FORT VALLEY, Ga. — Blue Bird Corporation (BLBD) (“Blue Bird”), the leading independent designer and manufacturer of school buses, announced today its fiscal 2017 second quarter results.
Second Quarter Highlights:
- Unit sales for the quarter totaled 2,367 buses, 235 units (or 11%) above the same period last year
- Net sales of $208.7 million, $17.4 million (or 9%) higher than the same period last year
- Second quarter income from continuing operations of $2.8 million, up $1.4 million compared with the same period last year
- Second quarter Adjusted EBITDA1 of $8.1 million was down $2.0 million compared with the same period last year. The decline was primarily driven by customer mix and higher operating expenses in support of growth
- Net cash provided by continuing operations was $22.9 million, down $5.3 million compared with the same period last year
- Adjusted Free Cash Flow1 was $23.7 million in the quarter, $2.2 million below the same period last year driven by lower Adjusted EBITDA1
- Gross margins in the quarter were 11.8%, down 130 bps. from last year. The deterioration was primarily driven by product and customer mix
- Reaffirming full-year fiscal 2017 net sales guidance of $980 million - 1,010 million, Adjusted EBITDA guidance of $72 - 76 million and Adjusted Free Cash Flow guidance of $38 - 42 million
“Our second quarter sales were strong with double-digit growth in unit volume and we secured a number of first-time accounts,” said Phil Horlock, President and Chief Executive Officer of Blue Bird Corporation. “We maintained our strong leadership position in alternative-fuel-powered buses, with year-to-date orders 43% higher than at the same time last year. With a strong backlog of new bus orders that take us into the fourth quarter, we are pleased to reaffirm our full-year fiscal 2017 net revenue guidance of $980 million - 1,010 million, Adjusted EBITDA guidance of $72 - 76 million and Adjusted Free Cash Flow guidance of $38 - 42 million.”
Second Quarter 2017 Results
Total net sales were $208.7 million for the second quarter of fiscal 2017, an increase of $17.4 million, or 9.1%, from prior year period. Bus unit sales were 2,367 units for the quarter compared with 2,132 units for the same period last year.
Second quarter gross profit of $24.6 million represents a decrease of $0.5 million from the second quarter of last year.
Income/Loss from Continuing Operations
Income from continuing operations was $2.8 million for the second quarter of fiscal 2017, an increase of $1.4 million compared with the same period last year. The increase was primarily driven by higher sales volume.
Adjusted Income from Continuing Operations was $3.0 million, representing an increase of $0.8 million compared with the same period last year.
Adjusted EBITDA was $8.1 million, or 3.9% of net sales, for the second quarter of fiscal 2017, representing a decrease of $2.0 million compared with the second quarter of the prior year. The decrease in adjusted EBITDA was primarily driven by product and customer mix and higher operating expenses to support future growth.
Year-to-Date 2017 Results
Total net sales were $345.3 million for the six months ended April 1, 2017, an increase of $22.8 million, or 7.1%, compared with the prior year. This was primarily driven by higher bus unit sales, which were 320 units above the same period last year.
Year-to-date gross profit was $42.8 million, a decrease of $1.0 million from the prior year.
Income/Loss from Continuing Operations
Loss from continuing operations was $5.7 million for the six months ended April 1, 2017, which was $4.7 million more than the same period in the prior year. The increased loss was primarily driven by debt extinguishment costs of $10.1 million, offset by lower interest expense and tax expense.
Adjusted Income from Continuing Operations was $1.0 million, representing an increase of $0.3 million compared with the prior year.
Adjusted EBITDA was $10.7 million, or 3.1% of net sales, for the six months ended April 1, 2017, a decrease of $4.7 million from the prior year. The decrease in adjusted EBITDA was primarily the result of lower gross profit and increased selling, general and administrative expenses.
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 Income/Loss from Continuing Operations," "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 income from continuing operations prior to 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 income (loss) from continuing operations is net income from continuing operations net of taxes, as adjusted to add back certain transaction costs not considered an indicator of ongoing company performance. Adjusted diluted earnings per share represents adjusted income (loss) from continuing operations by diluted weighted average common shares outstanding (as if we had GAAP net income during the respective period). Adjusted EBITDA, Adjusted EBITDA margin, Adjusted Income from Continuing Operations, 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 Income from Continuing Operations, 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 Income from Continuing Operations 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 Income from Continuing Operations, 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 Income from Continuing Operations, 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 Income from Continuing Operations, 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 continuing 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.