Blue Bird Corporation — FY2020 Form 10-K
Reporting period: Fiscal year ended October 3, 2020 (53 weeks); comparable FY2019 ended September 28, 2019 (52 weeks). This filing reports annual results, not standalone fourth-quarter figures. Blue Bird designs and manufactures school buses and sells replacement parts through Bus and Parts segments.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Net sales | $879.2 million | $1,018.9 million | Down 13.7% |
| Gross profit / margin | $96.2 million / 10.9% | $133.5 million / 13.1% | Margin down 2.2 percentage points |
| Operating profit / margin | $22.0 million / 2.5% | $43.8 million / 4.3% | Down 49.8% |
| Net income | $12.2 million | $24.3 million | Down 49.9% |
| Diluted EPS | $0.45 | $0.90 | Down 50.0% |
| Adjusted EBITDA / margin | $54.7 million / 6.2% | $81.8 million / 8.0% | Down 33.2% |
| Operating cash flow | $3.5 million | $55.7 million | Down $52.2 million |
| Free cash flow | $(15.5) million | $20.2 million | Down $35.7 million |
Bus-segment sales were $822.6 million, down 13.6%; Parts sales were $56.6 million, down 15.0%. The company sold 8,878 buses worldwide. Alternative-fuel bus sales were $381.6 million; 4,262 alternative-fuel buses were sold, including 158 electric buses.
Balance sheet and liquidity
- Cash and cash equivalents were $44.5 million at year-end, down from $71.0 million. Current assets were $116.9 million and current liabilities were $111.6 million.
- Long-term debt, net of financing costs and current portion, was $164.2 million; reported term-loan principal was $176.4 million. No revolving-credit borrowings were outstanding; $6.9 million of letters of credit left $135.0 million available under the revolver at October 3, 2020.
- Total assets were $317.4 million, total liabilities $370.6 million, and stockholders’ deficit $53.2 million.
- Capital spending was $19.0 million. The company reported $6.9 million of letters of credit and a $3.0 million dealer-related debt guarantee, which management considered unlikely to require payment.
Material changes and drivers
- COVID-19 reduced demand as school systems shifted to virtual or hybrid learning, disrupted suppliers, increased production-worker absenteeism, and caused a two-week plant shutdown in April 2020. Bus orders booked fell to 8,878 from 11,017.
- Bus unit selling prices increased 7.2%, but average cost of goods sold per bus increased 10.0%, reflecting pandemic-related supply and manufacturing inefficiencies. This contributed to lower gross margin.
- SG&A fell $15.4 million, partly offsetting lower gross profit, due to lower prior-year product-development spending and FY2020 cost controls, including headcount reductions and lower travel expense.
- Operating cash flow weakened substantially, mainly from changes in payables and accrued expenses; inventory reductions partly offset the outflow. Lower capital expenditures than in FY2019 softened the decline in free cash flow.
- Debt interest expense declined to $12.3 million from $12.9 million. The company had $176.4 million of term-loan principal outstanding and quarterly principal payments scheduled; $151.6 million was scheduled for 2023.
Outlook, risks, and unusual items
- Management expected pandemic effects to continue through a significant portion of FY2021 and possibly longer, and stated that demand, production, supply-chain conditions, and seasonality were difficult to predict. No specific FY2021 revenue or earnings guidance is provided in the supplied filing text.
- Management believes post-pandemic Type C and Type D industry registrations could return to levels experienced in 2016–2019, citing an aging fleet and student-population growth; this is an expectation, not a quantified company forecast.
- On December 4, 2020, after year-end, the company amended its credit agreement. Temporary covenant relief included minimum liquidity of $15 million, minimum EBITDA tests for specified quarters, additional reporting and restrictions, and a 0.50% additional interest margin during the limited-availability period. The filing says the company was compliant with covenants at October 3, 2020.
- Management took cost-control and liquidity-preservation measures and said further reductions in hiring, discretionary spending, and capital investment could be considered. The CARES Act payroll-tax deferral was estimated at $4–$6 million; approximately $3.2 million of pension contributions was deferred, with payment due January 4, 2021.
- Adjusted EBITDA included $1.0 million of COVID-related costs, $646,000 of restructuring charges, and adjustments for product redesign and operational transformation. These are non-GAAP adjustments and should be considered alongside GAAP results.
- The defined-benefit pension plan was underfunded by $47.3 million; management expected a $5.8 million contribution in FY2021. Environmental liabilities were accrued at $0.2 million, with estimated undiscounted costs of $0.6 million over seven years; remediation planning at the Fort Valley site remained a matter to monitor.
- Key risks include prolonged school closures or remote learning, supplier concentration and shortages, fixed-price contracts exposed to cost increases, substantial debt and covenant compliance, pension funding, product warranty and liability claims, and environmental obligations. Management said pending legal proceedings were not expected to have a material adverse effect.
Most important facts for investors to verify
- FY2021 orders, deliveries, production efficiency, and school-district purchasing behavior as in-person schooling and replacement cycles evolve.
- Liquidity, revolver availability, covenant headroom, and the impact and duration of the December 2020 credit amendment and added borrowing costs.
- Whether operating cash flow and free cash flow recover, including working-capital movements and required capital spending.
- Margin trends, particularly the balance between pricing, input costs, supplier availability, and manufacturing utilization.
- Pension funding needs and the actual cost, timing, and scope of environmental corrective actions.