blbd-20221231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2022


☐			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 001-36267

BLUE BIRD CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 46-3891989

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

3920 Arkwright Road, 2nd Floor, Macon, Georgia 31210

(Address of principal executive offices and zip code)

(478) 822-2801

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.0001 par value

BLBD

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated Filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At February 2, 2023, 32,032,067 shares of the registrant’s common stock, $0.0001 par value, were outstanding.

BLUE BIRD CORPORATION

FORM 10-Q

TABLE OF CONTENTS



PART I – FINANCIAL INFORMATION			2
Item 1. Financial Statements (Unaudited)			2
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Statements of Operations			3
Condensed Consolidated Statements of Comprehensive Loss			4
Condensed Consolidated Statements of Cash Flows			5
Condensed Consolidated Statements of Stockholders' (Deficit) Equity			6
Notes to Condensed Consolidated Financial Statements			7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			31
Item 4. Controls and Procedures.			31
PART II – OTHER INFORMATION			32
Item 1. Legal Proceedings.			32
Item 1A. Risk Factors.			32

Item 6. Exhibits.			32
SIGNATURES			33

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands of dollars, except for share data)	December 31, 2022		October 1, 2022
Assets
Current assets
Cash and cash equivalents	$	5,664	$	10,479
Accounts receivable, net	9,125		12,534
Inventories	129,120		142,977
Other current assets	14,048		8,486
Total current assets	$	157,957	$	174,476
Restricted cash	$	236	$	—
Property, plant and equipment, net	99,110		100,608
Goodwill	18,825		18,825
Intangible assets, net	46,931		47,433
Equity investment in affiliate	10,727		10,659
Deferred tax assets	13,892		10,907
Finance lease right-of-use assets	1,560		1,736
Other assets	2,367		1,482
Total assets	$	351,605	$	366,126
Liabilities and Stockholders' (Deficit) Equity
Current liabilities
Accounts payable	$	124,789	$	107,937
Warranty	6,525		6,685
Accrued expenses	18,713		16,386
Deferred warranty income	7,238		7,205
Finance lease obligations	571		566
Other current liabilities	6,681		6,195
Current portion of long-term debt	19,800		19,800
Total current liabilities	$	184,317	$	164,774
Long-term liabilities
Revolving credit facility	$	5,000	$	20,000
Long-term debt	124,341		130,390
Warranty	9,055		9,285
Deferred warranty income	12,052		11,590
Deferred tax liabilities	72		—
Finance lease obligations	1,428		1,574
Other liabilities	8,633		11,107
Pension	15,903		16,024
Total long-term liabilities	$	176,484	$	199,970
Guarantees, commitments and contingencies (Note 6)
Stockholders' (deficit) equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at December 31, 2022 and October 1, 2022	$	—	$	—
Common stock, $0.0001 par value, 100,000,000 shares authorized, 32,032,067 and 32,024,911 shares outstanding at December 31, 2022 and October 1, 2022, respectively	3		3
Additional paid-in capital	173,592		173,103
Accumulated deficit	(90,806)		(79,512)
Accumulated other comprehensive loss	(41,703)		(41,930)
Treasury stock, at cost, 1,782,568 shares at December 31, 2022 and October 1, 2022	(50,282)		(50,282)
Total stockholders' (deficit) equity	$	(9,196)	$	1,382
Total liabilities and stockholders' (deficit) equity	$	351,605	$	366,126

The accompanying notes are an integral part of these condensed consolidated financial statements.

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended
(in thousands of dollars except for share data)	December 31, 2022		January 1, 2022
Net sales	$	235,732	$	129,223
Cost of goods sold	228,275		113,026
Gross profit	$	7,457	$	16,197
Operating expenses
Selling, general and administrative expenses	16,832		18,233
Operating loss	$	(9,375)	$	(2,036)
Interest expense	(4,196)		(3,082)

Other (expense) income, net	(236)		736
Loss on debt modification	(537)		(561)
Loss before income taxes	$	(14,344)	$	(4,943)
Income tax benefit	2,981		1,762
Equity in net income (loss) of non-consolidated affiliate	69		(901)
Net loss	$	(11,294)	$	(4,082)

Loss per share:
Basic weighted average shares outstanding	32,026,311		28,118,450
Diluted weighted average shares outstanding	32,026,311		28,118,450
Basic loss per share	$	(0.35)	$	(0.15)
Diluted loss per share	$	(0.35)	$	(0.15)

The accompanying notes are an integral part of these condensed consolidated financial statements.

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)


	Three Months Ended
(in thousands of dollars)	December 31, 2022		January 1, 2022
Net loss	$	(11,294)	$	(4,082)
Other comprehensive income, net of tax:
Net change in defined benefit pension plan	227		221

Total other comprehensive income	$	227	$	221
Comprehensive loss	$	(11,067)	$	(3,861)

The accompanying notes are an integral part of these condensed consolidated financial statements.

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
(in thousands of dollars)	December 31, 2022		January 1, 2022
Cash flows from operating activities
Net loss	$	(11,294)	$	(4,082)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization expense	3,361		3,288
Non-cash interest expense	417		1,143
Share-based compensation expense	589		1,673
Equity in net (income) loss of non-consolidated affiliate	(69)		901
Loss on disposal of fixed assets	—		9


Deferred income tax benefit	(2,986)		(1,704)
Amortization of deferred actuarial pension losses	299		291
Loss on debt modification	537		561
Changes in assets and liabilities:
Accounts receivable	3,409		3,827
Inventories	13,857		(16,747)
Other assets	(5,227)		(2,554)
Accounts payable	16,572		(11,115)
Accrued expenses, pension and other liabilities	461		(8,568)

Total adjustments	$	31,220	$	(28,995)
Total cash provided by (used in) operating activities	$	19,926	$	(33,077)
Cash flows from investing activities
Cash paid for fixed assets	$	(1,146)	$	(1,570)

Total cash used in investing activities	$	(1,146)	$	(1,570)
Cash flows from financing activities
Revolving credit facility borrowings	$	5,000	$	35,000
Revolving credit facility repayments	(20,000)		(75,000)

Term loan repayments	(4,950)		(3,713)
Principal payments on finance leases	(141)		(328)
Cash paid for debt costs	(3,211)		(2,468)
Sale of common stock	—		75,000

Repurchase of common stock in connection with stock award exercises	(57)		(1,484)


Total cash (used in) provided by financing activities	$	(23,359)	$	27,007
Change in cash, cash equivalents, and restricted cash	(4,579)		(7,640)
Cash, cash equivalents, and restricted cash at beginning of period	10,479		11,709
Cash, cash equivalents, and restricted cash at end of period	$	5,900	$	4,069

Supplemental disclosures of cash flow information
Cash paid or received during the period:
Interest paid, net of interest received	$	3,170	$	3,648
Income tax (received) paid, net of tax refunds	(90)		—
Non-cash investing and financing activities:
Changes in accounts payable for capital additions to property, plant and equipment	$	672	$	469



Accrue debt modification costs	61		—
Accrue common stock issuance costs	—		178
Right-of-use assets obtained in exchange for operating lease obligations	199		—

The accompanying notes are an integral part of these condensed consolidated financial statements.

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' (DEFICIT) EQUITY

(Unaudited)


	Three Months Ended
(in thousands of dollars, except for share data)	Common Stock					Convertible Preferred Stock							Treasury Stock
	Shares	Par Value		Additional Paid-In-Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated Deficit		Shares	Amount		Total Stockholders' (Deficit) Equity
Balance, October 1, 2022	32,024,911	$	3	$	173,103	—	$	—	$	(41,930)	$	(79,512)	1,782,568	$	(50,282)	$	1,382



Restricted stock activity	7,156	—		(57)		—	—		—		—		—	—		(57)


Share-based compensation expense	—	—		546		—	—		—		—		—	—		546



Net loss	—	—		—		—	—		—		(11,294)		—	—		(11,294)
Other comprehensive income, net of tax	—	—		—		—	—		227		—		—	—		227
Balance, December 31, 2022	32,032,067	$	3	$	173,592	—	$	—	$	(41,703)	$	(90,806)	1,782,568	$	(50,282)	$	(9,196)

Balance, October 2, 2021	27,205,269	$	3	$	96,170	—	$	—	$	(44,794)	$	(33,753)	1,782,568	$	(50,282)	$	(32,656)
Private placement	4,687,500	—		74,822		—	—		—		—		—	—		74,822

Restricted stock activity	82,505	—		(1,484)		—	—		—		—		—	—		(1,484)


Share-based compensation expense	—	—		1,642		—	—		—		—		—	—		1,642


Net loss	—	—		—		—	—		—		(4,082)		—	—		(4,082)
Other comprehensive income, net of tax	—	—		—		—	—		221		—		—	—		221
Balance, January 1, 2022	31,975,274	$	3	$	171,150	—	$	—	$	(44,573)	$	(37,835)	1,782,568	$	(50,282)	$	38,463

BLUE BIRD CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

Blue Bird Body Company ("BBBC"), a wholly-owned subsidiary of Blue Bird Corporation, was incorporated in 1958 and has manufactured, assembled and sold school buses to a variety of municipal, federal and commercial customers since 1927. The majority of BBBC’s sales are made to an independent dealer network, which in turn sells buses to ultimate end users. References in these notes to condensed consolidated financial statements to “Blue Bird,” the “Company,” “we,” “our,” or “us” relate to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise. We are headquartered in Macon, Georgia.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting and Article 8 of Regulation S-X. The Company’s fiscal year ends on the Saturday closest to September 30 with its quarters consisting of thirteen weeks in most years. The fiscal years ending September 30, 2023 ("fiscal 2023") and ended October 1, 2022 ("fiscal 2022") consist or consisted of 52 weeks. The first quarters of fiscal 2023 and fiscal 2022 both included 13 weeks.

In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for any interim period are not necessarily indicative of the results that may be expected for the entire year. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The Condensed Consolidated Balance Sheet data as of October 1, 2022 was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes as of and for the fiscal year ended October 1, 2022 as set forth in the Company's fiscal 2022 Form 10-K filed with the Securities and Exchange Commission ("SEC") on December 12, 2022.

Impacts of COVID-19 and Subsequent Supply Chain Constraints on our Business

Towards the end of our second quarter of the fiscal year that ended October 3, 2020 ("fiscal 2020"), the novel coronavirus known as "COVID-19" spread throughout the world, resulting in a global pandemic. Countermeasures taken to address the COVID-19 pandemic included virtual and hybrid schooling in many jurisdictions throughout the United States of America ("U.S.") and Canada. The uncertainty of when and how schools would open materially affected demand for new buses and replacement/maintenance parts during the second half of fiscal 2020 and first half of the fiscal year that ended October 2, 2021 ("fiscal 2021"), significantly impacting our business and operations.

Demand for school buses strengthened substantially during the second half of fiscal 2021 as COVID-19 vaccines were administered and many jurisdictions began preparing for a return to in-person learning environments for the new school year that began in mid-August to early September 2021. However, during this same period of time, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints resulting from, among others, labor shortages; the lack of maintenance on, and acquisition of, capital assets by suppliers during the extended COVID-19 global lockdowns; significant increased demand for consumer products containing certain materials required for the production of vehicles, such as microchips, as consumers spent stimulus and other funds on items for their homes; etc. These supply chain disruptions had a significant adverse impact on our operations and results during the second half of fiscal 2021 and all of fiscal 2022 due to higher purchasing costs, including freight costs incurred to expedite receipt of critical components, increased manufacturing inefficiencies and our inability to complete the production of buses to fulfill sales orders. Towards the end of fiscal 2022 and continuing throughout the first quarter of fiscal 2023, there were slight improvements in the supply chain's ability to deliver the parts and components necessary to support our production operations, resulting in increased (i) manufacturing efficiencies and (ii) production of buses to fulfill sales orders during the first quarter of fiscal 2023. However, the higher costs charged by suppliers to procure inventory continued into the first quarter of fiscal 2023 and had a significant adverse impact on our operations and results as such costs outpaced the increases in sales prices that we

charged for the buses that were sold during the quarter, all of which were included in the backlog of fixed price sales orders originating in fiscal 2021 and 2022 that carried forward into fiscal 2023.

Additionally, Russian military forces launched a large-scale invasion of Ukraine on February 24, 2022, which further exacerbated global supply chain disruptions. While the Company has no assets or customers in either of these countries, this military conflict significantly impacted our financial results during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country. Specifically, it has contributed to increased a) costs charged by suppliers for the purchase of inventory that is at least partially dependent on resources originating from either of the countries and b) freight costs, both of which negatively impacted the gross profit recognized on sales during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023.

The continuing development and fluidity of the pandemic and subsequent supply chain constraints and their trailing impacts preclude any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. At the date of the financial statements, these estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities, and during the reporting period, these estimates and assumptions affect the reported amounts of revenues and expenses. For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory; the allowance for doubtful accounts; potential impairment of long-lived assets, goodwill and intangible assets; and the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies. Future events, including the extent and duration of any COVID-19 outbreaks and continued supply chain constraints and their related economic impacts, and their effects cannot be predicted with certainty, and, accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Company’s condensed consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. The Company evaluates and updates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in the Company’s evaluations. Actual results could differ from the estimates that the Company has used.

2. Summary of Significant Accounting Policies and Recently Issued Accounting Standards

The Company’s significant accounting policies are described in the Company’s fiscal 2022 Form 10-K, filed with the SEC on December 12, 2022. Our senior management has reviewed these significant accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the three months ended December 31, 2022.

Recently Issued Accounting Standards

ASU 2020-04 On March 12, 2020, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, providing temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR (defined below), which was initially expected to occur on December 31, 2021. The amendments in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

ASU 2021-01 On January 7, 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope, which refines the scope of Accounting Standards Codification Topic ("ASC") 848, Reference Rate Reform, and clarifies some of its guidance as part of the FASB’s ongoing monitoring of global reference rate reform activities. The ASU permits entities to elect certain optional expedients and exceptions when accounting for derivative contracts and certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and calculating price alignment interest in connection with reference rate reform activities under way in global financial markets.

ASU 2022-06 On December 21, 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which defers the sunset date of ASC 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in ASC 848.

The above amendments are effective for all entities from March 12, 2020 through December 31, 2024. An entity may elect to apply the amendments to contract modifications on a (i) full retrospective basis as of any date from the beginning of an interim period that

includes or is subsequent to March 12, 2020 or (ii) prospective basis from any date within an interim period that includes or is subsequent to March 12, 2020 through the date that the interim financial statements are issued or available to be issued.

On March 5, 2021, the Intercontinental Exchange, Inc. ("ICE") Benchmark Administration ("IBA"), the administrator of the United States Dollar London Interbank Offering Rate ("LIBOR"), issued a statement, following the completion of a formal consultation process, reaffirming the preliminary announcement it made on November 30, 2020, to cease publication of (i) 1 week and 2 month LIBOR subsequent to December 31, 2021 and (ii) the overnight and 1, 3, 6 and 12 month LIBOR tenors subsequent to June 30, 2023. The IBA’s statement regarding such cessation dates primarily resulted from a majority of LIBOR panel banks communicating to the IBA that they would be unwilling to continue contributing to the relevant LIBOR settings after such dates. As a result, the IBA determined that it would be unable to publish the relevant LIBOR settings on a representative basis after such dates. The United Kingdom Financial Conduct Authority ("FCA"), which regulates the IBA, confirmed that, based on information it received from LIBOR panel banks, it does not expect that any LIBOR settings will become unrepresentative before the announced cessation dates summarized above.

With the maturity of the interest rate collar on September 30, 2022 and execution of the Fifth Amended Credit Agreement (defined below) on September 2, 2022, which, among other things, changed one of the market interest rate indices that the Company can elect to accrue interest on outstanding borrowings from LIBOR to the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (“SOFR”) and became effective at the end of the applicable interest period for any LIBOR borrowings outstanding on the fifth amendment effective date, the Company no longer has any contracts that reference LIBOR as of December 31, 2022 and has no plans to enter such contracts prior to the discontinuation of LIBOR. The change in interest rate indices from LIBOR to SOFR had virtually no impact on the first quarter of fiscal 2023 as the LIBOR interest rate on outstanding borrowings on the fifth amendment effective date remained in place through approximately the end of December 2022. Accordingly, interest was accrued utilizing SOFR for only a short period of time and the Company adjusted the effective interest rate on outstanding borrowings on a prospective basis, which did not have a material impact on the condensed consolidated financial statements.

3. Supplemental Financial Information

Inventories

The following table presents the components of inventories at the dates indicated:


(in thousands of dollars)	December 31, 2022		October 1, 2022
Raw materials	$	89,099	$

SEC Form 10-Q filed by Blue Bird Corporation