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 February 1, 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 March 1, 1997, 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.
BLUE BIRD CORPORATION
BLUE BIRD BODY COMPANY
QUARTERLY REPORT ON FORM 10-Q
FOR THE THREE-MONTH PERIOD
ENDED FEBRUARY 1, 1997
TABLE OF CONTENTS
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
as of February 1, 1997 and
November 2, 1996 ..................................... 1
Condensed Consolidated Statements of
Income for the three-month periods
ended February 1, 1997 and
January 27, 1996 ..................................... 2
Condensed Consolidated Statements of
Cash Flows for the three-month
periods ended February 1, 1997
and January 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
PART II. OTHER INFORMATION
Item 1. Legal Proceedings ...................................... 7
Item 6. Exhibits and Reports on Form 8-K ....................... 7
Signatures ....................................................... 8
BLUE BIRD CORPORATION AND SUBSIDIARIES
BLUE BIRD BODY COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
FEBRUARY 1, 1997 AND NOVEMBER 2, 1996
($ IN THOUSANDS)
FEBRUARY 1, NOVEMBER 2,
1997 1996
--------- -----------
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,751 $ 46,253
Trade receivables 14,076 13,443
Leases receivable 33,703 32,215
Inventories 88,793 69,776
Prepaid expenses 5,334 2,137
Other current assets 17,483 3,167
-------- --------
Total current assets 161,140 166,991
LEASES RECEIVABLE, NONCURRENT 41,950 41,862
PROPERTY, PLANT, AND EQUIPMENT 65,162 64,599
Less accumulated depreciation (27,176) (25,710)
-------- --------
Property, plant, and equipment, net 37,986 38,849
-------- --------
GOODWILL AND DEBT ISSUE COSTS 162,180 162,849
Less accumulated amortization (18,731) (26,131)
-------- --------
Goodwill & other intangibles, net 143,449 136,718
-------- --------
OTHER ASSETS 6,611 6,571
-------- --------
Total assets $ 391,136 $ 391,031
======== ========
LIABILITIES AND STOCKHOLDERS' (DEFICIT) EQUITY
CURRENT LIABILITIES:
Revolving credit facilities $ 9,600 $ 0
Current portion of long-term debt 10,938 16,000
Accounts payable 20,339 27,704
Income taxes payable 0 9,270
Deferred income taxes 8,869 9,080
Other current liabilities 28,997 24,519
-------- --------
Total current liabilities 78,743 86,573
LONG-TERM DEBT 329,911 131,350
DEFERRED INCOME TAXES 5,615 5,306
OTHER LIABILITIES 20,471 20,309
REDEEMABLE COMMON STOCK, NET 12,660 29,305
-------- --------
Total liabilities 447,400 272,843
STOCKHOLDERS' (DEFICIT) 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 (131,158) 43,228
Other stockholders'(deficit) equity (2,206) (2,140)
-------- --------
Total stockholders'(deficit) equity (56,264) 118,188
-------- --------
Total liabilities and stockholders'
(deficit) equity $ 391,136 $ 391,031
======== ========
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 PERIODS ENDED FEBRUARY 1, 1997 AND JANUARY 27, 1996
($ IN THOUSANDS)
THREE MONTHS ENDED
FEBRUARY 1, JANUARY 27,
1997 1996
--------- ---------
(UNAUDITED) (UNAUDITED)
Net sales $ 84,107 $ 92,826
Cost of goods sold 69,560 77,185
-------- --------
Gross profit 14,547 15,641
Selling, general and
administrative expenses 10,790 10,115
Amortization of goodwill
and other intangibles 960 940
Nonrecurring charge 16,506 0
-------- -------
Operating (loss) income (13,709) 4,586
Interest income 1,534 1,802
Interest and debt issue
expense (7,554) (4,142)
Other income (expense) 237 196
------- -------
(Loss) income before income
taxes (19,492) 2,442
(Benefit) provision for income
taxes (12,992) 975
------- -------
Net (loss) income before
extraordinary items (6,500) 1,467
Extraordinary item - loss
on early extinguishment of
debt (2,986) (1,416)
------- -------
Net (loss) income $ (9,486) $ 51
======= =======
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 THREE MONTH PERIODS ENDED FEBRUARY 1, 1997 AND JANUARY 27, 1996
($ IN THOUSANDS)
THREE MONTHS ENDED
FEBRUARY 1, JANUARY 27,
1997 1996
--------- ---------
(UNAUDITED) (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (9,486) $ 51
------- -------
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 2,824 2,827
Increase (decrease) in cash surrender
value of life insurance (9) 20
Deferred income taxes 98 (420)
Changes in operating assets and liabilities:
(Increase) decrease in trade receivables (633) 7,906
(Increase) decrease in inventories (19,017) (18,409)
(Increase) decrease in prepaid expenses (3,197) (1,883)
Increase (decrease) in accounts payable (7,365) (678)
Increase (decrease) in income taxes
payable (9,270) (6,043)
Other (9,474) 4,948
-------- --------
Total adjustments (41,288) (9,478)
-------- --------
Net cash used in operating activities (50,774) (9,427)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant, and equipment acquisitions (855) (731)
Leases receivable (1,576) (5,725)
-------- --------
Net cash used in investing activities (2,431) (6,456)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowing on working capital revolvers 14,400 26,788
Borrowing on long-term debt 274,699 0
Repayment of long-term debt (86,000) (27,000)
Dividends Paid (185,345) 0
Debt prepayment premium (3,369) (1,625)
Debt Issuance Costs (9,416) 0
Proceeds from Management Notes 3,800 0
-------- --------
Net cash (used in) provided by
financing activities 8,769 (1,837)
-------- --------
EFFECT OF EXCHANGE RATE FLUCTUATIONS (66) (249)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (44,502) (17,969)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 46,253 21,452
-------- --------
CASH AND CASH EQUIVALENTS AT END
OF PERIOD $ 1,751 $ 3,483
======== ========
SUPPLEMENTAL INFORMATION:
Cash interest paid $ 5,142 $ 3,675
======== ========
Cash income taxes paid $ 9,620 $ 2,595
======== ========
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 (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
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 $2,400,000
higher at February 1, 1997 and approximately $2,100,000 higher at
November 2, 1996.
The components of inventory consist of the following at February 1, 1997
and November 2, 1996 (dollars in thousands):
1997 1996
-------- --------
Raw materials $ 23,997 $18,848
Work in process 33,201 22,916
Finished goods 31,595 28,012
------- ------
$88,793 $69,776
======= =======
3. CONTINGENCIES
PENDING LITIGATION AND INSURANCE PROGRAM
As of February 1, 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, new debt issued in the amount of $275
million and a dividend paid to shareholders in the amount of $185.3 million.
The existing Subordinated Notes were repurchased at a premium of $3.4 million.
Debt issuance costs related to the recapitalization were $9.4 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 G&A expenses for a total of $21.3 million.
5
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED FEBRUARY 1, 1997 COMPARED TO THREE MONTHS ENDED JANUARY
27, 1996
Net sales for the quarter ended February 1, 1997, were $84.1 million, a
decrease of $8.7 million or 9.4% compared to the corresponding period in 1996.
This decrease was due to fewer deliveries and a lower average selling price
due to delivery mix changes during the current reporting period as compared
to the 1996 period.
Gross profit decreased to $14.5 million in the first quarter of 1997
from $15.6 million in the first quarter of 1996, a decrease of $1.1 million
or 7.0% due primarily to lower sales volume. The gross margin increased to
17.3% compared to 16.8% in the 1996 period due to lower delivery of GM
chassis which have low margins.
Selling, general and administrative expenses increased to $10.8 million from
$10.1 million in the 1996 period, an increase of $.7 million or 6.7%. This
increase was related to increased engineering and marketing costs associated
with new product development and introduction. Nonrecurring G&A charges of
$16.5 million were taken in the current year due to the recapitalization
described below. See "Financial Condition - - Liquidity and Capital
Resources."
Interest and debt issue expense increased to $7.6 million in the current
period from $4.1 million in the prior year period due to the increased amount
of debt as a result of the recapitalization.
The benefit for income taxes was $13.0 million in the current period compared
to a provision of $1.0 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 dividend paid to shareholders in the recapitalization being
deductible for tax purposes as well as the tax benefit related to the ordinary
loss and the nonrecurring charge.
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.
6
FINANCIAL CONDITION
WORKING CAPITAL
The Company' 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 three month period was
$50.8 million. A significant portion of this amount was the result of the net
loss of the Company attributable to the nonrecurring charges related to the
Company's recapitalization. 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 G&A expenses for a
total of $21.3 million. Other items attributing to the cash use was the
seasonal increase in inventory, the payment of income taxes, the increase in
tax claims receivable, and the decrease in accounts payable, slightly offset by
an 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, new debt issued in the amount of $275
million and a dividend paid to shareholders in the amount of $185.3 million.
The existing Subordinated Notes were repurchased at a premium of $3.4 million.
Debt issuance costs related to the recapitalization were $9.4 million.
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 Financial data schedule
99 Discretionary Option Agreement
(b) Reports on Form 8-K.
There were no reports on Form 8-K filed by the Registrants during the quarter
ended February 1, 1997.
7
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: March 17, 1997 Date: March 17, 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: March 17, 1997 Date: March 17, 1997
8
Exhibit Index
-------------
Exhibit
No. Description
------- -----------
27 Financial data schedule
99 Discretionary Option Agreement