<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/x/ JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the period ended July 27, 1996
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.
For the transition period from to
Commission File Number 33-49544-01 Commission File Number 33-49544
Blue Bird Corporation Blue Bird Body Company
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Georgia
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
13-3638126 58-0813156
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
3920 Arkwright Road 3920 Arkwright Road
Macon, Georgia 31210 Macon, Georgia 31210
(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(912) 757-7100 (912) 757-7100
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
Indicate by check mark whether the registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrants were required to file such reports),
and (2) have been subject to such filing requirements for the past 90
days. Yes /X/ No / /
As of June 1, 1996, 8,424,778 shares of Blue Bird Corporation's
common stock and 10 shares of Blue Bird Body Company's common stock
were outstanding.
BLUE BIRD BODY COMPANY ("BLUE BIRD" OR THE "COMPANY") IS A WHOLLY-
OWNED SUBSIDIARY OF BLUE BIRD CORPORATION ("BBC"). BLUE BIRD MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H(1) (a) AND (b) OF
FORM 10-Q AND IS THEREFORE FILING CERTAIN PORTIONS OF THIS FORM 10-Q
APPLICABLE TO IT WITH THE REDUCED DISCLOSURE FORMAT PERMITTED BY SUCH
GENERAL INSTRUCTION.
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BLUE BIRD CORPORATION
BLUE BIRD BODY COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE-MONTH AND NINE-MONTH PERIODS
ENDED July 27, 1996
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
as of July 27, 1996 and
October 28, 1995 ..................................... 1
Condensed Consolidated Statements of
Income for the three-month and nine-month
periods ended July 27, 1996 and
July 29, 1995 ........................................ 2
Condensed Consolidated Statements of
Cash Flows for the nine-month
periods ended July 27, 1996
and July 29, 1995 .................................... 3
Notes to Condensed Consolidated
Financial Statements ................................. 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ........................................... 6
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 8
Item 6. Exhibits and Reports on Form 8-K ....................... 8
Signatures ....................................................... 9
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<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
JULY 27, 1996 AND OCTOBER 28, 1995
($ IN THOUSANDS)
<TABLE>
<CAPTION>
JULY 27, OCTOBER 28,
1996 1995
--------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,260 $ 21,452
Trade receivables 20,067 18,866
Leases receivable 33,125 47,222
Inventories 156,756 83,346
Prepaid expenses 1,579 1,020
Other current assets 2,914 5,927
-------- --------
Total current assets 219,701 177,833
LEASES RECEIVABLE, NONCURRENT 38,654 15,000
PROPERTY, PLANT, AND EQUIPMENT 61,170 58,872
Less accumulated depreciation (25,986) (21,860)
-------- --------
Property, plant, and equipment, net 35,184 37,012
-------- --------
GOODWILL AND OTHER INTANGIBLE ASSETS 163,733 165,594
Less accumulated amortization (24,714) (21,712)
-------- --------
Goodwill & other intangible assets,
net 139,019 143,882
-------- --------
OTHER ASSETS 6,935 6,065
-------- --------
Total assets $ 439,493 $ 379,792
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Revolving credit facilities $ 46,547 $ 35,662
Current portions of long-term debt 13,000 12,000
Accounts payable 58,600 25,743
Income taxes payable 1,764 6,926
Deferred income taxes 8,442 9,535
Other current liabilities 33,644 26,242
-------- --------
Total current liabilities 161,997 116,108
LONG-TERM DEBT 118,404 113,750
DEFERRED INCOME TAXES 5,550 5,898
OTHER LIABILITIES 21,017 20,536
REDEEMABLE COMMON STOCK, NET 20,431 20,872
-------- --------
Total liabilities 327,399 277,164
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 25,000,000
shares authorized; 7,704,778 and
7,704,778 outstanding respectively 77 77
Additional paid-in capital 77,023 77,023
Retained earnings 37,553 27,896
Other stockholders' equity (2,559) (2,368)
-------- --------
Total stockholders' equity 112,094 102,628
-------- --------
Total liabilities and stockholders'
equity $ 439,493 $ 379,792
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
1
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<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH AND NINE MONTH
PERIODS ENDED JULY 27, 1996 AND JULY 29, 1995
($ IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
JULY 27, JULY 29, JULY 27, JULY 29,
1996 1995 1996 1995
--------- --------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 146,788 $ 137,340 $ 346,115 $ 319,445
Cost of goods sold 122,141 113,037 287,427 264,085
-------- -------- -------- --------
Gross profit 24,647 24,303 58,688 55,360
Selling, general and
administrative expenses 10,612 9,499 31,501 29,462
Amortization of goodwill
and other intangibles 940 965 2,820 3,728
-------- ------- -------- --------
Operating income 13,095 13,839 24,367 22,170
Interest income 1,845 1,016 5,353 2,993
Interest and debt issue
expense (4,425) (5,332) (12,796) (14,005)
Other income (expense) 110 613 543 475
------- ------- ------- -------
Income before income
taxes 10,625 10,136 17,467 11,633
Provision for income
taxes 4,049 4,330 6,835 4,929
------- ------- ------- -------
Net income before
extraordinary items 6,576 5,806 10,632 6,704
Extraordinary item - loss
on extinguishment of
debt (net of income
tax benefit of $838) 0 0 (1,416) 0
------- ------- ------- -------
Net income $ 6,576 $ 5,806 $ 9,216 $ 6,704
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these condensed consolidated
statements.
2
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<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTH PERIODS ENDED JULY 27, 1996 AND JULY 29, 1995
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 27, JULY 29,
1996 1995
--------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 9,216 $ 6,704
------- -------
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Extraordinary loss on extinguishment
of debt 2,254 0
Depreciation and amortization 8,694 9,452
Increase in cash surrender value of
life insurance (47) (71)
Deferred income taxes (1,441) (1,971)
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables (1,201) (6,597)
(Increase) decrease in inventories (73,410) (74,177)
(Increase) decrease in prepaid expenses (559) (109)
Increase (decrease) in accounts payable 32,857 24,449
Increase (decrease) in income taxes
payable (5,162) 974
Other 10,220 2,730
-------- --------
Total adjustments (27,795) (45,320)
-------- --------
Net cash used in operating activities (18,579) (38,616)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant, and equipment acquisitions (2,587) (2,762)
Leases receivable (9,557) (9,991)
-------- --------
Net cash used in investing activities (12,144) (12,753)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on working capital revolvers 49,539 49,900
Repayment of long-term debt (33,000) (6,000)
Debt prepayment premium (1,625) 0
Other (192) (949)
-------- --------
Net cash (used in) provided by
financing activities 14,722 42,951
-------- --------
EFFECT OF EXCHANGE RATE FLUCTUATIONS (191) (95)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (16,192) (8,513)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 21,452 10,490
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 5,260 $ 1,977
======== ========
SUPPLEMENTAL INFORMATION:
Cash interest paid $ 2,294 $ 11,818
======== ========
Cash income taxes paid $ 8,351 $ 5,928
======== ========
The accompanying notes are an integral part of these condensed consolidated
statements.
3
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BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF FINANCIAL STATEMENTS AND FORMATION AND ORGANIZATION
The accompanying unaudited condensed consolidated financial
statements of Blue Bird Corporation and subsidiaries ("BBC") have been
prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. It is suggested that
these condensed consolidated financial statements be read in conjunction
with the financial statements and the notes thereto included in the
joint annual report of BBC and Blue Bird Body Company (the
"Predecessor") (see "Acquisition" below) on Form 10-K for the fiscal
year ended October 28, 1995.
The accompanying unaudited financial statements include, in the
opinion of management, all adjustments, which are of a normal recurring
nature, necessary for a fair presentation for the periods presented.
Results for the interim periods presented are not necessarily indicative
of results that may be expected for a full fiscal year.
FISCAL YEAR
BBC's fiscal year ends on the Saturday nearest October 31 of each
year, generally referred to as a "52-/53-week year." Fiscal year 1996
contains 53 weeks and fiscal year 1995 contains 52 weeks.
ACQUISITION
On April 15, 1992, BBC (formerly B B Holding Corp.) acquired all of
the outstanding capital stock of the Predecessor through the merger of
B B Acquisition Corp., a wholly owned subsidiary of BBC, with and into
the Predecessor (the "Acquisition"), with the Predecessor as the
surviving corporation. The Acquisition was accounted for as a purchase.
4 <PAGE>
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2. INVENTORIES
Inventories are valued at the lower of cost or market, cost being
determined on the last-in, first-out basis. If the first-in, first-out
method had been used, inventories would have been approximately $4,000,000
higher at July 27, 1996 and approximately $2,600,000 higher at October 28,
1995.
The components of inventory consist of the following at July 27,
1996 and October 28, 1995 (dollars in thousands):
</TABLE>
<TABLE>
<CAPTION>
1996 1995
<C> <C>
Raw materials $ 29,024 $32,463
Work in process 47,473 22,831
Finished goods 80,259 28,052
-------- -------
$156,756 $83,346
======== =======
</TABLE>
3. CONTINGENCIES
PENDING LITIGATION AND INSURANCE PROGRAM
As of July 27, 1996, a number of product liability cases were
pending against a subsidiary of BBC. Neither the outcome of certain cases
nor the amounts of any liabilities related to these certain cases are known,
however, management believes that the ultimate resolution of these matters
will not have a material adverse impact on BBC's financial position or results
of operations.
5
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<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JULY 27, 1996 COMPARED TO THREE MONTHS ENDED JULY 29, 1995
Net sales for the quarter ended July 27, 1996, were $146.8 million, an
increase of 6.9% or $9.4 million compared to the corresponding period in
1995. This increase was due to more deliveries with a higher average selling
price during the current reporting period as compared to the 1995 period.
Gross profit increased to $24.6 million in the third quarter of 1996 from
$24.3 million in the third quarter of 1995, an increase of $.3 million or
1.4% due to higher sales volume.
Selling, general and administrative expenses increased to $10.6 million from
$9.5 million in the 1995 period, an increase of 11.6% or $1.1 million. This
increase was due primarily to higher engineering and selling/promotional
expenses.
Interest income was $1.8 million in 1996, an increase of $.8 million compared
to $1.0 million in the third quarter of 1995. This increase was due to a
higher average dollar amount of leases held in the lease portfolio in 1996
compared to 1995.
Interest and debt issue expenses decreased to $4.4 million in the current
period from $5.3 million in the prior year's period due to lower interest
rates on bank debt as well as lower debt due to the repurchase of $25 million
of Subordinated Debt in December, 1995. The resulting lower interest
expense was partially offset by higher interest expense on the line of credit
related to leases in Blue Bird Capital Corporation. The line of credit for
Blue Bird Capital Corporation was not in place during the 1995 period.
Other (income)/expense was $.1 million income in the current period as
compared to $.6 million income in the corresponding period in 1995 due
primarily to an insurance settlement received in the 1995 period.
The provision for income taxes was $4.0 million in the current period
compared to $4.3 million in the 1995 period. The effective tax rate for the
current period was 38.1% compared to 42.7% during the prior year period. The
effective tax rate for both periods is higher than the statutory rate
primarily due to the effect of certain nondeductible amortization charges,
principally goodwill.
NINE MONTHS ENDED JULY 27, 1996 COMPARED TO NINE MONTHS ENDED JULY 29, 1995
Net sales for the nine months ended July 27, 1996, were $346.1 million, an
increase of $26.7 million or 8.4% compared to the corresponding period in
1995. This was due to delivering more units during the current period as
compared to the 1995 period.
6
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<PAGE>
Gross profit increased to $58.7 million in the current period as compared to
$55.4 million in the 1995 period. This was an increase of $3.3 million or
6.0%. The increased gross profit was due to the higher sales volume.
Selling, general and administrative expenses increased to $31.5 million from
$29.5 million in the 1995 period, an increase of $2.0 million or 6.8%. This
increase was due primarily to normal budgeted increases in engineering and
marketing, as well as higher selling expenses.
Interest income increased to $5.4 million in 1996, compared to $3.0 million
in 1995. The increase was due mainly to a higher average dollar amount of
leases held in the lease portfolio in 1996 compared to 1995.
Interest and debt issue expenses decreased to $12.8 million in the current
period from $14.0 million in the prior year's period due to lower interest
rates on bank debt as well as lower debt due to the repurchase of $25 million
of Subordinated Debt in December, 1995. The resulting lower interest expense
was partially offset by interest expense on the line of credit related to
leases in Blue Bird Capital Corporation. The line of credit for Blue Bird
Capital Corporation was not in place during the 1995 period.
The provision for income taxes was $6.8 million in the current period compared
to $4.9 million in the 1995 period. The effective tax rate for the current
period was 39.1% compared to 42.4% during the prior year period. The
effective tax rate for both periods is higher than the statutory rate
primarily due to the effect of certain nondeductible amortization charges,
principally goodwill.
On December 14, 1995, the Company repurchased, for cash on the open market,
$25 million in principal amount of outstanding 11 3/4% Senior Subordinated
Notes due 2002, Series B (the "Subordinated Notes") for the purchase price
(expressed as a percentage of principal amount) of 106.500% plus accrued
interest to the purchase date. An extraordinary loss of $1.4 million net
of a tax benefit of $.8 million occurred during the 1996 period due to the
early extinguishment of such Subordinated Notes.
FINANCIAL CONDITION
WORKING CAPITAL
The Company's working capital needs are seasonal. Working capital and related
bank borrowings are lowest immediately after heavy school bus deliveries late
in the fourth fiscal quarter. Beginning in December or January, working
capital and related bank borrowings typically start to increase as parts are
purchased or manufactured and distributed to the assembly plants for assembly
into buses. Management tries to build buses as close to expected delivery
time as possible. Inventory is at its highest during May, June and July prior
to heavy seasonal deliveries.
7
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LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the current period was $18.6
million. This was primarily the result of the seasonal increase in inventory
and payment of income taxes, partially offset by depreciation, amortization
and an increase in accounts payable. Net borrowings on the working capital
revolvers increased $49.5 million, reflecting primarily the seasonal increase
in inventory. The early extinguishment of $25 million of outstanding
Subordinated Notes was funded primarily from internally generated cash and
partially from an increase in the working capital revolver. On March 29,
1996, Blue Bird Capital Corporation entered into an Amended and Restated Loan
Agreement with LaSalle National Bank, as Agent, and other financial
institutions (the "Amended Credit Agreement"). The Amended Credit Agreement
provides Blue Bird Capital with a revolving credit facility (the "Credit
Facility") up to a maximum aggregate principal amount of $100 million, subject
to certain limitations as set forth in the Amended Credit Agreement. The
Credit Facility terminates on March 31, 1999 and may be extended for up to two
one-year periods. The Company believes that its established financing
sources are adequate for the foreseeable future.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to BBC's and the Predecessor's Joint Annual Report on Form
10-K for the fiscal year ended October 28, 1995 for a description of certain
legal proceedings to which BBC or the Predecessor is a party.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27 Financial data schedule
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Registrants
during the quarter ended July 27, 1996.
8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, each Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
BLUE BIRD CORPORATION BLUE BIRD BODY COMPANY
By /s/ Paul E. Glaske By /s/ Paul E. Glaske
Paul E. Glaske Paul E. Glaske
Chairman of the Board and Chairman of the Board and
President and Director President and Director
(Principal Executive (Principal Executive
Officer) Officer)
Date: September 9, 1996 Date: September 9, 1996
By /s/ Bobby G. Wallace By /s/ Bobby G. Wallace
Bobby G. Wallace Bobby G. Wallace
Vice President, Treasurer and Vice President - Finance
Secretary and Director and Administration,
(Principal Financial and Treasurer and Secretary
Accounting Officer) and Director
(Principal Financial and
Accounting Officer)
Date: September 9, 1996 Date: September 9, 1996
9
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Exhibit Index
-------------
Exhibit
No. Description
------- -----------
27 Financial data schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000889468
<NAME> Blue Bird Body Company
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> NOV-02-1996
<PERIOD-END> JUL-27-1996
<CASH> 5,260
<SECURITIES> 0
<RECEIVABLES> 53,192
<ALLOWANCES> 0
<INVENTORY> 156,756
<CURRENT-ASSETS> 219,701
<PP&E> 61,170
<DEPRECIATION> 25,986
<TOTAL-ASSETS> 439,493
<CURRENT-LIABILITIES> 161,997
<BONDS> 118,404
<COMMON> 77,100
0
0
<OTHER-SE> 55,425
<TOTAL-LIABILITY-AND-EQUITY> 439,493
<SALES> 346,115
<TOTAL-REVENUES> 346,115
<CGS> 287,427
<TOTAL-COSTS> 287,427
<OTHER-EXPENSES> 33,778
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,796
<INCOME-PRETAX> 17,467
<INCOME-TAX> 6,835
<INCOME-CONTINUING> 10,632
<DISCONTINUED> 0
<EXTRAORDINARY> 1,416
<CHANGES> 0
<NET-INCOME> 9,216
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
