<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 August 2, 1997
/ / 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 September 1, 1997, 8,444,778 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 August 2, 1997
Table of Contents
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
as of August 2, 1997 and
November 2, 1996 ..................................... 1
Condensed Consolidated Statements of
Income for the three-month and nine-month
periods ended August 2, 1997 and
July 27, 1996 ........................................ 2
Condensed Consolidated Statements of
Cash Flows for the nine-month
periods ended August 2, 1997
and July 27, 1996 .................................... 3
Notes to Condensed Consolidated
Financial Statements ................................. 4
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations ........................................... 6
Item 3. Quantitative and Qualitative Disclosures
about Market Risk .................................... 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 8
Item 6. Exhibits and Reports on Form 8-K ....................... 8
Signatures ............................................. 10
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<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AUGUST 2, 1997 AND NOVEMBER 2, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
AUGUST 2, NOVEMBER 2,
1997 1996
--------- ----------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 3,614 $ 46,253
Trade receivables 33,167 13,443
Leases receivable 40,652 32,215
Inventories 151,285 69,776
Prepaid expenses 2,917 2,137
Other current assets 13,855 3,167
-------- --------
Total current assets 245,490 166,991
LEASES RECEIVABLE, NONCURRENT 46,666 41,862
PROPERTY, PLANT, AND EQUIPMENT 68,177 64,599
Less accumulated depreciation (29,551) (25,710)
-------- --------
Property, plant, and equipment, net 38,626 38,889
GOODWILL AND DEBT ISSUE COSTS 162,460 162,849
Less accumulated amortization (21,238) (26,131)
-------- --------
Goodwill & debt issue costs, net 141,222 136,718
-------- --------
OTHER ASSETS 6,624 6,571
-------- --------
Total assets $ 478,628 $ 391,031
======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Revolving credit facilities $ 41,900 $ 0
Current portions of long-term debt 13,938 16,000
Accounts payable 52,754 27,704
Income taxes payable 56 9,270
Deferred income taxes 7,885 9,080
Other current liabilities 43,094 24,519
-------- --------
Total current liabilities 159,627 86,573
LONG-TERM DEBT 329,047 131,350
DEFERRED INCOME TAXES 5,296 5,306
OTHER LIABILITIES 20,839 20,309
REDEEMABLE COMMON STOCK, NET 14,586 29,305
-------- --------
Total liabilities 529,395 272,843
-------- --------
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 (deficit) earnings (125,312) 43,228
Other stockholders' (deficit) equity (2,555) (2,140)
-------- --------
Total stockholders' equity (50,767) 118,188
-------- --------
Total liabilities and
stockholders' (deficit) equity $ 478,628 $ 391,031
======== ========
</TABLE>
The accompanying notes are an integral part of these condensed
consolidated statements.
1
<PAGE>
<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH AND NINE MONTH PERIODS
ENDED AUGUST 2, 1997 AND JULY 27, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
AUGUST 2, JULY 27, AUGUST 2 JULY 27,
1997 1996 1997 1996
--------- ---------- --------- ---------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
Net sales $ 193,672 $ 146,788 $ 372,587 $ 346,115
Cost of goods sold 160,162 122,141 306,422 287,427
-------- -------- -------- --------
Gross profit 33,510 24,647 66,165 58,688
Selling, general and
administrative expense 11,703 10,612 34,051 31,501
Amortization of goodwill
and other intangibles 960 940 2,880 2,820
Nonrecurring items 0 0 16,506 0
-------- -------- -------- --------
Operating income 20,847 13,095 12,728 24,367
Interest income 1,440 1,845 4,382 5,353
Interest and debt issue
expense (9,371) (4,425) (25,520) (12,796)
Other income (expense) 369 110 1,174 543
-------- -------- -------- --------
Income (loss) before
income taxes 13,285 10,625 (7,236) 17,467
(Benefit) provision
for income taxes 4,920 4,049 (8,328) 6,835
-------- -------- -------- --------
Net income before
extraordinary items 8,365 6,576 1,092 10,632
Extraordinary item - loss on
early extinguishment of debt 0 0 (2,986) (1,416)
-------- -------- -------- --------
Net income (loss) $ 8,365 $ 6,576 $ (1,894) $ 9,216
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
statements.
2
<PAGE>
<PAGE>
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED AUGUST 2, 1997 AND JULY 27, 1996
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
AUGUST 2, JULY 27,
1997 1996
--------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,894) $ 9,216
------- -------
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Extraordinary loss on extinguishment of debt 4,755 2,254
Depreciation and amortization 8,488 8,694
Increase (decrease) in cash surrender value
of life insurance (109) (47)
Deferred income taxes (1,205) (1,441)
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables (19,724) (1,201)
(Increase) decrease in inventories (81,509) (73,410)
(Increase) decrease in prepaid expenses (780) (559)
Increase (decrease) in accounts payable 25,050 32,857
Increase (decrease) in income taxes payable (9,214) (5,162)
Other 8,823 10,220
------- -------
Total adjustments (65,425) (27,795)
------- -------
Net cash used in operating activities (67,319) (18,579)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant, and equipment acquisitions (4,759) (2,587)
Increase in leases receivable (13,241) (9,557)
------- -------
Net cash used in investing activities (18,000) (12,144)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on working capital revolvers 52,200 49,539
Borrowing on long-term debt 274,699 0
Repayment of long-term debt (89,375) (33,000)
Dividends paid (185,345) 0
Debt prepayment premium (3,369) (1,625)
Debt issuance costs (9,695) 0
Proceeds from management notes 3,800 0
Other 180 (192)
------- -------
Net cash provided by
financing activities 43,095 14,722
------- -------
EFFECT OF EXCHANGE RATE FLUCTUATIONS (415) (191)
------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (42,639) (16,192)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 46,253 21,452
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,614 $ 5,260
======= =======
SUPPLEMENTAL INFORMATION:
Cash interest paid $ 22,232 $ 10,790
======= =======
Cash income taxes paid $ 10,044 $ 8,351
======= =======
</TABLE>
The accompanying notes are an integral part of these condensed
statements.
3<PAGE>
<PAGE>
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 November 2,
1996.
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 1997 contains
52 weeks and fiscal year 1996 contains 53 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>
<PAGE>
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
$3,000,000 higher at August 2, 1997 and approximately $2,100,000 higher
at November 2, 1996.
The components of inventory consist of the following at August 2, 1997
and November 2, 1996 (dollars in thousands):
<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Raw materials $ 29,827 $18,848
Work in process 46,563 22,916
Finished goods 74,895 28,012
------- ------
$151,285 $69,776
======== =======
</TABLE>
3. CONTINGENCIES
PENDING LITIGATION AND INSURANCE PROGRAM
As of August 2, 1997, 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.
4. RECAPITALIZATION
During November 1996, Blue Bird was recapitalized, resulting in the
repayment of the existing $86 million of debt, the issuance of new debt
in the amount of $275 million and a distribution paid to shareholders
and holders of options for BBC common stock of $185.3 million and $16.5
million, respectively. The existing Subordinated Notes were repurchased
at a premium of $3.4 million. Debt issuance costs related to the
recapitalization were $9.7 million. A nonrecurring recapitalization
charge was taken in November to recognize the $3.4 million premium cost,
$1.4 million of original debt issue costs written off and $16.5 million
General and Administrative expenses related to the distribution payment
to option holders for a total of $21.3 million.
The Company quarterly records an adjustment to the redeemable common
stock based on an estimated Company valuation net of outstanding debt in
accordance with the formula in the stockholders' agreement. The $14.7
million decrease in the redeemable common stock since the beginning of
the fiscal year is primarily the result of the increased debt arising
from the recapitalization.
5<PAGE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three Months Ended August 2, 1997 Compared to Three Months Ended July 27,
1996
Net sales for the quarter ended August 2, 1997, were $193.7 million compared to
$146.8 million for the corresponding period in 1996. The increase was due to
delivering more units in the current year period. Distributors scheduled more
units for third quarter delivery this year as compared to the third
quarter of 1996. Type C chassis manufacturers were able to deliver chassis to
our assembly facilities earlier this year than in 1996 which also permitted
earlier delivery of units.
Gross profit increased to $33.5 million in the third quarter of 1997 from
$24.6 million in the third quarter of 1996, an increase of $8.9 million or
36.0% due to higher sales volume and higher gross margins. The gross margin
increased to 17.3% compared to 16.8% in the 1996 period due to the mix of
product delivered in the 1997 quarter containing more of the higher
margin Type C units.
Selling, general and administrative expenses increased to $11.7 million from
$10.6 million in the 1996 period, an increase of $1.1 million. This increase
was related to increased engineering and marketing costs associated with new
product development and introduction as well as a negotiated settlement in a
product liability case.
Interest and debt issue expense increased to $9.4 million in the current
period from $4.4 million in the prior year period due to the increase in the
aggregate principal amount of debt outstanding and the higher interest rate
payable thereon as a result of the recapitalization.
The provision for income taxes was $4.9 million in the current period compared
to a provision of $4.0 million in the 1996 period. The increase was due to
increased taxable income.
Nine Months Ended August 2, 1997 Compared to Nine Months Ended July 27, 1996
Net sales for the nine months ended August 2, 1997, were $372.6 million, an
increase of $26.5 million or 7.6% compared to the corresponding period in 1996.
This increase was due to more deliveries during the current reporting period
as compared to the 1996 period. Distributors scheduled more units for third
quarter delivery this year as compared to third quarter 1996. Based on
current scheduled deliveries, fourth quarter unit deliveries should be below
fourth quarter of 1996 because of the high delivery volume in the third
quarter of 1997. The total number of units delivered in 1997 is expected to be
comparable to the total units delivered in 1996.
Gross profit increased to $66.2 million in the current period compared to
$58.7 million in the 1996 period. This was an increase of $7.5 million or
12.7% due to higher sales volume and higher gross margins. The gross margin
increased to 17.8% compared to 17.0% in the 1996 period due primarily to the
mix of product delivered in 1997 containing more of the higher margin Type C
units.
6<PAGE>
<PAGE>
Selling, general and administrative expenses increased to $34.1 million from
$31.5 million in the 1996 period, an increase of $2.6 million or 8.1%. This
increase was related to increased engineering and marketing costs associated
with new product development and introduction as well as a negotiated
settlement in a product liability case. Nonrecurring General and
Administrative charges of $16.5 million were taken in the current year due to
the recapitalization described in note 4 to the condensed consolidated
financial statements and below. See "Financial Condition - Liquidity and
Capital Resources."
Interest and debt issue expense increased to $25.5 million in the current
period from $12.8 million in the prior year period due to the increase in the
aggregate principal amount of debt outstanding and the higher interest rate
payable thereon as a result of the recapitalization.
The benefit for income taxes was $8.3 million in the current period compared
to a provision of $6.8 million in the 1996 period. The 1997 period reflected
a loss. The higher effective tax rate for 1997 was a result of the combined
effect of certain tax benefits, in particular, the tax benefit related to a
portion of the distribution paid to shareholders in the recapitalization
being deductible for tax purposes.
The extraordinary loss of $3.0 million, net of a tax benefit of $1.8 million,
occurring in the 1997 period was due to the early extinguishment of $50
million of Subordinated Notes as part of the recapitalization. Similarly,
during the corresponding period in 1996, the early extinguishment of $25
million of Subordinated Notes resulted in an extraordinary loss of $1.4
million, net of a tax benefit of $.8 million.
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.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities during the nine month period was $67.3
million. A portion of this amount resulted from the Company's expenses
associated with the recapitalization, in particular, the $16.5 million payment
to the option holders and the $3.4 million premium payment to redeem the
Subordinated Notes. Other items attributing to the cash use were the seasonal
7<PAGE>
<PAGE>
increase in inventory and accounts receivable and the payment of income taxes,
partially offset by an increase in accounts payable, the extraordinary loss on
the extinguishment of debt, depreciation and amortization.
During November 1996, Blue Bird was recapitalized, resulting in the repayment
of the existing $86 million of debt, the issuance of new debt in the amount of
$275 million and a distribution paid to shareholders and holders of options
for BBC common stock of $185.3 million and $16.5 million, respectively. The
existing Subordinated Notes were repurchased at a premium of $3.4 million.
Debt issuance costs related to the recapitalization were $9.7 million. A
nonrecurring recapitalization charge was taken in November to recognize the
$3.4 million premium cost, $1.4 million of original debt issue costs written
off and $16.5 million General and Administrative expenses related to the
distribution payment to option holders for a total of $21.3 million.
FORWARD-LOOKING STATEMENTS
Any statements contained in this Form 10-Q which are not historical facts are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company cautions readers that there can be
no assurance that the actual results or business conditions will not differ
materially from those projected or suggested in such forward-looking
statements as a result of various factors, including, but not limited to, the
degree to which the Company is leveraged and the Company's significant debt
service obligations, the restrictive covenants contained in and the asset
encumbrances resulting from certain of the Company's credit agreements,
product liability claims for personal injuries and other matters, the
availability of insurance coverage with respect to such claims and matters,
governmental regulation of the Company's business, the limited number of
chassis suppliers, the control of the Company by Merrill Lynch Capital
Partners, Inc. and the consequences arising under the Company's credit
agreements in the event of a change of control.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
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 November 2, 1996 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.
27.1 Financial Data Schedule.
8<PAGE>
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Registrants during the
quarter ended August 2, 1997.
9<PAGE>
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 15, 1997 Date: September 15, 1997
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 15, 1997 Date: September 15, 1997
10
<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-01-1997
<PERIOD-START> NOV-03-1996
<PERIOD-END> AUG-02-1997
<CASH> 3,614
<SECURITIES> 0
<RECEIVABLES> 73,819
<ALLOWANCES> 0
<INVENTORY> 151,285
<CURRENT-ASSETS> 245,490
<PP&E> 68,177
<DEPRECIATION> (29,551)
<TOTAL-ASSETS> 478,628
<CURRENT-LIABILITIES> 159,627
<BONDS> 329,047
<COMMON> 14,663
0
0
<OTHER-SE> (50,844)
<TOTAL-LIABILITY-AND-EQUITY> 478,628
<SALES> 372,587
<TOTAL-REVENUES> 372,587
<CGS> 306,422
<TOTAL-COSTS> 53,437
<OTHER-EXPENSES> (5,556)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,520
<INCOME-PRETAX> (7,236)
<INCOME-TAX> (8,328)
<INCOME-CONTINUING> 1,092
<DISCONTINUED> 0
<EXTRAORDINARY> (2,986)
<CHANGES> 0
<NET-INCOME> (1,894)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
