<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                Amendment No. 1
                                       to
                                    FORM 10-K

[X]   Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
      Act of 1934 for the fiscal year ended DECEMBER 31, 1998 or 
[ ]   Transition Report Pursuant to Section 13 or 15(d) of the Securities 
      Exchange Act of 1934

                          Commission File No. 333-08871

                            MCII HOLDINGS (USA), INC.
             (Exact name of registrant as specified in its charter)

<TABLE>
<S>                                                     <C>       
            Delaware                                                 86-0830781
(State or other jurisdiction of                         (I.R.S. Employer Identification No.)
(incorporation or organization)

</TABLE>

                 10 East Golf Road, Des Plaines, Illinois 60016
               (Address of principal executive offices) (Zip Code)

       Registrant's telephone number, including area code: (847) 299-9900


        Securities registered pursuant to Section 12(b) of the Act: None

        Securities registered pursuant to Section 12(g) of the Act: None


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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.    [X]

The aggregate market value of the voting stock held by non-affiliates of the
registrant: None as of March 15, 1999.

The number of shares outstanding of the registrant's Common Stock: 1,000 shares
as of March 15, 1999.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

                            REDUCED DISCLOSURE FORMAT

The registrant meets the conditions set forth in General Instruction I (1)(a)
and (b) of Form 10-K and is therefore filing this Form with the reduced
disclosure format.



                                       1
<PAGE>   2

On April 15, 1999, an EDGAR filing was made with the Securities and Exchange
Commission (the "Commission") of the Company's Annual Report on Form 10-K for
the year ended December 31, 1998 (the "1998 Form 10-K") pursuant to Rule
12b-25. This filing, however, was made by the financial printer without the
Company's or its independent accountants' authorization. Because the 1998 Form
10-K that was filed with the Commission was in draft, not final form, the 1998
Form 10-K, including the auditor's report should not be relied upon.

The attached final Annual Report on Form 10-K for the year ended December 31,
1998, including the auditor's report, as filed on April 20, 1999 has been
authorized by the Company and its independent public accountant.


<PAGE>   3
                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                     PART I

<S>             <C>                                                                           <C>
ITEM 1.         BUSINESS.....................................................................  3
ITEM 2.         PROPERTIES...................................................................  xx
ITEM 3.         LEGAL PROCEEDINGS............................................................  xx
ITEM 4.         SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..........................  omitted

                                     PART II

ITEM 5.         MARKET FOR REGISTRANT'S COMMON EQUITY AND
                RELATED STOCKHOLDER MATTERS..................................................  N/A
ITEM 6.         SELECTED FINANCIAL DATA......................................................  omitted
ITEM 7.         MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                RESULTS OF OPERATIONS AND FINANCIAL CONDITION................................  xx
ITEM 8.         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..................................  xx
ITEM 9.         CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
                ON ACCOUNTING AND FINANCIAL DISCLOSURE.......................................  none

                                    PART III

ITEM 10.        DIRECTORS AND EXECUTIVE OFFICERS
                OF THE REGISTRANT............................................................  omitted
ITEM 11.        EXECUTIVE COMPENSATION.......................................................  omitted
ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
                OWNERS AND MANAGEMENT........................................................  omitted
ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...............................  omitted

                                     PART IV

ITEM 14.        EXHIBITS, FINANCIAL STATEMENTS SCHEDULES, AND
                REPORTS ON FORM 8-K..........................................................  XX

</TABLE>


          Some information included in this Report on Form 10-K may constitute
forward-looking statements that involve a number of risks and uncertainties. The
Private Securities Litigation Reform Act (the "Act") provides a "Safe Harbor"
for forward looking statements to encourage companies to provide prospective
investors information, to the extent such statements are identified as forward
looking and are accompanied by meaningful cautionary statements identifying
important factors which could cause actual results to be materially different to
those discussed in the statement. MCII Holdings (USA), Inc. would like to take
advantage of this provision of the Act.

         In discussing the future prospects of MCII Holdings (USA), Inc.,
management has identified factors including, but not restricted to, the
following: general economic conditions including inflation, interest rate
fluctuations, trade restrictions, and general debt levels; competitive factors
including price pressures, technological developments, and products offered by
competitors; inventory risks due to changes in market demand or business
strategies; and changes in effective tax rates. Readers are cautioned not to
place undue reliance on these forward-looking statements, which speak only as of
the date made. MCII Holdings (USA), Inc. undertakes no obligation to publicly
update or revise any forward-looking statements, whether as a result of new
information, future events, or otherwise.



                                       2
<PAGE>   4
 
ITEM 1.  BUSINESS

GENERAL

MCII Holdings (USA), Inc. ("MCII Holdings" or the "Company") is a leading
designer, manufacturer and marketer of inter-city coaches and related
replacement parts for the North American market. The Company's Motor Coach
Industries International, Inc. ("MCII") subsidiaries began manufacturing
inter-city coaches and distributing replacement parts in Canada in 1933 and
since 1963 in the United States. Since the late 1970s, the Company has
consistently maintained a market share in excess of 50% in the United States and
Canadian coach markets. MCII's established market position and product longevity
have led to an installed base of approximately 75% of the estimated 38,000
industry-wide fleet of coaches operating in the United States and Canada. The
Company's Dina Autobuses, S.A. de C.V. ("Autobuses") subsidiary began
manufacturing inter-city coaches and distributing replacement parts in Mexico in
1951. Autobuses has an installed base of approximately 65% of the estimated
34,000 industry-wide fleet of coaches operating in Mexico. The Company's large
installed customer base creates a high level of customer loyalty leading to new
coach purchases and demand for its replacement parts.

MCII Holdings is 100% owned by Consorcio G Grupo Dina, S.A. de C.V. ("Dina"), a
Mexican manufacturer of trucks and buses listed both on Bolsa Mexican de Valores
(Mexican Stock Exchange) and the New York Stock Exchange ("NYSE"). Dina was
formed by the Mexican government in 1951 in a joint venture with Fiat and was
privatized in 1989. Grupo Empresarial G, S.A. de C.V., a holding company owned
by members of the Gomez Flores family, owns approximately 48% of the outstanding
shares of the capital stock of Dina. Collectively, the Gomez Flores family owns
an additional 3.2% of the capital stock of the Company directly.

Revenues and operating income from continuing operations for each of the
segments for the last three years are as follows:

<TABLE>
<CAPTION>

                                                                   Year Ended
                                                                   December 31
                                         ----------------------------------------------------------------
                                                       1998                  1997                   1996
                                         ----------------------------------------------------------------
                                                                  (000 omitted)
<S>                                                <C>                   <C>             <C>     
Revenues:
United States and Canadian Operations
     Coach and Support                             $677,661              $503,635        $499,611
     Replacement Parts                              172,815               190,178         161,682
Mexican Operations                                   81,307                45,970           5,791
                                                   --------              --------        --------
                                                   $931,783              $739,783        $667,084
                                                   ========              ========        ========

Operating income:
United States and Canadan Operations
     Coach and Support                              $70,114               $46,785         $39,865
     Replacement Parts                               21,497                15,754          14,788
Mexican Operations                                   (9,740)               15,914           5,180
                                                   --------              --------        --------
                                                    $81,871               $78,453         $59,833
                                                   ========              ========        ========

</TABLE>


MCII

COACH MANUFACTURING AND SUPPORT

MCII designs, manufactures, and markets inter-city coaches for sale into the
United States and Canadian markets.


                                       3
<PAGE>   5
MARKET AND CUSTOMERS.

MCII's management believes that there is currently an industry-wide fleet of
38,000 inter-city coaches in operation in the United States and Canada,
having an average age of approximately nine years.

Activity in the new coach market has proven closely correlated to the economic
cycle, particularly to interest rates. During times of general economic weakness
and high interest rates, many coach operators postpone fleet replacement
programs and may even reduce the size of their fleets. As economic recovery
occurs, operators tend to accelerate fleet replacement and increase fleet size.
As a result of underlying economic strength and certain other factors explained
below, MCII has seen substantial improvements in its business in recent years.

While the coach operator market is characterized by a high degree of
fragmentation with a large number of operators utilizing some 38,000 units,
several large players exist. Greyhound Lines, Inc. (GLI), which operates 2,000
units, and Coach USA, Inc. (CUI), which operates 3,400 units, are leaders in the
line haul and tour and charter markets. Several state transit authorities,
including New York City Transit Authority ("NYCTA") and New Jersey Transit
Corporation ("NJTC") also have large fleets. While management estimates that in
the past three years the average order size (excluding GLI orders) for any
single operator has been approximately 2.7 units, order size has ranged from one
coach up to approximately 100 coaches. By virtue of their relative size, large
operators are able to negotiate favorable terms when acquiring new units. MCII
has long term contracts with GLI and CUI.

Coach buyers may be characterized into four general groups. While the profile of
each segment varies considerably, several purchasing criteria are common to all:
life cycle costs, reliability, availability of replacement parts and support,
passenger comfort, interior amenities and purchase price. The importance of
these and other criteria vary across each market niche.

1    LINE HAUL OPERATORS transport passengers between cities at regularly
     scheduled intervals. The largest operator in this sector is GLI.

     In January 1998, GLI and MCII renewed a 10-year long-term supply agreement
     until 2007. The agreement guarantees GLI discounts from MCII if a minimum
     order level is placed. In 1998 GLI agreed to merge with Laidlaw, a large
     operator of buses in Canada and the United States. Sales to Line Haul
     operators represented approximately 29%, 25%, and 16% of MCII's new unit
     sales in 1998, 1997 and 1996, respectively.

2.   TOUR AND CHARTER OPERATORS TYPICALLY PROVIDE TRANSPORTATION TO THE TOURIST
     MARKET. This segment is the largest area of product sales representing
     approximately 54%, 62%, and 81% of MCII's new unit sales in 1998, 1997 and
     1996, respectively. CUI operates across the United States with a fleet of
     3,400 units, the largest provider of coach charter, tour and sightseeing
     services and one of the five largest non-municipal providers of commuter
     and transit coach services in the United States. CUI continues to implement
     a growth strategy that concentrates on the acquisition of coach operators,
     internal growth and developing economies of scale. Effective June 9, 1997,
     CUI signed an agreement with MCII pursuant to which CUI 

                                       4
<PAGE>   6

     agreed that MCII would be the primary supplier of CUI's annual new coach
     requirements through 1999.

3.   GOVERNMENT AGENCIES. Government-funded public transportation agencies
     utilize a variety of commuter, wheelchair-lift compatible and other
     specialty coaches. Given that the majority of units in this category are
     sold on a bid basis, management believes that the primary buying criterion
     for such customers is initial price for a given set of design
     specifications, with overall lifecycle costs as a secondary concern. The
     demand from such customers varies widely from year to year as government
     agencies periodically make large procurements, every three to six years on
     average. Sales to government agencies were approximately 15%, 13%, and 2%
     of MCII's new unit sales in 1998, 1997 and 1996 respectively.


     Two government authorities, NYCTA and NJTC, proved to be large customers 
     in 1998, acquiring 180 and 50 units, respectively or approximately 77% 
     of units sales to this segment.

4.   COACH CONVERTERS. The coach conversion market involves the customizing of a
     coach interior for personal or corporate use. MCII sells coach shells to
     coach conversion companies. With the recent introduction of the E-Series
     unit (described below) MCII is optimistic of gaining market share in this
     sector, estimated to account for approximately 500 units in each of the
     last three years. In 1998, MCI sold 49 units to this segment

PRODUCTS. 
MCII currently manufactures under the MCI trademark three integral-frame models.
A fourth is due to enter production in 1999. MCII also distributes the
Viaggio(R), a coach, which is produced in Mexico by Autobuses.

-        THE D SERIES is a 102-inch wide vehicle available in either a 40 or 45
         foot length with space for up to 55 seats. The model was introduced in
         1992, although the unit evolved from a basic design over 25 years old.
         The unit is utilized in a broad range of applications and is MCII's
         most popular unit representing approximately 61%, 69%, and 68% of
         MCII's new unit sales in 1998, 1997, and 1996, respectively. The unit
         retails from $240,000 to $350,000 depending on customer specification
         and length.
-        THE MC-12 MODEL is a lower-priced, line-haul coach, 40-feet long and 96
         inches wide, produced principally for GLI although also having
         alternative applications. Sales of MC-12 units represented
         approximately 4%, 12%, and 16% of MCII's new unit sales in 1998, 1997,
         and 1996, respectively. The price range for this model is $240,000 to
         $275,000.
-        THE E-SERIES "RENAISSANCE(R)" UNIT was introduced in 1997, the first
         all-new design from MCII in more than 25 years. The model incorporates
         many new design features including a spiral staircase and features 10
         patented designs. The unit has been quickly accepted by its target tour
         and charter markets representing approximately 26% of MCII's new unit
         sales in 1998, compared with 4% in its launch year 1997. The Company
         intends to utilize the design in gaining further market share in the
         conversion market, an area in which it has not been an aggressive
         competitor in recent years. The approximate price of the E-Series unit
         is $375,000. 
-        THE G-SERIES unit will be introduced into the line-haul market in 1999,
         a design which will build on the experience of the E-Series unit. GLI,
         the launch customer for the product, has actively assisted the Company
         in the design of the unit, which will be phased into markets currently
         serviced by the MC-12 and some D-Series models. It is envisaged that
         the unit will be priced at approximately $260,000. 
-        THE VIAGGIO(R) 1000 is a unit manufactured by Autobuses, a subsidiary
         of MCII Holdings and distributed in the United States by Hausman Bus
         Sales, Inc. ("HBSI"), a subsidiary of MCII. Since its introduction in
         1995 the unit has proved popular in an economy niche, competing
         primarily with used units. Viaggio sales represented approximately 9%,
         15%, and 15% of MCII's new unit sales in 1998, 1997, and 1996,
         respectively. The Viaggio(R), which is manufactured under license from
         Marcopolo S.A. -- Carrocerias e Omnibus of Brazil, sells in a range of
         $225,000 to $270,000.

                                       5
<PAGE>   7

The manufacture of long-distance coaches is characterized by a high degree of
flexibility with orders generally being engineered and built to operator's
specifications. Buyers can choose from over 2000 options on each unit. The
Company offers a standard warranty period of 24 months or 30 months, depending
upon the coach model selected.

MARKETING.

In the United States and Canada, MCII relies on its direct-sales force to market
the MCI and Viaggio(R) coaches, with 18 full-time new coach sales
representatives who make regular visits to both current and potential customers
and attend major industry trade shows. Management believes that the
attentiveness and visibility of MCII's sales force among coach operators
solidify MCII's reputation and enhance its sales position. MCII uses agents to
market its coaches overseas. MCII does not use distributors in the United States
or Canada.

COMPETITION.
MCII has two principal competitors in the United States and Canadian coach
market: Prevost, a subsidiary of Volvo, which management believes to be the
largest of its competitors, and Van Hool. MCII has maintained a strong market
position in the new coach market despite aggressive price competition Management
believes customer loyalty stems from a quality product and strong after-market
parts and service capability. As well as convenience and cost efficiencies which
operators derive from managing and servicing a fleet of coaches manufactured and
supported by a single supplier. These efficiencies may exist for both larger,
multi-site operators and smaller, independent operators, which rely on MCII for
a variety of support services. The high resale value of MCII units has also
proved popular with independent operators.

FINANCING.
MCII sells coaches for cash, credit terms (generally net 30 days) to its most
creditworthy customers, and provides long-term financing as a necessary adjunct
to its coach manufacturing business. Demand for new coach financing from MCII is
primarily dependent upon the annual level of new coach sales as well as the
availability of alternative sources of financing. MCII had $45.9 million of
notes receivables at December 31, 1998.

MCII provides new and used coach financing to its inter-city coach customers
principally through an affiliated, independent financing company, MCII Financial
Services Inc. ("MCIFS"). MCIFS provides financing through its MCII Funding Inc.
Subsidiary primarily at a floating rate of interest for three to five years, in
the case of used coaches, and seven to 10 years in the case of new coaches.

MCII, through its wholly-owned leasing and financing subsidiary, BusLease, Inc.
("BLI"), also finances coaches for customers under operating leases and loans.
The leases require security deposits and usually have a duration of three to
seven years. At December 31, 1998, the book value of coaches being leased to
customers under operating leases was approximately $18.5 million.

Periodically, BLI sells notes receivables to financial institutions
and provides a limited guarantee to those institutions against losses related to
such notes with respect to debtor defaults.


USED COACHES

MCII provides used coach brokerage and dealership services through HBSI. MCII
offers used coaches in support of its new bus operations since typically 1/3 of
all customers trade-in used coaches when buying new coaches. The size of the
used coach business is dependent upon several factors, including the size of the
entire coach fleet, new coach orders which generate trade-ins and the level of
changes in the fleet composition of coach operators. Management estimates that
the existing industry-wide fleet of over 38,000 coaches changes ownership every
12 years, creating an average used coach volume of about 2,500 units per year.

                                       6
<PAGE>   8

The used coach operations provided revenues for the years 1998, 1997, and 1996,
of approximately $86.0 million, $50.4 million, and $52.3 million respectively.
The used coach operations accounted for $72.0 million and $58.6 million of
MCII's inventories at December 31, 1998 and 1997, respectively..

Due to MCII's installed base of coaches, its maintenance and repair
capabilities, customer network and industry knowledge, HBSI is able to
repurchase and resell a substantial volume of used coaches. Management believes
that MCII's capacity to accept used coaches in support of new coach sales and
resell them through its distribution system provides MCII with a competitive
advantage. Management believes that HBSI's largest competitor in the dealership
business is ABC Bus, Inc., which also serves as Van Hool's United States sales
agent for new coaches.


REPLACEMENT PARTS

Management believes that MCII is the leading supplier of original equipment
manufacturer ("OEM") quality replacement parts for the combined inter-city
coach and transit bus aftermarkets in the United States and Canada. Through its
Universal Coach Parts, Inc. ("UCP") subsidiary, MCII offers over 160,000 items
necessary for coach and bus repair and regularly scheduled maintenance. MCII
has six strategically located distribution outlets in the United States and
Canada which allow MCII to promptly (if necessary, within 24 hours) deliver
replacement parts nationwide. In addition to the core inter-city coach and
transit bus parts business, MCII also distributes parts for school buses and
diesel engines.

The large installed base of its vehicles further enhances MCII's competitive
position in the parts business. The approximately 23,000 coaches and 47,000
transit buses in the United States and Canada originally produced by MCII
creates a core demand for MCII parts, approximately 20% of which are proprietary
to MCII and may not be purchased elsewhere. Despite the fact that MCII no longer
manufactures transit buses, MCII continues to supply replacement parts to the
Canadian transit bus market, and until November 1999, is the provider of OEM
replacement parts for the RTS line of transit buses previously manufactured in
the United States by MCII.

Universal Coach Parts Mexico, S.A. de C.V., a wholly owned subsidiary of UCP,
supplies OEM replacement parts to the inter-city coach and transit bus
aftermarkets in Mexico.

PRODUCT LINE.

The replacement parts business is segmented into high quality parts supplied by
an OEM, which may fit coaches made by other manufacturers, and non-OEM parts,
which are marketed primarily on a price basis. Management believes that MCII's
current strength is in providing OEM parts that are either manufactured by MCII
or acquired by MCII from the OEM. UCP in the United States and Motor Coach
Industries Limited ("MCIL") in Canada offer a wide selection of replacement and
repair parts to MCII's coach customers. In an effort to leverage further the
competitive strength of its replacement parts business and distribution
facilities, UCP has developed its own brand of alternate, non-OEM parts under
the COACH GUARD(R) name. More than sixty products have been introduced under
this brand name since its inception in 1993. UCP has also developed a line of
remanufactured parts and components, which were introduced during 1994.
Management believes that the availability of remanufactured products has
permitted UCP to access new markets that are currently served by local and
regional parts remanufacturers.

In 1994, UCP began marketing diesel engine parts under the name DIESEL GUARD(R)
and also began targeting the school bus parts market. As a result of its focus
on the school bus market, UCP purchased the assets of a school bus parts
distributor, Billingsley Parts and Equipment, Inc., in April 1995 for $2.9
million.


MARKETING.

For sales of replacement parts, UCP utilizes 13 full-time field
representatives, as well as telemarketing salespersons. The sales force makes
regular visits to both current and potential customers, attends major 






                                       7
<PAGE>   9

industry trade shows, responds to advertisements for bids to supply replacement
parts and uses telemarketing techniques. In addition, customer orders are
facilitated through the use, by the sales force and certain of UCP's larger
customers, of remote order entry terminals to minimize lead-time. Management
believes that UCP's efficiency and responsiveness allow customers to minimize
inventory-holding costs and to increase fleet utilization ratios.


CUSTOMERS. 
Coach part customers served by UCP include both purchasers of MCII coaches as
well as purchasers of non-MCII coaches such as Dina's Viaggio(R) coach model.
Management believes that customers place considerable emphasis on the quality of
parts purchased as well as the speed and efficiency provided by their parts
suppliers. Under an agreement with GLI, which is terminable by either party upon
180 days notice, UCP supplies and manages most of GLI's inventory of replacement
parts.

Management believes that the demand for transit parts is a function of the
number of transit buses currently in operation, the average level of usage for
each bus and the average age of the bus fleet. Management believes that
purchasers of transit parts are more price-sensitive and less service sensitive
than customers in the coach aftermarket, as the opportunity cost to the transit
authority of a transit bus out of operation is less significant than the lost
revenue of a line-haul coach operator. As a result, a large percentage of
transit parts purchases are conducted on a public bid basis. Customers often
choose to make a major purchase of parts inventory upon the procurement of
additional new transit buses to ensure the availability of parts and to minimize
cost through volume purchasing.


COMPETITION.
The replacement parts business is highly fragmented and competitive. Management
believes that UCP's largest competitors are Prevost and Mohawk, for coach
replacement parts, and the major transit manufacturers - BIA and Neopart (the
parts operation of Neoplan), for transit bus replacement parts. The remaining
competitors include other coach manufacturers, diesel engine manufacturers,
niche marketers and local vendors. Management believes that the factors
influencing the choice of parts suppliers include a supplier's proximity to the
customer, the number of replacement parts offered, level of technical knowledge
and support and, to a lesser extent, price. In addition, management believes
that the installed base of vehicles manufactured by MCII, also provides UCP a
distinct competitive advantage.

Management estimates that UCP has consistently captured a significant share of
the replacement parts business in its core inter-city coach and transit bus
parts segments (excluding engines, transmissions and related parts).


AUTOBUSES
Autobuses designs, manufacturers and sells coaches in the Mexican market and
manufactures for sale in the United States which is distributed by HBSI.

In January 1997, Dina contributed 99.99% of the capital stock of Autobuses to
MCII Holdings. This change in structure made Autobuses and its two
subsidiaries, Autopartes Hidalguenses, S.A. de C.V. and Carrocera Sahagun, S.A.
de C.V., indirect subsidiaries of MCII Holdings. Autobuses subsequently
established MCII Buses (USA), Inc. as its third subsidiary.


<TABLE>
<CAPTION>

                                                                           Year Ended December 31,
                                              ----------------------------------------------------------------------
                                                      1998                  1997                     1996
                                                      ----                  ----                     ----
                                                          
<S>                                                   <C>                    <C>                      <C>
Autobuses' Mexican inter-city coach sales             325                    232                      40

</TABLE>

                                       8
<PAGE>   10
<TABLE>
<CAPTION>

                                                                           Year Ended December 31,
                                              ----------------------------------------------------------------------
                                                      1998                  1997                     1996
                                                      ----                  ----                     ----
<S>                                                  <C>                     <C>                      <C>
Total Mexican market sales.............              1,308                   772                      313
Autobuses' market share................                 25%                   30%                      13%
Autobuses' export sales................                126                   234                      270
Urban buses                                            211                   248                        3
</TABLE>



MARKET AND CUSTOMERS
The use of coaches for inter-city travel in Mexico is more prevalent than in the
United States due to lower per capita disposable income and a relatively under
developed railway system. The current installed base of inter-city coaches in
Mexico is approximately 34,000 units, compared with approximately 38,000 units
in the United States, a country with nearly triple the population.

Market demand for coaches has proved sensitive to underlying economic
conditions, particularly interest rates. The Mexican new bus market is still
suffering from the consequences of the peso devaluation in late 1994

The provision of transit services is concentrated among relatively few
companies. Management estimates that four companies, operate over half of the
total long distance buses in the country. Due to the existing fleets and
purchase agreements each operator is closely identified to specific
manufacturers. The acquisition strategy of any of the four operators tends to
have a very important determinant on the market dynamics in each particular
year.

In 1993, Autobuses entered into a thirty-year contract with Grupo Estrella
Blanca, S.A. de C.V. ("Estrella Blanca"), pursuant to which Estrella Blanca
agreed to purchase coaches exclusively from Autobuses so long as Autobuses
priced its coaches competitively with the Mexican coach market. Due to the
crisis in the Mexican economy and Estrella Blanca's distressed financial
condition, Autobuses made no sales to Estrella Blanca in 1995, 1996 or 1997, but
was paid in full by FOBAPROA, a trust established by the Mexican government to
assist financially distressed vital service entities in Mexico, for the coaches
delivered to Estrella Blanca in 1994. Following the financial recovery of
Estrella Blanca, in 1997 Autobuses and Estrella Blanca agreed to extend the
contract for the sale of coaches until 2027.



                                        9
<PAGE>   11
PRODUCT LINE

Currently Autobuses manufactures two intracity coach models and a transit bus
model in Mexico, available in five variations.
-    THE VIAGGIO(R) MODEL is manufactured by Autobuses under a license from
     Marcopolo SA -- Carrocerias e Omnibus, a Brazilian bus manufacturer.
     Autobuses produces two products: the two axle 850 and the three-axle 1000
     unit, for different niches in the Mexican market. Autobuses also produces a
     variant of the 1000 compliant with Department of Transportation ("DOT")
     regulations for sale in United States markets; Such sales are handled by
     MCII's HBSI subsidiary.
-    THE F-SERIES models were introduced in the first quarter of 1998 with the
     launch of the F-11. This new unit has proved popular with operators,
     representing over half of total Autobuses deliveries in 1998. The unit is a
     basic line-haul product produced from a proprietary design, which offers
     operators an attractive unit at an economic price. Autobuses launched the
     F-12, a twelve-meter unit in the first quarter of 1999. Management is
     considering producing a DOT unit for the US market.
-    In 1994 Autobuses introduced to the cities and urban transit bus for use in
     inner-city markets.

COMPETITION.
     Autobuses competes against two other major companies --Mexicana de
Autobuses (MASA), which had been operating under bankruptcy laws until it was
acquired by Volvo in 1998, and Omnibus Integrales. Each manufacturer is closely
affiliated with a specific operator. Autobuses' market share was 25% in 1998
compared with 30% and 13% in 1997 and 1996, respectively.

     The bases for competition in the inter-city coach market are original sales
price, parts availability and U.S.-manufactured componentory. Autobuses believes
it enjoys a competitive advantage due to its domestic production facilities, its
U.S.-designed components, the ability to tailor bodies to customer
specifications by offering a wide array of seating options and other amenities,
the well-established Dina brand names, nationwide replacement parts availability
and the imposition of tariffs on new coach imports by companies located in
countries that are not subject to the terms of NAFTA.

DISTRIBUTION.
      Except for sales in the United States by HBSI, coaches and transit buses
are currently sold by Autobuses directly to end users without the use of
distributors.


PRODUCTION.
      Autobuses assembles coaches at its plant in Ciudad Sahagun, Mexico. In
addition to Marcopolo bodies, Autobuses uses several suppliers, primarily in the
United States, for materials, components and other parts. Purchases from these
suppliers provide substantially all of Autobuses' requirements for diesel
engines, transmissions, suspensions, axles, brakes, electronic components, glass
parts and most components for bodies. Autobuses operates one line at its plant
with the capacity to produce 1,800 coaches annually.

     In 1998 Mexicana Manufactura Especiales ("MME") was formed as a subsidiary
of MCII Trucks, a wholly owned subsidiary of MCII Holdings. MME will establish
six facilities in the city of Guadalajara, Mexico and the surrounding Jalisco
state with the intention of manufacturing automotive parts for both subsidiaries
of Dina, including MCI and Dina Autobuses, and outside parties. In establishing
such a subsidiary management hopes to achieve considerable cost savings through
eliminating component outsourcing, as well as improve quality standards.
Initially parts production will focus on brake parts, sub-assembly, windows,
hoses, exhaust tubing, seats, electrical harnesses, steel shapes and structural
tubing; Later products will include bus bodies. 

                                       10
<PAGE>   12
OTHER CONSIDERATIONS

BUSINESS STRATEGY

In recent years MCII has benefited from the strength of the US economy.
Management is aware of the cyclical nature of the business and is pursuing the
following strategies to maximize profitability:

MAINTAIN A TECHNOLOGY ADVANTAGE OVER COMPETITORS
In the last two years, the Company has introduced two new model lines, the
E-Series "Renaissance" for use in luxury tour & charter markets, and the
F-Series a budget line haul model designed for the Mexican marketplace.
Management believes that each unit is highly competitive within each specific
market place and that customer acceptance of both units has been high in 1998.
In 1999, the Company intends to introduce the G-Series unit, which will enter
pilot production late in the year. The all-new unit, designed in conjunction
with GLI, incorporates many of the design lessons derived from the introduction
of the E-Series unit and is targeted to serve the needs of the line haul market.

SEEK NEW MARKET NICHES AND GEOGRAPHIC OPPORTUNITIES 
In 1999, Management intends to build on the success of recently launched units.
In the United States Management will increase its marketing of E-Series units
into the conversion segment. The Company is also examining the possibility of
introducing the F-Series model into this niche. In Mexico, the Company will
introduce a twelve-meter version of the F-Series market to broaden the
availability of options to operators. In the longer term the Company is
considering marketing the F-Series unit internationally, with a particular focus
into Latin America.

IMPROVE THE SERVICE ASPECTS OF THE BUSINESS
Management firmly believes that a major reason behind the Company's success has
been its dedication to offer customers the best in service. This culture is one
reflected in the full-service approach to business undertaken by MCII, including
new bus sales, used bus sales, financing, leasing and parts. In 1998, the
Company opened three new facilities in Dallas, Montreal and Los Angeles while
other such facilities are planned. At UCP, the Company announced the
consolidation of facilities in a new custom-built facility in Louisville,
Kentucky. The strategic location of this facility will permit orders placed as
late as 10pm to be delivered next day to customers nationwide.

LEVERAGE LOW COST MANUFACTURING
The Company continues to seek to lower manufacturing costs particularly by
leveraging Autobuses's underutilized facilities in Ciudad Sahgun, Mexico. In a
limited manner this process commenced with the introduction of the Viaggio(R)
1000 DOT units, which have filled a niche in the United States and Canadian
markets.

RESEARCH AND DEVELOPMENT.
The Company devotes significant resources to developing new products and
proprietary technology in order to expand and enhance its product line, reduce
production costs and improve service to customers. The Company conducts
engineering, testing and design at three facilities in Winnipeg, Manitoba;
Roswell, New Mexico; and Ciudad Sahagun, Mexico. In addition, the Company
periodically engages the services of engineering, testing and design companies.
The Company spent $10.2 million, $6.7 million and $7.3 million in the fiscal
years ended December 31, 1998, 1997 and 1996, respectively on research and
development. Current research and development projects for the Company's coach
operations include the G-Series and F-Series coach models.

                                       11
<PAGE>   13


RAW MATERIALS/COMPONENTS
         The Company's manufacturing/assembling operations utilize raw material
and components supplied by diverse North American and international sources.
Major component parts, such as engines, axles, transmissions, suspension, seats
and air conditioners, are provided by original equipment manufacturers.

         For certain materials and major components, the Company relies
primarily on a limited number of suppliers, namely Meritor for axles, Detroit
Diesel for engines, Allison Transmission for transmissions, Carrier for air
conditioning units and Atlas Alloys for stainless steel. Alternate suppliers
used to a lesser extent or available for use are Dana Corporation and Eaton
Corporation for axles, Cummins and Caterpillar for engines, Eaton Fuller and ZF
Friedrichshafen AGA for transmissions, Thermoking for air conditioning units and
Namasco Ltd. and others for stainless steel. Although there are additional
alternate suppliers, the Company's customers demand the component parts that are
currently assembled into its coaches. The Company also relies on component parts
and design technology provided by Marcopolo in the assembly of its Viaggio(R)
coach models.


GOVERNMENT REGULATION
The operations of, and the products manufactured by, MCII Holdings' subsidiaries
are subject to various United States federal and state and Canadian federal and
provincial laws and agency regulations. In the United States, these regulations
include the Clean Air Act and other environmental acts which regulate coach
engine emissions and plant operations; Federal Motor Vehicle Safety Standards
which establish minimum safety standards for various components of coaches; the
Americans With Disabilities Act, which specifies accessibility standards for the
physically challenged; and Buy America legislation prohibiting the use of
federal funds for coaches with less than 60% United States content. In Canada,
regulations include various environmental acts, which regulate coach plant
operations, and Canadian Motor Vehicle Safety Regulations that establish minimum
safety standards for various coach components. Although the Canadian government
has not adopted accessibility standards for the physically challenged, such
standards are currently the subject of several official studies. MCII Holdings
cannot accurately predict future expenses or liability which might be incurred
as a result of such laws and regulations.

The Americans with Disabilities Act required, among other things, that the
Department of Transportation ("DOT") promulgate handicapped accessibility
standards for coaches. On September 28, 1998, DOT issued final regulations
regarding coach accessibility requirements. The rules require that all coaches
delivered to large line haul operators beginning October 2000 must be
handicapped accessible. Further, the rules also contain certain other
requirements concerning accessible fleet percentages and providing accessible
service. The Company cannot predict whether rules, will have a material adverse
effect on an operator's business and possibly on the Company's coach business.

         Sales of coaches to the public sector in the United States are 
typically to local transit authorities, paid for in part by federal grants 
administered by the FTA and subject to the Buy America Act. The Buy America Act 
generally prohibits the use of federal funds for coach procurements unless (1) 
the cost of the coach components manufactured in the United States equals or 
exceeds 60% of the cost of all components and (2) final assembly of the coach 
occurs in the United States. While the Company believes that its manufacturing 
processes comply with the Buy America requirements for coach sales that are 
subject to the act, the Company cannot predict whether any future changes made 
by the Federal Transit Administration to the Buy America regulations would have 
any material effect on the Company.

         The operations and products of the Company are subject to Mexican
federal and state laws and regulations relating to the protection of the
environment. The fundamental environmental law in the




                                       12
<PAGE>   14

Mexican federal system is the Ley General de Equilibrio Ecologico y Proteccion
al Ambiente (the General Law of Ecological Balance and Environmental Protection,
or the "Ecological Law"). Under the Ecological Law, rules have been promulgated
concerning water pollution, air pollution, noise pollution and hazardous
substances. Additionally, the Mexican federal government has enacted regulations
concerning the importation and exportation of hazardous materials and hazardous
wastes. The Ministry of the Environment, in conjunction with other governmental
entities, state and municipal governments and with the participation of the
social and private sectors, is the Mexican federal agency in charge of
overseeing compliance with the federal environmental laws. The Ministry of the
Environment has the authority to enforce the Mexican federal environmental laws.
As part of its enforcement powers, the Ministry of the Environment can bring
administrative and criminal proceedings against companies that violate
environmental laws, and it also has the power to close non-complying facilities.

         It is possible that changes in Mexican federal and state environmental
laws, or their interpretation or enforcement, could result in material costs to
the Company. At this time, management of the Company is not aware of any pending
legislation which might, if passed, result in material costs to the Company.

         All of the engines used on the Company's coaches comply with current
United States and Mexican government emissions standards.

         After the implementation of NAFTA in 1994, the Mexican
Auto-Transportation Decree was replaced with a transitional system of quotas
which were to be phased out over five years. Commencing in 1999, such import
limitation is scheduled to be eliminated. NAFTA permits Mexico to maintain
quotas on parts and components for a ten-year period. Under NAFTA, Mexican
import tariffs for 1994 were 9% for components and 8% for engines. These tariffs
will be phased out over a ten-year period with respect to new United States and
Canadian coaches that satisfy NAFTA's United States, Canadian and Mexican
regional content requirements (50% regional content required to qualify for
reduced tariffs in 1994 to 1998, 55% in 1999 to 2002 and 60% thereafter). In
addition, under NAFTA, Mexican import tariffs on coach parts and components will
be phased out over a ten-year period. The present prohibition on importing used
coaches into Mexico will be maintained under NAFTA for 15 years and then will be
eliminated over a ten-year transition period, permitting the importation of used
coaches into Mexico with model ages not exceeding ten years. Dina products
imported by MCII for sale in the United States and Canada are subject to various
United States and Canadian laws and regulations.


PATENTS AND TRADEMARKS 
MCII Holdings owns numerous trademarks and patents that MCII Holdings believes
give it a competitive advantage in the marketplace. United States trademark
registrations are for a term of 10 years, renewable every 10 years so long as
the trademarks are used in the regular course of trade. The trademarks owned and
used by MCII Holdings include the MCI, and FLXIBLE marks. COACH GUARD and
DEISEL GUARD marks are in use in the replacement parts operations. MCII Holdings
owns numerous patents protecting, among other things, various aspects of the MCI
coaches. Patents are granted for a term of 17 years. MCII Holdings has the right
to use the Greyhound name and the "Image of the Running Dog" for the manufacture
and sale of inter-city coaches, transit buses and replacement parts in all
countries other than the United States, Canada and Mexico.



                                       13
<PAGE>   15

In Mexico, Dina has registered certain trademarks including DINA, DIMEX and
Citus. The Company also uses the Viaggio brand under license from Marcopolo in
Mexico, and owns the same trademark in the United States. The Company has
certain patents relating to its advanced "torsilastic" suspension system and
other components used in coaches. The Company operates under license for
numerous patents relating to its products and their manufacture held by third
parties. While many of these patents are considered important to particular
products, no particular patent or group of patents is considered by the Company
to be essential to its business as a whole.

EMPLOYEES
As of December 31, 1998, the Company had approximately 4,800 employees, with
approximately 1,400 in the United States, 2,300 employees in Canada and 1,100 in
Mexico. The hourly workers at most locations are organized and represented by
unions. Approximately 2,500 employees of the total work force are represented by
labor unions. The largest contracts are with the International Association of
Machinists and Aerospace Workers (the "IAM") in Winnipeg, Manitoba and Pembina,
North Dakota. The IAM contracts at Pembina expire September 30, 2000; those at
Winnipeg will expire in January 2000. MCII's subsidiaries have historically
enjoyed satisfactory relations with both union and non-union employees.

Approximately 800 Mexican employees are represented by the Independent Union of
Workers in the Automotive and Related Industries (the "Automotive Workers
Union".) In accordance with Mexican law, the salary provisions of these
agreements are renegotiated every year with the benefits provisions every two
years. The salary provision was renegotiated in February 1999. On February 10,
1999 the Company announced that it had reached agreement with the unions to
increase workers' salaries 18% immediately with an additional 4% in benefits.

The Company has experienced labor stoppages in early 1992, February 1994, and
most recently in February 1999 when Mexican production was halted for nearly one
week.


ITEM 2.   PROPERTIES

         The Company owns manufacturing and assembly plants in the United
States, Canada and Mexico. Additionally, the Company owns or leases various
replacement parts and repair facilities in the United States and Canada. The
Company also owns or leases other properties in Mexico, including a vehicle and
parts distribution center.

         The following table is a summary of the approximate square footage of
the Company's facilities as of December 31, 1998:

<TABLE>
<CAPTION>

                                  United States             Canada                 Mexico                    Total
                                  -------------             ------                 ------                    -----
<S>                                <C>                    <C>                  <C>                      <C>      
       Facility Type
       -------------
Manufacturing                         186,000                767,000              1,359,000                2,312,000
Replacement parts                   1,087,000                104,000                653,880                1,844,880
Modification or repair                134,000                      0                      0                  134,000
                                    ---------             ----------              ---------                ---------
     Total square feet              1,407,000                871,000              2,012,880                4,290,880
                                    =========             ==========              =========                =========

         Ownership
         ---------
Owned property                        782,000                811,000              1,359,000                2,952,000
Leased property                       625,000                 60,000                653,880                1,338,880
                                    ---------             ----------              ---------                ---------
     Total square feet              1,407,000                871,000              2,012,880                4,290,880
                                    =========             ==========              =========                =========

</TABLE>

                                       14
<PAGE>   16
ITEM 3.  LEGAL PROCEEDINGS
MCII Holdings and certain of its subsidiaries are parties either as plaintiffs
or defendants to various actions, proceedings and pending claims, certain of
which involve claims for compensatory, punitive or other damages. Litigation is
subject to many uncertainties and it is possible that some of the legal actions,
proceedings or claims referred to above could be decided against MCII Holdings.
Although the ultimate amount for which MCII Holdings may be held liable with
respect to matters where MCII Holdings is a defendant is not ascertainable, MCII
Holdings believes that any resulting liability will not materially affect its
financial condition or results of operations.

         The Company's Canadian income tax returns for 1982 through 1992 are
currently under review by Revenue Canada. Authorities have proposed imputing
additional income related to transactions with a United States based subsidiary
of the Company. Revenue Canada has issued a formal reassessment on the 1985
return. The Company has filed a notice of objection for 1985. In the event of an
adverse judgment, the additional income taxes for 1982 through 1992 could amount
to $23,000,000 plus interest of approximately $47,000,000 and, in addition, the
Company may be subject to potential reassessments for the years subsequent to
1992 on the same basis, which could result in additional income taxes and
interest. These amounts are all before recoveries of United States federal
income taxes which may be available to offset a portion of any additional taxes
paid to Canada, as these years are still open for United States federal income
tax purposes. In accordance with SFAS No. 109, "Accounting for Income Taxes," a
portion of any ultimate liability owed as a result of this issue would be
treated as an adjustment of Dina's purchase price on acquiring the Company,
resulting in an increase of purchase goodwill. (If the ultimate liability were
$70,000,000, then approximately $45,000,000 would be a purchase accounting
adjustment.) Based on its review of current relevant information, including the
advice of outside counsel, the Company is of the opinion that Revenue Canada's
arguments are without merit and that any liability from this matter will not be
material to its financial condition or results of operations.


         Manufacturers and sellers of defective products in Mexico may be
subject to liability for loss and injury caused by such products under Mexican
law. The Company does not carry product liability insurance for product sales in
Mexico. Although the Company has never had a product liability claim brought
against its Mexican operations and the Mexican laws providing for such liability
appear to have been seldom utilized, no assurance can be given that the Company
may not be exposed to future product liability claims in Mexico and, if such
claims are successful, that the Company will have sufficient resources to pay
such claims.



ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
This item has been omitted pursuant to General Instruction I of Form 10-K, which
provides for a reduced disclosure format.


                                     PART II



ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Not applicable.





                                       15
<PAGE>   17

ITEM 6.  SELECTED FINANCIAL DATA
         This item has been omitted pursuant to General Instruction I of Form
10-K, which provides for a reduced disclosure format.


ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS


           Pursuant to General Instruction I of Form 10-K, which provides for a
reduced disclosure format, the following is management's narrative analysis of
the material changes in the Statement of Consolidated Income and is in lieu of
management's discussion and analysis pursuant to Regulation S-K 303. The
following discussion should be read in conjunction with MCII Holding's
consolidated financial statements included in this Annual Report.










                                       16
<PAGE>   18
MCII HOLDINGS OPERATING HIGHLIGHTS
<TABLE>
<CAPTION>

                                                                       1998                   1997                  1996
                                                                       ----                   ----                  ----

<S>                                                                    <C>                    <C>                   <C>  
         Units:
              United States and Canadian Operations
                   MCII New Coaches                                    1,670                  1,279                 1,245
                   Viaggio Coaches                                       159                    222                   226
                   Used Coaches                                          779                    496                   571
               Mexican Operations
                   Intercity Coaches                                     325                    232                    40

                                                                                         (000 OMITTED)
         Revenues:
              United States and Canadian Operations
                  Coach and Support                                  $ 677,661             $ 503,635              $ 499,611
                  Replacement Parts                                    172,815               190,178                161,682
              Mexican Operations                                        81,307                45,970                  5,791
                                                                     ---------             ---------              ---------
                                                                     $ 931,783             $ 739,783              $ 667,084
                                                                     =========             =========              =========
         Operating income:
              United States and Canadian Operations
                  Coach and Support                                  $ 70,114              $  46,785              $ 39,865
                  Replacement Parts                                    21,497                 15,754                14,788
              Mexican Operations                                       (9,740)                15,914                 5,180
                                                                     --------              ---------              --------
                                                                     $ 81,871              $  78,453              $ 59,833
                                                                     ========              =========              ========

</TABLE>







                                       17
<PAGE>   19
RESULTS OF OPERATIONS

1998 COMPARED WITH 1997

         Revenues increased 26% in 1998 to $931.8 million due to strong customer
demand and acceptance of the E-Series Coach in the United States and Canada and
improving economic conditions in Mexico. Operating income increased 4% to $81.9
million. Operating income in the United States and Canada increased $29.1
million, or 46%, to $91.6 million, due to increased sales, reduced production
costs, and recovery of business insurance claims for business interruptions
caused by flooding conditions in 1997. Operating income in Mexico decreased
$25.7 million to a loss of $9.7 million Net income from continuing operations
was $38.6 million in 1998, compared with $38.2 million in 1997.

MCII

         MCII's revenues were a record $850.5 million in 1998, an increase of
$156.7 million, or 23%, over 1997. New coach deliveries were a record 1,670, up
32% from 1997. Improvements were derived from the continued high growth / low
interest rate environment of the United States economy which has heightened
demand for coach travel and facilitated lower cost financing for operators.
Growth was particularly enabled by the non-recurrence of production problems
that impacted the Company during 1997 (flooding conditions during the second
quarter and difficulties associated wit h the initial rollout of the E-Series
coach.

         The increasing acceptance of the new E-Series unit has been a major
feature of the demand profile. Sales reached 482 units in 1998, compared to 67
units when introduced in 1997.

         The used coach business responded well to management initiatives aimed
at increasing turnover, with sales advancing to 779, compared to 496 units in
1997. Over the course of 1998, HBSI accepted 733 units as trade-ins as part of
new unit transactions.

         Parts sales declined 9%, to $172.8 million. Traditionally, parts demand
has run in a counter-cyclical manner to the demand for new units and this trend
appears to continue.

         MCII's operating income of $91.6 million represented an increase of
$29.1 million from $62.5 million in 1997. MCII's coach manufacturing operations
benefited from the increasing production efficiency of the E-Series unit as the
learning curve of the model rollout continued to improve. Other cost
improvements resulted from the settlement of flood related insurance claims in
1998 ($8.0 million) and reduced new product start-up costs ($7.3 million).


                                       18
<PAGE>   20
Mexico

         Mexican sales continued to improve in 1998, reaching $81.3 million, an
increase of $35.3 million. Deliveries of inter-city coaches increased to 325
units in 1998 from 232 units in 1997. Replacement parts sales increased $13.7
million, or 164%, to $22.0 million in 1998.

         Mexican operating losses of $9.8 million were a disappointment
compared to income of $15.9 million in 1997. Earnings at Autobuses declined
$18.2 million, due to higher commissions expense of $1.1 million and increased
provision for bad debts of $3.9 million. Mexicana had start-up losses of $2.2
million, caused mainly by new product start-up costs of $1.4 million. Finally,
manufacturing profits on Viaggio units sold in the United States decline by $5.7
million.

Other Income and Expense

         Other income and expenses reduced income by $12.0 million in 1997,
compared with $19.0 million. The favorable effect of $5.0 million was
essentially due to a gain on the sale of an equity investment.

         On September 14 1998, a subsidiary of MCII Holdings sold its 10% stake
in Mexicana de Autobuses S.A. de C.V. (MASA) for $7 million in cash. The Company
acquired its 10% ownership interest in MASA in 1995 and had revalued the
investment to zero when MASA subsequently filed for bankruptcy. The 1998 gain on
the sale was $5.0 million before taxes, after reimbursing Dina for $2 million in
related expenses.

         Net interest expense was $20.0 million in 1998, compared with $21.9
million in 1997. Dina allocated net interest income of $8.8 million to Autobuses
in 1998, compared with Dina's allocation of net interest income of $1.4 million
to Autobuses in 1997. Therefore, external interest expense increased
approximately $5.5 million, primarily due to Autobuses Pre-Export Notes.


Income Taxes

         The effective income tax rate increased to 44.8% in 1998 from 35.8%
in 1997 primarily due to the decline Autobuses' Mexican income. Autobuses has
generated net loss carry-forwards in prior years as a result of economic
difficulties encountered in the early 1990s. The Company had not previously
recognized the carry-forward benefit of such losses due to the uncertainty of
the realization of such benefits. Therefore, these loss carryforwards were
recognized in 1997 to offset Autobuses 1997 income. Due to the continued
uncertainty of the realization of any net operating loss carryforwards,
Autobuses' 1998 Mexican losses were recorded without income tax benefits.


                                       19
<PAGE>   21
         1997 COMPARED WITH 1996


         Results in 1997 were characterized by strong market demand for units
being negated by production problems at MCII and resulting in lower market share
and flat sales. Mexican sales indicated substantial year-on-year improvements
although the overall level of activity was still very depressed due to the after
effects of the 1994 peso crisis. Revenues for 1997 were $739.8 million, 11%
higher than those generated in 1996. Operating income increased 31% to $78.5
million. Net income from continuing operations was $38.2 million in 1997,
compared with $27.7 million in 1996 (net income for 1996 was $21.8 million,
which reflected an additional $5.0 million expense incurred for MCII's
discontinued transit manufacturing business and $0.9 million of debt issuance
costs.)

MCII

         Despite very strong underlying strength in the United States coach
market, MCII was unable to take full advantage of such growth due to two
production problems: (1): The flooding of the Red River in the second quarter of
the year closed access roads to MCII's manufacturing operations in the United
States and Canada, and unfavorably affecting production; and (2): Production
difficulties encountered with the introduction of the E-Series unit over the
course of the year. As a result of these two factors, new coach sales were 1,279
in 1997, compared with 1,245 in 1996. Sales of Viaggios in the United States
declined to 222 units in 1998, compared with 226 in 1996. To compensate
customers who experienced delays as a result of the production difficulties, the
Company leased 75 used units at favorable terms. As a result of such leases,
used coach sales declined to 496 in 1997, compared with 571 in 1996. MCII's
revenues of $693.8 million in 1997 increased from 1996 by 5% as coach
manufacturing revenues increased 1% against the prior year and replacement
parts' revenues of $190.2 million in 1997 increased from 1996 by 18%, due
largely to the 1996 acquisition of certain assets of the Flxible business.

         MCII's operating income of $62.5 million in 1997 was a $7.9 million
increase over MCII's operating income in 1996. Operating income from MCII's
coach manufacturing operations increased $6.9 million in 1997, due to improved
operating cost control efforts which more than offset $7.3 million in new
product start-up costs and $0.9 million of additional corporate office
relocation costs. Operating income from replacement parts increased $1.0 million
in 1997, due to higher sales volume.

Mexico

         In Mexico, Autobuses continued to reposition itself in response to the
lingering problems created by the 1994 devaluation and ensuing severe economic
recession. In 1997, Autobuses' domestic sales increased to 232 units, compared
with sales of 40 units in 1996. In addition, Autobuses, in a new business
initiative, leased 440 transit bus units during 1997, including 240 units to a
related party. Mexican revenues in 1997 of $46.0 million increased by $40.2
million over 1996 revenues.

                                       20
<PAGE>   22

         Mexican operating income increased $10.7 million in 1997 due to higher
revenues in Mexico and higher manufacturing profit on units sold in the United
States.

Other Income and Expense

         Other income and expenses reduced income by $19.0 million in 1997,
compared with $13.7 million. The unfavorable effect of $5.3 million was due to
higher net interest expenses.

         Interest expense increased $5.8 million to $21.9 million in 1997,
reflecting higher debt levels at MCII (greater use of revolving bank credit
facilities) and Autobuses (pre-export loans and notes). Dina allocated net
interest income of $1.4 million to Autobuses in 1997, compared with Dina's
allocation of net interest expense of $1.5 million to Autobuses in 1996.

Income Taxes

         The effective income tax rate declined to 35.8% in 1997 from 40.0% in
1996 primarily due to the application of net loss carry-forwards to Autobuses'
increased Mexican income. Autobuses had generated net loss carry-forwards in
prior years as a result of economic difficulties encountered in the early 1990s.
The Company had not previously recognized the carry-forward benefit of such
losses due to the uncertainty of the realization of such benefits. In 1997, the
Company was able to offset these losses against the current year's income.
Consequently, Autobuses' 1997 Mexican profits for book purposes were recorded
with no income tax.




                                       21
<PAGE>   23
OTHER FACTORS.

FINANCIAL RESTRUCTURING

         On June 3, 1996, the Company became contingently liable for payments of
principal and interest on the Senior Secured Discount Notes due 2002 ("Discount
Notes") of Dina, the parent company. It was intended that all payments with
respect to the Discount Notes would be paid by Dina, and that payments would be
made by the Company only in the event of the inability of the parent company to
service the debt. Effective December 31, 1998, the Company recognized it's
liability for interest and principal payments with regard to this debt
obligation due to substantial doubt about the parent company's ability to
service the debt. Consequently, the Company recorded $206,499,680 of additional
debt as more fully described in Note 16, accrued $2,919,000 of interest payable,
and adjusted shareholder's equity accordingly.

         As at December 31, 1998, Transportation Manufacturing Operations Inc.
("TMO") a principal subsidiary of the Company, had a $170 million US revolving
credit agreement ("the Senior Credit Facility") with a nine bank syndicate to
finance working capital and other general corporate needs, as more fully
described in Note 16. This credit facility expires on October 1, 1999, and the
lenders have indicated that they are not willing to extend the maturity of this
agreement. In addition, during 1998, the Company was required to reduce existing
long-term debt obligations by $50 million, consisting of a $25 million principal
payment on TMO's Senior Term Notes, due 2002, a $12 million reduction in it's
Canadian bank credit facility, and a $13 million principal payment on the
Pre-Export Notes due 1999 (see Note 16).

         As a result of the debt reductions during 1998 and the additional debt
obligations and working capital requirements for 1999, the Company does not
expect to generate sufficient cash flow from operations to fund both short term
requirements and meet the required expiration of the US credit facility.

         On March 18, 1999, the Company engaged CIBC Oppenheimer Corp. and its
affiliates (" CIBC Oppenheimer") to act as the Company's lead bank agent,
financial advisor, initial purchaser, placement agent and underwriter to
undertake a financial restructuring of the debt obligations of the Company and
the parent company.

         On April 19, 1999, TMO executed an agreement with CIBC Oppenheimer for
the issuance of $40 million of Senior Subordinated Increasing Rate Notes ("the
IRNs"), due December 31, 1999 (subject to extension to March 31, 2000). This
bridge financing will be used by TMO to meet short-term working capital
requirements while the financial restructuring process is underway. The IRNs
will mature on December 31, 1999 (with an option to extend the maturity to March
31, 2000) and will bear an increasing rate of interest, commencing with a rate
that will be the greater of (i)LIBOR plus 6.50% or (ii) 11.625%, and increasing
by 25 basis points (0.25%) every 30 days that the IRNs are outstanding to a
maximum rate of 18%. As a condition of the consent of the existing lenders,
interest above 15.0% must be paid in kind. The IRNs will rank senior to all
existing subordinated debt and subordinated to all existing senior debt of TMO.
The agreement provides TMO with an option to redeem the IRNs, in whole, but not
in part, at any time prior to maturity at fixed redemption prices. TMO must also
redeem the IRNs at a fixed redemption price upon a change in control of TMO or
any of its parent companies. TMO has the option to extend the maturity date of
the IRNs to March 31, 2000, at the maximum interest rate of 18.0% (with interest
above 15.0% paid in kind). However, as additional consideration for the
extension, TMO will be required to issue to the existing noteholders an
additional $4 million aggregate principal amount of IRNs (the "Extension IRNs").
The IRNs are subject to certain affirmative and negative covenants customary for
this type of financing, and are guaranteed by TMO's material domestic
subsidiaries.

         On April 19, 1999, TMO and its principal subsidiaries obtained the
necessary consent and related amendments required from the existing lenders to
permit the bridge financing and remain in compliance with certain financial
covenants. In consideration for the consent of the existing lenders, TMO agreed
to certain changes in the terms of the existing debt agreements, as further
described in Note 16.

         In addition to the bridge financing, the Company, in association with
CIBC Oppenheimer, has developed a financial restructuring plan to refinance all
of the material debt obligations of the parent, the Company and their respective
subsidiaries. The new financing is expected to result in gross proceeds to the
Company of approximately $715 million. The proceeds of the new financing are
expected to be used by the Company to refinance certain indebtedness of the
parent, the Company and their respective subsidiaries including, but not limited
to, the IRNs, the US and Canadian revolving credit facilities, the 9.02% Senior
Term Notes due 2002, and the Senior Secured Discount Notes due 2002. The
Company expects to complete the new financing and the refinancing prior to the
October 1, 1999 maturity of the existing US credit facilities. In the event that
the financial restructuring is not completed by September 30, 1999, and TMO has
not been able to obtain sufficient funding to retire the IRN's, the US Bank
credit facility and the Term Notes due 2002, TMO will be in default of each of
these credit agreements. This in turn would trigger cross default covenants in
substantially all of the Company's other debt agreements and provide the holders
of its debt with the right to accelerate payments of all amounts outstanding.
The existence of acceleration rights would also require the Company to classify
all long-term indebtedness as current. In light of these potentially adverse
consequences to the Company's financial position, management is diligently
pursuing the consummation of the financial restructuring.


                                       22
 
<PAGE>   24
         While there is no assurance that the financial restructuring plan will
be completed successfully at this time, the Company is continuing to work with
CIBC Oppenheimer to execute this plan. In the event that the financial
restructuring cannot be completed prior to the October 1, 1999 maturity, the
Company is also exploring alternatives to generate additional cash flow
including, but not limited to, selling substantial Company assets and seeking
strategic equity investors.

YEAR 2000 READINESS DISCLOSURE

         In today's business environment, companies have developed a strong
technological interdependence with each other. As the Year 2000 draws near, many
businesses are increasingly concerned about how their business applications, as
well as those utilized by their business partners, will handle the century date
change. A summarized definition of the Year 2000 issue is the inability of
certain computer systems, software, and embedded-technologies to recognize or
process dates beyond December 31, 1999. This problem may cause significant
disruptions in manufacturing, administrative, and distribution processes, as
well as other computer supported activities.

         The Company has developed a plan to ensure that its systems have the
ability to process transactions in the year 2000. The Company believes that it
has identified the applications that will need to be modified to properly
utilize dates beyond December 31, 1999. Both internal and external resources
will be utilized to reprogram and test software for Year 2000 compliance.

         It is anticipated that the Year 2000 project will be completed no later
than September 1999. The estimated total cost of making the systems Year 2000
compliant is approximately $2.0 million. This cost will be expensed as incurred
except for the installation of new applications that are already Year 2000
compliant.

         Based on present information, the Company believes that it will be able
to achieve Year 2000 compliance through a combination of modifications to some
existing systems and the purchase of other systems that are already Year 2000
compliant. The Company 



                                       23
<PAGE>   25

believes that the expenses and capital expenditures associated with achieving
Year 2000 compliance will not have a material effect on its financial results in
1999.

           The Company is contacting business partners whose Year 2000
non-compliance could adversely affect the Company's operations, employees, or
customers. The Company believes the most likely worst case scenario would be the
failure of a material business partner to be Year 2000 compliant. Therefore, the
Company will continue to work with and monitor the progress of its partners and
formulate a contingency plan when the Company does not believe the business
partner will be compliant.



ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

      MCII Holdings' consolidated financial statements and Report of Independent
Accountants is set forth at pages F-1 to F-26 of this Annual Report on Form
10-K.



ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

      None.





                                    PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
      This Item has been omitted pursuant to General Instruction I of Form 10-K,
which provides for a reduced disclosure format.


                                       24
<PAGE>   26
ITEM 11. EXECUTIVE COMPENSATION
         This item has been omitted pursuant to General Instruction I of Form
10-K, which provides for a reduced disclosure format.



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
      This item has been omitted pursuant to General Instruction I of Form 10-K,
which provides for a reduced disclosure format.




ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
         This item has been omitted pursuant to General Instruction I of Form
10-K, which provides for a reduced disclosure format.



                                     PART IV

ITEM 14. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

      (a)LIST OF DOCUMENTS FILED

      1. FINANCIAL STATEMENTS

         Report of Independent Accountants

         Statement of Consolidated Income,
         Years ended December 31, 1998, 1997, and 1996

         Balance Sheet, December 31, 1998 and 1997

         Statement of Consolidated Changes in Stockholder's Equity, Years ended
         December 31, 1998 and 1997.

         Statement of Consolidated Cash Flows,
         Years ended December 31, 1998, 1997, and 1996

         Notes to Consolidated Financial Statements

      2. FINANCIAL STATEMENT SCHEDULES

         Report of Independent Accountants

         Schedule I -- Condensed Financial Information of Registrant

                                       
                                       25
<PAGE>   27

         All other schedules are omitted because they are not applicable or the
         required information is presented in the consolidated financial
         statements or notes thereto.

3. EXHIBITS

     EXHIBIT NO.               DESCRIPTION
     -----------               -----------

        3.1     Restated Certificate of Incorporation of the Company
                (incorporated by reference to Exhibit 3.2 to Dina's Registration
                Statement on Form F-1/S-1, File No. 333-08843)

        3.2     Restated Certificate of Incorporation of the Company 
                (incorporated by reference to Exhibit 3.3 to Dina's 
                Registration Statement Form F-1/S-1, File No. 333-08843)

        4.1     Credit Agreement, dated as of September 30, 1996, among 
                Transportation Manufacturing Operations, the Lenders named 
                therein and NBD Bank, as Administrative Agent (incorporated by 
                reference to Exhibit 4.3 to Dina's Registration Statement on 
                Form F-1/S-1, File No. 333-08843)

        4.2     Amendment No. 1 to Credit Agreement, dated as of December 17, 
                1996, by and between Transportation Manufacturing Operations, 
                Inc. and NBD Bank, as Administrative Agent, Swing Line Bank and
                Issuing Lender (incorporated by reference to Exhibit 4.2 to the
                Company's Form 10-K for the fiscal year ended December 31, 1996)
 
        4.3     Amendment No. 2 to Credit Agreement, dated as of May 23, 1997,
                among Transportation Manufacturing Operations, Inc., the
                Guarantors named therein, the Lenders named therein, The First
                National Bank of Chicago, as Swing Line Bank and an Issuing
                Lender, and as Administrative Agent, and NBD Bank, as Swing Line
                Bank and an Issuing Lender, and as the resigning Administrative
                Agent

        4.4     Amendment No. 3 to Credit Agreement, dated as of September 25, 
                1997, among Transportation Manufacturing Operations, Inc., the 
                Lenders named therein, The First National Bank of Chicago, as 
                Administrative Agent, and The Bank of New York, as Co-Agent

        4.5     Amendment No. 4 to Credit Agreement dated as of June 26, 1998, 
                among Transportation Manufacturing Operations, Inc., the 
                Lenders named therein, The First National Bank of Chicago, as 
                Administrative Agent, and The Bank of New York as Co-Agent

        4.6     Amendment No. 5 to Credit Agreement, dated as of April 19, 1999,
                among Transportation Manufacturing Operations, Inc., the lenders
                named therein, and the First National Bank of Chicago, as
                Administrative Agent for the Lenders.

        4.7     Note Agreement, dated as of November 15, 1994, among 
                Transportation Manufacturing Operations, Inc. and the Purchasers
                named therein governing the 9.02% Senior Notes due November 15,
                2002 (incorporated by reference to Exhibit 3.23 to Dina's Form 
                20-F for the year ended December 31, 1994)

        4.8     Amendment to Note Agreement, dated as of April 7, 1995, among
                Transportation Manufacturing Operations, Inc. and the Purchasers
                named therein (incorporated by reference to Exhibit 4.4 to
                Dina's Registration Statement on Form F-1/S-1, File No.
                333-08843)
        
        4.9     Amendment to Note Agreement, dated as of September 1996, among 
                Transportation Manufacturing Operations, Inc. and the Holders 
                named therein

        4.10    Amendment to Note Agreement, dated as of October 30, 1997, 
                among Transportation Manufacturing Operations, Inc. and the 
                Holders named therein

        4.11    Amendment to Note Agreement, dated as of April 19, 1999, among
                Transportation Manufacturing Operations, Inc., and the Holders
                named therein.
 
        4.12    Intercreditor Agreement, dated as of September 30, 1996, by and
                among the Lenders under the Credit Agreement dated as of 


                                       26

<PAGE>   28

                September 30, 1996, NBD Bank, and the holders of the 9.02% 
                Senior Notes due 2002 (incorporated by reference to Exhibit 4.6 
                to Dina's Registration Statement on Form F-1/S-1, File No. 
                333-08843)

        4.13    Indenture, dated as of April 30, 1996 between Dina and IBJ 
                Schroder Bank & Trust Company, as Trustee, relating to the 
                9.02% Senior Notes due November 15, 2002, including the form of 
                Old Note and New Note, filed as Exhibit 2.4 to Dina's Annual 
                Report on Form 20-F for the year ended December 31, 1995 and 
                incorporated by reference herein (incorporated by reference to 
                Exhibit 4.6 to the Company's Form 10-K for the fiscal year 
                ended December 31, 1996)

        4.14    Form of 9.02% Senior Note due 2002 (incorporated by reference 
                to Exhibit 2.4 to Dina's Annual Report on Form 20-F for the 
                year ended December 31, 1995)

        10      Employment Agreement, dated as September 30, 1996, between 
                Transportation Manufacturing Operations, Inc., and James P. 
                Bernacchi (incorporated by reference to Exhibit 10.24 to Dina's 
                Registration Statement on Form F-1/S-1, File No. 333-08843)


        12      Computation of ratio of earnings to fixed charges

        27      EDGAR Financial Data Schedule 


        (b) REPORTS ON FORM 8-K

        The Company did not file any reports on Form 8-K during the fourth
quarter of the fiscal year covered by this report.


                                       27
<PAGE>   29

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

DATE:  April 19, 1999           MCII HOLDINGS (USA), INC. (Registrant)


                                  By:  /s/
                                      -----
                                  Director, Chief Executive Officer

                                  By:  /s/
                                      -----
                                  Chief Accounting Officer


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>

  Signature                                    Title                               Date
  ---------                                    -----                               ----




<S>                             <C>                                           <C> 
/s/ Rafael G\mez                    
----------------------------           President and Director                  April 15, 1999
Rafael G\mez Flores               (Principal Executive Officer )

          /s/                    
      ----------                                                               April 15, 1999
Jose Ignacio Moreno                   Chief Financial Officer


          /s/                
      ----------                             Director                          April 15, 1999
Gamaliel Garcia Cortes


          /s/                
      ----------                              Director                         April 15, 1999
Stephen P. Glennon

</TABLE>

                                       28
<PAGE>   30



                            MCII HOLDINGS (USA), INC.
                                  CONSOLIDATED
                              FINANCIAL STATEMENTS
                                  AND SCHEDULES











                                      
<PAGE>   31


Report of Independent Public Accountants

To the Shareholder of MCII Holdings (USA), Inc.:

     We have audited the accompanying consolidated balance sheets of MCII
     Holdings (USA), Inc. and its subsidiaries (the "Company") as of December
     31, 1998 and December 31, 1997 and the related consolidated statements of
     income, changes in stockholder's equity and cash flows for the years then
     ended. These financial statements are the responsibility of the Company's
     management. Our responsibility is to express an opinion on these
     consolidated financial statements based on our audits.

     We conducted our audits in accordance with generally accepted auditing
     standards. Those standards require that we plan and perform the audit to
     obtain reasonable assurance about whether the consolidated financial
     statements are free of material misstatement. An audit includes examining,
     on a test basis, evidence supporting the amounts and disclosures in the
     consolidated financial statements. An audit also includes assessing the
     accounting principles used and significant estimates made by management, as
     well as evaluating the overall financial statement presentation. We believe
     that our audits provide a reasonable basis for our opinion.

     In our opinion, the consolidated financial statements referred to above
     present fairly, in all material respects, the consolidated financial
     position of the Company as of December 31, 1998 and December 31, 1997, and
     the consolidated results of its operations and cash flows for the years 
     then ended in conformity with generally accepted accounting principles.

     The accompanying financial statements have been prepared assuming the
     Company will continue as a going concern. As discussed in Note 2 and 15 to
     the financial statements, the Company and its principal subsidiaries have
     significant debt obligations, including a US bank credit facility that
     expires on October 1, 1999. The Company does not expect to generate
     sufficient cash flow from operations to meet its current debt obligations
     and provide for growth in working capital. While the Company plans to
     refinance all of its existing material debt obligations prior to maturity,
     no binding agreement currently exists to undertake the refinancing. This
     matter raises substantial doubt about the Company's ability to continue as
     a going concern. Management plans with regard to this matter are described
     in Note 2. These financial statements do not include any adjustments that
     might result from the outcome of this uncertainty.


     Arthur Andersen LLP

     Chicago, IL
     April 20, 1999




                                      
<PAGE>   32

Report of  Independent Accountants

To the Stockholder of MCII Holdings (USA), Inc.:

In our opinion, the accompanying consolidated statements of income, changes in 
stockholder's equity and cash flows (as restated for acquisition of affiliate, 
see Note 6) for the year ended December 31, 1996 present fairly, in all 
material respects, the results of operations and cash flows of MCII Holdings
(USA), Inc. and its subsidiaries (the Company) for the year ended December 31, 
1996 in conformity with generally accepted accounting principles. These 
financial statements are the responsibility of the Company's management; our 
responsibility is to express an opinion on these financial statements based on 
our audit. We conducted our audit of these statements in accordance with 
generally accepted auditing standards which require that we plan and perform 
the audit to obtain reasonable assurance about whether the financial statements 
are free of material misstatement. An audit includes examining, on a test 
basis, evidence supporting the amounts and disclosures in the financial 
statements, assessing the accounting principles used and significant estimates 
made by management, and evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for the opinion expressed 
above. We have not audited the consolidated financial statements of the company 
for any period subsequent to December 31, 1996.



PricewaterhouseCoopers LLP

Chicago, Illinois

February 28, 1997 (except with respect to the matter in Note 6, as to which the
date is March 23, 1998).



                                     
<PAGE>   33
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS


                            MCII HOLDINGS (USA), INC.
       (A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)

                        STATEMENTS OF CONSOLIDATED INCOME

<TABLE>
<CAPTION>

                                                                                          Year Ended December 31,
                                                                             --------------------------------------------------
(000 omitted)                                                                   1998               1997               1996
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                          <C>               <C>                <C>     
Revenues:
         Sales                                                                  $925,945           $735,210           $658,823
         Finance income                                                            5,838              4,573              8,261
                                                                             ------------      -------------       ------------
                                                                                 931,783            739,783            667,084
                                                                             ------------      -------------       ------------

Operating costs and expenses:
         Cost of sales (exclusive of items shown separately below)               728,395            546,607            506,199
         Depreciation and amortization                                            24,819             22,035             17,618
         Interest expense, finance operations                                      2,765              2,394              3,605
         Research and development expenses                                         9,641              6,655              7,346
         New product start-up costs                                                1,521              7,333                  -
         Business insurance recoveries                                            (8,462)              (500)                 -
         Provision for relocation of Corporate office                                  -                886              3,000
         Selling, general and administrative expenses                             91,233             75,920             69,483
                                                                             ------------      -------------       ------------
                                                                                 849,912            661,330            607,251
                                                                             ------------      -------------       ------------

Operating Income                                                                  81,871             78,453             59,833
                                                                             ------------      -------------       ------------


Other income and (expense):
         Interest (expense) - net                                                (19,980)           (21,859)           (16,029)
         Other income                                                               (502)             2,920              2,197
         Gain (loss) on equity investments                                         5,000                  -             (1,200)
         Foreign currency translation gain (loss)                                  3,482                (85)             1,347
                                                                             ------------      -------------       ------------
                                                                                 (12,000)           (19,024)           (13,685)
                                                                             ------------      -------------       ------------

Income before income taxes                                                        69,871             59,429             46,148

Income taxes                                                                      31,283             21,268             18,474
                                                                             ------------      -------------       ------------

Income from Continuing Operations                                                 38,588             38,161             27,674

Discontinued operations:
         (Loss) on disposal of transit manufacturing, net of
              tax benefit of $3,130                                                    -                  -             (5,000)
                                                                             ------------      -------------       ------------

Income before extraordinary item                                                  38,588             38,161             22,674

Extraordinary (charge) for early retirement of debt, net
     of tax benefit of $550                                                            -                  -               (851)
                                                                             ------------      -------------       ------------

Net Income                                                                      $ 38,588           $ 38,161           $ 21,823
                                                                             ============      =============       ============

</TABLE>
        The accompanying notes are an integral part of these statements

                                      F-1
<PAGE>   34
                            MCII HOLDINGS (USA), INC.
       (A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)

                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>

                                                                            December 31,            December 31,
(000 omitted)                                                                   1998                    1997
Except per share info
-----------------------------------------------------------------------------------------------------------------

                 ASSETS
<S>                                                                            <C>                      <C>     
Current Assets:
              Cash and cash equivalents                                        $ 24,103                 $ 13,997
              Receivables, less allowance of $10,316 and $3,244                 122,508                   88,543
              Receivables from affiliates (Note 3)                                    -                   16,293
              Current portion of notes receivable                                10,548                    6,625
              Inventories                                                       226,272                  257,795
              Deferred income taxes                                              21,488                   14,430
              Other current assets                                                6,089                    7,591
                                                                            ------------            -------------
                          Total Current Assets                                  411,008                  405,274
Property, plant, and equipment, net                                             104,530                  106,845
Notes receivable                                                                 35,400                   42,465
Investments in affiliates                                                        23,116                   15,253
Intangible assets                                                               215,589                  227,367
Other assets                                                                     16,511                   23,469
                                                                            ------------            -------------

                          Total Assets                                         $806,154                 $820,673
                                                                            ============            =============

LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:

              Accounts payable                                                 $ 82,420                 $ 67,580
              Accrued compensation and other benefits                            13,343                   12,380
              Accrued warranties                                                 13,960                   10,020
              Accrued income taxes                                               32,390                    7,251
              Self insurance reserves                                             6,365                    5,610
              Net liabilities of discontinued operations                          4,416                    2,229
              Other current liabilities                                          31,132                   25,111
              Current portion of long-term debt                                 192,742                   44,418
                                                                            ------------            -------------
                          Total Current Liabilities                             376,768                  174,599
Long-term debt                                                                  281,723                  268,833
Pensions and other benefits                                                      15,787                   14,037
Other deferred items and self insurance reserves                                 19,059                   24,370
Deferred income taxes                                                             6,522                    6,916
                                                                            ------------            -------------
                          Total Liabilities                                     699,859                  488,755
                                                                            ------------            -------------

Commitments and contingent liabilities

Stockholder's Equity:
              Common stock, $.01 par value, 1,000 shares authorized,
                   issued, and outstanding and additional capital               159,500                  411,524
              Accumulated deficit                                               (23,945)                 (58,590)
              Accumulated other Comprehensive Income                            (29,260)                 (21,016)

                                                                            ------------            -------------
                          Total Stockholder's Equity                            106,295                  331,918
                                                                            ------------            -------------

                          Total Liabilities and Stockholder's Equity           $806,154                 $820,673
                                                                            ============            =============
</TABLE>
        The accompanying notes are an integral part of these statements
                                      F-2
<PAGE>   35
                            MCII HOLDINGS (USA), INC.
       (A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)

                 CONSOLIDATED STATEMENT OF STOCKHOLDER'S EQUITY

<TABLE>
<CAPTION>
                                                                                          Accumulated Other
                                                                                         Comprehensive Income
                                                                                        ----------------------
                                                      Common Stock                      Unfunded   Cumulative          Total
                                       Comprehensive  and Additional    Accumulated     Pension    Translation       Stockholder's
(000 omitted)                             Income         Capital      Earnings/(Deficit)  Loss      Adjustment          Equity
----------------------------------------------------------------------------------------------------------------------------------
<S>                                      <C>            <C>               <C>            <C>        <C>                <C> 
BALANCE, JANUARY 1, 1996                                $ 419,176         $(76,126)      $    -     $ (14,572)         $ 328,478
Comprehensive income -- 1996:
  Net income -- 1996                     $ 21,823                           21,823                                        21,823
  Other comprehensive income:
    Unfunded pension loss                    (423)                                         (423)                            (423)
    Unrealized translation loss            (1,061)                                                     (1,061)            (1,061)
                                         --------  
Comprehensive income                     $ 20,339  
                                         --------  
Capital contribution                                        1,342                                                          1,342
Return of capital to parent company                       (13,030)                                                       (13,030)
Dividends on common stock                                                  (30,000)                                      (30,000)
                                                        ---------         --------       ------     ---------          ---------
  
BALANCE, DECEMBER 31, 1996                                407,488          (84,303)        (423)      (15,633)           307,129
Comprehensive income -- 1997:
  Net income -- 1997                     $ 38,161                           38,161                                        38,161
  Other comprehensive income:
    Unfunded pension loss                    (154)                                         (154)                            (154)
    Unrealized translation loss            (4,806)                                                     (4,806)            (4,806)
                                         --------  
Comprehensive income                     $ 33,201
                                         --------  
Dividends on common stock                                                  (12,448)                                      (12,448)
Capital contribution                                        4,036                                                          4,036
                                                        ---------         --------       ------     ---------          ---------

BALANCE, DECEMBER 31, 1997                                411,524          (58,590)        (577)      (20,439)           331,918
Comprehensive income -- 1998:
  Net income -- 1998                     $ 38,588                           38,588                                        38,588
  Other comprehensive income:
    Unfunded pension loss                      61                                            61                               61
    Unrealized translation loss           (10,161)                                                    (10,161)           (10,161)
                                         --------  
Comprehensive income                     $ 28,488                                                                              -
                                         --------  
Recognition of contingent 
  obligation (Note 2)                                    (209,419)                                                      (209,419)
Net Receivable from Affliate (Note 3)                     (38,278)                                                       (38,278)
Adjustment (Note 5)                                        (4,327)            (443)                     1,856             (2,914)
Dividends on common stock                                                   (3,500)                                       (3,500)
                                                        ---------         --------     ----------   ---------          ---------

BALANCE, DECEMBER 31, 1998                              $ 159,500         $(23,945)      $ (516)    $ (28,744)         $ 106,295
                                                        ========================================================================

</TABLE>

        The accompanying notes are an integral part of these statements

                                      F-3
<PAGE>   36
                            MCII HOLDINGS (USA), INC.
       (A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)

                      STATEMENTS OF CONSOLIDATED CASH FLOWS

<TABLE>
<CAPTION>

                                                                                        Year Ended December 31,
                                                                      ------------------------------------------------------------
(000 omitted)                                                             1998                    1997                    1996
----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>                     <C>                     <C>
Cash Flows Provided (Used) By Operating Activities:
    Net Income                                                           $ 38,588                $ 38,161                $ 21,823
    Adjustments to reconcile net income to net cash
      provided (used) by operations:
                Depreciation and amortization                              24,819                  22,035                  17,618
                Deferred income taxes                                      (5,222)                  1,373                  (4,812)
                Discontinued operations                                         -                       -                   5,000
                Extraordinary items                                             -                       -                     851
                Provision for relocating corporate office                       -                     886                   3,000
                Gain on sale of property and notes receivable              (1,188)                    (92)                 (1,664)
                (Gain)/loss on equity investment                           (5,000)                      -                   1,200
                Other noncash items, net                                    8,609                   2,378                   5,403
                Change in operating assets and liabilities                 14,930                (117,326)                 (4,099)
                                                                      ------------            ------------            ------------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES                           75,536                 (52,585)                 44,320
                                                                      ------------            ------------            ------------

Cash Flows Provided (Used) By Investing Activities:
    Capital expenditures                                                  (13,478)                (32,096)                (25,609)
    Investments in assets held for lease                                   (4,279)                (56,375)                (54,538)
    Proceeds from sale of property and assets held for lease                1,247                  57,372                  50,880
    Notes receivable from customers                                       (59,644)                (49,580)                (40,344)
    Collections of notes receivable                                        57,656                  15,696                  18,844
    Proceeds from sale of notes receivable                                  2,750                  17,381                  24,934
    Purchase of, investment in, businesses                                 (7,860)                      -                 (12,200)
    Investment in affiliates                                                5,000                 (25,708)                      -
    Proceeds from sale of business                                              -                       -                   1,295
    Discontinued operations, net changes                                    2,187                   2,140                   6,400
                                                                      ------------            ------------            ------------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES                          (16,421)                (71,170)                (30,338)
                                                                      ------------            ------------            ------------

Cash Flows Provided (Used) By Financing Activities:
    Additional long-term borrowings                                             -                       -                  68,000
    Payment of long-term borrowings                                       (37,573)                   (149)                (68,148)
    Net change in bank credit facilities                                   (7,936)                136,910                  (7,000)
    Termination of interest rate swap position                                  -                       -                   4,733
    Payment of debt issuance costs                                              -                       -                  (3,330)
    Extraordinary charge for early retirement of debt                           -                       -                    (851)
    Increasing (decreasing) capital                                             -                   4,036                   1,342
    Dividends paid to parent company                                       (3,500)                (12,448)                (30,000)
                                                                      ------------            ------------            ------------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES                          (49,009)                128,349                 (35,254)
                                                                      ------------            ------------            ------------

NET INCREASE (DECREASE) IN CASH                                            10,106                   4,594                 (21,272)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                             13,997                   9,403                  30,675
                                                                      ------------            ------------            ------------
CASH AND CASH EQUIVALENTS AT END OF YEAR                                 $ 24,103                $ 13,997                 $ 9,403
                                                                      ============            ============            ============

</TABLE>

        The accompanying notes are an integral part of these statements

                                      F-4
<PAGE>   37



                            MCII HOLDINGS (USA), INC.
                          (A WHOLLY OWNED SUBSIDIARY OF
                      CONSORCIO G GRUPO DINA, S.A. DE C.V.)

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
           (1996 HAS BEEN RESTATED TO INCLUDE AUTOBUSES - SEE NOTE 6)


1.       BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

         The accompanying consolidated financial statements include the accounts
of MCII Holdings (USA), Inc., and its subsidiaries ("MCII Holdings" or the
"Company"), which is wholly owned by Consorcio G Grupo Dina, S.A. de C.V.
("Dina"), a Mexican corporation. The Company is a manufacturer of motor coaches,
and a manufacturer and distributor of motor coach and transit bus replacement
parts, with manufacturing facilities in the United States, Canada, and Mexico.
Sales are made predominately to a diversified customer base, including
independent operators, national fleet operators, government agencies, and
others.

         The accompanying consolidated financial statements have been prepared
in accordance with United States generally accepted accounting principles.
Intercompany accounts and transactions between MCII Holdings and its
subsidiaries have been eliminated. Certain reclassifications have been made to
the financial statements of prior periods to conform to 1998 classifications.
Described below are those accounting policies that are particularly significant
to the Company.

MANAGEMENT ESTIMATES

         The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
and expenses, as well as contingent assets and liabilities disclosed in the
financial statements.
Actual results could differ from those amounts reported or disclosed.

PRINCIPLES OF CONSOLIDATION

The accompanying consolidated financial statements include the financial
statements of MCII Holdings and its majority and wholly owned subsidiaries:

<TABLE>
<CAPTION>
                                                                                          PARTICIPATION (%)
                                                                                          -----------------

<S>                                                                                       <C>  
Motor Coach Industries International, Inc. ("MCII")                                            100.0

Transportation Manufacturing Operations, Inc. ("TMO")                                          100.0
(A direct subsidiary of MCII)

Dina Autobuses, S.A. de C.V. ("Autobuses")                                                      99.99

Mexicana de Manufacturas Especiales, S.A. de C.V. ("Mexicana")                                 100.0
</TABLE>


                                      F-5
<PAGE>   38

         In March 1998, the Company formed Mexicana to manufacture coach parts
in Mexico.

         In January 1997, the Company acquired from Dina 99.99% of the shares of
Autobuses. This event represented a combination of entities under common control
and has been accounted for on an "as-if" pooling-of-interest basis, with the
accompanying financial statements and related footnotes restated for all periods
presented, see Note 6.


CASH EQUIVALENTS

         The Company considers all highly liquid investments with maturities of
three months or less, when purchased, to be cash equivalents.

FOREIGN CURRENCY TRANSACTIONS

         As a means of reducing exposure to fluctuations in foreign currency
exchange rates, the Company may enter into foreign exchange forward contracts to
hedge certain firm and anticipated purchase commitments settled in foreign
currencies (principally the Canadian dollar). The Company does not engage in
foreign currency speculation. The contracts do not subject the Company to risk
due to exchange rate movements as gains and losses on the contracts offset gains
and losses on the transactions being hedged. Foreign currency transactions,
which are not hedged, are converted at the exchange rates in effect at the date
of the transaction. Any gain or loss resulting from the translation of such
transactions is included in the income statement and were not material in any
year. The Company did not enter into any such transactions during 1998.

         The assets and liabilities of the Company's Canadian operations are
translated into U.S. dollars at current exchange rates, and revenues and
expenses are translated at average exchange rates for the years 1998, 1997, and
1996. Resulting translation adjustments are reflected as other comprehensive
income. This same approach has been applied to the Company's Mexican operations
for the year 1996. However, the application of Statement of Financial Accounting
Standards ("SFAS") No. 52 "Foreign Currency Translation" requires that the
Mexican economy be judged a highly inflationary economy for 1998 and 1997 and
that the Company's Mexican operations be remeasured as if the U.S. dollar was
the functional currency during 1998 and 1997. This treatment caused a resulting
translation gain for the 1998 period of $3,482,000 and a translation loss for 
the 1997 period of $85,000 to be included in the income statement rather than as
other comprehensive income.

INTANGIBLES

         Intangibles, which consist primarily of goodwill, are carried at cost
less accumulated amortization of $26,925,000 at December 31, 1998 and
$21,288,000 at December 31, 1997. Intangibles are amortized primarily on the
straight-line method over the periods of expected benefit, generally, but not in
excess of 40 years. The Company evaluates the carrying value of goodwill and
other long-lived assets at each reporting period for possible impairment in
accordance with the provisions of SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of."

                                      F-6

<PAGE>   39

INVENTORIES

         Inventories are generally stated at the lower of cost or market. Cost
is generally determined on a first-in, first-out basis.

NOTES RECEIVABLE

         Notes receivables are collateralized by coaches. Substantially all
notes carry market floating rates of interest based on the creditworthiness of
each individual purchaser. The allowance for uncollectible contracts is adjusted
periodically based on an evaluation of individual contract collectibility.

PENSIONS AND OTHER BENEFITS

         Trusteed, noncontributory pension plans cover substantially all
employees in the United States and Canada. Benefits for the noncontributory
plans are based primarily on final average salary and years of service. Net
periodic pension cost for the Company is based on the provisions of SFAS No. 87,
"Employers' Accounting for Pensions." Funding policies provide that payments to
pension trusts shall be at least equal to the minimum funding required by
applicable regulations.

         Under Mexican Labor Law, Companies are liable for severance payments
for all indemnities and seniority premiums to employees terminated under certain
circumstances. Additionally, there is a liability for voluntary retirements as
agreed in the union contract and a pension plan for the personnel. Indemnity
payments are expensed as incurred. The liability for seniority premiums, 
pensions and severance payments is recorded as incurred, based on actuarial
computations determined by using the projected unit credit method.

         Certain employees in the U.S. and Canada are covered under defined
benefit post retirement plans that provide medical and life insurance for
eligible retirees and dependents. The net periodic postretirement benefit cost
for the Company is based on the provisions of SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions."

PROPERTY, PLANT, AND EQUIPMENT

         Property, plant, and equipment are stated at cost. Depreciation is
provided principally by use of the straight-line method at annual rates as
follows:

<TABLE>
<S>                                                                                         <C>
         Buildings and leasehold improvements                                                3% to 25%
         Assets held for lease                                                              10% to 20%
         Machinery and equipment                                                             8% to 33%
</TABLE>


                                      F-7


<PAGE>   40


RESEARCH AND DEVELOPMENT

         Research and development expenses, net of contributions, are charged to
income as incurred.

         Autobuses has a trust arrangement to earmark deductible funds for
research and development of technology. Autobuses is authorized to make use of
these funds for specific purposes and the fund may be increased by future
contributions or by fund earnings. The fund was established in 1990 and no
subsequent cash contributions were made. The balance of the fund at December 31,
1998 and 1997 was $1,543,000 and $1,723,000, respectively, and was included in
other assets.


REVENUE RECOGNITION

         Sales are generally recognized on shipment of product to customers.
Price allowances are recorded at the time of sale. An allowance for losses on
receivables is maintained at an amount that management considers appropriate in
relation to the outstanding receivable portfolio. Allowances for losses on
receivables are charged to expense as appropriate. In 1997, the Company
delivered coaches with related revenues of $6,918,000 and earnings before taxes
of $1,187,000 that were omitted from revenues and income because they involved
guaranteed residual values of approximately $3,700,000. In accordance with the
Emerging Issues Task Force Issue ("EITF") 95-1, these coaches are being 
accounted for on a lease basis and will be recognized in revenues and income
over periods ranging from 2 to 15 years. During 1998, the Company did not enter
into any transactions that require deferral under EITF 95-1.

START-UP COSTS

         Start-up costs on major projects are charged to expense as incurred.

WARRANTY

         In the United States and Canada, an accrual for warranty claims is made
at the time of sale. This accrual is based on management's estimate of future
warranty liabilities and is charged to operations. Actual warranty expenditures
are charged to the accrual as incurred. The accrual is reviewed periodically for
adequacy in light of actual experience and adjustments are recorded if
necessary.

         In Mexico the suppliers of components pay most warranty costs.
Accordingly, the exposure for warranty is not material.



                                      F-8

<PAGE>   41





2.       FINANCIAL RESTRUCTURING

         On June 3, 1996, the Company became contingently liable for payments of
principal and interest on the Senior Secured Discount Notes due 2002 ("Discount
Notes") of Dina, the parent company. It was intended that all payments with
respect to the Discount Notes would be paid by Dina, and that payments would be
made by the Company only in the event of the inability of the parent company to
service the debt. Effective December 31,1998 the Company recognized its
liability for interest and principal payments with regard to this debt
obligation due to substantial doubt about the parent company's ability to
service the debt. Consequently, the Company recorded $206,499,680 of accrued
additional debt as more fully described in Note 15, $2,919,000 of accrued
interest payable, and adjusted stockholder's equity accordingly.

         As of December 31,1998, Transportation Manufacturing Operations, Inc.
("TMO") a principal subsidiary of the Company, had a $170 million US revolving
credit agreement (" the Senior Credit Facility") with a nine-bank syndicate to
finance working capital and other general corporate needs, as more fully
described in Note 15. This credit facility expires on October 1, 1999, and the
lenders have indicated that they are not willing to extend the maturity of this
agreement. In addition, during 1998, the Company was required to reduce existing
long-term debt obligations by $50 million, consisting of a $25 million principal
payment on TMO's Senior Term Notes due 2002, a $12 million reduction in it's
Canadian bank credit facility, and a $13 million principal payment on the
Pre-Export Notes due 1999 (see Note 15).

         As a result of the debt reductions during 1998 and the additional debt
obligations and working capital requirements for 1999, the Company does not
expect to generate sufficient cash flow from operations to fund both short term
requirements and meet the required expiration of the Senior Credit Facility.

         On March 18,1999, the Company engaged CIBC Oppenheimer Corp. and its
affiliates ("CIBC Oppenheimer") to act as the Company's lead bank agent,
financial advisor, initial purchaser, placement agent and underwriter to
undertake a financial restructuring of the debt obligations of the Company and
its parent company.

         On April 19, 1999, TMO executed an agreement with CIBC Oppenhiemer for
the issuance of $40 million of Senior Subordinated Increasing Rate Notes ("the
IRNs"), due December 31, 1999, (subject to extension to March 31,2000). This
bridge financing will be used by TMO to meet short-term working capital
requirements while the financial restructuring process is underway. The IRNs
will mature on December 31, 1999, (with an option to extend the maturity to
March 31, 2000) and will bear an increasing rate of interest, commencing with a
rate that will be the greater of i) LIBOR plus 6.50% or ii) 11.625%, and
increasing by 25 basis points (0.25%) every 30 days that the IRNs are
outstanding to a maximum rate of 18%. As a condition of the consent of the
existing lenders, interest above 15.0% must be paid in kind. The IRNs will rank
senior to all existing subordinated debt and subordinated to all existing senior
debt of TMO. The agreement provides TMO with an option to redeem the IRNs, in
whole, but not in part, at any time prior to maturity at fixed redemption
prices. TMO must also redeem the IRNs at a fixed redemption price upon a change
in control of TMO or any of its parent companies. TMO has the option to extend
the maturity date of the IRNs to March 31, 2000, at the maximum interest rate of
18.0% (with interest above 15.0% paid in kind). However, as additional
consideration for the

                                      F-9
<PAGE>   42

extension, the company will be required to issue to the existing noteholders, an
additional $4 million aggregate principal amount of IRNs (the "Extension IRNs).
The IRNs are subject to certain affirmative and negative covenants customary for
this type of financing, and are guaranteed by TMO's material domestic
subsidiaries.

         On April 19, 1999, TMO and its principal subsidiaries obtained the
necessary consent and related amendments required from the existing lenders to
permit the bridge financing and remain in compliance with certain financial
covenants. In consideration for the consent of the existing lenders, TMO agreed
to certain changes in the terms of the existing debt agreements, as further
described in Note 15.

         In addition to the bridge financing, the Company, in association with
CIBC Oppenheimer, has developed a financial restructuring plan to refinance all
of the material debt obligations of the parent, the Company and their respective
subsidiaries. The new financing is expected to result in gross proceeds to the
Company of approximately $715 million. The proceeds of the new financing are
expected to be used by the Company to refinance certain indebtedness of the
parent, the Company and their respective subsidiaries including, but not limited
to, the IRNs, the US and Canadian revolving credit facilities, the 9.02% Senior
Term Notes due 2002, and the Senior Secured Discount Notes due 2002. The Company
expects to complete the new financing and the refinancing prior to the October
1, 1999 maturity of the existing Senior Credit Facilities. In the event that the
financial restructuring is not completed by September 30, 1999, and TMO has not
been able to obtain sufficient funding to retire the IRN's, the US Bank credit
facility and the Term Notes due 2002, TMO will be in default of each of these
credit agreements. This in turn would trigger cross default covenants in 
substantially all of the Company's other debt agreements and provide the holders
of its debt with the right to accelerate payments of all amounts outstanding.
The existence of acceleration rights would also require the Company to classify
all long-term indebtedness as current. In light of these potentially adverse
consequences to the Company's financial position, management is diligently
pursuing the consummation of the financial restructuring.

         While there is no assurance that the financial restructuring plan will
be completed successfully at this time, the Company is continuing to work with
CIBC Oppenheimer to execute this plan. In the event that the financial
restructuring cannot be completed prior to the October 1, 1999 maturity, the
Company is also exploring alternatives to generate additional cash flow
including, but not limited to, selling substantial Company assets and seeking
strategic equity investors.

3.       NET RECEIVABLE FROM AFFILIATES

         During the second quarter of 1998, Dina forgave, in the Company's
favor, a receivable from Autobuses in the amount of $35,038,000. In addition,
due to the uncertainty of the financial position of its parent company, the
Company has made a provision for the uncollectabilitty of the December 31, 1998
net receivable balance from Dina in the amount of $73,316,000. These two
transactions have resulted in a $38,278,000 net charge against Additional
Capital in Stockholder's Equity.

4.       BUSINESS INTERRUPTION INSURANCE RECOVERIES

         During 1997, flooding along the Red River caused significant operating
disruptions at the Company's Pembina, North Dakota and Winnipeg, Manitoba
facilities. As a result, the Company filed insurance claims seeking recovery of
various out-of -pocket costs and business interruption losses. Partial
recoveries of $500,000 and $500,000 were received in 1998 and 1997,
respectively. In early 1999, the Company reached a settlement of its claim for
business interruption for a total of $8,962,000. 


                                      F-10

<PAGE>   43

5.       EQUITY CONSOLIDATION ADJUSTMENT

         During the year, the company made a $2,914,000 Stockholder's Equity
adjustment that corrected an immaterial prior period accounting error occurring
in a consolidation adjustment of a subsidiary company.

6.       TRANSFER OF ENTITIES UNDER COMMON CONTROL

         In January 1997, MCII Holdings acquired from its parent company, Dina,
99.99% of the shares of Autobuses. This change in structure was accomplished by
Dina contributing 99.99% of the capital stock of Autobuses ($30,363,000 in net
assets as of December 31, 1996) to MCII Holdings, thereby making Autobuses and
its two subsidiaries, Autopartes Hidalguense, S.A. de C.V. and Carrocera
Sahagun, S.A. de C.V., subsidiaries of MCII Holdings.

         The transaction was a transfer of entities under common control, which
requires the acquisition to be accounted for as a pooling of interests.
Accordingly, the financial statements for all periods reflect the results of
operations, financial condition, cash flows, and changes in stockholder's equity
of MCII Holdings and Autobuses as if the companies had been consolidated for all
periods presented.

         A reconciliation of a condensed income statement between amounts
previously reported for 1996 and as restated is as follows:

<TABLE>
<CAPTION>
                                                          PREVIOUSLY
                                                           REPORTED         AUTOBUSES       ELIMINATIONS         TOTAL
                                                           --------         ---------       ------------         -----
                                                                                       1996
                                                                                  (000 omitted)

<S>                                                       <C>               <C>             <C>                <C>      
Revenues                                                  $ 661,293         $ 64,148         $ (58,357)        $ 667,084
                                                          ---------         --------         ----------        ---------

Income from Continuing Operations                            22,784            7,757            (2,867)           27,674

Discontinued Operations                                      (5,000)               -                 -            (5,000)

Extraordinary Item                                             (851)               -                 -              (851)
                                                          ----------        --------         ---------         ----------

Net Income                                                 $ 16,933          $ 7,757          $ (2,867)         $ 21,823
                                                           ========          =======          ========          ========
</TABLE>

7.       GAIN ON EQUITY INVESTMENT

         In 1993, the Company purchased a 10% ownership interest in Mexicana de
Autobuses, S.A. de C.V. ("MASA"), a Mexican coach manufacturing company, for
$6,000,000. In December 1994, the Company distributed the MASA shares to Dina as
a dividend. In December 1995, the Company repurchased the MASA shares directly
from Dina for $1,200,000. In 1996, the Company evaluated the realizability of
its investment in MASA, and, due to the continuing operating losses of MASA and
prolonged weakness in the Mexican economy, wrote off the investment, resulting
in a pre-tax loss of $1,200,000.

                                      F-11

<PAGE>   44

         In 1998, the Company sold its interest in MASA for $7,000,000 less
reimbursement of fees and expenses of $2,000,000 paid to Dina.

8.       DISCONTINUED OPERATIONS

         In 1993, the Board of Directors approved a plan of disposition for the
transit bus-manufacturing segment of the Company. This decision was based on
management's review of market activities, business prospects, competitive
bidding, evaluation of backlogs, economic value analysis, and opportunities for
cost reduction, which indicated that the transit bus manufacturing business
might not achieve acceptable profitability in the foreseeable future. As a
result of this decision, a charge to discontinued operations of $53,629,000
($87,202,000 before taxes) was recorded in 1993 to reflect the estimated loss on
disposal of the transit-manufacturing segment.

         In November 1994, the Company sold the fixed assets and certain of the
inventory of the transit bus manufacturing business, as well as the right to
manufacture, remanufacture, and distribute transit buses previously made by the
Company, for aggregate consideration of $14,947,000, of which $4,877,000 was in
the form of a note receivable and the remainder was in cash. Additionally, the
purchaser, for a period of five years from the sale date, has agreed not to
distribute parts to transit buses previously made by the Company. The Company
retained all other assets and all of the remaining liabilities of the transit
manufacturing business.

         Based on further analysis of the estimated loss to be incurred on the
disposal, additional provisions were made in 1994 and 1996 of $3,500,000
($5,385,000 before taxes) and $5,000,000 ($8,130,000 before taxes),
respectively.

         The summarized balance sheet of the discontinued transit bus
manufacturing segment at December 31 was as follows:

<TABLE>
<CAPTION>
                                                                                  1998                      1997
                                                                                  ----                      ----
                                                                                          (000 OMITTED)
         Assets:
<S>                                                                             <C>                       <C>    
              Notes receivable                                                  $ 1,496                   $ 3,953
              Other current assets                                                   79                        82
              Deferred taxes and other assets                                     2,063                     2,314
                                                                                -------                   -------
                                                                                  3,638                     6,349
                                                                                -------                   -------
         Liabilities:
              Other current liabilities                                           7,150                     7,582
              Other liabilities                                                     904                       996
                                                                                -------                   -------
                                                                                  8,054                     8,578
                                                                                -------                   -------

         Net Liabilities                                                        $ 4,416                   $ 2,229
                                                                                =======                   =======
</TABLE>


                                      F-12



<PAGE>   45

9.       PROVISION FOR THE RELOCATION OF CORPORATE HEADQUARTERS

         In December 1996, the Company provided $3,000,000 for the costs
associated with the decision to relocate the Company's corporate headquarters
from Phoenix, Arizona to Des Plaines, Illinois. An additional $886,000 was
provided in 1997 based on a revised estimate of the likelihood that the Phoenix
office would be subleased. At December 31, 1998, the remaining $2,063,000 of
reserves are included in the Consolidated Balance Sheet under the captions,
"other current liabilities" ($644,000) and "other deferred items and insurance
reserves" ($1,419,000). Substantially all of the severance and other relocation
costs were paid in 1997 and the lease costs will be paid through 2003.

10.      ACQUISITION

         In October 1996, the Company purchased certain assets of The Flxible
Corporation ("Flxible") that were being sold through bankruptcy proceedings.
Flxible was a manufacturer of transit buses and a distributor of related
replacement parts. The purpose of the purchase was to utilize the assets to
become the OEM parts distributor for the existing fleet of Flxible transit
buses. The transaction was accounted for as a purchase of assets. The total
purchase price was $ 12,200,000.

11.      CASH FLOW EFFECT OF CHANGES IN OPERATING ASSETS AND LIABILITIES

         Change in operating assets and liabilities consisted of:

<TABLE>
<CAPTION>
                                                                      1998                 1997                 1996
                                                                      ----                 ----                 ----
                                                                                       (000 OMITTED)

<S>                                                                <C>                  <C>                  <C>
         Decrease (Increase) in operating assets:
              Receivables                                          $ (44,663)          $  (25,839)           $ (21,894)
              Inventories                                             27,856              (69,006)              (4,414)
              Other operating assets                                   9,101               (2,854)               3,525
                                                                   ---------           ----------            ---------
                                                                      (7,706)             (97,699)             (22,783)
                                                                   ---------           ----------            ---------
         Increase (Decrease) in operating liabilities:
              Accounts payable                                        14,349               26,525               12,724
              Accrued income taxes                                    25,315                2,916               (4,549)
              Other operating liabilities                            (17,028)             (49,068)              10,509
                                                                   ---------           ----------            ---------
                                                                      22,636              (19,627)              18,684
                                                                   ---------           ----------            ---------

         Net Cash Flow Effect                                      $  14,930           $ (117,326)           $ (4,099)
                                                                   =========           ==========            =========
</TABLE>


                                      F-13


<PAGE>   46




12.      INVENTORIES

         Inventories at December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                                                  1998                      1997
                                                                                  ----                      ----
                                                                                          (000 OMITTED)

<S>                                                                             <C>                       <C>     
         Raw materials                                                         $  38,506                 $  48,938
         Work in process                                                          42,515                    61,230
         Finished goods                                                          171,661                   170,879
                                                                                --------                  --------
                                                                                 252,682                   281,047
         Excess quantity and obsolescence reserve                                (26,410)                  (23,252)
                                                                                --------                  --------
                                                                               $ 226,272                 $ 257,795
                                                                               =========                 =========
</TABLE>

13.      PROPERTY, PLANT, AND EQUIPMENT

         Property, plant, and equipment at December 31 consisted of the
following:

<TABLE>
<CAPTION>
                                                                                  1998                      1997
                                                                                  ----                      ----
                                                                                          (000 OMITTED)

<S>                                                                            <C>                       <C>      
         Land                                                                  $   5,183                 $   5,309
         Buildings and leasehold improvements                                     45,831                    43,261
         Assets held for lease                                                    31,132                    28,386
         Machinery and equipment                                                  62,395                    58,218
                                                                                --------                  --------
                                                                                 144,541                   135,174
         Less accumulated depreciation and amortization                          (40,011)                  (28,329)
                                                                                --------                  --------

                                                                               $ 104,530                 $ 106,845
                                                                               =========                 =========
</TABLE>

         Depreciation and amortization expense for property, plant, and
equipment was $17,005,000, $14,072,000 and $9,964,000, respectively, for the
years ended December 31, 1998, 1997, and 1996.

14.      NOTES RECEIVABLE

         Notes receivable at December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                                                  1998                      1997
                                                                                  ----                      ----
                                                                                          (000 OMITTED)

<S>                                                                             <C>                       <C>     
         Notes receivable, at contract amount                                   $ 47,693                  $ 50,359
         Less allowance for uncollectible contracts                               (1,745)                   (1,269)
                                                                                --------                  --------
         Notes receivable, net                                                    45,948                    49,090
         Less current portion                                                    (10,548)                   (6,625)
                                                                                --------                  --------
</TABLE>


                                      F-14

<PAGE>   47

<TABLE>
<S>                                                                             <C>                       <C>     
         Long-term notes receivable                                             $ 35,400                  $ 42,465
                                                                                ========                  ========
</TABLE>

         Scheduled annual maturities of note receivables at December 31, 1998,
were:

<TABLE>
<CAPTION>
        1999                  2000                 2001                 2002                 2003              THEREAFTER
        ----                  ----                 ----                 ----                 ----              ----------
<S>                        <C>                  <C>                  <C>                  <C>                  <C>
     $10,548,000           $4,618,000           $4,541,000           $4,238,000           $4,061,000           $19,687,000
</TABLE>

15.      LONG-TERM DEBT

         Long-term debt at December 31 was follows:

<TABLE>
<CAPTION>
                                                                                  1998                      1997
                                                                                  ----                      ----
                                                                                          (000 OMITTED)

<S>                                                                            <C>                       <C>      
         United States bank credit facility                                    $ 137,000                 $ 135,000
         Canadian bank credit facility                                               -                      12,033
         Bancomext export loan facility                                            8,594                     6,496
         Pre-Export Notes, due to 1999                                            22,000                    34,203
         9.02% of Senior Notes, due 2002                                         100,000                   125,000
         Senior Secured Discount Notes, due 2002                                 206,500                      -
         Note payable at 7%, due 2001                                                371                       519
                                                                                --------                 ---------
                                                                                 474,465                   313,251
         Less current portion                                                   (192,742)                  (44,418)
                                                                               ---------                 ---------

         Long-term debt                                                        $ 281,723                 $ 268,833
                                                                               =========                 =========
</TABLE>


         The United States bank credit facility was increased in September 1997
to provide up to $170,000,000 for borrowing purposes, of which up to $35,000,000
is available for issuance of standby letters of credit. The facility previously
provided $125,000,000 for borrowing purposes. Borrowings are available under the
bank credit facility on a revolving basis through October 1, 1999. This facility
replaced a former bank credit facility in October 1996 in a refinancing which
resulted in an extraordinary charge for the write off of related debt issuance
costs of $851,000 ($1,401,000 before taxes). At December 31, 1998, the Company
was contingently liable under standby letters of credit in the amount of
$10,980,000. The interest rates applicable to borrowings under this agreement
are, at the Company's option, indexed to the bank prime rate or the 30-day
London Interbank Offered Rate ("LIBOR"), plus appropriate spreads over such
indices during the period of each borrowing agreement. The average 30-day LIBOR
rate was 6.3% for 1998 and 6.2% at December 31, 1998. The average base rate
applicable to borrowings of less than 30 days was 8.25% for 1998 and was 7.75%
at December 31, 1998. The agreements also provide for commitment fees. Such
spreads and fees can change based on changes in the Company's financial ratios.
Interest rate prime rate only. As a result of amendments to this facility,
effective, April 15, 1999, the Company will no longer have the option of
indexing interest rates based on LIBOR.


                                      F-15

<PAGE>   48

         The Canadian bank credit facility was increased in July 1997 to provide
up to Cdn$30,000,000 (equivalent to $19,605,000 at December 31, 1998 exchange
rates) for borrowing purposes, of which Cdn$4,000,000 is reserved for certain
specific purposes. Borrowings are available under the bank credit facility on a
revolving basis through October 1, 1999. The interest rates applicable to
borrowings under this agreement are, at the Company's option, indexed to the
bank prime rate or the 30-day London Interbank Offered Rate ("LIBOR"), plus
appropriate spreads over such indices during the period of each borrowing
agreement. The average interest rate was 6.6% for 1998 and 6.75% at December 31,
1998. The agreements also provide for commitment fees. Such spreads and fees can
change based on changes in the Company's financial ratios.

         On December 4, 1997, an indirect subsidiary of the Company completed
the placement of $35,000,000 of Guaranteed Pre-Export Notes with international
investors. The securities were issued in two Series: Series 1 Notes, of which
$13,000,000 were issued, carry a 10.0% coupon and had a maturity date of
December 3, 1998; and Series 2 Notes, of which $22,000,000 were issued, carry a
10.5% coupon and have a maturity date of March 31, 1999. This note was fully
paid on March 31, 1999.

         The Company has $125,000,000 of term notes payable which are due in
annual installments of $25,000,000 beginning in November 1998 and extending
through November 2002. Interest on the notes is at a fixed rate of 9.02%.
However, the Company entered into an interest rate swap agreement in November
1994, which effectively changed the interest rate on the notes to LIBOR plus
1.14%. The Company terminated $62,500,00 of the swap in 1995 and the remainder
of the swap in 1996 in exchange for an aggregate cash consideration of
$9,683,000 which is being amortized as a reduction of interest expense over the
remaining life of the notes. As a result, the effective interest rate on the
$125,000,000 borrowing is at a fixed rate of 7.3% for 1997 and 1998. For the
future years, 1999-2002, the estimated effective interest rate ranges from 7.5%
to 7.99%. As a result of amendments to the term notes payable agreement,
effective April 15, 1999, interest on the Notes will become payable monthly.
Additionally, these amendments, contain changes to certain financial covenants 
for which the Company would be in violation had they not been changed. The 
amendment also added a covenant that causes the Company to be in default if
the refinancing (as defined) is not consummated by September 30, 1999.

         In September 1996, The National Bank Foreign Trade S.N.C. ("Bancomext")
provided a $20,000,000 credit facility to Autobuses for the purpose of financing
export sales.  This agreement terminated on March 29, 1998.  A new one year
agreement, effective May 25, 1998, was entered into which provides a $30,000,000
credit facility at the Mexican Interbank rate.
     
         As discussed in Note 2, The Company became contingently liable for
payments of interest and principal on the Senior Secured Discount Notes due
2002. The Company's obligation under the Discount Notes is secured by a pledge
of the common stock of its wholly owned subsidiary, MCII. The Discount Notes
bear interest at an annual rate of 12% through maturity on a zero coupon basis
through November 15, 1998 and, thereafter payable in cash. If, however, the
Discount Notes do not achieve minimum debt ratings by November 15, 1999, the
interest rate increases to 15% from such date through maturity. No interest
expense was recorded during 1998 in regards to these notes.

         The Company's long-term debt agreements include various restrictive
covenants, including financial covenants; the most restrictive of which is
negative covenants regarding transactions with affiliates and current ratio
test. The Company is in compliance with these covenants, or has received waivers
and amendments for any violations. At December 31, 1998, $17,791,000
of stockholders' equity was available for the payment of dividends by TMO.

         Annual maturities of long-term debt in the next five years will
approximate:

<TABLE>
<CAPTION>
        1999                  2000                 2001                 2002                 2003              THEREAFTER
        ----                  ----                 ----                 ----                 ----              ----------
<S>                        <C>                  <C>                 <C>                      <C>               <C>       
    $192,742,000           $25,148,000          $25,075,000         $231,500,000               -                    -
</TABLE>

                                      F-16

<PAGE>   49

         Interest paid in the years ended December 31, 1998, 1997, and 1996 was
$24,858,000, $26,067,000, and $21,362,000, respectively.

16.      FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following disclosures of the estimated fair value of financial
instruments have been determined by the Company using available market
information and valuation methodologies described below. However, considerable
judgment is required in interpreting market data to develop the estimates of
fair value. Accordingly, the estimates presented herein may not be indicative of
the amounts that the Company could realize in a current market exchange. The use
of different market assumptions or valuation methodology may have a material
affect on the estimated fair value amounts. 

         The carrying values of cash and cash equivalents, receivables, and
accounts payable approximate fair values due to the short-term maturities of
these instruments. The carrying value of the Notes Receivable approximates fair
value because a significant portion of the notes receivable are variable rate
notes rather than fixed rate notes. The carrying amounts and estimated fair
values of the Company's other financial instruments at December 31 were as
follows:

<TABLE>
<CAPTION>
                                                                      1998                              1997 
                                                                      ----                              ----
                                                          CARRYING           FAIR            CARRYING           FAIR
                                                           AMOUNT            VALUE            AMOUNT            VALUE
                                                            -----            -----            ------            -----
                                                                                  (000 OMITTED)
<S>                                                       <C>              <C>               <C>              <C>     
         Debt                                             (474,465)        (445,284)         (313,251)        (317,054)
         Foreign exchange forward contracts                  -                -                 -                 (306)
</TABLE>


         The methods and assumptions used to estimate the fair values of the
financial instrument are summarized as follows:

         Debt - Estimated by discounting the future cash flows using rates
currently available for debt of similar terms and maturity.


         Foreign exchange forward contracts (used for hedging purposes) -
Estimated using quoted exchange rates.

17.      INCOME TAXES

         The U.S. operations of MCII are included in the consolidated and other
applicable U.S. income tax returns of the Company. Tax returns for the Company's
Canadian and Mexican subsidiaries are filed separately in Canada and Mexico.



                                      F-17

<PAGE>   50

         United States, Canadian, and Mexican income before income taxes was as
follows:

<TABLE>
<CAPTION>
                                                                       1998                 1997                 1996
                                                                       ----                 ----                 ----
                                                                                        (000 OMITTED)

<S>                                                                  <C>                  <C>                  <C>     
     United States                                                   $ 33,163             $ 21,753             $ 21,874
     Canada                                                            41,145               23,671               19,477
     Mexico                                                            (4,437)              14,005                4,797
                                                                     --------             --------             --------
                                                                     $ 69,871             $ 59,429             $ 46,148
                                                                     ========             ========             ========
</TABLE>

         Income tax expense (benefit) for the years ended December 31 was
comprised of the following:

<TABLE>
<CAPTION>
                                                                      1998                 1997                 1996
                                                                      ----                 ----                 ----
                                                                                       (000 OMITTED)
<S>                                                                 <C>                  <C>                  <C>     
         Current:
              United States:
                   Federal                                          $ 14,661             $  8,435             $ 11,098
                   State                                               3,665                1,806                1,685
              Foreign                                                 18,288                9,654               10,503
                                                                    --------             --------             --------
                                                                      36,614               19,895               23,286
                                                                    --------             --------             --------
         Deferred:
              United States:
                   Federal                                            (3,812)                (351)              (2,812)
                   State                                                (706)                (195)                (236)
              Foreign                                                   (813)               1,919               (1,764)
                                                                     --------             --------             --------
                                                                      (5,331)               1,373               (4,812)
                                                                     --------             --------             --------

         Total income tax expense                                   $ 31,283             $ 21,268             $ 18,474
                                                                    ========             ========             ========
</TABLE>


         A reconciliation of the provision for income taxes and the amount that
would be computed using statutory federal income tax rates on income before
income taxes is set forth below:

<TABLE>
<CAPTION>
                                                                      1998                 1997                 1996
                                                                      ----                 ----                 ----
                                                                                       (000 OMITTED)
<S>                                                                 <C>                  <C>                  <C>     
         Computed income tax provision at
              Statutory rate of 35%                                 $ 24,455             $ 20,800             $ 16,152
         State income taxes                                            1,923                1,057                  942
         Canadian tax differences                                      2,601                1,126                1,258
         Mexican tax differences                                         690               (3,970)              (1,772)
         Foreign dividend received                                         -                1,160                    -
         Intangible amortization                                       1,778                1,425                1,367
         Other, net                                                     (164)                (330)                 527
                                                                    --------             --------             --------

         Total income tax expense                                   $ 31,283             $ 21,268             $ 18,474
                                                                    ========             ========             ========
</TABLE>

                                      F-18

<PAGE>   51

         Deferred income tax assets and liabilities included in the Consolidated
Balance Sheet at December 31 consisted of the following:

<TABLE>
<CAPTION>
                                                                         1998                      1997
                                                                         ----                      ----
                                                                                  (000 OMITTED)
<S>                                                                      <C>                       <C>    
         Deferred tax assets:
              Property , plant, and equipment                            $ 6,767                   $ 8,315
              Pension and other benefits                                   7,650                     6,228
              Allowances and reserves for losses                          21,500                    13,920
              Net operating loss carryforward                             15,040                    15,554
              Alternative minimum tax carryforward                         7,901                     8,065
              Deferred state income taxes                                  1,876                     1,431
              Inventories                                                  4,062                       929
              Other                                                        4,938                     3,295
                                                                         -------                   -------
         Total gross deferred tax assets                                  69,734                    57,737
               Valuation allowance                                       (37,711)                  (33,707)
                                                                         -------                   -------
         Total gross deferred tax assets                                  32,023                    24,030
                                                                         -------                   -------

         Deferred tax liabilities:
              Property , plant, and equipment                             (6,996)                   (8,615)
              Intangibles                                                 (5,964)                   (4,608)
              Installment sales                                             (309)                     (489)
              Other                                                       (3,788)                   (2,804)
                                                                         -------                   -------
         Total gross deferred tax liabilities                            (17,057)                  (16,516)
                                                                         -------                   -------
         Net deferred tax asset                                         $ 14,966                   $ 7,514
                                                                        ========                   =======
</TABLE>


         SFAS No. 109, "Accounting for Income Taxes," requires that deferred tax
assets be reduced by a valuation allowance if it is more likely than not that
some portion or the entire deferred tax asset will not be realized. A valuation
reserve was established against the deferred tax assets in Mexico, primarily
loss carryforwards, that might not be realized. The Mexican net operating losses
expire between 1999 and 2007.

         Income taxes paid in the years ended December 31, 1998, 1997, and 1996
were $12,907,000 $10,814,000 and $13,093,000, respectively.


                                      F-19

<PAGE>   52



         The Company's Canadian income tax returns for 1982 through 1992 are
currently under review by Revenue Canada. Authorities have proposed imputing
additional income related to transactions with a U.S. based subsidiary of the
Company. Revenue Canada has issued a formal reassessment on the 1985 return. The
Company has filed a notice of objection for 1985. In the event of an adverse
judgment, the additional income taxes for 1982 through 1992 could amount to
$23,000,000 plus interest of approximately $47,000,000 and, in addition, the
Company may be subject to potential reassessments for the years subsequent to
1992 on the same basis which could result in additional income taxes and
interest. These amounts are all before recoveries of U.S. federal income taxes
which may be available to offset a portion of any additional taxes paid to
Canada as these years are still open for U.S. federal income tax purposes. In
accordance with SFAS No. 109, "Accounting for Income Taxes," a portion of any
ultimate liability owed as a result of this issue would be treated as an
adjustment of Dina's purchase price on acquiring the Company, resulting in an
increase of purchase goodwill. (If the ultimate liability were $70,000,000, then
approximately $45,000,000 would be a purchase accounting adjustment.) Based on
its review of current relevant information, including the advice of outside
counsel, the Company is of the opinion that Revenue Canada's arguments are
without merit and that any liability from this matter will not be material to
its financial condition or results of operations.

         The Company has not provided for U.S. federal income taxes and foreign
withholding taxes on the undistributed earnings of non-U.S. subsidiaries. The
undistributed earnings are intended to be reinvested indefinitely and were
approximately $81,000,000. If these earnings were distributed, foreign
withholding taxes would be imposed; however, foreign tax credits would become
available to substantially reduce any resulting U.S.
income tax liability.


                                      F-20


<PAGE>   53




18.      PENSION BENEFITS

         The Company sponsors various retirement plans for most full-time
employees. Benefits of the plans are generally based on years of service and
employees' compensation during the final years of employment. In 1998, the
Financial Accounting Standards Board issued SFAS 132, "Employers' Disclosures
about Pensions and Other Postretirement Benefits," which the Company adopted as
of December 31, 1998.

         The components of net periodic pension costs are summarized in the
following table:

<TABLE>
<CAPTION>
                                                           UNITED STATES                              CANADA
                                                           -------------                              ------
                                                    1998        1997        1996             1998       1997       1996
                                                    ----        ----        ----             ----       ----       ----
                                                                              (000 OMITTED)

<S>                                               <C>         <C>          <C>              <C>        <C>        <C>
    Service cost benefits earned
         During the period                        $ 1,214     $ 1,028     $   996         $   485     $   475    $   452
    Interest cost on projected
         Benefit obligation                         1,494       1,262       1,072             427         435        415
    Expected return on plan assets                 (1,289)     (1,154)     (1,002)           (621)       (597)      (559)
    Amortization of prior service cost                510         510         512               3           4          3
    Amortization of transition obligation              (9)         (9)         (9)             (2)         (2)        (2)
    Recognized net actuarial (gain)/loss              100          26          30               -          17          2
    FAS 88 settlement                                   -           -        (165)              -           -          -
                                                  -------     -------     -------         -------     -------    -------

    Net pension cost                              $ 2,020     $ 1,663     $ 1,434         $   292     $   332    $   311
                                                  =======     =======     =======         =======     =======    =======
</TABLE>

         The following tables summarize pension benefit obligations, plan assets
and funded status as of December 31:

<TABLE>
<CAPTION>
    CHANGE IN PENSION BENEFIT                               UNITED STATES                             CANADA
                                                            -------------                             ------
    OBLIGATION:                                     1998        1997        1996             1998       1997       1996
                                                    ----        ----        ----             ----       ----       ----
                                                                               (000 OMITTED)

<S>                                                 <C>         <C>         <C>              <C>        <C>        <C>    
    Benefit obligation as of January 1              $ 19,559    $ 15,943    $ 12,329       $ 6,407    $ 6,361    $ 5,607
    Service cost                                       1,214       1,028         996           485        475        452
    Interest cost                                      1,494       1,262       1,072           427        435        415
    Plan participants' contributions                       -           -           -             -          -          -
    Amendments                                             -           -           -             -          -          -
    Actuarial (gain)/loss                              1,933       1,646       1,959           495         35        478
    Benefits paid                                       (360)       (320)       (413)         (280)      (623)      (563)
    Foreign currency rate change                           -           -           -          (453)      (276)       (28)
                                                    --------    --------    --------       -------     ------    -------

    Benefit obligation as of December 31            $ 23,840    $ 19,559    $ 15,943       $ 7,081    $ 6,407    $ 6,361
                                                    ========    ========    ========       =======    =======    =======
</TABLE>

                                      F-21

<PAGE>   54

<TABLE>
<CAPTION>
    CHANGE IN PLAN ASSETS:                                  UNITED STATES                             CANADA
                                                            -------------                             ------
                                                     1998       1997        1996             1998       1997       1996
                                                     ----       ----        ----             ----       ----       ----
                                                                               (000 OMITTED)

<S>                                                  <C>        <C>         <C>            <C>        <C>        <C>    
    Fair value of plan assets at
    beginning of year                                $ 15,412    $ 12,863    $ 11,790      $ 7,205    $  6,713    $ 5,835
    Actual return on plan assets                        3,938       2,820       1,416          831         969      1,060
    Employer contribution                                 241          49          70          510         451        411
    Plan participants' contributions                        -           -           -            -           -          -
    Benefits paid                                        (360)       (320)       (413)        (280)       (623)      (563)
    Foreign currency rate change                            -           -           -         (503)       (305)       (30)
                                                     --------    --------    --------      -------     -------    -------

    Fair value of plan assets at end of year         $ 19,231    $ 15,412    $ 12,863      $ 7,763     $ 7,205    $ 6,713
                                                     ========    ========    ========      =======     =======    =======
</TABLE>


<TABLE>
<CAPTION>
    FUNDED STATUS:                                          UNITED STATES                             CANADA
                                                            -------------                             ------
                                                    1998        1997        1996             1998       1997       1996
                                                    ----        ----        ----             ----       ----       ----
                                                                               (000 OMITTED)

<S>                                                <C>         <C>         <C>               <C>        <C>        <C>  
    Funded status at end of year                   $ (4,609)   $ (4,147)   $ (3,220)           $ 682      $ 798      $ 352
    Unrecognized transition obligation                  (36)        (45)        (54)               9          8          7
    Unrecognized net actuarial (gain)/loss             (812)           4        (67)             256        (31)       327
    Unrecognized prior service cost                     691       1,201       1,711               32         38         43
                                                   --------    --------    --------            -----      -----      -----

    Prepaid (accrued) benefit cost                 $ (4,766)   $ (2,987)   $(1,630)            $ 979      $ 813      $ 729
                                                   =========    ========   ========            =====      =====      =====
</TABLE>

         The Company has one pension plan for which the employer must recognize
an additional minimum liability in accordance with the provisions of paragraph
36 of Statement 87.

<TABLE>
<CAPTION>
    AMOUNTS RECOGNIZED IN THE                               UNITED STATES                             CANADA
    STATEMENT OF FINANCIAL POSITION                         -------------                             ------
    CONSIST OF:                                     1998        1997        1996             1998       1997       1996
                                                    ----        ----        ----             ----       ----       ----
                                                                               (000 OMITTED)

<S>                                                <C>         <C>        <C>               <C>         <C>        <C>
         Prepaid benefit cost                      $     38    $      9    $      -             N/A        N/A        N/A
         Accrued benefit liability                   (6,290)     (5,044)     (3,997)            N/A        N/A        N/A
         Intangible asset                               691       1,203       1,716             N/A        N/A        N/A
         Accumulated other comprehensive
              income (pretax)                           794         845         651             N/A        N/A        N/A
                                                   --------    --------    --------             ---        ---        ---

    Net amount recognized                          $ (4,767)   $ (2,987)   $ (1,630)            N/A        N/A        N/A
                                                   =========   =========   =========            ===        ===        ===
</TABLE>

                                      F-22

<PAGE>   55


         Weighted average assumptions used were:

<TABLE>
<CAPTION>
                                                            UNITED STATES                              CANADA
                                                            -------------                              ------
                                                      1998       1997       1996            1998        1997       1996
                                                      ----       ----       ----            ----        ----       ----
<S>                                                   <C>        <C>        <C>             <C>         <C>        <C> 
         Discount rate for obligation                 6.8%       7.0%       7.5%            6.8%        7.0%       7.5%
         Rate of increase in compensation             4.0%       4.0%       5.0%            4.0%        4.0%       4.5%
         Long-term rate of return on assets           9.5%       9.5%       9.5%            9.5%        9.5%       9.5%
</TABLE>


         The Company also has defined contribution plans for certain employees.
Company contributions in the years ended December 31, 1998, 1997 and 1996 were
$1,307,000, $623,000, and $783,000 in the U.S. and $1,147,000, $950,000 and
$846,000 in Canada, respectively.



19.      MEXICAN EMPLOYEE BENEFITS


         Net periodic pension cost for the three years ended December 31
included the following components:

<TABLE>
<CAPTION>
                                                                      1998                 1997                 1996
                                                                      ----                 ----                 ----
                                                                                       (000 OMITTED)

<S>                                                                 <C>                  <C>                  <C> 
         Service cost benefits earned
              During the period                                     $   57                 $ 96                $ 123
         Interest cost on projected
              Benefit obligation                                       456                  574                  474
         Expected return on plan assets                               (666)                (808)                (644)
         Net amortization and deferral                                 (51)                 (66)                   1
                                                                    ------               ------                -----

         Net pension cost                                           $ (204)              $ (204)               $ (46)
                                                                    =======              =======               ------
</TABLE>


         The following tables summarize pension benefit obligations, plan assets
and funded status as of December 31:


<TABLE>
<CAPTION>
         CHANGE IN PENSION BENEFIT                                   1998                  1997                 1996
         OBLIGATION:                                                 ----                  ----                 ----
                                                                                      (000 OMITTED)

<S>                                                                 <C>                   <C>                  <C>    
         Benefit obligation as of January 1                         $ 2,845               $ 2,264              $ 1,809
         Service cost                                                    57                    96                  123
         Interest cost                                                  456                   574                  474
         Plan participants' contributions                                 -                     -
         Amendments                                                       -                     -
         Actuarial (gain)/loss                                         (612)                    -                  (94)
         Benefits paid                                                  (17)                  (22)
         Foreign currency rate change                                  (517)                  (67)                 (47)
                                                                    -------               -------                -----

         Benefit obligation as of December 31                       $ 2,212               $ 2,845              $ 2,265
                                                                    =======               =======              -------
</TABLE>

                                      F-23


<PAGE>   56

<TABLE>
<CAPTION>
         CHANGE IN PLAN ASSETS:                                      1998                  1997                 1996
                                                                     ----                  ----                 ----
                                                                                      (000 OMITTED)

<S>                                                                 <C>                   <C>                  <C>    
         Fair value of plan assets at
         Beginning of year                                          $ 3,700               $ 3,001              $ 1,878
         Actuarial (gain)/loss in rate                                 (668)                    -                  551
         Actual return on plan assets                                   666                   809                  644
         Employer contribution                                            -                     -
         Plan participants' contributions                                 -                     -
         Benefits paid                                                  (17)                  (22)
         Foreign currency rate change                                  (682)                  (88)                 (72)
                                                                    -------               -------              -------

         Fair value of plan assets at end of year                   $ 2,999               $ 3,700              $ 3,001
                                                                    =======               =======              -------


<CAPTION>
<S>                                                                 <C>                   <C>                  <C>    
         Funded status:                                               1998                 1997                 1996
                                                                      ----                 ----                 ----
                                                                                       (000 OMITTED)

         Funded status at end of year                                 $ 787                $  855               $   85
         Unrecognized transition obligation                               -                     -
         Unrecognized net actuarial (gain)/loss                        (802)               (1,041)                 203
         Unrecognized prior service cost                                 52                     -                 (635)
                                                                      -----                ------               ------

         Prepaid (accrued) benefit cost                               $  37                $ (186)              $ (347)

         Weighted average assumptions used were:

<CAPTION>
                                                                  1998              1997             1996
                                                                  ----              ----             ----
<S>                                                              <C>               <C>               <C>  
         Discount rate for obligation                            24.0%             25.4%             24.0%
         Rate of increase in compensation                        18.6%             20.0%             21.0%
         Long-term rate of return on assets                      25.7%             27.2%             32.0%
</TABLE>

                                      F-24


<PAGE>   57


20.      POSTRETIREMENT BENEFITS OTHER THAN PENSIONS

         The Company has defined benefit postretirement plans that provide
medical and life insurance benefits for eligible retirees and dependents. In
1998, the Financial Accounting Standards Board issued SFAS 132, "Employers'
Disclosures about Pensions and other Postretirement Benefits," which the company
adopted as of December 31, 1998.

         The net periodic postretirement benefit cost for the years ended
December 31 included the following components:

<TABLE>
<CAPTION>
                                                          UNITED STATES                              CANADA
                                                          -------------                              ------
                                                    1998       1997       1996            1998       1997       1996
                                                    ----       ----       ----            ----       ----       ----
                                                                             (000 OMITTED)

<S>                                                <C>         <C>        <C>             <C>        <C>        <C> 
    Service cost                                   $ 563       $ 531      $ 494           $ 21       $ 24       $ 21
    Interest cost                                    475         453        425             18         25         24
    Expected return on plan assets                     -           -          -              -          -          -
    Amortization of prior service cost                (3)         (3)        (3)             -          -          -
    Amortization of transition obligation              -           -          -              -          -          -
    Recognized net actuarial (gain)/loss             (69)         (5)                        -          2          2
                                                                            (68)
    Curtailment (gain)/loss                            -           -       (665)             -          -          -
                                                   -----       -----      -----           ----       ----       ----

    Net periodic benefit cost                      $ 966       $ 976      $ 183           $ 39       $ 51       $ 47
                                                   =====       =====      =====           ====       ====       ====
</TABLE>

         The following tables summarize postretirement benefit obligations and
funded status as of December 31:

<TABLE>
<CAPTION>
    CHANGE IN POSTRETIREMENT BENEFIT                         UNITED STATES                             CANADA _
    OBLIGATION:                                              -------------               ----          --------
                                                       1998       1997       1996            1998       1997      1996
                                                       ----       ----       ----            ----       ----      ----
                                                                                (000 OMITTED)

<S>                                                  <C>         <C>        <C>             <C>        <C>        <C>  
    Benefit obligation as of January 1               $ 7,574     $ 6,066    $ 6,042         $ 278      $ 289      $ 264
    Service cost                                         563         531        494            21         24         21
    Interest cost                                        475         453        425            18         25         24
    Plan participants' contributions                       -           -          -             -          -          -
    Amendments                                            (3)         (3)      (665)            -          -          -
                                                                   
    Actuarial (gain)/loss                               (457)        583       (441)            -        (37)         2
    Benefits paid                                        (69)        (56)       211           (25)       (11)       (21)
    Foreign currency rate change                           -           -          -           (18)       (12)        (1)
                                                     -------     --------   -------         -----      -----      -----

    Benefit obligation as of December 31             $ 8,083     $ 7,574    $ 6,066         $ 274      $ 278      $ 289
                                                     =======     =======    =======         =====      =====      =====
</TABLE>


                                      F-25
<PAGE>   58



<TABLE>
<CAPTION>
    FUNDED STATUS:                                            UNITED STATES                           CANADA
                                                              -------------                           ------
                                                       1998       1997        1996           1998       1997      1996
                                                       ----       ----        ----           ----       ----      ----
                                                                                (000 OMITTED)

<S>                                                 <C>         <C>         <C>            <C>        <C>        <C>    
    Funded status at end of year                    $ (8,083)   $ (7,574)   $ (6,066)      $ (274)    $ (278)    $ (289)
    Unrecognized transition obligation                     -           -           -             -          -          -
    Unrecognized net actuarial (gain)/loss              (368)         23        (505)          (21)       (25)         -
    Unrecognized prior service cost                      (15)        (18)        (21)            -          -          -
                                                    ---------   ---------   ---------      --------   -------    -------

    Prepaid (accrued) benefit cost                  $ (8,466)   $ (7,569)   $ (6,592)      $ (295)    $ (303)    $ (289)
                                                    =========   =========   =========      =======    =======    =======
</TABLE>

         The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation ("APBO") for the Company's U.S.
operations was 9.0% as of December 1998, declining by 1.0% per year to 5.0% by
the year 2002 and remaining at that level thereafter for retirees below the age
65, and 6.5% as of December 31, 1998, declining by 0.5% per year to 5.0% by the
year 2002 and remaining at that level thereafter for retirees above age 65. A
one percentage-point change in the assumed health-care-cost trend rate would
have the following effects:

<TABLE>
<CAPTION>
                                                                       ONE PERCENTAGE            ONE PERCENTAGE
(THOUSANDS)                                                            POINT INCREASE            POINT DECREASE
---------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>                       <C>  
Effect on total of service and interest cost components                261                       (199)
Effect on postretirement benefit obligation                            1,945                     (1,530) 
--------------------------------------------------------------------------------------------------------
</TABLE>

         The postretirement benefit obligation of the Company's Canadian
operations does not contain health care component.

21.      LEASE OBLIGATIONS

         Certain warehouses, offices, and equipment are leased under leases
expiring through the year 2014 with some of the leases providing for renewal
options. Leases, which expire, are generally renewed or replaced by similar
leases.

         At December 31, 1998, future minimum rental payments with respect to
noncancellable operating leases with terms in excess of one year were as
follows:

<TABLE>
<CAPTION>
        1999                  2000                 2001                 2002                 2003              THEREAFTER
        ----                  ----                 ----                 ----                 ----              ----------
<S>                        <C>                  <C>                  <C>                  <C>                  <C>       
     $2,551,686            $2,340,937           $1,809,653           $1,451,543           $1,303,316           $5,439,363
</TABLE>


         Total rental  expenses for the years ended December 31, 1998,  1997,
and 1996 were $4,068,000 , $3,384,000 and $3,440,000, respectively.


                                      F-26


<PAGE>   59

FINANCIAL INSTRUMENTS WITH OFF-BALANCE-SHEET RISK

         The Company enters into foreign exchange forward contracts to hedge
certain firm and anticipated purchase commitments which are settled in Canadian
dollars. These contracts are purchased to reduce the impact of Canadian dollar
currency fluctuations on operating results. The Company does not engage in
Canadian dollar currency speculation. The contracts do not subject the Company
to risk due to exchange rate movements because gains and losses on the contract
are offset by gains and losses on the materials being purchased. At December 31,
1998 the Company had no Canadian dollar exchange forward contract outstanding.
At December 31, 1997, the Company had approximately $7,558,000 of Canadian
dollar exchange forward contracts outstanding. The Company's theoretical risk in
these transactions is the cost of replacing, at current rates, these contracts
in the event of default by the other party to the contract. Management believes
the risk of incurring such losses is remote because the contracts are entered
into with major financial institutions.

         As an adjunct to its coach business, the Company has entered into
repurchase and first loss agreements with certain companies which provide
financing for coaches sold by the Company, pursuant to which the Company agrees
to either repurchase coaches from such companies or guarantee the payment of
certain obligations of coach owners or operators. The amounts of such repurchase
agreements as of December 31, 1998 and 1997 were approximately $21,000,000 and
$23,000,000, respectively. Additionally, as a result of certain sales of notes
receivable and leases, the Company is obligated to reimburse the purchaser of
such notes and leases for any losses as a result of defaults up to $6,700,000
and $6,600,000 as of December 31, 1998 and 1997, respectively. The Company has
experienced no material losses in respect to such obligations and losses under
existing agreements are not expected to have a material affect on the Company's
financial statements.

22.      LITIGATION

         Certain entities of the Company are plaintiffs or defendants to various
actions, proceedings and pending claims. Some of the foregoing involve or may
involve claims for compensatory, punitive, or other damages in material amounts.
Litigation is subject to many uncertainties and it is possible that some of
these legal actions, proceedings and pending claims could be decided against the
Company. Although the amount of liability at December 31, 1998 with respect to
these matters is not ascertainable, the Company believes that any resulting
liability would not materially affect the Company's financial condition or
results of operations.

23.      COMMITMENTS AND CONTINGENCIES

         As a part of the Company's marketing strategy for the 1997 introduction
of the new EL model intercity coach, the "Renaissance", it has entered into
trade-in agreements, in 1996, whereby certain customers may trade-in, at
predetermined values, their recently purchased D or DL model coaches when
purchasing a new EL model. Under the terms of the agreements, the Company has
committed to trade-in values ranging from 73% to 82% of the original invoice
price for a 36-month-old coach; such trade-in values being estimated by
management to approximate fair market value for such coaches at the time of the
trade-in. At December 31, 1998 the Company's commitment under this program was
$14,525,000. The Company has reserved $600,000 for the estimated net cost to the
Company.

                                      F-27

<PAGE>   60

         During 1996, the Company completed a research and development project
in connection with the development of the E coach, which had been undertaken,
with the cooperation of the Government of Canada and the Province of Manitoba.
Agreements entered into between the parties for this project provided for
payment of matching contributions and specified that the contributions may be
repayable if, during the first five years following project completion, the
ratio of Canadian employees to total employees of the Company falls below 40%.
As of December 31, 1998, the total amount of such contributions was $6,891,000
and the Company had met the employee ratio commitment ($1,479,000 was recorded 
as income in the 1996 Statement of Consolidated Income).


24.      NONCONSOLIDATED AFFILIATE

         In 1997 a new company was formed, MCII Financial Services, Inc.
("MFS"). The Company acquired 250,000 shares, or 25%, of voting common stock of
MFS and 15,000,000 shares of non-voting preferred stock of MFS for $250,000 and
$15,000,000 respectively. The remaining 750,000 shares, or 75%, of the voting
common stock were acquired by the indirect controlling shareholders of the
Company. In 1998, the Company increased its investment by $7,650,000. The
Company also recognized its share of equity income of $210,000 for 1998. MFS
will operate independently from the Company and will provide conditional sales
contracts and operating leases to the Company's customers. MFS is expected to
have better access to funding on competitive terms.

         MFS's initial transaction was the purchase of $19,406,000 of loans and
$12,742,000 of leases from certain subsidiaries of the Company. The Company has
guaranteed the full and prompt collection of the loans sold to MFS. The Company
received a fairness opinion from an independent third party as to the basis for
the selling price of these assets. No gain was recognized on the transaction.
MFS will in the future engage in loan and leasing activities involving the
Company and others in the motor coach and other industries. During 1998, MFS
purchased additional loans of $35,519,000 and leases of $3,216,000 from the
Company.

25.      RELATED PARTY TRANSACTIONS

         Related party transactions for the years ended December 31 were as
follows:

<TABLE>
<CAPTION>
                                                                               1998                 1997                 1996
                                                                               ----                 ----                 ----
                                                                                                (000 OMITTED)

<S>                                                                          <C>                  <C>                   <C>    
         Purchases from affiliated companies:
            Goods                                                            $  3,253             $ 15,044              $ 4,815
            Services                                                            7,150               21,587                8,229
            Allocated interest expense                                          3,234                6,978                3,172
                                                                              -------             --------             --------
                                                                             $ 13,637             $ 43,609             $ 16,216
                                                                             ========             ========             ========

         Sales to affiliated companies:
            Goods                                                            $     --             $  2,973               $  968
            Services                                                            2,640                7,384                4,443
            Allocated interest income                                          11,989                8,376                1,720
                                                                              -------             --------             --------
                                                                             $ 14,629             $ 18,733              $ 7,131
                                                                             ========             ========              =======
         Charges for MFS Management Services                                 $    931                  N/A                  N/A
                                                                             ========             ========              =======
</TABLE>




                                      F-28
<PAGE>   61

<TABLE>
<S>                                                                          <C>                  <C>                   <C>    
         Charges for Dina management services                                 $ 1,000              $ 1,000              $ 1,000
                                                                              =======              =======              =======


                     --------------------------
         Related party balances included in the December 31 balance sheet 
           were:

<CAPTION>
                                                                                  1998                      1997
                                                                                  ----                      ----
                                                                                          (000 OMITTED)

<S>                                                                               <C>                     <C>     
         Affiliated companies receivables (payables) - net                        $ 0                     $ 16,293
                                                                                  ===                     ========
</TABLE>



         Dina's interest income and expense is allocated to its subsidiaries
based on relative monthly intercompany balances.

         During 1997, Autobuses put 240 transit bus units, with a sales value of
$9,340,000, out on lease to Transportes y Services Terrestres G S.A. de C.V.
("TSTG"). TSTG is controlled by members of the group consisting of the indirect
controlling shareholders of the Company.


26.      BUSINESS SEGMENT AND GEOGRAPHIC DATA

BUSINESS SEGMENT DATA

         The Company has three reporting segments, US and Canadian
Coach and Support, US and Canadian Replacements Parts, and Mexican Operations.
The Coach and Support Segment manufactures Motor Coaches and buys and sells used
Motor Coaches. The replacement parts segment distributes replacement parts for
Motor Coaches, transit buses and school buses.  The Mexican segment manufactures
Motor Coaches and Motor Coach components, and distributes replacement parts. The
reportable segments are managed separately because each business has differing
customer or manufacturing requirements. The accounting policies of the segments
are the same as those described in the summary of significant accounting
policies. Intangible assets are included in each segment's reportable assets,
and the corresponding amortization of these intangible assets is included in the
determination of a segment's operating profit or loss. The Company evaluates
performance based on profit or loss from operations before income taxes,
interest, and other non-operating income (expenses).


                                      F-29
<PAGE>   62


Data for these three segments of the years ending December 31 are as follows:

<TABLE>
<CAPTION>
                                                                      1998                 1997                 1996
                                                                      ----                 ----                 ----
                                                                                       (000 OMITTED)
<S>                                                                 <C>                  <C>                  <C>      
         Revenues:
              United States and Canadian Operations
                  Coach and Support                                 $ 677,661            $ 503,635            $ 499,611
                  Replacement Parts                                   172,815              190,178              161,682
              Mexican Operations                                       81,307               45,970                5,791
                                                                    ---------            ---------            ---------
                                                                    $ 931,783            $ 739,783            $ 667,084
                                                                    =========            =========            =========
         Operating income:
              United States and Canadian Operations
                  Coach and Support                                 $  70,114             $ 46,785             $ 39,865
                  Replacement Parts                                    21,497               15,754               14,788
              Mexican Operations                                       (9,740)              15,914                5,180
                                                                    ---------             --------             --------
                                                                    $  81,871             $ 78,453             $ 59,833
                                                                    =========             ========             ========
         Depreciation and amortization:
              United States and Canadian Operations
                  Coach and Support                                 $ 15,037             $ 13,944             $ 12,644
                  Replacement Parts                                    4,021                4,739                4,014
              Mexican Operations                                       5,761                3,352                  960
                                                                    --------             --------             --------
                                                                    $ 24,819             $ 22,035             $ 17,618
                                                                    ========             ========             ========
         Capital expenditures:
              United States and Canadian Operations
                  Coach and Support                                 $  8,384             $ 12,361             $ 11,749
                  Replacement Parts                                    2,832                1,423                1,229
              Mexican Operations                                       2,262               18,312               12,631
                                                                    --------             --------             --------
                                                                    $ 13,478             $ 32,096             $ 25,609
                                                                    ========             ========             ========
         Assets:
              United States and Canadian Operations

                  Coach and Support                                 $560,978            $522,817
                  Replacement Parts                                  174,455             178,788
              Mexican Operations                                    $ 70,721            $119,068
                                                                    --------            --------
                                                                    $806,154            $820,673
                                                                    ========            ========
</TABLE>


There are no material intersegment transactions.


                                      F-30


<PAGE>   63

         Major customers are generally defined as those which individually
account for more that 10% of the Company's revenue. For the years ended 1998,
1997, and 1996, Greyhound Lines, Inc. ("GLI"), accounted for 8.0%, 9.5%, and
11.1%, respectively, of the Company's consolidated revenues. In January 1998,
GLI and MCII signed a 10-year long-term supply agreement until the year 2007.
For the years-ended 1998, 1997 and 1996, sales to Coach USA, Inc. accounted for
8.0%, 7.6% and 0.9%, respectively, of the Company's consolidated revenues.
Effective June 9th, 1997, CUI and MCII signed an agreement pursuant to which CUI
agreed that MCII would be the primary supplier of CUI's annual new coach
requirements through 1999.

         The company also has a long-term agreement to purchase Coach part
"kits" from Marcopolo for its Viaggio coaches manufactured in Mexico.  The 
agreement requires the company to pay a royalty fee based on the value of
certain "kit" parts and components purchased from suppliers other than
Marcopolo.  The royalty fee ranges from 2.7% to 3.5% of the "kit" value. Royalty
fees paid in 1998 and 1997 were $291,000 and $1,114,000 respectively.

GEOGRAPHICAL DATA


<TABLE>
<CAPTION>
                                                                      1998                 1997                 1996
                                                                      ----                 ----                 ----
                                                                                       (000 OMITTED)

<S>                                                                 <C>                  <C>                  <C>      
         Revenues:
              United States                                         $ 770,351            $ 610,915            $ 579,136
              Canada                                                   80,125               82,898               82,157
              Mexico                                                   81,307               45,970                5,791
                                                                    ---------            ---------            ---------
                                                                    $ 931,783            $ 739,783            $ 667,084
                                                                    =========            =========            =========

         Long-Lived Assets:
              United States                                         $ 229,758            $ 222,501
              Canada                                                  101,669              110,965
              Mexico                                                   28,319               39,468
                                                                    ---------            ---------     
                                                                    $ 359,746            $ 372,934
                                                                    =========            =========
</TABLE>



                                      F-31
<PAGE>   64



                                  EXHIBIT INDEX



     EXHIBIT NO.             DESCRIPTION 
    ------------             -----------

        3.1*    Restated Certificate of Incorporation of MCII Holdings

        3.2*    Bylaws of MCII Holdings

        4.1*    $125,000,000 Credit Agreement, dated as of September 30, 1996,
                among Transportation Manufacturing Operations, Inc. as the
                Borrower, the Lenders Parties thereto and NBD Bank as
                Administrative Agent.

        4.2     Amendment No. 1 dated December 17, 1996 to $125,000,000 Credit
                Agreement dated as of September 30, 1996.

        4.3**   $125,000,000 9.02% Senior Notes Due November 15, 2002 Note
                Agreement, as amended by letter agreement, dated April 1995.

        4.4*    Form of Amendment to $125,000,000 9.02% Senior Notes Due
                November 15, 2002 Note Agreement as executed by the requisite
                holders of the Notes.

        4.5     Intercreditor Agreement, dated as of September 30, 1996, by and
                among the Lenders under the $125,000,000 Credit Agreement dated
                as of September 30, 1996, NBD Bank, and the holders of the 9.02%
                Senior Notes due 2002 issued by Transportation Manufacturing
                Operations, Inc.

        4.6     Indenture, dated as of April 30, 1996, between Grupo Dina and
                IBJ Schroder Bank & Trust Company, as Trustee, relating to the
                Notes, including the form of Old Note and New Note, filed as
                Exhibit 2.4 to Grupo Dina's Annual Report on Form 20-F for the
                year ended December 31, 1995.

        10.1**  Bus Purchase Requirements Agreement by and among GLI Operating
                Company, Greyhound Lines, Inc., Transportation Manufacturing
                Corporation and Motor Coach Industries, Inc., as amended by: a
                letter agreement dated June 15, 1987 from GLI Holding Company to
                The Greyhound Corporation; Amendment to Bus Purchase
                Requirements Agreement; entered into as of June 30, 1988 by and
                among GLI Operating Company, Transportation Leasing Co.,
                Transportation Manufacturing Corporation and Motor Coach
                Industries, Inc.; Term Sheet/Agreement in Principle dated July
                13, 1988 among GLI Holding Company and The Greyhound
                Corporation; Claims Treatment Agreement made and entered into as
                of August, 1991 among Greyhound Lines, Inc., the other Debtors
                signatory thereto and The Greyhound Corporation; and Amendment
                Number 2 to Bus Purchase Requirements Agreement executed as of
                December 21, 1994 by Greyhound Lines, Inc., Transportation
                Leasing Co., Motor Coach Industries, Inc. and Transportation
                Manufacturing Corporation.

        10.2*   In Re: The Flxible Corporation, United State Bankruptcy Court,
                Southern District of Ohio, Eastern Division, Order Authorizing
                and Approving Sale of Debtor's Assets Pursuant to Sections 363
                and 365 of the Bankruptcy Code.

        10.3**  Parts Purchase and Supply Agreement entered into as of May 1,
                1994 by and between Greyhound Lines, Inc. and Universal Coach
                Parts, Inc., as amended by Amendment No. 1 entered into as of
                May 1, 1994.



<PAGE>   65

        10.4**  Limited Recourse Chattel Paper Purchase Agreement dated as of
                March 31, 1994 between MCI Acceptance Corp. and The CIT
                Group/Equipment Financing, Inc. and related Guaranty dated as of
                March 31, 1994; and Amendment No. 1 dated May 15, 1995 and
                related Guaranty dated as of May 15, 1995.

                                       2

<PAGE>   66




        10.5*** Registration Agreement, dated June 3, 1996, among Grupo Dina,
                MCII Holdings and Salomon Brothers, Inc., Alliance Capital
                Management Corporation and John Hancock Mutual Life Insurance
                Company.

        10.6*   Coach Purchase Agreement, dated August 1, 1995, between Dina
                Autobuses, S.A. de C.V. and Hausman Bus Sales, Inc.

        10.7*   Employment Agreement, dated as of September 30, 1996, between
                Universal Coach Parts, Inc. and Jerry W Bost.

        10.8*   Employment Agreement, dated as of September 30, 1996, between
                Transportation Manufacturing Operations, Inc. and James P.
                Bernacchi.

        12      Computation of ratio of earnings to fixed charges.

        21      List of Subsidiaries of MCII Holdings.

        27      EDGAR Financial Data Schedule.


        * Previously filed on Form F-1/S-1, Registration No. 333-08843, and
incorporated herein by reference.

        ** Previously filed on Form 20F for the year ended December 31, 1994 and
incorporated herein by reference.

        *** Previously filed on Form 20F for the year ended December 31, 1995
and incorporated herein by reference.