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Solid Blue Bird Fiscal 2018 Second Quarter Financial Performance Supports Achievement of Full Year Guidance

Blue Bird Corporation (“Blue Bird”) (Nasdaq: BLBD), the leading independent designer and manufacturer of school buses, announced today its fiscal 2018 second quarter results. Blue Bird Corporation delivered higher revenue, up 4% from prior year, positive net income of $1.8 million and solid Adjusted EBITDA of $10.0 million. Positive earnings were delivered despite higher commodity costs.

Highlights

Three Months EndedB/(W)Six Months EndedB/(W)

(in millions except EPS data)

March 31, 20182017March 31, 20182017
Unit Sales 2,441 74 4,146 286
GAAP Measures:
Revenue $ 216.6 $ 8.0 $ 379.2 $ 33.9
Net Income $ 1.8 $ (0.9 ) $ (6.0 ) $ (0.2 )
Diluted Earnings per Share $ 0.04 $ (0.03 ) $ (0.32 ) $ 0.02
Non-GAAP Measures1:
Adjusted EBITDA $ 10.0 $ 1.6 $ 15.3 $ 4.3
Adjusted Net Income $ 4.6 $ 1.4 $ 2.9 $ 1.8

Adjusted Diluted Earnings per Share

$ 0.15 $ 0.06 $ 0.06 $ 0.10

1 Reconciliation to relevant GAAP metrics shown below

“We are pleased with our second quarter performance and are well positioned to deliver our full-year targets," said Phil Horlock, President and Chief Executive Officer of Blue Bird Corporation. “We are excited about the Operational Transformation Initiatives we are implementing to improve quality, reduce cost, increase capacity and ensure that Blue Bird continues its tradition as the innovator in the School Bus industry. These key initiatives will drive higher profitability and margins and we are pleased with progress toward our target of an Adjusted EBITDA margin of more than 10% by FY2020. Continuing to invest in differentiated products that customers want and value is a core priority in Blue Bird, as evidenced by another quarter of strong growth and leadership in sales of our alternative-fuel powered school buses and by customer reaction to our all-new range of electric-powered buses. Blue Bird will begin delivery of electric buses to school districts before the end of this fiscal year.

"Despite investment in our initiatives in the second quarter, we continue to generate positive cash flow, with positive net cash provided by operating activities of $0.8 million and Adjusted Free Cash Flow of $3.3 million for the quarter. With our peak sales months ahead, we are maintaining our full year guidance of $40 - $45 million for Adjusted Free Cash Flow for the fiscal year.

"Also, despite the substantial jump in commodity prices (especially steel), we are pleased to announce that we are able to re-affirm our full year guidance for both net revenue of $1,010 million - $1,040 million and Adjusted EBITDA guidance of $80 - $85 million."

Second Quarter 2018 Results

Net Sales

Net sales were $216.6 million for the second quarter of fiscal 2018, an increase of $8.0 million, or 3.8%, from prior year period. Bus unit sales were 2,441 units for the quarter compared with 2,367 units for the same period last year.

Gross Profit

Second quarter gross profit of $21.7 million represents a decrease of $3.0 million from the second quarter of last year.

Net Income

Net income was $1.8 million for the second quarter of fiscal 2018, a decrease of $0.9 million compared with the same period last year.

Adjusted Net Income

Adjusted Net Income was $4.6 million, representing an increase of $1.4 million compared with the same period last year.

Adjusted EBITDA

Adjusted EBITDA was $10.0 million, or 4.6% of net sales, representing an increase of $1.6 million compared with the second quarter of the prior year.

Year-to-Date 2018 Results

Net Sales

Net sales were $379.2 million for the six months ended March 31, 2018, an increase of $33.9 million, or 9.8%, compared with the prior year. This was primarily driven by higher bus unit sales, which were 286 units above the same period last year.

Gross Profit

Gross profit was $42.3 million, a decrease of $0.5 million from the prior year.

Net Income

Net income was $6.0 million for the six months ended March 31, 2018, which was $0.2 million below the same period in the prior year. The decrease was primarily driven by a decrease of $7.2 million in selling, general and administrative expenses, which was partially offset by a decrease of $0.5 million in gross profit.

Adjusted Net Income

Adjusted Net Income was $2.9 million, representing an increase of $1.8 million compared with the prior year.

Adjusted EBITDA

Adjusted EBITDA was $15.3 million, or 4.0% of net sales, for the six months ended March 31, 2018, an increase of $4.3 million from the prior year. The increase in adjusted EBITDA was primarily the of lower adjusted selling, general and administrative expenses.

Conference Call Details

Blue Bird will discuss its second quarter 2018 results and other related matters in a conference call at 4:30 PM ET today. Participants may listen to the audio portion of the conference call either through a live audio webcast on the Company's website or by telephone. The slide presentation and webcast can be accessed via the Investor Relations portion of Blue Bird's website at www.blue-bird.com.

  • Webcast participants should log on and register at least 15 minutes prior to the start time on the Investor Relations homepage of Blue Bird’s website at http://investors.blue-bird.com. Click the link in the events box on the Investor Relations landing page.
  • Participants desiring audio only should dial 1-800-263-0877 or 1-646-828-8143.

A replay of the webcast will be available approximately two hours after the call concludes via the same link on Blue Bird’s website.

About Blue Bird Corporation

Blue Bird is the leading independent designer and manufacturer of school buses, with more than 550,000 buses sold since its formation in 1927 and approximately 180,000 buses in operation today. Blue Bird’s longevity and reputation in the school bus industry have made it an iconic American brand. Blue Bird distinguishes itself from its principal competitors by its singular focus on the design, engineering, manufacture and sale of school buses and related parts. As the only manufacturer of chassis and body production specifically designed for school bus applications, Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability, operating costs and drivability. In addition, Blue Bird is the market leader in alternative fuel applications with its propane-powered and compressed natural gas-powered school buses. Blue Bird manufactures school buses at two facilities in Fort Valley, Georgia. Its Micro Bird joint venture operates a manufacturing facility in Drummondville, Quebec, Canada. Service and after-market parts are distributed from Blue Bird’s parts distribution center located in Delaware, Ohio.

Key Non-GAAP Financial Measures We Use to Evaluate Our Performance

This press release includes the following non-GAAP financial measures “Adjusted EBITDA,” "Adjusted EBITDA Margin," "Adjusted Net Income (Loss)," "Adjusted Diluted Earnings per Share," “Free Cash Flow” and “Adjusted Free Cash Flow” because management views these metrics as a useful way to look at the performance of our operations between periods and to exclude decisions on capital investment and financing that might otherwise impact the review of profitability of the business based on present market conditions.

Adjusted EBITDA is defined as net income prior to discontinued operations income or loss, interest income, interest expense, income taxes, and depreciation, amortization, and disposals, as adjusted to add back certain charges that we may record each year, such as stock-compensation expense and transaction costs, as these expenses are not considered an indicator of ongoing company performance. We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net sales. Adjusted Net Income (Loss) is net income as adjusted to add back certain transaction costs not considered an indicator of ongoing company performance. Adjusted diluted earnings per share represents Adjusted Net Income (Loss) by diluted weighted average common shares outstanding (as if we had GAAP net income during the respective period). Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), and Adjusted Diluted Earnings per Share are not measures of performance defined in accordance with GAAP. The measures are used as a supplement to GAAP results in evaluating certain aspects of our business, as described below.

We believe that Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), and Adjusted Diluted Earnings per Share are useful to investors in evaluating our performance because the measures consider the performance of our operations, excluding decisions made with respect to capital investment, financing, and other expenses. We believe that the non-GAAP metrics offer additional financial metrics that, when coupled with the GAAP results and the reconciliation to GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business.

Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss) and Adjusted Diluted Earnings per Share should not be considered as alternatives to net income or GAAP earnings per share as an indicator of our performance or as alternatives to any other measure prescribed by GAAP as there are limitations to using such non-GAAP measures. Although we believe the non-GAAP measures may enhance the evaluation of our operating performance based on recent revenue generation and product/overhead cost control because they exclude the impact of prior decisions made about capital investment, financing, and other expenses, (i) other companies in Blue Bird’s industry may define Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), and Adjusted Diluted Earnings per Share differently than we do and, as a result, they may not be comparable to similarly titled measures used by other companies in Blue Bird’s industry, and (ii) Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), and Adjusted Diluted Earnings per Share exclude certain financial information that some may consider important in evaluating our performance.

We compensate for these limitations by providing disclosure of the differences between Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Net Income (Loss), and Adjusted Diluted Earnings per Share and GAAP results, including providing a reconciliation to GAAP results, to enable investors to perform their own analysis of our operating results.

Our measures of “Free Cash Flow” and "Adjusted Free Cash Flow" are used in addition to and in conjunction with results presented in accordance with GAAP and free cash flow and adjusted free cash flow should not be relied upon to the exclusion of GAAP financial measures. Free cash flow and adjusted free cash flow reflect an additional way of viewing our liquidity that, when viewed with our GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. We strongly encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

We define free cash flow as net cash provided by/used in operations minus cash paid for fixed assets. We define adjusted free cash flow as free cash flow minus cash paid for special compensation and other business combination expenses. We use free cash flow and adjusted free cash flow, and ratios based on both, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flow since purchases of fixed assets and intangible assets are a necessary component of ongoing operations. In limited circumstances in which proceeds from sales of fixed or intangible assets exceed purchases, free cash flow would exceed cash flow from operations. However, since we do not anticipate being a net seller of fixed or intangible assets, we expect free cash flow to be less than operating cash flows.

Forward Looking Statements

This press release includes forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements include statements in this press release regarding guidance, seasonality, product mix and gross profits and may include statements relating to:

  • Inherent limitations of internal controls impacting financial statements
  • Growth opportunities
  • Future profitability
  • Ability to expand market share
  • Customer demand for certain products
  • Economic conditions that could affect fuel costs, commodity costs, industry size and financial conditions of our dealers and suppliers
  • Labor or other constraints on the Company’s ability to maintain a competitive cost structure
  • Volatility in the tax base and other funding sources that support the purchase of buses by our end customers
  • Lower or higher than anticipated market acceptance for our products
  • Other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,” “expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions

These forward-looking statements are based on information available as of the date of this press release, and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. The factors described above, as well as risk factors described in reports filed with the SEC by us (available at www.sec.gov), could cause our actual results to differ materially from estimates or expectations reflected in such forward-looking statements.

BLUE BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands except for share data)March 31, 2018September 30, 2017
Assets
Current assets
Cash and cash equivalents $ 10,349 $ 62,616
Accounts receivable, net 12,190 10,148
Inventories 105,387 76,155
Other current assets 12,883 11,528
Total current assets $ 140,809 $ 160,447
Property, plant and equipment, net 38,126 34,708
Goodwill 18,825 18,825
Intangible assets, net 56,476 57,481
Equity investment in affiliate 11,859 11,625
Deferred tax asset 10,129 11,755
Other assets 991 975
Total assets $ 277,215 $ 295,816
Liabilities and Stockholders' Deficit
Current liabilities
Accounts payable $ 96,125 $ 87,331
Warranty 7,906 8,573
Accrued expenses 12,283 18,229
Deferred warranty income 7,204 6,776
Other current liabilities 6,716 9,847
Current portion of long-term debt 8,000 8,000
Total current liabilities $ 138,234 $ 138,756
Long-term liabilities
Long-term debt $ 139,608 $ 143,224
Warranty 11,377 12,337
Deferred warranty income 13,257 12,519
Other liabilities 15,618 15,064
Pension 29,073 32,426
Total long-term liabilities $ 208,933 $ 215,570
Stockholders' deficit
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 400,000 issued with liquidation preference of $40,000 at March 31, 2018 and September 30, 2017 $ 40,000 $ 40,000
Common stock, $0.0001 par value, 100,000,000 shares authorized, 23,912,188 and 23,739,344 issued and outstanding at March 31, 2018 and September 30, 2017, respectively. 2 2
Additional paid-in capital 38,747 45,418
Accumulated deficit (106,058 ) (100,055 )
Accumulated other comprehensive loss (42,643 ) (43,875 )
Total stockholders' deficit $ (69,952 ) $ (58,510 )
Total liabilities and stockholders' deficit $ 277,215 $ 295,816
BLUE BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months EndedSix Months Ended
(in thousands except for share data)March 31, 2018April 1, 2017March 31, 2018April 1, 2017
Net sales $ 216,628 $ 208,651 $ 379,177 $ 345,311
Cost of goods sold 194,960 184,002 336,861 302,464
Gross profit $ 21,668 $ 24,649 $ 42,316 $ 42,847
Operating expenses
Selling, general and administrative expenses 18,741 19,259 44,659 37,451
Operating profit (loss) $ 2,927 $ 5,390 $ (2,343 ) $ 5,396
Interest expense (1,826 ) (1,715 ) (3,278 ) (4,403 )
Interest income 2 6 17 13
Other income (expense), net 1,020 (37 ) 1,190 (164 )
Loss on debt extinguishment (10,142 )
Income (loss) before income taxes $ 2,123 $ 3,644 $ (4,414 ) $ (9,300 )
Income tax (expense) benefit (471 ) (1,108 ) (1,823 ) 2,564
Equity in net income of non-consolidated affiliate 184 212 234 961
Net income (loss) $ 1,836 $ 2,748 $ (6,003 ) $ (5,775 )
Earnings per share:
Net income (loss) (from above) $ 1,836 $ 2,748 $ (6,003 ) $ (5,775 )
Less: preferred stock dividends 763 1,017 1,533 1,970
Net income (loss) available to common stockholders $ 1,073 $ 1,731 $ (7,536 ) $ (7,745 )
Basic weighted average shares outstanding 23,899,772 23,048,517 23,911,909 22,822,416
Diluted weighted average shares outstanding 25,127,082 24,590,905 23,911,909 22,822,416
Basic earnings (loss) per share $ 0.04 $ 0.08 $ (0.32 ) $ (0.34 )
Diluted earnings (loss) per share $ 0.04 $ 0.07 $ (0.32 ) $ (0.34 )
BLUE BIRD CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
(in thousands of dollars) March 31, 2018April 1, 2017
Cash flows from operating activities
Net loss $ (6,003 ) $ (5,775 )
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 4,173 4,101
Amortization of debt costs 384 713
Share-based compensation 1,510 410
Equity in net income of affiliate (234 ) (961 )
Loss (gain) on disposal of fixed assets 78 (46 )
Deferred taxes 1,098 (2,964 )
Amortization of deferred actuarial pension losses 1,760 3,145
Loss on debt extinguishment 10,142
Unrealized gains on foreign currency hedges (1,036 )
Changes in assets and liabilities:
Accounts receivable (2,042 ) 13,444
Inventories (29,232 ) (56,618 )
Other assets (335 ) (1,112 )
Accounts payable 9,151 30,961
Accrued expenses, pension and other liabilities (12,329 ) (4,765 )
Total adjustments $ (27,054 ) $ (3,550 )
Total cash used in operating activities $ (33,057 ) $ (9,325 )
Cash flows from investing activities
Cash paid for fixed assets (7,021 ) (5,159 )
Proceeds from sale of fixed assets 46
Total cash used in investing activities $ (7,021 ) $ (5,113 )
Cash flows from financing activities
Repayments under the former senior term loan $ $ (161,500 )
Borrowings under new term loan 156,887
Repayments under the new term loan (4,000 ) (2,000 )
Cash paid for capital leases (77 ) (79 )
Cash paid for debt issuance costs (271 )
Cash paid to extinguish debt (507 )
Payment of dividends on preferred stock (1,533 ) (1,970 )
Cash paid for employee taxes on vested restricted shares and stock option exercises (571 ) (981 )
Proceeds from exercises of warrants 9,504 10,982
Common stock repurchases under the share repurchase program (15,512 )
Total cash (used in) provided by financing activities $ (12,189 ) $ 561
Change in cash and cash equivalents (52,267 ) (13,877 )
Cash and cash equivalents, beginning of period 62,616 52,309
Cash and cash equivalents, end of period $ 10,349 $ 38,432
Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest paid, net of interest received $ 2,950 $ 3,294
Income tax paid, net of tax refunds 3,596 1,233
Non-cash investing and financing activities
Change in accounts payable for capital additions to property, plant and equipment $ (357 ) $ (2,178 )
Cashless exercise of stock options 897 4,124
Reconciliation of Net Income (Loss) to Adjusted EBITDA
(Unaudited)
Three Months EndedSix Months Ended
(in thousands of dollars) March 31, 2018April 1, 2017March 31, 2018April 1, 2017
Net income (loss) $ 1,836 $ 2,748 $ (6,003 ) $ (5,775 )
Adjustments:
Discontinued operations loss (income) 6 61 (81 ) 188
Interest expense, net 1,824 1,709 3,261 4,390
Income tax expense 471 1,108 1,823 (2,564 )
Depreciation, amortization, and disposals 2,169 2,047 4,280 4,084
Loss on debt extinguishment 10,142
Operational transformation initiatives 3,427 10,385
Business combination expenses (174 )
Unrealized gains on foreign currency hedges (1,036 ) (1,036 )
Share-based compensation 886 410 1,510 410
Product redesign initiatives 399 282 1,139 282
Adjusted EBITDA $ 9,982 $ 8,365 $ 15,278 $ 10,983
Adjusted EBITDA margin (percentage of net sales) 4.6 % 4.0 % 4.0 % 3.2 %
Reconciliation of Free Cash Flow to Adjusted Free Cash Flow
(Unaudited)
Three Months EndedSix Months Ended
(in thousands of dollars) March 31, 2018April 1, 2017March 31, 2018April 1, 2017
Net cash used in operating activities $ 751 $ 22,881 $ (33,057 ) $ (9,325 )
Cash paid for fixed assets (3,572 ) (2,203 ) (7,021 ) (5,159 )
Free cash flow $ (2,821 ) $ 20,678 $ (40,078 ) $ (14,484 )
Cash paid for operational transformation initiatives (5,711 ) (10,385 )
Cash paid for product redesign initiatives (399 ) (282 ) (1,139 ) (282 )
Cash paid for business combination expenses (3,000 ) (3,313 )
Adjusted free cash flow 3,289 23,960 (28,554 ) (10,889 )
Reconciliation of Net Income (Loss) to Adjusted Net Income
(Unaudited)
Three Months EndedSix Months Ended
(in thousands of dollars) March 31, 2018April 1, 2017March 31, 2018April 1, 2017
Net income (loss) $ 1,836 $ 2,748 $ (6,003 ) $ (5,775 )
Adjustments, net of tax benefit or expense (1)
Operational transformation initiatives 2,570 7,789
Loss on debt extinguishment 6,491
Business combination expenses (111 )
Unrealized gains on foreign currency hedges (777 ) (777 )
Share-based compensation 665 262 1,133 262
Product redesign initiatives 299 180 854 180
Discontinued operations loss (income) 5 39 (61 ) 120
Adjusted net income, non-GAAP $ 4,598 $ 3,230 2,935 1,168
Less: preferred stock dividends 763 1,017 1,533 1,970
Adjusted net income (loss) available to common stockholders, non-GAAP $ 3,835 $ 2,213 1,402 (802 )

(1) Amounts are net of estimated statutory tax rates of 25% for the three and six months ended March 31, 2018 and 36% for the three and six months ended April 1, 2017.

Reconciliation of Diluted EPS to Adjusted Diluted EPS
(Unaudited)
Three Months EndedSix Months Ended
March 31, 2018April 1, 2017March 31, 2018April 1, 2017
Diluted earnings (loss) per share $ 0.04 $ 0.07 $ (0.32 ) $ (0.34 )
One-time charge adjustments, net of tax benefit or expense 0.11 0.02 0.38 0.30
Adjusted diluted earnings (loss) per share, non-GAAP (1) $ 0.15 $ 0.09 $ 0.06 $ (0.04 )
Weighted average dilutive shares outstanding (2) 25,127,082 24,590,905 25,161,770 22,822,416
(1) Numerator is adjusted net income available to common stockholders, non-GAAP.
(2) The diluted loss per share calculations for the six months ended March 31, 2018 excluded 1,249,861 shares as their effect would be anti-dilutive, but were included in the adjusted diluted earnings (loss) per share, non-GAAP calculation as their effect was dilutive.

Contacts:

Blue Bird Corporation
Mark Benfield, 478-822-2315
Investor Relations & Government Affairs
Mark.Benfield@blue-bird.com

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