Blue Bird Reports Fiscal 2020 Fourth Quarter and Full Year Results; Strong Fourth Quarter At or Above Guidance; Focused on Margin Growth and Industry Recovery; Guidance Range Provided for Fiscal 2021
December 16, 2020 at 16:06 PM EST
Blue Bird Corporation (“Blue Bird”) (Nasdaq: BLBD), the leading independent designer and manufacturer of school buses, announced today its fiscal 2020 fourth quarter and full year results. GAAP net income for the fourth quarter and full year were $11.9 million and $12.2 million, respectively, up $0.3 million and down $12.1 million from comparable FY2019 periods. Adjusted EBITDA for the quarter and year were $21.9 million and $54.7 million, respectively.
“The second half of fiscal 2020 was challenging for Blue Bird as operations were significantly impacted by COVID-19," said Phil Horlock, President and Chief Executive Officer of Blue Bird Corporation. “School shutdowns delayed orders and supplier disruptions impacted our efficiencies. Through the fourth quarter, however, we saw significant stabilization in our supply base and manufacturing processes.
"While working through these challenges, I am very pleased with our progress in improving our underlying business structure that is key to achieving our near-term EBITDA margin target of at least 10%. Full-year average selling price per bus increased by more than $6,000, or 7%, over last year. The increase was due to a combination of pricing and a richer mix of higher-priced vehicles, including electric-powered buses. Despite the significant COVID impact on orders, we had another strong year of alternative-fuel bus sales, with a record sales mix of 48%, equal to last year. We saw substantial growth in our electric-powered bus sales this year, with 158 buses sold and a strong growth runway in that segment. Our alternative-fuel market share remained strong in fiscal 2020, led by propane at 76%, followed by electric at 58% and we maintained our position as the undisputed leader in alternative fuels. We also announced the upcoming product launch of our all-new and exclusive 7.3 liter engine, developed with Ford and Roush, which will power our class-leading propane- and gas-powered Blue Bird Vision, described by our tagline, “The best just got better!” We also continued to make great progress in driving down structural costs with our Transformational Initiatives, which improved profits by $14.4 million in the full year. In fact, this initiative has reduced our structural costs by more than $50 million since inception three years ago. In addition, we successfully moved to a single shift production schedule late in the third quarter, which drove efficiency and quality improvements through the balance of the year. We are making changes in our plant, so that by spring of 2021, we will have the same daily capacity on one shift that we previously had on two shifts.
"With these business structure improvements, we are well positioned to capitalize on the market recovery as schools get back to in-classroom learning. We have a history of robust cash generation and strong liquidity, a culture of winning and leadership in growing segments, a clearly defined margin-growth strategy and an experienced team with a proven track record of delivering results and handling difficult times. As we look at guidance for FY2021, there is a lot of uncertainty around timing of a return-to-normalcy for schools. Recent news around the approval and distribution of COVID-19 vaccines, however, provides confidence that an industry rebound is in sight. We are providing a wide range for our guidance metrics, which we will narrow through the year as the control of the pandemic become clearer. We are announcing initial net revenue guidance of $750M-975M, with Adj. EBITDA between $40M-$65M and Adjusted Free Cash Flow of $(5)-$20M.”
Fiscal 2020 Fourth Quarter Results
Net sales were $281.4 million for the fourth quarter of fiscal 2020, a decrease of $62.1 million, or 18.1%, from prior year period. Bus unit sales were 2,876 units for the quarter compared with 3,726 units for the same period last year.
Fourth quarter gross profit of $29.6 million represented a decrease of $17.0 million from the fourth quarter of last year. Gross profit margin declined 3.1 points to 10.5%. The decline was driven by lower volumes and manufacturing disruptions due to COVID-19, partially offset by bus pricing and cost reductions.
Net income was $11.9 million for the fourth quarter of fiscal 2020, an increase of $0.3 million compared with the same period last year.
Adjusted Net Income
Adjusted Net Income was $13.3 million, representing a decrease of $6.7 million compared with the same period last year.
Adjusted EBITDA was $21.9 million, representing a decrease of $11.5 million compared with the fourth quarter last year. The decrease was driven by lower volume and production inefficiencies due to COVID-19, partially offset by bus pricing and cost reductions.
Full Year 2020 Results
Net sales were $879.2 million for the fiscal year ended October 3, 2020, a decrease of $139.7 million, or 13.7%, compared with the prior year. Bus unit sales were 8,878 units for the fiscal year ended October 3, 2020 compared with 11,017 units for the same period last year.
Full year gross profit was $96.2 million, a decrease of $37.3 million from the prior year.
Net income was $12.2 million for the fiscal year ended October 3, 2020, which was $12.1 million below the prior year.
Adjusted Net Income
Year-to-date Adjusted Net Income was $22.1 million, representing a decrease of $21.3 million compared with the prior year. The decline is more than accounted for by the decline in profits due to COVID-19 disruptions.
Adjusted EBITDA was $54.7 million for the fiscal year ended October 3, 2020, a decrease of $27.1 million below the prior year.
Conference Call Details
Blue Bird will discuss its fourth quarter and full year 2020 results in a conference call at 4:30 PM ET today. Participants may listen to the audio portion of the conference call either through a live audio webcast on the Company's website or by telephone. The slide presentation and webcast can be accessed via the Investor Relations portion of Blue Bird's website at www.blue-bird.com.
A replay of the webcast will be available approximately two hours after the call concludes via the same link on Blue Bird’s website.
About Blue Bird Corporation
Blue Bird is the leading independent designer and manufacturer of school buses, with more than 570,000 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 Net Income," "Adjusted Diluted Earnings per Share," “Free Cash Flow” and “Adjusted Free Cash Flow”. Adjusted EBITDA and Free Cash Flow are financial metrics that are utilized by management and the board of directors to determine (a) the annual cash bonus payouts, if any, to be made to certain members of management based upon the terms of the Company’s Management Incentive Plan, and (b) whether the performance criteria have been met for the vesting of certain equity awards granted annually to certain members of management based upon the terms of the Company’s Omnibus Equity Incentive Plan. Additionally, consolidated EBITDA, which is an adjusted EBITDA metric defined by our Amended Credit Agreement that could differ from Adjusted EBITDA discussed above as the adjustments to the calculations are not uniform, is used to determine the Company's ongoing compliance with several financial covenant requirements, including being utilized in the denominator of the calculation of the Total Net Leverage Ratio. Accordingly, management views these non-GAAP financial metrics as key for the above purposes and as a useful way to evaluate the performance of our operations as discussed further below.
Adjusted EBITDA is defined as net income prior to interest income; interest expense including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our GAAP financial statements) that represents interest expense on lease liabilities; income taxes; and depreciation and amortization including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our GAAP financial statements) that represents amortization charges on right-of-use lease assets; as adjusted for certain non-cash charges or credits that we may record on a recurring basis such as stock-compensation expense and unrealized gains or losses on certain derivative financial instruments; net gains or losses on the disposal of assets as well as certain charges such as (i) significant product design changes; (ii) transaction related costs; (iii) discrete expenses related to major cost cutting initiatives; or (iv) costs directly attributed to the COVID-19 pandemic. While certain of the charges that are added back in the Adjusted EBITDA calculation, such as transaction related costs and operational transformation and major product redesign initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company’s normal operations. Accordingly, we believe that these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company’s ongoing annual operating performance. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net sales. Adjusted EBITDA and Adjusted EBITDA Margin 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 Net Income, and Adjusted Diluted Earnings per Share are useful to investors in evaluating our performance because the measures consider the performance of our ongoing operations, excluding decisions made with respect to capital investment, financing, and other non-recurring charges as outlined in the preceding paragraph. We believe the non-GAAP measures 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 Net Income 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 an 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 Net Income, 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 Net Income, 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 Net Income, 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 total cash provided by/used in operating activities as adjusted for net cash paid or received for the acquisition or disposal of fixed assets and intangible assets. We use Free Cash Flow, and ratios based on Free Cash Flow, 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, and in more limited circumstances significant disposals, of fixed assets and intangible assets are a necessary component of ongoing operations. In those rare instances in which proceeds from the significant sale of fixed or intangible assets exceed cash paid for the purchases of such assets, Free Cash Flow would exceed cash flows from operations. However, since we do not anticipate being a net seller of fixed or intangible assets, we generally expect Free Cash Flow to be less than operating cash flows.
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:
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.
Forward-looking statements in this document also may include, but are not limited to, statements regarding the pricing of the share repurchase, the potential tender offer by Blue Bird for shares of its common stock, and the benefits and timing of any potential tender offer. Many risks, contingencies and uncertainties could cause actual results to differ materially from Blue Bird’s forward-looking statements. Among these factors are the risk that Blue Bird may decide not to commence the tender offer, and that if Blue Bird does commence a tender offer, that the offer may not be completed.