Blue Bird Corporation — Q1 Fiscal 2022 Form 10-Q
Reporting period: 13 weeks ended January 1, 2022; comparative quarter ended January 2, 2021. Blue Bird designs, manufactures and sells school buses and replacement parts.
Financial results
| Metric | Q1 FY2022 | Q1 FY2021 |
|---|---|---|
| Net sales | $129.2 million | $130.4 million |
| Gross profit / margin | $16.2 million / 12.5% | $14.5 million / 11.1% |
| Operating loss | $2.0 million | $0.2 million |
| Net loss | $4.1 million; $0.15 per share | $1.6 million; $0.06 per share |
| Adjusted EBITDA / margin | $3.6 million / 2.8% | $5.8 million / 4.4% |
| Cash used in operating activities | $33.1 million | $11.5 million |
| Free cash flow | $(34.6) million | $(14.8) million |
Sales declined 0.9%. Bus sales were $112.4 million, down 4.6%; parts sales were $16.8 million, up 33.2%. Alternative-power bus revenue was $57.6 million versus $52.3 million; diesel bus revenue was $46.0 million versus $59.7 million. SG&A rose $3.5 million to $18.2 million, more than offsetting higher gross profit. Interest expense increased 59.7% to $3.1 million, primarily reflecting higher term-loan rates and revolving borrowings earlier in the quarter.
Liquidity, debt and balance sheet
At January 1, 2022, cash was $4.1 million, inventory $142.0 million and total assets $364.0 million. Term-loan principal was $162.7 million and revolver borrowings were $5.0 million; $6.3 million of letters of credit reduced revolver availability, leaving $88.7 million available. Current portion of long-term debt was $16.1 million. The company reported $38.5 million of stockholders’ equity, compared with a $32.7 million deficit at October 2, 2021.
Cash used in operations increased by $21.6 million year over year, driven by the larger loss and working-capital movements, including a $16.7 million inventory build. Financing cash flow included $75.0 million of private-placement proceeds and $40.0 million of revolver repayments. The company reported compliance with all credit covenants at quarter-end.
Material changes, outlook and risks
- COVID-19-related supply shortages constrained production and deliveries. Management estimated that more than 2,000 units were deferred across the latter part of FY2021 and Q1 FY2022. Backlog exceeded 4,800 units at January 1, 2022, versus more than 4,200 at October 2, 2021; management said no orders had been canceled because of production delays.
- Higher component and freight costs and manufacturing inefficiencies pressured results. Three sales-price increases were announced, but management said they had not yet benefited Q1 sales, which were largely from earlier backlog orders; the effect was expected to remain limited at least through Q2 FY2022.
- Management expected supply-chain disruptions and adverse pandemic effects to continue into Q2 and potentially beyond, but said their duration and financial impact could not be estimated. It was considering further cost controls and potentially additional equity or debt financing. No specific full-year financial guidance is provided in the filing text.
- A November 2021 credit amendment established temporary EBITDA, liquidity and, when triggered, bus-production covenants through the limited-availability period. Minimum liquidity requirements step up over time, reaching $20 million thereafter. Covenant noncompliance could require relief or refinancing; management cautioned that refinancing might not be available on acceptable terms.
- The December 15 private placement issued 4,687,500 shares at $16 per share to Coliseum investors, who obtained an approximately 15% ownership interest and a board seat. Net proceeds of about $74.8 million were applied as required to repay revolving loans.
- Other notable items include accelerated vesting of former executives’ stock awards, contributing to higher SG&A; $2.5 million of lender fees and issuance costs related to the credit amendment; and a $0.5 million cash payment on the interest-rate collar. The filing describes pending product-liability and other litigation but says management does not expect pending matters to have a material adverse effect. A $3.0 million dealer-debt guarantee was outstanding, with performance considered remote.
Key facts for investors to verify
- Whether suppliers’ component availability improves enough to convert the reported backlog into completed bus deliveries, and whether delayed orders remain intact.
- Whether price increases offset materials, freight and labor inflation, and how quickly pricing flows through the backlog.
- Cash use, inventory levels and liquidity against the amended credit agreement’s changing minimum-liquidity and other covenant requirements.
- Term-loan refinancing needs and interest costs; the filing says management expects to refinance before maturity and does not expect to have sufficient cash to repay the loan at maturity.
- The effect of the private placement on share count and governance, and whether additional capital raising becomes necessary.
- Reported Adjusted EBITDA and covenant-defined consolidated EBITDA are different measures; review the credit agreement definitions and covenant calculations rather than treating them as interchangeable.