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SECURITIES AND EXCHANGE COMMISSION
Washington,WASHINGTON, D.C. 20549
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FORM 10-Q
(Mark One)
[x](MARK ONE)
/X/ JOINT QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For the period ended May 1,1934
FOR THE PERIOD ENDED JULY 31, 1999
[ ]/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934.1934
For the transition period from _____________________ to ______________________
Commission File Numberfile number 33-49544-01 Commission File Number 33-49544
BLUE BIRD CORPORATION BLUE BIRD BODY COMPANYBlue Bird Corporation Blue Bird Body Company
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(Exact name of registrant as specified (Exact name of registrant as specified
in its charter) in its charter)
DELAWARE GEORGIADelaware Georgia
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(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
13-3638126 58-0813156
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(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
3920 Arkwright Road 3920 Arkwright Road
MACON, GEORGIAMacon, Georgia 31210 MACON, GEORGIAMacon, Georgia 31210
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(Address of principal executive (Address of principal executive
offices, including zip code) offices, including zip code)
(912) 757-7100 (912) 757-7100
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(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/X/ No --- ---/ /
As of JuneSeptember 1, 1999, 9,204,778 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 SIX-MONTHNINE-MONTH PERIODS
ENDED MAY 1,JULY 31, 1999
TABLE OF CONTENTS
PAGE
PART I. FINANCIAL INFORMATION PAGE
-----
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of May 1,July 31, 1999 and October 31,
1998....................................................................11998........................................................................ 1
Condensed Consolidated Statements of Income for the three-month and
six-monthnine-month periods ended May 1,July 31, 1999 and MayAugust 1, 1998................... 2 1998.........................................................................2
Condensed Consolidated Statements of Cash Flows for the six-monthnine-month periods
ended May 1,July 31, 1999 and May 2, 1998.....................................................................3August 1, 1998...................................... 3
Notes to Condensed Consolidated Financial Statements................................................................4Statements........................ 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations..........................................................................6Operations.................................................................. 5
Item 3. Quantitative and Qualitative Disclosures about Market Risk....................................................................9Risk.................. 8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.....................................................................9Proceedings........................................................... 8
Item 6. Exhibits and Reports on Form 8-K......................................................9
Signatures............................................................................108-K............................................ 8
Signatures.................................................................. 9
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MAY 1,JULY 31, 1999 AND OCTOBER 31, 1998
($ IN THOUSANDS)
ASSETS
MAY 1,JULY 31, OCTOBER 31,
1999 1998
-------------- ------------------------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalentsequivalents......................................................................... $ 7,8757,311 $ 54,558
Trade receivables 23,904receivables................................................................................. 34,711 20,226
Leases receivable 48,662receivable................................................................................. 47,180 48,262
Inventories 175,306Inventories....................................................................................... 163,577 85,148
Prepaid expenses 2,309expenses.................................................................................. 1,872 1,149
Other current assets 1,738assets.............................................................................. 3,036 1,913
-------------- ------------------------- -----------
Total current assets 259,794assets............................................................................ 257,687 211,256
LEASES RECEIVABLE, NONCURRENT 66,139NONCURRENT....................................................................... 64,103 63,205
PROPERTY, PLANT, AND EQUIPMENT 75,604EQUIPMENT...................................................................... 76,495 71,183
Less accumulated depreciation (38,404)depreciation..................................................................... (39,949) (35,293)
-------------- ------------------------- -----------
Property, plant, and equipment, net 37,200net............................................................. 36,546 35,890
-------------- ------------------------- -----------
GOODWILL AND DEBT ISSUE COSTSCOSTS....................................................................... 162,506 162,506
Less accumulated amortization (30,194)amortization..................................................................... (31,470) (27,642)
-------------- ------------------------- -----------
Goodwill & debt issue costs, net 132,312net................................................................ 131,036 134,864
-------------- ------------------------- -----------
OTHER ASSETS 8,128ASSETS........................................................................................ 8,216 4,743
-------------- ------------------------- -----------
Total assetsassets.................................................................................... $ 503,573497,588 $ 449,958
-------------- --------------
-------------- ------------------------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Revolving credit facilitiesfacilities....................................................................... $ 32,4008,000 $ 0
Current portion of long-term debt 18,750debt................................................................. 19,750 16,750
Accounts payable 50,612payable.................................................................................. 54,299 29,763
Income taxes payable 2,001payable.............................................................................. 5,389 7,444
Deferred income taxes 3,931taxes............................................................................. 4,163 5,356
Other current liabilities 44,769liabilities......................................................................... 46,999 38,259
-------------- ------------------------- -----------
Total current liabilities 152,463liabilities....................................................................... 138,600 97,572
LONG-TERM DEBT 322,969DEBT...................................................................................... 316,288 329,733
DEFERRED INCOME TAXES 4,577TAXES............................................................................... 4,442 4,844
OTHER LIABILITIESLIABILITIES................................................................................... 21,917 21,925
REDEEMABLE COMMON STOCK, NET 45,950NET........................................................................ 58,047 48,445
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Total liabilities 547,876liabilities............................................................................... 539,294 502,519
STOCKHOLDERS' (DEFICIT) EQUITY:
Common stock, $.01 par value; 25,000,000 shares authorized; 7,704,778 shares outstandingoutstanding.......... 77 77
Additional paid-in capitalcapital........................................................................ 77,023 77,023
Retained earnings (deficit) (117,685)....................................................................... (115,237) (125,309)
Other comprehensive income (3,718)income........................................................................ (3,569) (4,352)
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Total stockholders' (deficit) equity (44,303)equity............................................................ (41,706) (52,561)
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Total liabilities and stockholders' (deficit) equityequity............................................ $ 503,573497,588 $ 449,958
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-------------- ------------------------- -----------
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The accompanying notes are an integral part of these condensed consolidated
statements.
1
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTH AND SIXNINE MONTH PERIODS ENDED MAY 1,JULY 31, 1999 AND
MAY 2,AUGUST 1, 1998
($ IN THOUSANDS)
THREE MONTHS ENDED SIXNINE MONTHS ENDED
---------------------------- -----------------------------
MAY------------------------- -------------------------
JULY 31, AUGUST 1, MAY 2, MAYJULY 31, AUGUST 1, MAY 2,
1999 1998 1999 1998
------------- ------------- ------------- ----------------------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
Net sales $ 136,710 $ 102,713 $ 237,274 $ 193,614sales................................................................... $219,930 $200,558 $457,204 $394,172
Cost of goods sold 111,503 82,553 193,336 157,168
--------- --------- --------- ---------sold.......................................................... 179,205 165,582 372,541 322,750
----------- ----------- ----------- -----------
Gross profit 25,207 20,160 43,938 36,446profit............................................................ 40,725 34,976 84,663 71,422
Selling, general and administrative expenses 11,918 11,474 23,401 22,701expenses................................ 12,123 11,932 35,524 34,633
Amortization of goodwill and other intangiblesintangibles.............................. 960 960 1,920 1,920
--------- --------- --------- ---------2,880 2,880
----------- ----------- ----------- -----------
Operating income 12,329 7,726 18,617 11,825income............................................................ 27,642 22,084 46,259 33,909
Interest income 1,987 1,690 4,176 3,629income............................................................. 2,036 1,694 6,212 5,323
Interest and debt issue expense (7,798) (8,636) (15,602) (17,098)expense............................................. (7,923) (9,357) (23,525) (26,455)
Other income 430 307 736 605
--------- --------- --------- ---------(expense)...................................................... 569 139 1,305 744
----------- ----------- ----------- -----------
Income (loss) before income taxes 6,948 1,087 7,927 (1,039)taxes.................................................. 22,324 14,560 30,251 13,521
Provision (benefit) for income taxes 2,425 300 2,798 (322)
--------- --------- --------- ---------taxes.................................................. 7,779 4,827 10,577 4,505
----------- ----------- ----------- -----------
Net income (loss)income.................................................................. $ 4,52314,545 $ 7879,733 $ 5,12919,674 $ (717)
--------- --------- --------- ---------
--------- --------- --------- ---------9,016
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
The accompanying notes are an integral part of these condensed consolidated
statements.
2
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTHNINE-MONTH PERIODS ENDED MAY 1,JULY 31, 1999 AND
MAY 2,AUGUST 1, 1998
($ IN THOUSANDS)
SIXNINE MONTHS ENDED
---------------------------------------
MAY--------------------------
JULY 31, AUGUST 1, MAY 2,
1999 1998
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(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)................................................................................. $19,674 $ 5,129 $ (717)
------------- -------------9,016
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation and amortization 5,629 5,782amortization................................................................... 8,411 8,664
Increase (decrease) in cash surrender value of life insurance 19 11insurance................................... (71) (76)
Deferred income taxes (1,692) (699)taxes........................................................................... (1,595) 2,311
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables (3,678) 993receivables........................................................ (14,485) (20,114)
(Increase) decrease in inventories (90,158) (96,274)inventories.............................................................. (78,429) (104,141)
(Increase) decrease in prepaid expenses (1,160) (838)expenses......................................................... (723) (327)
Increase (decrease) in accounts payable 20,849 29,349payable......................................................... 24,536 32,854
Increase (decrease) in income taxes payable (5,443) 36
Other 3,012 11,239
------------- -------------payable..................................................... (2,055) 1,648
Other........................................................................................... 3,800 10,229
Total adjustments (72,622) (50,401)
------------- -------------adjustments............................................................................. (60,611) (68,952)
Net cash used in operating activities (67,493) (51,118)
------------- -------------activities........................................................... (40,937) (59,936)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant, and equipment acquisitions (4,116) (1,303)acquisitions....................................................... (4,814) (2,369)
(Increase) decrease in leases receivable (3,334) (134)
------------- -------------receivable.......................................................... 184 3,948
Net cash used in investing activities (7,450) (1,437)
------------- -------------activities........................................................... (4,630) 1,579
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on revolving credit agreements 34,000 31,100agreements...................................................... 8,100 45,300
Repayment of long-term debt (6,375) (5,375)
------------- -------------debt....................................................................... (10,563) (8,563)
Net cash provided by financing activities 27,625 25,725
------------- -------------activities....................................................... (2,463) 36,737
EFFECT OF EXCHANGE RATE FLUCTUATIONS 635 (222)
------------- -------------FLUCTUATIONS................................................................ 783 (734)
NET DECREASE IN CASH AND CASH EQUIVALENTS (46,683) (27,052)EQUIVALENTS........................................................... (47,247) (22,354)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIODPERIOD.................................................... 54,558 31,031
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIODPERIOD.......................................................... $ 7,8757,311 $ 3,979
------------- -------------
------------- -------------8,677
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----------- ------------
SUPPLEMENTAL INFORMATION:
Cash interest paidpaid................................................................................ $25,396 $ 15,066 $ 16,554
------------- -------------
------------- -------------28,102
----------- ------------
----------- ------------
Cash income taxes paidpaid............................................................................ $14,234 $ 9,866 $ 312
------------- -------------
------------- -------------456
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----------- ------------
The accompanying notes are an integral part of these condensed consolidated
statements.
3
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 on Form 10-K for the
fiscal year ended October 31, 1998.
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 years 1999 and 1998 each
has contain 52 weeks.
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 $3.5$3.7 million higher at May 1,July 31,
1999 and approximately $2.9 million higher at October 31, 1998.
4
31,1998.
The components of inventory consist of the following at May 1,July 31, 1999 and
October 31, 1998 (dollars in thousands):
1999 1998
----- ---------------- ---------
Raw materialsmaterials.......................................................... $ 30,207 $23,92325,933 $ 23,923
Work in process 71,133process........................................................ 55,707 31,956
Finished goods 73,966goods......................................................... 81,937 29,269
------- ------
$175,306 $85,148
-------- -------
-------- ----------------- ---------
$ 163,577 $ 85,148
---------- ---------
---------- ---------
3. CONTINGENCIES
PENDING LITIGATION AND INSURANCE PROGRAM
As of May 1,July 31, 1999, 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
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. RECAPITALIZATION
During November 1996, Blue Bird was recapitalized, resulting in the
repayment of the then 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.
5. REDEEMABLE COMMON STOCK
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.
5
6. COMPREHENSIVE INCOME
Effective November 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, Reporting Comprehensive Income, which requires
companies to disclose comprehensive income and its components, defined as the
total of net income and all other nonowner changes in equity. The Company has
other nonowner changes in equity ("other comprehensive income") in the form of
cumulative translation adjustments and unrealized gains on available-for-sale
equity securities. Total comprehensive income for the quarters ended May 1,July 31,
1999 and May 2,August 1, 1998 was $4.9$14.7 million and $.8$9.2 million respectively. Total
comprehensive income (loss) for the sixnine months ended May 1,July 31, 1999 and May 2,August
1, 1998 was $5.8$20.5 million and ($.9),$8.3, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MAY 1,JULY 31, 1999 COMPARED TO THREE MONTHS ENDED MAY 2,AUGUST 1,
1998
Net sales for the quarter ended May 1,July 31, 1999, were $136.7$219.9 million compared
to $200.6 million for the corresponding period in 1998. The increase was due to
increased unit sales volume and a higher average selling price per unit in 1999.
Gross profit increased to $40.7 million in the third quarter of 1999 from
$35.0 million in the third quarter of 1998, an increase of $5.7 million or 16.3%
due to higher sales volume and higher gross margin. The gross margin of 18.5%
was above the 1998 period gross margin of 17.4% due primarily to the mix of
units delivered having a higher gross margin compared to the prior year.
Interest income increased to $2.0 million from $1.7 million in the 1998
period, an increase of $.3 million or 17.6%. The increase was due to a larger
average lease portfolio balance in the current year.
Interest expense decreased to $7.9 million in the current period from $9.4
million in the prior year period due to a combination of lower interest rates
and reduced borrowing on the revolving credit line and term loans.
5
The provision for income taxes was $7.8 million in the current period
compared to a provision of $4.8 million in the 1998 period. The increase in the
provision was due primarily to the higher income before taxes in the current
three month period.
NINE MONTHS ENDED JULY 31, 1999 COMPARED TO NINE MONTHS ENDED AUGUST 1, 1998
Net sales for the nine months ended July 31, 1999, were $457.2 million, an
increase of $34.0$63.0 million or 33.1%16.0% compared to the corresponding period in 1998.
This increase was due to more deliveries duringincreased unit sales volume and a higher average
selling price per unit in 1999.
Gross profit increased to $84.7 million in the current reporting period as compared to
the 1998 period.
Gross profit increased to $25.2$71.4 million in the second quarter of 1999 from $20.2
million in the second quarter of 1998, an increase of $5.0 million or 24.8% as a
result of higher sales volume. The gross margin decreased to 18.4% compared to
19.6% in the 1998 period. This was an increase of $13.3 million or 18.6%
due to higher sales volume and gross margin. The mix of buses delivered duringgross margin increased to 18.5%
compared to 18.1% in the 1998 period resulted in unusually high margins.due to the mix of units delivered having a
higher gross margin compared to prior year.
Selling, general and administrative expenses increased to $11.9$35.5 million from
$11.5$34.6 million in the 1998 period, an increase of $.4$.9 million or 3.5%2.6% related to
higher engineering and selling expenses.
Interest income increased to $6.2 million from $5.3 million in the 1998
period, an increase of $.9 million or 17.0%. The increase was due primarily to higher selling and engineering expenses relateda larger
average lease portfolio balance compared to higher sales volume.1998.
Interest and debt issue expensesexpense decreased to $7.8$23.5 million in the current period from $8.6$26.5
million in the prior year period due to lower average interest rates and decreased averagelower volume of
debt in the current period asthis year compared to the prior year
period.
The provision forlast year.
Other income taxes was $2.4$1.3 million in the current period compared to $.3 million in the 1998 period as a result of increased taxable income.
6
SIX MONTHS ENDED MAY 1, 1999 COMPARED TO SIX MONTHS ENDED MAY 2, 1998
Net Sales for the six months ended May 1, 1999, were $237.3 million, an increase
of $43.7 million or 22.6% compared to the corresponding period in 1998. This
increase was due to more deliveries during the current reporting period as
compared to the 1998 period.
Gross profit increased to $43.9 million in the current period as compared to
$36.4 million in the 1998 period. This increase was $7.5 million or 20.6% due to
higher sales volume. The gross margin of 18.5% was down slightly compared to the
gross margin for the prior year period of 18.8%. The prior year period mix of
units delivered generated a slightly higher gross margin.
Selling, general and administrative expenses increased to $23.4 million from
$22.7 million in the 1998 period, an increase of $.7 million or 3.1%. This
increase was due to increased engineering and selling expenses related to higher
sales volume.
Interest and debt issue expense decreased to $15.6 million in the current period
from $17.1 million in the prior year
period due to lower average interest rates
and decreased average debt in the current period as compared to the prior
period.favorable exchange expense.
The provision for income taxes was $2.8$10.6 million in the current periodyear
compared to a benefitprovision of $.3$4.5 million in the 1998 period. The 1998 period reflected a
loss.increase in the
provision was due primarily to the higher income before taxes in the current
year.
YEAR 2000
As a result of certain computer programs being written using two digits
rather than four to define the applicable year, information systems that have
date sensitive software may be unable to properly recognize and process dates
and date-sensitive information on and beyond January 1, 2000 (the "Year 2000
Problem"). The Year 2000 Problem, which is common to most businesses, could, if
not resolved, have a detrimental effect on the Company's operations, and
interfere with the Company's ability to engage in normal business activities. If
unremedied, the Year 2000 Problem could result in systems failures or
miscalculations causing disruptions, including among other things, a temporary
slowdown of manufacturing operations due to parts shortages and, consequently, a
temporary inability to deliver buses to customers.
In 1993, the Company began a company-wide assessment of the vulnerability of
its information technology systems to the Year 2000 Problem and began modifying
all affected software. Approximately 90% of the software used by the company was
developed and is maintained in house. All software systems have been reviewed to
determine Year 2000 compliance. As of May 1, 1999,July 31,1999, the Company estimates that
it has completed approximately 97%98% of the necessary revisions and testing.
Hardware and network systems review is scheduled for completionwas completed in mid summer ofJuly 1999.
The Company also has been assessing its non-information technology systems
to identify potential Year 2000 problems. The review to date has not identified
any major non-information technologynon-IT system problems that
7
would adversely affect operations in a
significant way. The evaluation and testing of non-information technologynon-IT systems is scheduled to be completed by
mid summer of 1999.was recently
completed.
6
The Company is also in process of surveying major suppliers and customers to
determine their efforts toward resolution of the Year 2000 Problem. The Company
has developed contingency plans to address various Year 2000 problems which
would result in the failure of critical business systems of the Company, its
significant suppliers or customers.
Since 1993, the Company has treated the costs associated with modifying
affected systems as on-going software maintenance using primarily in-house
resources. The Company estimates that approximately $.6$.7 million has been
expended in connection therewith through the secondthird quarter of fiscal 1999,
mainly costs associated with employee payroll. The Company believes that the
remaining costs associated with completion of the Year 2000 Problem will be
approximately $.3$.1 million, again mainly internal payroll related, including the
additional cost of an outside contractor. Remediation costs comprise less than
15 percent of the information technologyIT budget for fiscal 1999. All remediation costs are funded
from current operating income.
Although the Company believes that it will be able to modify or replace its
affected systems in time to minimize any detrimental effects on its operation
caused by the Year 2000 Problem, it can make no assurance that the Company will
be successful in such efforts, or that its major vendors or customers will
successfully modify or replace their affected systems or that such failures
would not have a material adverse effect on the Company's consolidated results
of operations, liquidity or capital resources in the future.
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 first sixnine month period of fiscal
1999 was $67.5$40.9 million. This amount reflects income tax payments of $5.4
million, the customary seasonal increasebuildup in inventory
of $90.2$78.4 million, offset in part by a related increase in accounts payable of
$20.8$24.5 million. The trade receivable increase of $14.5 million reflects the
seasonal nature of the company's sales at this time of year. Scheduled
repaymentrepayments of the term debt during the period used additional funds of $6.4$10.6
million. Capital expenditures for the period were $4.1$4.8 million. The Company's
principal sources of funds during the period were cash on hand at the beginning
of the fiscal year, net income and proceeds from a working capital line of
credit. One of the Company's subsidiaries, Blue Bird Capital Corporation,
provides sales 8
financing.financing for the Company's products. The increase in leases receivable isare
funded primarily through a separate revolving line of credit.
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 Privateprivate 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,
7
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 Company'sPredecessor's Joint Annual Report on Form
10-K for the fiscal year ended October 31, 1998 for a description of certain
legal proceedings to which BBC or the CompanyPredecessor is a party.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
27.1 Financial Data Schedule
(b) Reports on Form 8-K.
BBC and the Company filed one ReportThere were no reports on Form 8-K dated
March 25, 1999, which reported certain changes infiled by the executive officers of BBC andRegistrants during the
Company.
9quarter ended July 31, 1999.
8
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 Chairman of the Board
and Director and Director
(Principal Executive (Principal Executive
Officer) Officer)
Date: June 15,
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
Director Director
(Principal Executive (Principal Executive
Officer) Officer)
Date: September 3, 1999 Date: September 3, 1999
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 3, 1999 Date: September 3, 1999
Date: June 15, 1999
BY /s/ Bobby G. Wallace BY /s/ Bobby G. Wallace
- ----------------------------------- --------------------------------
Bobby G. Wallace Bobby G. Wallace
Vice Chairman, Treasurer, Vice Chairman, Treasurer,
Secretary and Director Secretary and Director
(Principal Financial and (Principal Financial and
Accounting Officer) Accounting Officer)
Date: June 15, 1999 Date: June 15, 1999
10
9