What changed in this filing

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Item 1. Financial Statements

2020-08-13 compared with 2020-05-14 · 113 added, 134 removed, 342 unchanged (42% of the section changed)

3 unchanged sentences

(in thousands of dollars, except for share data)

April 4, 2020

September 28, 2019

28 unchanged sentences

Stockholders' deficit

Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued at April 4, 2020 and September 28, 2019

Common stock, $0.0001 par value, 100,000,000 shares authorized, 27,027,272 and 26,476,336 shares outstanding at April 4, 2020 and September 28, 2019, respectively

Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares issued at July 4, 2020 and September 28, 2019

Common stock, $0.0001 par value, 100,000,000 shares authorized, 27,048,404 and 26,476,336 shares outstanding at July 4, 2020 and September 28, 2019, respectively

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Treasury stock, at cost, 1,782,568 shares at April 4, 2020 and September 28, 2019

Treasury stock, at cost, 1,782,568 shares at July 4, 2020 and September 28, 2019

Total stockholders' deficit

4 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars except for share data)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Cost of goods sold

5 unchanged sentences

Other income (expense), net

Loss before income taxes

Income tax benefit

Equity in net (loss) income of non-consolidated affiliate

Income (loss) before income taxes

Income tax (expense) benefit

Equity in net income of non-consolidated affiliate

Earnings per share:

1 unchanged sentence

Diluted weighted average shares outstanding

Basic loss per share

Diluted loss per share

Basic earnings per share

Diluted earnings per share

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Other comprehensive income, net of tax

1 unchanged sentence

Total other comprehensive income

Comprehensive loss

Comprehensive income

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

1 unchanged sentence

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

June 29, 2019

Cash flows from operating activities

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net income to net cash used in operating activities:

Depreciation and amortization

1 unchanged sentence

Share-based compensation

Equity in net loss (income) of non-consolidated affiliate

Equity in net income of non-consolidated affiliate

(Gain) loss on disposal of fixed assets

17 unchanged sentences

Principal payments on finance leases

Cash paid for debt issuance costs

Cash paid for employee taxes on vested restricted shares and stock option exercises

12 unchanged sentences

Cashless exercise of stock options

Cash receivable for warrant exercises

Right-of-use assets obtained in exchange for finance lease obligations

12 unchanged sentences

Total Stockholders' Deficit

Balance, January 4, 2020

Warrant exercises

Balance, April 4, 2020

Restricted stock activity

2 unchanged sentences

Other comprehensive income, net of tax

Balance, April 4, 2020

Balance, December 29, 2018

Balance, July 4, 2020

Balance, March 30, 2019

Warrant exercises

Restricted stock activity

Stock option activity

2 unchanged sentences

Other comprehensive income, net of tax

Balance, March 30, 2019

Six Months Ended

Balance, June 29, 2019

Nine Months Ended

(in thousands of dollars, except for share data)

11 unchanged sentences

Other comprehensive income, net of tax

Balance, April 4, 2020

Balance, July 4, 2020

Balance, September 29, 2018

7 unchanged sentences

Other comprehensive income, net of tax

Balance, March 30, 2019

Balance, June 29, 2019

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

7 unchanged sentences

References in these notes to financial statements to “Blue Bird”, the “Company,” “we,” “our,” or “us” refer to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise.

During our second fiscal quarter of 2020, the novel coronavirus known as "COVID-19" spread throughout the world creating a global pandemic.

The COVID-19 pandemic did not materially impact our second fiscal quarter of 2020 financial condition, results of operations, or liquidity.

The full extent of the future impacts of COVID-19 on the Company's operations is uncertain.

A prolonged economic shutdown could have a material adverse impact on our financial results.

For further discussion about COVID-19, please refer to Part I, Item 2.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Part II, Item 1A.

"Risk Factors" of this Quarterly Report on Form 10-Q.

During our third quarter of fiscal 2020, the novel coronavirus known as "COVID-19" continued to spread throughout the world, perpetuating a global pandemic.

The pandemic materially impacted our third quarter of fiscal 2020 results causing lower customer orders for both buses and bus parts, supply disruptions, higher rates of absenteeism among our hourly production workforce and a temporary shutdown of manufacturing.

The continuing development and fluidity of the pandemic precludes any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.

A prolonged economic downturn resulting from the continuing pandemic would likely have a material adverse impact on our financial results.

Basis of Presentation

4 unchanged sentences

In fiscal year 2020 , there is a total of 53 weeks.

The second quarters of fiscal 2020 and 2019 both included 13 weeks.

The six month periods in fiscal 2020 and 2019 included 27 and 26 weeks, respectively.

The third quarters of fiscal 2020 and 2019 both included 13 weeks.

The nine month periods in fiscal 2020 and 2019 included 40 and 39 weeks, respectively.

In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made.

15 unchanged sentences

The Company’s significant accounting policies are described in the Company’s 2019 Form 10-K, filed with the SEC on December 12, 2019 .

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 six months ended April 4, 2020 , except as follows (and as discussed in the Recently Adopted Accounting Standards section of this Note 2 ):

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 nine months ended July 4, 2020 , except as follows (and as discussed in the Recently Adopted Accounting Standards section of this Note 2 ):

Amortization of Deferred Pension Losses

22 unchanged sentences

Our debt and derivative agreements currently reference LIBOR.

Contract language is expected to be incorporated into these agreements to address the transition to an alternative rate.

Contract language is expected to be incorporated into these agreements to address the transition to an alternative reference rate.

We are currently evaluating the impact this ASU may have on our consolidated financial statements.

2 unchanged sentences

(in thousands of dollars)

April 4, 2020

September 28, 2019

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Balance at beginning of period

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Balance at beginning of period

7 unchanged sentences

(in thousands of dollars)

April 4, 2020

September 28, 2019

4 unchanged sentences

Shipping and Handling Revenues

Shipping and handling revenues were $4.1 million and $3.2 million for the three months ended April 4, 2020 and March 30, 2019 , respectively, and $7.6 million and $6.5 million for the six months ended April 4, 2020 and March 30, 2019 , respectively.

The related cost of goods sold was $3.5 million and $2.7 million for the three months ended April 4, 2020 and March 30, 2019 , respectively, and $6.6 million and $5.7 million for the six months ended April 4, 2020 and March 30, 2019 , respectively.

Shipping and handling revenues were $ 3.9 million and $ 6.0 million for the three months ended July 4, 2020 and June 29, 2019 , respectively, and $ 11.5 million and $ 12.5 million for the nine months ended July 4, 2020 and June 29, 2019 , respectively.

The related cost of goods sold was $ 3.4 million and $ 5.3 million for the three months ended July 4, 2020 and June 29, 2019 , respectively, and $ 10.0 million and $ 11.0 million for the nine months ended July 4, 2020 and June 29, 2019 , respectively.

Pension Expense

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Interest cost

11 unchanged sentences

No payments or receipts are exchanged on the interest rate collar contracts unless interest rates rise above or fall below the contracted ceiling or floor rates.

During the three-months ended July 4, 2020 , the three-month LIBOR rate fell below the established floor, which required an immaterial payment to the counterparty.

Changes in the interest rate collar fair value are recorded in interest expense as the collar does not qualify for hedge accounting.

At April 4, 2020 , the fair value of the interest rate collar contract was $(3.4) million and is included in "other current liabilities" on the Condensed Consolidated Balance Sheets.

At July 4, 2020 , the fair value of the interest rate collar contract was $( 4.2 ) million and is included in "other current liabilities" on the Condensed Consolidated Balance Sheets.

The fair value of the interest rate collar is a Level 2 fair value measurement, based on quoted prices of similar items in active markets.

Equity Investment in Affiliate

The Company holds a 50 % equity interest in Micro Bird Holdings, Inc.

(“Micro Bird”), and accounts for Micro Bird under the equity method of accounting.

The carrying amount of the equity method investment is adjusted for the Company’s proportionate share of net earnings and losses and any dividends received.

At July 4, 2020 and September 28, 2019 , the carrying value of the Company's investment was $ 11.9 million and $ 11.1 million , respectively.

In recognizing the Company’s 50 % portion of Micro Bird net income, the Company recorded $ 0.8 million and $ 1.2 million in Equity in net income of non-consolidated affiliate for the nine months ended July 4, 2020 and June 29, 2019 , respectively.

Summarized unaudited financial information for these periods for Micro Bird is as follows:

Nine Months Ended

(in thousands of dollars)

June 29, 2019

Operating income

On May 7, 2020, the Company entered into a Second Amendment which amended the Credit Agreement, dated as of December 12, 2016 (the “Credit Agreement”, as amended by that certain First Amendment to Credit Agreement, dated as of September 13, 2018 (the “First Amendment”), and as further amended by the Second Amendment, the “Amended Credit Agreement”).

The Second Amendment provided

for an aggregate lender commitment of $ 41.9 million of additional revolving commitments bringing the total revolving commitments to $ 141.9 million .

The revolving commitments under the Amended Credit Agreement mature on September 13, 2023, which is the fifth anniversary of the effective date of the First Amendment.

The interest rate pricing grid remained unchanged, but the LIBOR floor was amended from 0 % to 0.75 % .

We incurred $ 0.9 million in fees related to the amendment.

The fees were capitalized to other assets on the Consolidated Balance Sheets and are amortized on a straight-line basis to interest expense until maturity of the agreement.

Term debt consisted of the following at the dates indicated:

(in thousands of dollars)

April 4, 2020

September 28, 2019

5 unchanged sentences

If measured at fair value in the financial statements, the term loans would be classified as Level 2 in the fair value hierarchy.

At April 4, 2020 and September 28, 2019 , $181.3 million and $186.3 million , respectively, were outstanding on the term loans.

At April 4, 2020 and September 28, 2019 , the stated interest rates on the term loans were 3.2% and 4.4% , respectively.

At April 4, 2020 and September 28, 2019 , the weighted-average annual effective interest rates for the term loans were 4.5% and 5.0% , respectively, which includes amortization of the deferred financing costs.

At April 4, 2020 , $30.0 million in borrowings were outstanding on the Revolving Credit Facility and $6.9 million of Letters of Credit were outstanding;

At July 4, 2020 and September 28, 2019 , $ 178.8 million and $ 186.3 million , respectively, were outstanding on the term loans.

At July 4, 2020 and September 28, 2019 , the stated interest rates on the term loans were 2.8 % and 4.4 % , respectively.

At July 4, 2020 and September 28, 2019 , the weighted-average annual effective interest rates for the term loans were 4.1 % and 5.0 % , respectively, which includes amortization of the deferred financing costs.

At July 4, 2020 , $ 45.0 million in borrowings were outstanding on the Revolving Credit Facility and $ 6.9 million of Letters of Credit were outstanding;

therefore, the Company would have been able to borrow $ 90.0 million on the revolving line of credit.

Interest expense on all indebtedness was $5.7 million and $4.0 million for the three months ended April 4, 2020 and March 30, 2019 , respectively, and $7.6 million and $6.9 million for the six months ended April 4, 2020 and March 30, 2019 , respectively.

Interest expense on all indebtedness was $ 2.4 million and $ 3.4 million for the three months ended July 4, 2020 and June 29, 2019 , respectively, and $ 10.0 million and $ 10.3 million for the nine months ended July 4, 2020 and June 29, 2019 , respectively.

The schedule of remaining principal payments through maturity for total debt is as follows:

7 unchanged sentences

While the CARES Act has broad income tax implications for many companies, it did not have a material impact on our reported income tax accounts.

The effective tax rate for the three-month period ended April 4, 2020 was 70.0% , which differed from the statutory federal income tax rate of 21% .

The difference is mainly due to discrete period tax benefit from share-based compensation expenses, but also due to normal tax rate items, such as the benefit from federal and state tax credits (net of valuation allowance), which were partially offset by net non-deductible compensation expenses and other tax adjustments.

The effective tax rate for the three-month period ended March 30, 2019 was 14.4% , which differed from the statutory federal tax rate of 21% .

The effective tax rate for the three-month period ended July 4, 2020 was 70.1 % , which differed from the statutory federal income tax rate of 21 % .

The difference is mainly due to discrete period tax expense from prior year tax return adjustments and normal tax rate items, such as the benefit from federal and state tax credits (net of valuation allowance), which were partially offset by net non-deductible compensation expenses and other tax adjustments.

The effective tax rate for the three-month period ended June 29, 2019 was 19.1 % , which differed from the statutory federal tax rate of 21 % .

The difference is mainly due to normal tax rate benefit items, such as federal and state tax credits (net of valuation allowance), which were partially offset by non-deductible share-based compensation expenses and other tax adjustments.

The effective tax rate for the six -month period ended April 4, 2020 was 55.4% and differed from the statutory federal tax rate of 21% .

The effective tax rate for the six -month period ended March 30, 2019 was 15.8% and differed from the statutory federal income tax rate of 21% .

The effective tax rate for the nine -month period ended July 4, 2020 was 38.8 % and differed from the statutory federal tax rate of 21 % .

The difference is mainly due to a net discrete period tax benefit from share-based compensation expenses, but also due to normal tax rate items, such as the benefit from federal and state tax credits (net of valuation allowance), which were partially offset by net non-deductible compensation expenses and other tax adjustments.

The effective tax rate for the nine -month period ended June 29, 2019 was 19.7 % and differed from the statutory federal income tax rate of 21 % .

The difference is mainly due to normal tax rate benefit items, primarily federal and state tax credits (net of valuation allowance), which were partially offset by non-deductible share-based compensation expenses and other tax adjustments.

Guarantees, Commitments and Contingencies

At April 4, 2020 , the Company had a number of product liability and other cases pending.

At July 4, 2020 , the Company had a number of product liability and other cases pending.

Management believes that, considering the Company’s insurance coverage and its intention to vigorously defend its positions, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial statements.

2 unchanged sentences

Failure by the Company to comply with present and future regulations could subject it to future liabilities.

In addition, such regulations could require the Company to acquire costly equipment or to incur other significant expenses to

comply with environmental regulations.

In addition, such regulations could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations.

The Company is currently not involved in any material environmental proceedings and therefore management believes that the resolution of pending environmental matters will not have a material adverse effect on the Company’s financial statements.

In the ordinary course of business, we may provide guarantees for certain transactions entered into by our dealers.

At April 4, 2020 , we had a $3.0 million guarantee outstanding which relates to a guarantee of indebtedness for a term loan with remaining maturity up to 2.8 years .

At July 4, 2020 , we had a $ 3.0 million guarantee outstanding which relates to a guarantee of indebtedness for a term loan with remaining maturity up to 2.5 years .

The $ 3.0 million represents the estimated maximum amount we would be required to pay upon default of all guaranteed indebtedness, and we believe the likelihood of required performance to be remote.

At April 4, 2020 , $0.3 million was included in other current liabilities on our Condensed Consolidated Balance Sheets for the estimated fair value of the guarantee.

At July 4, 2020 , $ 0.3 million was included in other current liabilities on our Condensed Consolidated Balance Sheets for the estimated fair value of the guarantee.

Lease Commitments

7 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Segment net sales

(1) Parts segment revenue includes $1.2 million and $0.9 million for the three months ended April 4, 2020 and March 30, 2019 , respectively, and $2.4 million and $1.5 million for the six months ended April 4, 2020 and March 30, 2019 , respectively, related to inter-segment sales of parts that was eliminated by the Bus segment upon consolidation.

(1) Parts segment revenue includes $ 0.8 million and $ 1.0 million for the three months ended July 4, 2020 and June 29, 2019 , respectively, and $ 3.2 million and $ 2.5 million for the nine months ended July 4, 2020 and June 29, 2019 , respectively, related to inter-segment sales of parts that was eliminated by the Bus segment upon consolidation.

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Segment gross profit

The following table is a reconciliation of segment gross profit to consolidated loss before income taxes for the periods presented:

The following table is a reconciliation of segment gross profit to consolidated income (loss) before income taxes for the periods presented:

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Segment gross profit

3 unchanged sentences

Other income (expense), net

Loss before income taxes

Income (loss) before income taxes

Sales are attributable to geographic areas based on customer location and were as follows for the periods presented:

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

United States

3 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Alternative fuel buses (1)

5 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands except for share data)

April 4, 2020

March 30, 2019

April 4, 2020

March 30, 2019

June 29, 2019

Weighted-average common shares outstanding

Effect of dilutive securities (1)

Weighted-average dilutive securities, restricted stock

Weighted-average dilutive securities, warrants

Weighted-average dilutive securities, stock options

Weighted-average shares and dilutive potential common shares

Earnings per share:

Basic loss per share

Diluted loss per share

(1) Potentially dilutive securities representing 0.5 million and 1.4 million shares of common stock were excluded from the computation of diluted earnings per share for April 4, 2020 and March 30, 2019 , respectively, as their effect would have been antidilutive.

Basic earnings per share

Diluted earnings per share

(1) Potentially dilutive securities representing 0.4 million and 0.3 million shares of common stock were excluded from the computation of diluted earnings per share for the three and nine months ended July 4, 2020 , respectively, as their effect would have been anti-dilutive.

Accumulated Other Comprehensive Loss

1 unchanged sentence

Three Months Ended

Six Months Ended

Nine Months Ended

(in thousands of dollars)

1 unchanged sentence

Defined Benefit Pension Plan

April 4, 2020

Beginning Balance

2 unchanged sentences

Income tax expense

Ending Balance April 4, 2020

March 30, 2019

Ending Balance July 4, 2020

June 29, 2019

Beginning Balance

2 unchanged sentences

Income tax expense

Ending Balance March 30, 2019

Subsequent Event

Second Amendment to the Credit Agreement

As reported in our May 8, 2020 Current Report on Form 8-K, on May 7, 2020, the Company entered into a Second Amendment which amended the Credit Agreement, dated as of December 12, 2016 (the “Credit Agreement”, as amended by that certain First Amendment to Credit Agreement, dated as of September 13, 2018 (the “First Amendment”), and as further amended by the Second Amendment, the “Amended Credit Agreement”).

The Second Amendment, among other things, provides for an aggregate lender commitment of $41.9 million of additional revolving commitments bringing the total revolving commitments to $141.9 million .

The additional revolving commitments are intended to be used for working capital, to fund general corporate purposes and to pay transaction costs, fees and expenses related thereto and in connection with the Second Amendment.

The revolving commitments under the Amended Credit Agreement will mature on September 13, 2023, which is the fifth anniversary of the effective date of the First Amendment.

The interest rate pricing grid remained unchanged, but the LIBOR floor was amended from 0% to 0.75% .

Approximately $0.9 million in fees were incurred related to the amendment and are expected to be capitalized.

Ending Balance June 29, 2019

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements