foregoing litigation. In addition, in January
1995 the Company received notice that the Securities and Exchange Commission is
conducting a formal, non-public investigation into possible securities laws
violations allegedly involving the Company and certain other parties. See Note 5
to the Interim Consolidated Financial Statements for the period ended June 30,
1998, included elsewhere in this filing.

OTHER LEGAL PROCEEDINGS

In addition to the litigation discussed above, the Company is a defendant in
various lawsuits arising in the ordinary course of business, primarily cases
involving personal injury and property damage claims 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 the personal injury and property
damage 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 in the ordinary course of business that, if resolved against the
Company, would materially exceed the amounts recorded.



                                       22
<PAGE>   23
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

ELECTIONS OF DIRECTORS

On May 15, 1998, at the Company's annual stockholders' meeting, Messrs. Thomas
G. Plaskett, Craig R. Lentzsch and Frank L. Nageotte were each elected to serve
as Class I directors for three-year terms. In each case, the election was
determined by a plurality vote. Total stockholder votes for and withheld on the
election of Mr. Plaskett were 56,967,142 and 663,536, respectively. Total
stockholder votes for and withheld on the election of Mr. Lentzsch were
56,993,187 and 637,491, respectively. Total stockholder votes for and withheld
on the election of Mr. Nageotte were 56,950,080 and 680,598, respectively. Dr.
Alfred E. Osborne, Jr., Mr. Stephen M. Peck and Mr. Ernest P. Werlin continue to
serve as Class II directors until their terms expire in 1999. Mr. Richard J.
Caley, Ms. Linda Chavez and Mr. A. A. Meitz continue to serve as Class III
directors until their terms expire in 2000.

APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS

The Board of Directors appointed Arthur Anderson LLP as independent public
accountants to examine the Company's financial statements for the fiscal year
ending December 31, 1998, effective upon ratification by the stockholders of
such appointment. Although stockholder ratification is not required for the
selection of Arthur Andersen LLP, since the Board of Directors has the
responsibility for the selection of the Company's independent auditors and such
ratification will not obligate the Company to continue the services of such
firm, the Board of Directors submitted the selection for ratification by Company
stockholders. On May 15, 1998, at the Company's annual stockholders' meeting,
the appointment of Arthur Andersen LLP to serve as independent public
accountants was ratified by a majority vote of the stockholders present or
represented at the meeting and entitled to vote. Total votes for, against and
abstentions were 56,932,818 and 232,729 and 465,131, respectively.

APPROVAL OF GREYHOUND LINES, INC. 1998 DIRECTORS' STOCK INCENTIVE PLAN

On May 15, 1998, at the Company's annual stockholders' meeting, the Greyhound
Lines, Inc. 1998 Directors' Stock Incentive Plan was approved by a majority vote
of the stockholders present or represented at the meeting and entitled to vote.
Total votes for, against and abstentions were 55,585,755 and 1,709,102 and
335,821, respectively.

STOCKHOLDER PROPOSAL TO ELECT THE ENTIRE BOARD OF DIRECTORS EVERY YEAR

On May 15, 1998, at the Company's annual stockholders' meeting, a stockholder
proposal to elect the entire Board of Directors every year was defeated by a
majority vote of the stockholders present or represented at the meeting and
entitled to vote. Total votes for, against and abstentions were 11,082,934 and
19,731,352 and 712,460, respectively.



                                       23
<PAGE>   24

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS


27    -  Financial Data Schedule as of and for the three months and six months
         ended June 30, 1998.(1)


--------------

 (1) Filed only in EDGAR format with the Registrant's Quarterly Report on Form
     10-Q for the quarter ended June 30, 1998.

(b)  REPORTS ON FORM 8-K

      During the quarter ended June 30, 1998, the Company did not file any
current reports on Form 8-K with the Securities and Exchange Commission.




                                       24
<PAGE>   25

                                   SIGNATURES


   Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


Date:  August  12, 1998




                                       GREYHOUND LINES, INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                           (Duly Authorized Officer
                                           and Chief Accounting Officer)

                                       ATLANTIC GREYHOUND LINES OF
                                       VIRGINIA, INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                       FCA INSURANCE LIMITED

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                       GLI HOLDING COMPANY

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                       GREYHOUND de MEXICO S.A. de
                                       C.V.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                       GRUPO CENTRO, INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer



                                       25
<PAGE>   26


                                       LOS BUENOS LEASING CO., INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Financial Officer and Secretary

                                       SISTEMA INTERNACIONAL de
                                       TRANSPORTE de AUTOBUSES, INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                       TEXAS, NEW MEXICO & OKLAHOMA
                                       COACHES, INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                       T.N.M. & O. TOURS, INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer

                                       VERMONT TRANSIT CO., INC.

                                       By: /s/ T. Scott Kirksey
                                           ------------------------------------
                                           T. Scott Kirksey
                                           Chief Accounting Officer



                                       26
<PAGE>   27
                               INDEX TO EXHIBITS



<TABLE>
<CAPTION>
EXHIBIT
NUMBER                             DESCRIPTION
-------                            -----------
<S>                        <C>

  27                       Financial Data Schedule
</TABLE>