Blue Bird Body Co, et al. – ‘424B3’ on 1/10/97

As of:  Friday, 1/10/97   ·   Accession #:  912057-97-616   ·   File #s:  333-17515, -01

in

this entire Filing. an “Entity” Search.

Show

Documents searched

and

each “hit”. the 1st “hit”.

↓↑Hints

Prospectus   —   Rule 424(b)(3)
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 424B3       Prospectus                                            30    157K 

Document Table of Contents

424B3
1st Page of 30
TOC
↑Top
Previous
Next
↓Bottom
Just 1st
 
AMENDMENT TO PROSPECTUS DATED DECEMBER 12, 1996                                 
                                                      Pursuant to Rule 424(b)(3)
                                                Filed Registration No. 333-17515

OFFER TO EXCHANGE 
ALL OUTSTANDING 
10 3/4% SENIOR SUBORDINATED NOTES DUE 2006, SERIES B

                                                                [LOGO]
FOR ANY AND ALL OF THE OUTSTANDING
10 3/4% SENIOR SUBORDINATED NOTES DUE 2006
OF
BLUE BIRD BODY COMPANY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JANUARY 24, 1997, UNLESS EXTENDED. 

 Pursuant to a Prospectus dated December 12, 1996 (the "Prospectus"), Blue
Bird Body Company, a Georgia corporation (the "Company"), has offered, upon the 
terms and subject to the conditions set forth in the Prospectus and the         
accompanying letter of transmittal (the "Letter of Transmittal" and, together   
with the Prospectus, the "Exchange Offer"), to exchange an aggregate of up to   
$100,000,000 principal amount of 10 3/4% Senior Subordinated Notes due 2006,    
Series B (the "Exchange Notes") which have been registered under the Securities 
Act of 1933, as amended (the "Securities Act"), pursuant to a registration      
statement of which the Prospectus forms a part, for an identical face amount of 
the issued and outstanding 10 3/4% Senior Subordinated Notes due 2006 (the "144A
Notes" and, together with the Exchange Notes, the "Notes") of the Company from  
the Holders (as defined herein) thereof in integral multiples of $1,000. As of  
the date of the Prospectus, there were $100,000,000 aggregate principal amount  
of the 144A Notes outstanding. The terms of the Exchange Notes are identical in 
all material respects to the 144A Notes, except that the Exchange Notes have    
been registered under the Securities Act, and therefore will not bear legends   
restricting their transfer and will not contain certain provisions providing for
an increase in the interest rate payable on the 144A Notes under certain        
circumstances relating to the Registration Rights Agreement (as defined herein),
which provisions will terminate as to all of the Notes upon the consummation of 
the Exchange Offer. The Exchange Notes will be obligations of the Company       
evidencing the same indebtedness as the 144A Notes, and will be entitled to the 
benefits of the same indenture. See "The Exchange Offer." Capitalized terms used
and not defined herein shall have the meaning given them in the Prospectus.     

   This Amendment contains certain information relating to the results of Blue
Bird Corporation ("BBC") and the Company for the fiscal year ended November 2,  
1996, and specifically includes (1) a revised section entitled "SUMMARY         
FINANCIAL DATA", (2) a revised section entitled "SELECTED FINANCIAL DATA", (3) a
revised section entitled "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL     
CONDITION AND RESULTS OF OPERATIONS", and (4) audited consolidated financial    
statements for the year ended November 2, 1996 of BBC and Blue Bird. THIS       
AMENDMENT, INCLUDING THE FOREGOING, SHOULD BE READ IN CONJUNCTION WITH THE      
PROSPECTUS, THE CONTENTS OF WHICH ARE INCORPORATED IN THEIR ENTIRETY BY THIS    
REFERENCE.                                                                      

   In connection with the foregoing, the Exchange Offer has been extended, and
will now expire at 5:00 p.m., New York City time, on January 24, unless         
extended.                                                                       

    The Company will accept for exchange any and all validly tendered 144A Notes
on or prior to the Expiration Date (as defined herein). Tenders of 144A Notes   
may be withdrawn at any time prior to 5:00 p.m., New York City time, on the     
Expiration Date; otherwise such tenders are irrevocable. The Exchange Offer is  
not conditioned upon any minimum principal amount of 144A Notes being tendered  
for exchange. For certain conditions to the Exchange Offer, see "The Exchange   
Offer--Conditions."                                                             

   The Prospectus, as it may be amended or supplemented from time to time, may
be used by a broker-dealer in connection with any resale of Exchange Notes      
received in exchange for such 144A Notes where such 144A Notes were acquired by 
such broker-dealer for its own account as a result of market-making activities  
or other trading activities (other than 144A Notes acquired directly from the   
Company). The Company has agreed that, for a period of 180 days after the date  
of the Prospectus, it will make the Prospectus available to any broker-dealer   
for use in connection with any such resale.                                     

Copies of the Amendment, the Prospectus and accompanying Letter of      
Transmittal, and certain other documents relating to the Exchange Offer may be  
obtained from the information agent, MacKenzie Partners at the following        
address:                                                                        
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, NY 10010

    SEE "RISK FACTORS," BEGINNING ON PAGE 13 OF THE PROSPECTUS, FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PARTICIPANTS IN THE EXCHANGE    
OFFER.                                                                          
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND    
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE              
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION   
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS   PROSPECTUS. ANY    
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. 
------------------------------

THE DATE OF THIS AMENDMENT IS JANUARY 10, 1997. 

UNTIL MARCH 10, 1997 (90 DAYS AFTER THE DATE OF THIS AMENDMENT), ALL DEALERS    
EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT             
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.    

424B3
2nd Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 2nd
FORWARD-LOOKING STATEMENTS

CERTAIN STATEMENTS CONTAINED IN THE PROSPECTUS AND THIS AMENDMENT UNDER 
"PROSPECTUS SUMMARY," "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL        
CONDITION AND RESULTS OF OPERATIONS" AND "BUSINESS," IN ADDITION TO CERTAIN     
STATEMENTS CONTAINED ELSEWHERE IN THE PROSPECTUS AND THIS AMENDMENT, ARE        
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES       
LITIGATION REFORM ACT OF 1995 AND ARE THUS PROSPECTIVE. SUCH FORWARD-LOOKING    
STATEMENTS ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS WHICH COULD    
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM FUTURE RESULTS EXPRESSED OR      
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. THE MOST SIGNIFICANT OF SUCH RISKS, 
UNCERTAINTIES AND OTHER FACTORS ARE DISCUSSED UNDER THE HEADING "RISK FACTORS," 
BEGINNING ON PAGE 13 OF THE PROSPECTUS, AND HOLDERS OF 144A NOTES ARE URGED TO  
CAREFULLY CONSIDER SUCH FACTORS.                                                

2 

424B3
3rd Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 3rd
SUMMARY FINANCIAL DATA

Set forth below is certain summary historical consolidated financial    
information for BBC as of and for the fiscal years 1996, 1995, and 1994. The    
summary historical consolidated financial information of BBC and subsidiaries as
of and for the full fiscal years indicated were derived from the financial      
statements of BBC and its subsidiaries which were audited by Arthur Andersen    
LLP, independent accountants ("Arthur Andersen"). The PRO FORMA information is  
unaudited. The PRO FORMA other financial data and ratios are based on the       
summary historical consolidated financial information for BBC, adjusted to give 
effect to the Recapitalization as if it occurred on October 29, 1994. The PRO   
FORMA balance sheet data is based on the summary historical consolidated        
financial information for BBC, adjusted to give effect to the Recapitalization  
as if it occurred on November 2, 1996. The summary historical financial         
information set forth below should be read in conjunction with the consolidated 
financial statements of BBC and the notes thereto included elsewhere in this    
Prospectus, see "Index to Consolidated Financial Statements," as well as        
"Management's Discussion and Analysis of Financial Condition and Results of     
Operations."                                                                    

                                                        [Enlarge/Download Table]

                                                                                     FISCAL YEAR ENDED           
                                                                          ---------------------------------------
                                                                                                                 
                                                                           NOVEMBER 2,   OCTOBER 28,  OCTOBER 29,
                                                                              1996          1995         1994    
                                                                          -------------  -----------  -----------


                                                                                   (DOLLARS IN MILLIONS)         
                                                                                                                 
INCOME STATEMENT DATA:                                                                                           
Net sales................................................................   $   570.2     $   517.4    $   476.2 
Cost of goods sold.......................................................       474.1         430.6        392.9 
                                                                               ------    -----------  -----------
Gross profit.............................................................        96.1          86.8         83.3 
Selling, general and administrative expenses.............................        42.6          39.8         39.0 
Amortization of goodwill and noncompete agreements.......................         3.8           4.7          5.6 
                                                                               ------    -----------  -----------
Operating income.........................................................        49.7          42.3         38.7 
Interest income..........................................................         7.0           4.6          4.1 
Interest expense.........................................................       (16.9)        (18.5)       (17.4)
Other income, net........................................................          .2            .1           .2 
                                                                               ------    -----------  -----------
Income before income taxes...............................................        40.0          28.5         25.6 
Provision for income taxes...............................................        14.8          11.6         10.2 
                                                                               ------    -----------  -----------
Net income before extraordinary item.....................................   $    25.2     $    16.9    $    15.4 
                                                                               ------    -----------  -----------
                                                                               ------    -----------  -----------
OTHER FINANCIAL DATA AND RATIOS:                                                                                 
EBITDA(a)................................................................   $    66.3     $    57.3    $    54.2 
Adjusted EBITDA (b)......................................................        61.2          54.4         51.5 
Capital expenditures.....................................................         7.3           3.6          8.6 
Ratio of Adjusted EBITDA to Adjusted Cash Interest Expense (b)...........         5.3x          4.1x         3.9x
Pro forma ratio of Adjusted EBITDA to Adjusted Cash Interest Expense                                             
  (b)(c).................................................................         2.0x          1.9x          -- 
Ratio of earnings to fixed charges(d)....................................         3.3x          2.5x         2.4x
Pro forma ratio or deficiency of earnings to fixed charges(c)(d)(e)......         1.2x           --              
                                                        [Enlarge/Download Table]

                                                           AS OF NOVEMBER 2, 1996      
                                                          ------------------------     
                                                                                       
                                                          HISTORICAL    PRO FORMA      
                                                          -----------  -----------     


                                                           (DOLLARS IN MILLIONS)       
                                                                                       
BALANCE SHEET DATA:                                                                    
Working capital..........................................  $    80.4    $    80.9(f)   
Total assets.............................................      391.0        382.5(g)   
Total long-term debt, excluding current maturities.......      131.4        327.2(h)   
Redeemable common stock, net.............................       29.3         16.6(i)   
Stockholders' equity (deficit)...........................      118.2        (56.8)(j)  

                                                   (FOOTNOTES ON FOLLOWING PAGE)

3 

424B3
4th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 4th
--------------------------                                                      

(a) Earnings before interest, taxes, depreciation and amortization ("EBITDA")   
represents the sum of income before income taxes plus interest expense  
    (including amortization of debt issue costs), depreciation and amortization.
EBITDA is presented here to provide additional information about the    
  Company's ability to meet its future debt service, capital expenditure and
working capital requirements. EBITDA is not a measure of financial      
performance under generally accepted accounting principles ("GAAP") and 
should not be considered as an alternative either to net income as an   
indicator of the Company's operating performance, or to cash flows as a 
measure of the Company's liquidity.                                     

(b) Adjusted EBITDA and Adjusted Cash Interest Expense exclude interest income  
and interest expense (which includes amortization of debt issue costs), 
respectively, associated with the Company's lease financing activities. 
   These activities have been conducted principally by Blue Bird Capital since
October 1995. The associated interest expense of Blue Bird Capital is   
incurred under the LaSalle Credit Facility (as defined herein), which is
   recourse only against Blue Bird Capital. Blue Bird Capital is treated as an
"Unrestricted Subsidiary" under the Indenture. Adjusted Cash Interest   
    Expense also excludes the amortization of debt issue costs which is included
in interest expense.                                                    

(c) Presented on a PRO FORMA basis as though the Recapitalization had occurred  
at the beginning of the periods presented. In making the PRO FORMA      
calculation of Adjusted EBITDA to Adjusted Cash Interest Expense, the   
following additional adjustments have been made: (i) Adjusted EBITDA    
excludes the impact of the one-time compensation charge of $16.1 million
    related to that portion of the Distribution paid to management optionholders
and is therefore deemed compensation expense and (ii) PRO FORMA Adjusted
   Cash Interest Expense excludes the interest expense of $2.9 million related
    to the $25 million of Old Notes repaid for the fiscal year ended October 28,
  1995. On a PRO FORMA basis, Adjusted Cash Interest Expense would have been
   $30.4 million and $28.9 million for the fiscal years ended November 2, 1996
and October 28, 1995, respectively.                                     

(d) For the purpose of computing the ratios of earnings to fixed charges,       
"earnings" consists of operating income before income taxes and fixed   
    charges, and "fixed charges" consists of interest expense and the portion of
rental expense deemed representative of the interest factor.            

(e) On a PRO FORMA basis after giving effect to the Recapitalization for the    
   fiscal year ended October 28, 1995, the deficiency of the earnings to fixed
charges was $4.8 million.                                               

(f) Reflects (i) the receipt of gross proceeds from the 144A Note Offering of   
($99.7 million), borrowings under the Term Facility of the New Credit   
Agreement ($175 million); (ii) the retirement of indebtedness (including
  accrued interest) under the Old Credit Agreement ($36 million) and the Old
Notes ($50.3 million); (iii) the payment of fees and expenses associated
  with the Recapitalization ($9.1 million) and the costs (including premium)
associated with the retirement and amendment of the Old Notes ($3.4     
million); (iv) the payment of the Distribution ($201.4 million); (v) the
    proceeds from the repayment of the Management Notes (as defined herein) from
    the BBC Distribution to the management shareholders ($3.8 million); and (vi)
  the tax benefits associated with the Recapitalization ($14.7 million). See
"Capitalization."                                                       

(g) Reflects all of the items discussed in footnote (f) above; the write off of 
the debt issue costs related to the indebtedness being retired ($1.4    
million) and the capitalization of debt issue costs for the 144A Note   
Offering and the New Credit Agreement ($9.1 million).                   

(h) Reflects the incremental borrowings necessary to effect the                 
Recapitalization.                                                       

(i)  Redeemable common stock represents 720,000 issued and outstanding shares of
BBC Common Stock purchased by members of management (the "Management    
   Investors"), primarily in conjunction with the 1992 Acquisition (as defined
    herein). The Management Investors have the right, prior to the earlier of an
    initial public offering of equity securities of BBC or the tenth anniversary
  of the Stockholders' Agreement (as defined herein), to put these shares to
    BBC in the event of their disability, involuntary termination not for cause,
 retirement (as such terms are defined in the Stockholders' Agreement), or
 death for a fair value price (as defined in the Stockholders' Agreement).
The redeemable stock of BBC was recorded at fair value on the date of   
    issuance. The excess of the fair value price over the original fair value is
being accreted by periodic charges to retained earnings. The amounts    
recorded in the balance sheets represent the estimated maximum amount   
    payable if all Management Investors met the specified criteria and exercised
their put rights.                                                       

(j)  Reflects (i) the Distribution, net of tax benefit ($188.6 million); (ii)   
the adjustment to the fair value of the redeemable common stock ($16.5  
 million); (iii) the costs associated with the retirement and amendment of
 the Old Notes, net of tax benefit ($2 million); and (iv) the write-off of
  the debt issue costs related to the indebtedness being retired, net of tax
benefit ($1 million).                                                   

4 

424B3
5th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 5th
SELECTED FINANCIAL DATA 

  Set forth below is certain selected historical consolidated financial data
for BBC for fiscal years 1996, 1995, 1994 and 1993, and for the six months ended
October 31, 1992, as well as selected historical consolidated financial         
information for BBC prior to the 1992 Acquisition (the "Predecessor") as of and 
for the six months ended April 30, 1992. The selected historical consolidated   
financial data as of and for the full fiscal years indicated were derived from  
the financial statements of BBC and subsidiaries which were audited by Arthur   
Andersen. Currently, BBC conducts no independent operations and has no          
significant assets other than the capital stock of Blue Bird. The selected      
historical financial data set forth below should be read in conjunction with the
consolidated financial statements of BBC and the notes thereto included         
elsewhere in this Prospectus. Separate historical financial data for the        
Predecessor are not included in this Prospectus. Subsequent consolidated        
financial data of BBC reflect the purchase accounting treatment of the 1992     
Acquisition. Accordingly, the financial data of the Predecessor and BBC are not 
comparable in all material respects, since such data reflect financial positions
and results of operations of these two separate entities.                       

                                                        [Enlarge/Download Table]

                                                                                           BBC                               
                                                            -----------------------------------------------------------------
                                                                             FISCAL YEAR ENDED                    SIX MONTHS 
                                                            ----------------------------------------------------     ENDED   
                                                             NOVEMBER 2,   OCTOBER 28,  OCTOBER 29,  OCTOBER 30,  OCTOBER 31,
                                                                1996          1995         1994         1993         1992    
                                                            -------------  -----------  -----------  -----------  -----------
                                                                                                                             
                                                                                  (DOLLARS IN MILLIONS)                      
INCOME STATEMENT DATA:                                                                                                       
Net sales..................................................   $   570.2     $   517.4    $   476.2    $   413.5    $   244.4 
Cost of goods sold.........................................       474.1         430.6        392.9        340.5        198.4 
                                                                 ------    -----------  -----------  -----------  -----------
Gross profit...............................................        96.1          86.8         83.3         73.0         46.0 
Selling, general and administrative expenses(a)............        42.6          39.8         39.0         36.3         20.1 
Amortization of goodwill and                                                                                                 
  non-compete agreements...................................         3.8           4.7          5.6          5.6          9.3 
                                                                 ------    -----------  -----------  -----------  -----------
Operating income (loss)....................................        49.7          42.3         38.7         31.1         16.6 
Interest income............................................         7.0           4.6          4.1          2.9          1.4 
Interest expense...........................................       (16.9)        (18.5)       (17.4)       (18.2)        (9.5)
Other income (expense)(b)..................................         0.2           0.1          0.2          0.7         (0.5)
                                                                 ------    -----------  -----------  -----------  -----------
Income (loss) before income taxes..........................        40.0          28.5         25.6         16.5          8.0 
Provision (benefit) for income taxes.......................        14.8          11.6         10.2          6.9          4.3 
                                                                 ------    -----------  -----------  -----------  -----------
Net income before extraordinary item.......................        25.2          16.9         15.4          9.6          3.7 
Loss on extinguishment of debt.............................        (1.4)       --           --           --           --     
                                                                 ------    -----------  -----------  -----------  -----------
Net income (loss)..........................................   $    23.8     $    16.9    $    15.4    $     9.6    $     3.7 
                                                                 ------    -----------  -----------  -----------  -----------
                                                                 ------    -----------  -----------  -----------  -----------

BALANCE SHEET DATA (AS OF END OF PERIOD):                                                                                    
Working capital............................................   $    80.4     $    61.7    $    65.3    $    52.7    $    31.9 
Total assets...............................................       391.0         379.8        332.8        342.1        337.3 
Long-term debt, excluding current maturities...............       131.4         113.8        125.8        135.8        143.8 
Redeemable common stock, net...............................        29.3          20.9         17.5         11.0          8.0 
Stockholders' equity.......................................       118.2         102.6         88.8         80.7         83.8 



                                                            PREDECESSOR                                                      
                                                            -----------                                                      
                                                            SIX MONTHS                                                       
                                                               ENDED                                                         
                                                             APRIL 30,                                                       
                                                               1992                                                          
                                                            -----------                                                      
                                                                                                                             

INCOME STATEMENT DATA:                                                                                                       
Net sales..................................................  $   120.8                                                       
Cost of goods sold.........................................       98.7                                                       
                                                            -----------                                                      
Gross profit...............................................       22.1                                                       
Selling, general and administrative expenses(a)............       34.2                                                       
Amortization of goodwill and                                                                                                 
  non-compete agreements...................................     --                                                           
                                                            -----------                                                      
Operating income (loss)....................................      (12.1)                                                      
Interest income............................................        5.7                                                       
Interest expense...........................................       (1.7)                                                      
Other income (expense)(b)..................................        1.7                                                       
                                                            -----------                                                      
Income (loss) before income taxes..........................       (6.4)                                                      
Provision (benefit) for income taxes.......................       (3.0)                                                      
                                                            -----------                                                      
Net income before extraordinary item.......................       (3.4)                                                      
Loss on extinguishment of debt.............................     --                                                           
                                                            -----------                                                      
Net income (loss)..........................................  $    (3.4)                                                      
                                                            -----------                                                      
                                                            -----------                                                      
BALANCE SHEET DATA (AS OF END OF PERIOD):                                                                                    
Working capital............................................  $    69.4                                                       
Total assets...............................................      253.8                                                       
Long-term debt, excluding current maturities...............       39.4                                                       
Redeemable common stock, net...............................     --                                                           
Stockholders' equity.......................................      137.0                                                       

------------------------                                                        
(a) Includes expenses of the Predecessor incurred prior to the 1992 Acquisition 
   which the Company no longer incurs, including salaries of the Predecessor's
principal stockholders prior to the 1992 Acquisition, commission paid   
   relating to a Domestic International Sales Corporation (DISC) owned by such
principal stockholders, the amortization of contracts in process, and   
severance and restructuring costs. Such amounts totaled $6.6 million and
   $1.1 million for the six month periods ended October 31, 1992 and April 30,
1992, respectively.                                                     

(b) Includes charitable contributions made prior to the 1992 Acquisition which  
  BBC has reduced following the 1992 Acquisition. Such contributions totaled
$.6 million for the six-month period ended April 30, 1992.              

5 

424B3
6th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 6th
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 
AND RESULTS OF OPERATIONS 

GENERAL                                                                         

 Approximately 80% of the Company's fiscal 1996 net sales are derived from
school bus sales and approximately 14% and 6% of the Company's fiscal 1996 net  
sales are derived from the sale of commercial and recreational vehicles,        
respectively. Between fiscal 1994 and fiscal 1996, the Company's operating      
income has risen primarily due to increased sales volume. Over the same period, 
gross profit margins have decreased slightly, principally due to an increase in 
the number of Type C buses sold with GM chassis. The Company's operations are   
affected by trends in the number of students enrolled in grades kindergarten    
through 12 and overall educational spending by local and state governments as   
well as by the federal government. In addition to incremental needs due to pupil
population growth and replacement requirements based on changes in safety       
standards, factors which influence the need to purchase school buses include the
age of the existing school bus fleet, changes in school bus travel routes,      
regulatory changes such as compliance with new emissions standards,             
extracurricular activity usage and changes in the education structure in the    
United States such as the development of preschool "head start" programs,       
special education programs and magnet schools. The Company's experience has been
that during periods of stable or increasing student enrollment, demand for its  
core school bus products has also remained stable or increased.                 

On a PRO FORMA basis, assuming the Recapitalization had been effected on
November 2, 1996, the Company's total consolidated indebtedness was increased by
approximately $188.7 million, to $336 million. The primary effects of the       
Recapitalization on the Company's future operating results include reduced      
reported profitability to the extent interest expense is above historical       
amounts resulting from higher debt levels. The Company expects to generate      
sufficient cash from operations to fund its working capital and capital         
expenditure needs and make required interest and principal payments on its      
indebtedness. See "Risk Factors--Leverage and Debt Service" and "--Restrictive  
Covenants and Asset Encumbrances," and "--Liquidity and Capital Resources."     

RESULTS OF OPERATIONS                                                           

The discussion of results of operations that follows is based upon and  
should be read in conjunction with the financial statements, including the notes
thereto, included elsewhere in this Prospectus. Although the financial          
statements are consolidated financial statements of BBC, the Company's parent,  
BBC is a holding company and, as such, there would be no material differences in
the operating results of BBC, as compared with the Company. The following table 
sets forth certain operating results as a percentage of net sales for the       
historical periods indicated:                                                   

                                                        [Enlarge/Download Table]

                                                                    FISCAL YEAR ENDED              
                                                      ---------------------------------------------
                                                                                                   
                                                        NOVEMBER 2,     OCTOBER 28,    OCTOBER 29, 
                                                           1996            1995           1994     
                                                      ---------------  -------------  -------------
Net sales............................................        100.0%          100.0%         100.0% 
Cost of goods sold...................................        (83.1)          (83.2)         (82.5) 
Gross profit.........................................         16.9            16.8           17.5  
Selling, general and administrative expense..........         (7.5)           (7.7)          (8.1) 
Operating income.....................................          8.7%            8.2%           8.1% 

   FISCAL 1996 COMPARED TO FISCAL 1995.  Net sales increased to $570.2 million
in fiscal 1996 from $517.4 million in fiscal 1995, an increase of $52.8 million 
or 10.2%. This increase was due to increased sales volume of the Type C, Type D,
CS and Q-Bus units.                                                             

6 

424B3
7th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 7th
Gross profit increased to $96.1 million in fiscal 1996 compared to $86.8
million in fiscal 1995, an increase of $9.3 million or 10.7%. The increase was  
due to increased sales volume. The gross margin of 16.8% was unchanged compared 
to fiscal 1995.                                                                 

  Selling, general and administrative expenses increased to $42.6 million in
fiscal 1996 compared to $39.8 million in fiscal 1995, an increase of $2.8       
million or 7.0%. The increase was due primarily to higher engineering, marketing
and selling expenses.                                                           

Amortization expense decreased to $3.8 million in fiscal 1996 from $4.7 
million in 1995. The decrease reflects completion in fiscal 1995 of the         
amortization of certain non-compete agreements related to the 1992 Acquisition. 

    Interest income increased to $7.0 million compared to $4.6 million in fiscal
1995. The increase was due primarily to a higher average dollar amount of leases
in the lease portfolio in fiscal 1996 as compared to fiscal 1995.               

 Interest expense decreased to $16.9 million in fiscal 1996 as compared to
$18.5 million in fiscal 1995. This was due to lower interest rates on bank debt 
as well as lower debt levels due to the repurchase of $25 million of the Old    
Notes in December, 1995.                                                        

The provision for income taxes increased to $14.8 million in fiscal 1996
from $11.6 million in fiscal 1995. The increase was due to increased taxable    
income resulting from higher net sales and operating income. The provision for  
income taxes in fiscal 1996 decreased as a percentage of income before taxes as 
compared to fiscal 1995. The decrease was due to increased tax-exempt lease     
income as well as lower non-deductible amortization items related to the 1992   
Acquisition.                                                                    

   On December 14, 1995, the Company repurchased, for cash on the open market,
$25 million in principal amount of outstanding Old Notes for the purchase price 
(expressed as a percentage of principal amount) of 106.500% plus accrued        
interest to the purchase date. An extraordinary loss of $1.4 million net of a   
tax benefit of $.8 million occurred during the 1996 period due to the early     
extinguishment of such Old Notes.                                               

   FISCAL 1995 COMPARED TO FISCAL 1994.  Net sales increased to $517.4 million
in fiscal 1995 from $476.2 million in fiscal 1994, an increase of $41.2 million,
or 8.7%. This increase was due to increased sales of Type D, Q-Bus and CS units,
as well as increased sales of Type C units.                                     

Gross profit increased to $86.8 million in fiscal 1995 compared to $83.3
million in fiscal 1994, an increase of $3.5 million, or 4.2%. The increase was  
due to increased sales volume. Gross margin decreased to 16.8% in fiscal 1995   
from 17.5% in fiscal 1994. The reduced margin was due primarily to increased    
sales of Type C units, on which the Company generally realizes lower margins due
to the inclusion of GM chassis.                                                 

 Selling, general and administrative expenses were $39.8 million in fiscal
1995 compared to $39 million in fiscal 1994, an increase of 2.0%. The increase  
was due primarily to higher expenses related to engineering and product         
development.                                                                    

 Amortization expense decreased to $4.7 million in fiscal 1995 compared to
$5.6 million in fiscal 1994. The amortization of certain non-compete agreements 
was completed during the first half of fiscal 1995.                             

 Interest income increased to $4.6 million in fiscal 1995 compared to $4.1
million in fiscal 1994. The increase was due to a higher average dollar amount  
of leases held in the lease portfolio in fiscal 1995 compared to fiscal 1994.   

Interest expense increased to $18.5 million in fiscal 1995 from $17.4   
million fiscal 1994, an increase of $1.1 million. The increase was due to a     
higher interest rate on credit facility borrowings as compared to fiscal 1994.  

7 

424B3
8th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 8th
The provision for income taxes increased to $11.6 million in fiscal 1995
from $10.2 million in fiscal 1994. The increase was due to increased taxable    
income resulting from higher net sales and operating income.                    

   FISCAL 1994 COMPARED TO FISCAL 1993.  Net sales increased to $476.2 million
in fiscal 1994 from $413.5 million in fiscal 1993, an increase of $62.7 million,
or 15.2%. This increase was due to increased sales of Type D units, increased   
sales of chassis as part of the sale of an integrated Type C bus, as well as to 
sales of the new BMC and CS units. The Type D unit has a higher average selling 
price than the Type C unit.                                                     

Gross profit increased to $83.3 million in fiscal 1994 compared to $73  
million in fiscal 1993, an increase of $10.3 million, or 14.1%. The increase was
due to increased sales volume. Gross margin decreased to 17.5% from 17.7% in    
fiscal 1993. The reduced margin was due primarily to increased sales of Type C  
units, on which the Company generally realizes lower margins due to the         
inclusion of GM chassis.                                                        

Selling, general and administrative expenses increased to $39 million in
fiscal 1994 compared to $36.3 million in fiscal 1993, an increase of 7.4%. The  
increase was due to expenses related to the development, introduction and       
advertising of new products.                                                    

Interest income (which is primarily associated with income earned on the
Company's lease portfolio) increased to $4.1 million in fiscal 1994 from $2.9   
million in fiscal 1993, an increase of $1.2 million, or 41.4%. During fiscal    
1994, the average dollar amount of leases held in the lease portfolio was higher
as compared to the average fiscal 1993 portfolio amounts. In addition, the      
average rate earned by the portfolio was higher in fiscal 1994 as compared to   
fiscal 1993.                                                                    

Interest expense decreased to $17.4 million in fiscal 1994 from $18.2   
million in fiscal 1993, a decrease of $.8 million. The decrease was due to a    
combination of lower average outstanding balances on credit facilities as well  
as a lower average interest rate as compared to fiscal 1993.                    

Other income decreased to $.2 million in fiscal 1994 from $.7 million in
fiscal 1993. The decrease was due primarily to reduced gains on sales of lease  
paper to LaSalle compared to the prior year.                                    

 The provision for income taxes decreased as a percentage of income before
income taxes in fiscal 1994 compared to fiscal 1993. The amortization of certain
costs related to the 1992 Acquisition was essentially unchanged from fiscal 1993
to fiscal 1994. Due to the increase in taxable income, the relative effect of   
the non-deductibility of the amortization items on the effective tax rate was   
smaller, thereby reducing the effective tax rate in fiscal 1994.                

LIQUIDITY AND CAPITAL RESOURCES                                                 

 The Company's liquidity requirements arise primarily from funding working
capital needs, which consist primarily of inventory and accounts receivable, and
principal and interest payments on indebtedness. The Company also requires funds
for capital expenditures, for which the Company anticipates approximately $6    
million for fiscal 1997.                                                        

BBC is a holding company that conducts all of its business operations   
through the Company, which is a wholly-owned subsidiary. In connection with any 
liquidity needs, including needs arising out of the BBC Guarantee, BBC is       
dependent entirely upon cash generated by the Company.                          

   Historically, the Company has funded its working capital needs through cash
generated from operations and borrowings under the Old Credit Agreement. In     
addition, the LaSalle Credit Facility provides Blue Bird Capital with a         
revolving credit facility to finance school bus leases of up to a maximum       
aggregate principal amount of $100 million, of which $58.6 million was          
outstanding as of November 2, 1996. Following the Recapitalization, the         
Company's liquidity needs will arise primarily from debt service on the         
substantial indebtedness incurred in connection with the Recapitalization, as   
well as from the                                                                

8 

424B3
9th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 9th
funding of inventory and accounts receivable. Assuming the Recapitalization was 
completed as of November 2, 1996, the Company would have had total consolidated 
indebtedness at such date of approximately $336 million, consisting primarily of
$99.7 million principal amount of the 144A Notes, borrowings of $175 million    
under the New Credit Agreement and $58.6 million of borrowings under the LaSalle
Credit Facility. The Company would also have had the ability to borrow an       
additional $41.4 million under the LaSalle Credit Facility to finance school bus
leases and $80 million under the New Credit Agreement (assuming all of such     
funds would have been available under the borrowing base calculation under the  
Revolving Facility of the New Credit Agreement). Such Revolving Facility will be
available to meet future working capital and other business needs of the        
Company. The maximum amount available to be borrowed under such facility is     
based on the sum of 85% of Eligible Accounts Receivable (as defined in the New  
Credit Agreement) and 60% of Eligible Inventory (as defined in the New Credit   
Agreement) of the Company (the "Borrowing Base"). These provisions have the     
effect of limiting the ability of the Company to utilize in operations or       
satisfy other debt obligations with free cash flow and will limit the amount of 
cash the Company has on hand at any given time. See "Description of Debt        
Facilities." and "Risk Factors--Leverage and Debt Service."                     

The Company's interest expense as a result of the Recapitalization is   
substantially higher than immediately prior to such transactions. Loans under   
the New Credit Agreement bear interest at floating rates based upon the interest
rate option selected by the Company. With respect to the term loan borrowings   
under the New Credit Agreement, the Company will be required to make scheduled  
principal payments of approximately $8.8 million in fiscal 1997, $12.8 million  
in fiscal 1998 and $16.8 million in fiscal 1999. See "Risk Factors--Restrictive 
Covenants and Asset Encumbrances." For a schedule of payments due under the New 
Credit Agreement, see "Description of Debt Facilities--Senior Bank Financing."  

    Under the New Credit Agreement, the Company is permitted to accumulate up to
$40 million in its lease portfolio of leases for its own account in addition to 
leases held by Blue Bird Capital. As of November 2, 1996, the Company had       
approximately $6.3 million of such leases in its lease portfolio. In addition,  
as of such date, Blue Bird Capital had approximately $67.7 million in its lease 
portfolio. Blue Bird Capital is required to maintain certain financial ratios,  
including a ratio of Total Liabilities to Tangible Net Worth (as such terms are 
defined in the LaSalle Credit Facility) that cannot exceed 10 to 1. See         
"Business--Leasing" and "Description of Debt Facilities--LaSalle Credit         
Agreement."                                                                     

   Net cash provided by operations during the year ended November 2, 1996, was
$59.6 million compared to $21.3 million in fiscal 1995. This difference was     
primarily the result of an increase in net income and significant reductions in 
inventory and trade receivables. There were no net borrowings under the         
Company's working capital facility in fiscal 1996 or fiscal 1995. Net borrowing 
under the LaSalle Credit Facility were $22.9 during the current year compared to
$35.7 in fiscal 1995. The early extinguishment of $25 million of outstanding Old
Notes (see "--Results of Operations--Fiscal 1996 Compared to Fiscal 1995") was  
funded primarily from internally generated cash and partially from an increase  
in the working capital revolver.                                                

   Cash and cash equivalents were $46.3 at November 2, 1996, compared to $21.5
million at the end of fiscal 1995. Net working capital was $80.4 million at     
November 2, 1996, an increase of $18.7 million during the current fiscal year.  
Significant factors affecting working capital were a $24.8 million increase in  
cash, decreases in current leases receivable, inventory and trade receivables of
$15.0 million, $13.6 million and $5.4 million respectively, offset by a decrease
of $35.7 million in current portion of the LaSalle revolver. In accordance with 
the revised terms of LaSalle Credit Facility, as amended in March 1996, the     
LaSalle revolver has been reclassified entirely as long term debt as of November
2, 1996.                                                                        

As a result of the Recapitalization, the Company's future operating     
performance and ability to service or refinance the Notes and to repay, extend  
or refinance the New Credit Agreement are subject to future economic conditions 
and to financial, business and other factors, many of which are beyond the      
Company's                                                                       

9 

424B3
10th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 10th
control. The Company's liquidity may also be impacted by product liability      
claims and environmental matters. See "Risk Factors."                           

 The Company's business is seasonal in nature. A majority of the Company's
sales occur in the third and fourth quarters of the fiscal year, a pattern      
typical for the industry. The Company's working capital needs increase during   
the second and third quarters as production activity increases in response to   
the higher seasonal sales volume. Working capital needs decrease toward the end 
of this period, although beginning in December or January, working capital and  
related bank borrowings begin to increase as parts for assembly into buses are  
manufactured and distributed to the assembly plants. Inventory is at its highest
during July and August prior to heavy seasonal school deliveries. The following 
table shows the percentages of the Company's net sales per quarter for the last 
four fiscal years.                                                              

                                                        [Enlarge/Download Table]

                                                           1996        1995       1994       1993    
                                                        -----------  ---------  ---------  --------- 
                                                                                                     
First Quarter..........................................       16.3%       14.8%      18.5%      16.0%
Second Quarter.........................................       18.7        20.4       17.0       15.7 
Third Quarter..........................................       25.7        26.5       30.0       30.4 
Fourth Quarter.........................................       39.3        38.3       34.5       37.9 
                                                             -----   ---------  ---------  --------- 
                                                             100.0%      100.0%     100.0%     100.0%
                                                             -----   ---------  ---------  --------- 
                                                             -----   ---------  ---------  --------- 

10

424B3
11th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 11th
BLUE BIRD CORPORATION AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

                                                        [Enlarge/Download Table]

                                                                                                              PAGE   
                                                                                                            ---------
                                                                                                                     
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS...................................................................       F-2

AUDITED CONSOLIDATED FINANCIAL STATEMENTS                                                                            
  Consolidated Balance Sheets as of November 2, 1996 and October 28, 1995..................................       F-3
  Consolidated Statements of Income for the Years Ended November 2, 1996, October 28, 1995 and October 29,           
    1994...................................................................................................       F-5
  Consolidated Statements of Changes in Stockholders' Equity for the Years Ended November 2, 1996, October           
    28, 1995 and October 29, 1994..........................................................................       F-6
  Consolidated Statements of Cash Flows for the Years Ended November 2, 1996, October 28, 1995 and October           
    29, 1994...............................................................................................       F-7

NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS.........................................................       F-8

F-1 

424B3
12th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 12th
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Stockholders and                                                         
Board of Directors of                                                           
Blue Bird Corporation:                                                          

 We have audited the accompanying consolidated balance sheets of BLUE BIRD
CORPORATION (a Delaware corporation) AND SUBSIDIARIES as of November 2, 1996 and
October 28, 1995 and the related consolidated statements of income, changes in  
stockholders' equity, and cash flows for each of the three years in the period  
ended November 2, 1996. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these      
financial statements based on our audits.                                       

We conducted our audits in accordance with generally accepted auditing  
standards. Those standards require that we plan and perform the audit to obtain 
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting 
the amounts and disclosures in the financial statements. An audit also includes 
assessing the accounting principles used and significant estimates made by      
management, as well as evaluating the overall financial statement presentation. 
We believe that our audits provide a reasonable basis for our opinion.          

  In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Blue Bird Corporation and   
subsidiaries as of November 2, 1996 and October 28, 1995 and the results of     
their operations and their cash flows for each of the three years in the period 
ended November 2, 1996 in conformity with generally accepted accounting         
principles.                                                                     

Arthur Andersen LLP                                                             
Atlanta, Georgia                                                                
December 5, 1996                                                                

F-2 

424B3
13th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 13th
BLUE BIRD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS 

NOVEMBER 2, 1996 AND OCTOBER 28, 1995 

                                                        [Enlarge/Download Table]

                                                                                        1996            1995      
                                                                                   --------------  -------------- 
                                                                                                                  
                                     ASSETS                                                                       

CURRENT ASSETS:                                                                                                   
  Cash and cash equivalents......................................................  $   46,253,258  $   21,452,114 
  Trade receivables..............................................................      13,442,724      18,865,820 
  Leases receivable..............................................................      32,214,649      47,222,024 
  Inventories....................................................................      69,775,802      83,346,271 
  Other current assets...........................................................       5,304,168       6,946,710 
                                                                                   --------------  -------------- 
      Total current assets.......................................................     166,990,601     177,832,939 
                                                                                   --------------  -------------- 

LEASES RECEIVABLE, noncurrent....................................................      41,862,478      15,000,000 
                                                                                   --------------  -------------- 

PROPERTY, PLANT, AND EQUIPMENT:                                                                                   
  Land...........................................................................       4,090,351       4,079,545 
  Buildings......................................................................      17,678,238      16,898,812 
  Machinery and equipment........................................................      28,883,888      26,782,544 
  Automobiles, trucks, and airplane..............................................       7,758,985       4,847,494 
  Office furniture and equipment.................................................       5,178,814       4,844,284 
  Construction in progress.......................................................       1,008,435       1,419,916 
                                                                                   --------------  -------------- 
                                                                                       64,598,711      58,872,595 
  Less accumulated depreciation..................................................     (25,709,736)    (21,860,349)
                                                                                   --------------  -------------- 
      Net property, plant, and equipment.........................................      38,888,975      37,012,246 
                                                                                   --------------  -------------- 

OTHER ASSETS:                                                                                                     
  Deferred debt issuance costs, net of accumulated amortization of $8,733,592 and                                 
    $7,764,807 in 1996 and 1995, respectively....................................       1,424,137       4,111,690 
  Goodwill, net of accumulated amortization of $17,397,500 and $13,567,500 in                                     
    1996 and 1995, respectively..................................................     135,294,106     139,124,106 
  Land and idle facilities.......................................................       2,000,000       2,723,347 
  Other assets...................................................................       4,570,450       3,987,332 
                                                                                   --------------  -------------- 
      Total other assets.........................................................     143,288,693     149,946,475 
                                                                                   --------------  -------------- 
      Total assets...............................................................  $  391,030,747  $  379,791,660 
                                                                                   --------------  -------------- 
                                                                                   --------------  -------------- 

The accompanying notes are an integral part of these consolidated balance 
sheets. 

F-3 

424B3
14th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 14th
BLUE BIRD CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (CONTINUED) 

NOVEMBER 2, 1996 AND OCTOBER 28, 1995 

                                                        [Enlarge/Download Table]

                                                                                        1996            1995      
                                                                                   --------------  -------------- 
                                                                                                                  
                      LIABILITIES AND STOCKHOLDERS' EQUITY                                                        

CURRENT LIABILITIES:                                                                                              
  Revolving credit facility......................................................  $            0  $   35,661,573 
  Current portion of long-term debt..............................................      16,000,000      12,000,000 
  Trade accounts payable.........................................................      27,704,475      25,743,234 
  Deposits and amounts due to customers..........................................       1,344,852       4,021,274 
  Income taxes payable...........................................................       9,269,833       6,926,161 
  Accrued warranty...............................................................       5,603,021       5,455,110 
  Other accrued liabilities......................................................      17,571,052      16,766,138 
  Deferred income taxes..........................................................       9,079,975       9,534,962 
                                                                                   --------------  -------------- 
      Total current liabilities..................................................      86,573,208     116,108,452 
                                                                                   --------------  -------------- 

LONG-TERM LIABILITIES:                                                                                            
  Long-term debt.................................................................     128,600,000     111,000,000 
  Bonds payable..................................................................       2,750,000       2,750,000 
  Accrued pension expense........................................................       8,288,463       8,435,662 
  Deferred income taxes..........................................................       5,306,392       5,898,112 
  Other long-term liabilities....................................................      12,019,864      12,100,213 
                                                                                   --------------  -------------- 
      Total long-term liabilities................................................     156,964,719     140,183,987 
                                                                                   --------------  -------------- 

COMMITMENTS AND CONTINGENCIES (Notes 10 and 11)                                                                   

REDEEMABLE COMMON STOCK, $.01 par value; 720,000 shares issued and outstanding in                                 
  1996 and 1995 (Note 8).........................................................      33,105,000      24,672,000 

STOCK SUBSCRIPTIONS RECEIVABLE (Note 8)..........................................      (3,800,000)     (3,800,000)
                                                                                   --------------  -------------- 
                                                                                       29,305,000      20,872,000 
                                                                                   --------------  -------------- 

STOCKHOLDERS' EQUITY:                                                                                             
  Common stock, $.01 par value; 25,000,000 shares authorized, 7,704,778 shares                                    
    issued and outstanding in 1996 and 1995......................................          77,048          77,048 
  Additional paid-in capital.....................................................      77,022,956      77,022,956 
  Retained earnings..............................................................      43,227,960      27,895,901 
  Cumulative translation adjustments.............................................      (2,140,144)     (2,368,684)
                                                                                   --------------  -------------- 
      Total stockholders' equity.................................................     118,187,820     102,627,221 
                                                                                   --------------  -------------- 
      Total liabilities and stockholders' equity.................................  $  391,030,747  $  379,791,660 
                                                                                   --------------  -------------- 
                                                                                   --------------  -------------- 

The accompanying notes are an integral part of these consolidated balance 
sheets. 

F-4 

424B3
15th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 15th
BLUE BIRD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME 

FOR THE YEARS ENDED NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

                                                        [Enlarge/Download Table]

                                                                      1996            1995            1994      
                                                                 --------------  --------------  -------------- 
                                                                                                                
NET SALES....................................................... $  570,184,841  $  517,444,172  $  476,240,848 
COST OF GOODS SOLD..............................................    474,066,847     430,667,432     392,938,251 
                                                                 --------------  --------------  -------------- 
GROSS PROFIT....................................................     96,117,994      86,776,740      83,302,597 
                                                                 --------------  --------------  -------------- 
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES...................     42,568,911      39,795,821      39,038,361 
AMORTIZATION OF GOODWILL AND NONCOMPETE AGREEMENTS..............      3,830,000       4,692,867       5,567,000 
                                                                 --------------  --------------  -------------- 
                                                                     46,398,911      44,488,688      44,605,361 
                                                                 --------------  --------------  -------------- 
OPERATING INCOME................................................     49,719,083      42,288,052      38,697,236 
INTEREST INCOME.................................................      6,998,830       4,618,315       4,056,013 
INTEREST EXPENSE................................................    (16,889,261)    (18,537,244)    (17,405,932)
OTHER INCOME, net...............................................        224,052         168,554         217,613 
                                                                 --------------  --------------  -------------- 
INCOME BEFORE INCOME TAXES......................................     40,052,704      28,537,677      25,564,930 
PROVISION FOR INCOME TAXES......................................     14,872,343      11,686,056      10,157,248 
                                                                 --------------  --------------  -------------- 
NET INCOME BEFORE EXTRAORDINARY ITEM............................     25,180,361      16,851,621      15,407,682 
LOSS ON EXTINGUISHMENT OF DEBT, net of taxes of $838,364 (Note                                                  
  4)............................................................     (1,415,302)              0               0 
                                                                 --------------  --------------  -------------- 
NET INCOME...................................................... $   23,765,059  $   16,851,621  $   15,407,682 
                                                                 --------------  --------------  -------------- 
                                                                 --------------  --------------  -------------- 

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

F-5 

424B3
16th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 16th
BLUE BIRD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

                                                        [Enlarge/Download Table]

                                                                                                       MINIMUM   
                                                         ADDITIONAL     CUMULATIVE     CUMULATIVE      PENSION   
                                              COMMON       PAID-IN       RETAINED      TRANSLATION    LIABILITY  
                                               STOCK       CAPITAL       EARNINGS      ADJUSTMENTS   ADJUSTMENT  
                                             ---------  -------------  -------------  -------------  ----------- 
                                                                                                                 
BALANCE, OCTOBER 30, 1993................... $  77,000  $  76,923,000  $   5,526,998  $  (1,822,344) $         0 

  Net income................................         0              0     15,407,682              0            0 
  Issuance of common stock..................        48         99,956              0              0            0 
  Accretion of redeemable common stock......         0              0     (6,566,400)             0            0 
  Translation adjustments...................         0              0              0       (431,695)           0 
  Minimum pension liability adjustment......         0              0              0              0     (400,000)
                                             ---------  -------------  -------------  -------------  ----------- 
BALANCE, OCTOBER 29, 1994...................    77,048     77,022,956     14,368,280     (2,254,039)    (400,000)

  Net income................................         0              0     16,851,621              0            0 
  Accretion of redeemable common stock......         0              0     (3,324,000)             0            0 
  Translation adjustments...................         0              0              0       (114,645)           0 
  Minimum pension liability adjustment......         0              0              0              0      400,000 
                                             ---------  -------------  -------------  -------------  ----------- 
BALANCE, OCTOBER 28, 1995...................    77,048     77,022,956     27,895,901     (2,368,684)           0 

  Net income................................         0              0     23,765,059              0            0 
  Accretion of redeemable common stock......         0              0     (8,433,000)             0            0 
  Translation adjustments...................         0              0              0        228,540            0 
                                             ---------  -------------  -------------  -------------  ----------- 
BALANCE, NOVEMBER 2, 1996................... $  77,048  $  77,022,956  $  43,227,960  $  (2,140,144) $         0 
                                             ---------  -------------  -------------  -------------  ----------- 
                                             ---------  -------------  -------------  -------------  ----------- 

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

F-6 

424B3
17th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 17th
BLUE BIRD CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS 

FOR THE YEARS ENDED NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

                                                        [Enlarge/Download Table]

                                                                                  1996         1995         1994     
                                                                               -----------  -----------  ----------- 
                                                                                                                     
CASH FLOWS FROM OPERATING ACTIVITIES:                                                                                
  Net income.................................................................. $23,765,059  $16,851,621  $15,407,682 
                                                                               -----------  -----------  ----------- 
  Adjustments to reconcile net income to net cash provided by operating                                              
    activities:                                                                                                      
    Extraordinary loss on extinguishment of debt..............................   2,253,666            0            0 
    Depreciation and amortization.............................................  11,517,766   12,558,707   13,521,452 
    Increase in cash surrender value of life insurance........................    (110,113)    (234,103)    (116,467)
    Deferred income taxes.....................................................  (1,046,707)       5,011   (1,707,636)
    Changes in assets and liabilities:                                                                               
      Trade receivables.......................................................   5,423,096   (4,602,234)   3,927,301 
      Inventories.............................................................  13,570,469   (7,561,501)    (591,991)
      Trade accounts payable..................................................   1,961,241      689,604    1,088,116 
      Income taxes payable....................................................   2,343,672    5,180,641    1,201,942 
      Other current liabilities...............................................  (1,723,597)  (1,778,792)   3,055,578 
      Other...................................................................   1,632,686      185,669      640,166 
                                                                               -----------  -----------  ----------- 
        Total adjustments.....................................................  35,822,179    4,443,002   21,018,461 
                                                                               -----------  -----------  ----------- 
        Net cash provided by operating activities.............................  59,587,238   21,294,623   36,426,143 
                                                                               -----------  -----------  ----------- 
CASH FLOWS FROM INVESTING ACTIVITIES:                                                                                
  Property, plant, and equipment acquisitions.................................  (7,280,958)  (3,648,833)  (8,594,212)
  Increases in leases receivable.............................................. (11,855,103) (32,230,390)  (1,331,603)
                                                                               -----------  -----------  ----------- 
        Net cash used in investing activities................................. (19,136,061) (35,879,223)  (9,925,815)
                                                                               -----------  -----------  ----------- 
CASH FLOWS FROM FINANCING ACTIVITIES:                                                                                
  Net (repayments) borrowings under bank credit agreements and revolving                                             
    credit line............................................................... (14,061,573)  25,661,573  (26,100,000)
  Debt prepayment premium.....................................................  (1,625,000)           0            0 
  Other.......................................................................    (192,000)           0      100,004 
                                                                               -----------  -----------  ----------- 
        Net cash (used in) provided by financing activities................... (15,878,573)  25,661,573  (25,999,996)
                                                                               -----------  -----------  ----------- 
EFFECT OF EXCHANGE RATE FLUCTUATIONS..........................................     228,540     (114,645)    (431,695)
                                                                               -----------  -----------  ----------- 
NET INCREASE IN CASH AND CASH EQUIVALENTS.....................................  24,801,144   10,962,328       68,637 

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR................................  21,452,114   10,489,786   10,421,149 
                                                                               -----------  -----------  ----------- 
CASH AND CASH EQUIVALENTS AT END OF YEAR...................................... $46,253,258  $21,452,114  $10,489,786 
                                                                               -----------  -----------  ----------- 
                                                                               -----------  -----------  ----------- 

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:                                                                   
  Cash paid during the year for:                                                                                     
    Interest.................................................................. $11,935,717  $14,959,218  $13,856,104 
                                                                               -----------  -----------  ----------- 
                                                                               -----------  -----------  ----------- 
    Income taxes.............................................................. $12,725,475  $ 4,038,000  $10,224,110 
                                                                               -----------  -----------  ----------- 
                                                                               -----------  -----------  ----------- 

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

F-7 

424B3
18th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 18th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

1. NATURE OF BUSINESS                                                           

   Blue Bird Corporation and subsidiaries ("BBC" or the "Company") are engaged
in the manufacture and assembly of school and transit buses and recreational    
vehicles. BBC has facilities in the United States, Canada, and Mexico.          

FISCAL YEAR                                                                     

BBC's fiscal year ends on the Saturday nearest October 31 of each year, 
generally referred to as a "52-/53-week year." Fiscal year 1996 contained 53    
weeks. Fiscal years 1995 and 1994 contained 52 weeks.                           

ACQUISITION ACCOUNTING AND VALUATION                                            

    On April 15, 1992, BBC acquired all of the outstanding capital stock of Blue
Bird Body Company and subsidiaries (the "Predecessor") through the merger of BB 
Acquisition Corp., a wholly owned subsidiary of BBC, with and into the          
Predecessor, with the Predecessor as the surviving corporation. The acquisition 
was accounted for as a purchase. The excess purchase price over the fair value  
of the net assets, as adjusted, of $152,691,606 was allocated to goodwill. The  
goodwill is being amortized using the straight-line method over 40 years. BBC   
periodically reviews the value assigned to goodwill to determine whether it has 
been permanently impaired by adverse conditions affecting BBC. The Company uses 
an estimate of its undiscounted cash flows over the remaining life of the       
goodwill in measuring whether the goodwill is recoverable. Management is of the 
opinion that there has been no diminution in the value assigned to goodwill.    

SIGNIFICANT ACCOUNTING POLICIES                                                 

PRINCIPLES OF CONSOLIDATION                                             

  The accompanying consolidated financial statements include the accounts of
Blue Bird Corporation and its domestic and foreign subsidiaries (owned 100% by  
BBC). All significant intercompany transactions and accounts have been          
eliminated in consolidation.                                                    

TRANSLATION AND REMEASUREMENT OF FOREIGN CURRENCIES                     

For the purpose of consolidation, the accounts for certain foreign      
subsidiaries and foreign branches of domestic subsidiaries of the U.S. parent   
are translated into U.S. dollars. Foreign currency assets and liabilities are   
translated using the exchange rates in effect at the balance sheet dates.       
Results of operations are translated using the weighted average exchange rates  
in effect during the period. The effects of exchange rate fluctuations on       
translating foreign currency assets and liabilities into U.S. dollars are       
accumulated as part of the cumulative translation adjustments in the statements 
of stockholders' equity.                                                        

    One foreign subsidiary (the "Subsidiary") of the U.S. parent transacts sales
denominated in U.S. dollars, while the Company provides inventory and financing.
Accordingly, the U.S. dollar is deemed to be the functional currency. The       
Subsidiary does not maintain its books in U.S. dollars but remeasures its       
monetary assets and liabilities at balance sheet date rates, its nonmonetary    
items at historical rates, and income and expense amounts at the weighted       
average rates in effect for the period, except for depreciation and cost of     
goods sold, which use historical rates. The effects of exchange rate            
fluctuations on the                                                             

F-8 

424B3
19th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 19th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

1. NATURE OF BUSINESS (CONTINUED)                                               
remeasurement of the Subsidiary's financial statements are recognized as        
exchange gains or losses on the statements of income.                           

The Company recognizes exchange gains and losses from foreign currency  
transactions as other income or expense for the period. A loss of approximately 
$54,000 was recorded in fiscal 1996. A loss of approximately $617,000 and a gain
of approximately $5,000 were recorded in fiscal years 1995 and 1994,            
respectively.                                                                   

FINANCIAL INSTRUMENTS                                                   

   BBC's financial instruments consist primarily of cash and cash equivalents,
trade receivables, leases receivable, accounts payable, a revolving credit      
facility, long-term debt, and certain interest rate agreements (Note 4). In     
management's opinion, the carrying amounts of all financial instruments         
approximate their fair values at November 2, 1996.                              

REVENUE RECOGNITION                                                     

   BBC recognizes revenue on sales when the related product has been delivered
to the customer and title has passed or when full payment has been received from
the customer and the product is completed and awaiting customer pickup.         

CASH AND CASH EQUIVALENTS                                               

BBC considers all highly liquid investments purchased with an original  
maturity of three months or less to be cash equivalents.                        

INVENTORIES                                                             

    Inventories are valued at the lower of cost or market, cost being determined
on the last-in, first-out ("LIFO") basis. Such costs include raw materials,     
direct labor, and manufacturing overhead.                                       

    If the first-in, first-out method had been used, inventories would have been
approximately $71,900,000 at November 2, 1996 and approximately $85,900,000 at  
October 28, 1995.                                                               

The components of inventory as of November 2, 1996 and October 28, 1995 
consist of the following:                                                       

                                                        [Enlarge/Download Table]

                                                                    1996           1995     
                                                                -------------  -------------
                                                                                            
Raw materials.................................................. $  18,847,481  $  32,463,235
Work in process................................................    22,915,908     22,830,735
Finished goods.................................................    28,012,413     28,052,301
                                                                -------------  -------------
    Total inventories (LIFO cost).............................. $  69,775,802  $  83,346,271
                                                                -------------  -------------
                                                                -------------  -------------

PROPERTY, PLANT, AND EQUIPMENT                                          

 Property, plant, and equipment were stated at their fair market values at
the date of acquisition. Assets purchased since the acquisition are stated at   
cost. All assets are being depreciated on a straight-line basis over their      
estimated useful lives.                                                         

F-9 

424B3
20th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 20th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

1. NATURE OF BUSINESS (CONTINUED)                                               
The following represent the estimated useful lives of the assets:       

                                                                [Download Table]
                                                                            
                                                                  20-33     
Buildings.......................................................  years     
Machinery and equipment.........................................  5-10 years
Automobiles, trucks, and airplane...............................  3-5 years 
Office furniture and equipment..................................  3-10 years

Expenditures for property and repair costs which substantially increase 
useful lives are capitalized. Currently, normal maintenance and repair costs are
charged to expense as incurred. Gains and losses on disposals of property,      
plant, and equipment are reflected in current income.                           

Interest costs for the construction of certain long-term assets are     
capitalized and amortized over the related assets' estimated useful lives. The  
Company capitalized net interest costs of $0 for the year ended November 2, 1996
and $208,237 for the year ended October 28, 1995.                               

   Depreciation expense of $5,516,894, $5,575,840, and $5,608,035 was recorded
for the years ended November 2, 1996, October 28, 1995, and October 29, 1994,   
respectively.                                                                   

LAND AND IDLE FACILITIES                                                

 BBC currently has land and idle facilities held for sale located in Buena
Vista, Virginia. The estimated fair value of the land and facilities is included
as land and idle facilities in the accompanying balance sheets.                 

PRODUCT WARRANTY COSTS                                                  

   The provision for estimated warranty costs is recorded in the year the unit
is sold. Warranty costs totaled $6,185,115, $5,313,438, and $6,679,409 for the  
years ended November 2, 1996, October 28, 1995, and October 29, 1994,           
respectively.                                                                   

NONCOMPETE AGREEMENTS                                                   

    BBC assigned $5,000,000 to noncompete agreements with the former owners. The
related assets were amortized over three years. Amortization expense totaled $0,
$833,000, and $1,667,000 for the years ended November 2, 1996, October 28, 1995,
and October 29, 1994, respectively.                                             

ACCOUNTING STANDARDS YET TO BE ADOPTED                                  

 In October 1995, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for   
Stock-Based Compensation." In June 1996, the FASB issued SFAS No. 125,          
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments 
of Liabilities." The Company is required to adopt both of these standards in    
fiscal year 1997.                                                               

SFAS No. 123 requires companies to estimate the value of all stock-based
compensation using a recognized pricing model. Companies have the option to     
recognize this value as an expense or to disclose its pro forma effects on net  
income. SFAS No. 125 requires companies to use consistent standards for         

F-10

424B3
21st Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 21st
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

1. NATURE OF BUSINESS (CONTINUED)                                               
distinguishing between transfers of assets classified as sales and transfers of 
assets classified as secured borrowings.                                        

 The Company's management has not yet determined its method of adoption or
the financial statement impact of adopting SFAS No. 123 and SFAS No. 125. Other 
issued but not yet required FASB standards are not currently applicable to the  
Company's operations.                                                           

USE OF ESTIMATES                                                        

The preparation of financial statements in conformity with generally    
accepted accounting principles requires management to make estimates and        
assumptions that affect the reported amounts of assets and liabilities and      
disclosure of contingent assets and liabilities at the date of the financial    
statements and the reported amounts of revenues and expenses during the         
reporting period. Actual results could differ from those estimates.             

RECLASSIFICATIONS                                                       

    Certain October 28, 1995 balances have been reclassified to conform with the
November 2, 1996 presentation.                                                  

2. LEASES RECEIVABLE                                                            

Under the terms of the Bank Credit Agreement discussed in Note 4, BBC is
required to sell leases receivable to a bank once certain levels of lease       
receivables are exceeded. Under the original agreement, as leases were sold, the
purchaser established a holdback reserve. During 1994, the agreement was        
modified such that the holdback reserve was replaced with a letter of credit.   
The letter of credit fluctuates based on the amount of sold leases and was      
$1,053,000 and $1,000,000 at November 2, 1996 and October 28, 1995,             
respectively.                                                                   

    During 1995, BBC amended the Bank Credit Agreement to allow BBC to hold more
leases receivable. As part of the amendment, BBC created a new subsidiary, Blue 
Bird Capital Corporation ("Blue Bird Capital"), for the purpose of expanding the
availability of lease financing alternatives to customers of its school bus     
products.                                                                       

BBC finances the sale of buses to school districts, other tax-exempt    
municipalities, and contractors under sales-type leases. Lease terms range from 
one to seven years and contain a bargain purchase option at the end of the lease
term. Under the lease terms, the lessee bears substantially all risks of        
ownership. BBC retains a lien on the title until all lease payments have been   
made.                                                                           

   The net investment in leases arising from these arrangements as of November
2, 1996 and October 28, 1995 was as follows:                                    

                                                        [Enlarge/Download Table]

                                                                    1996           1995      
                                                                -------------  ------------- 
                                                                                             
Leases receivable.............................................. $  82,889,596  $  71,803,080 
Unearned interest revenue......................................    (8,812,469)    (9,581,056)
                                                                -------------  ------------- 
Net leases receivable.......................................... $  74,077,127  $  62,222,024 
                                                                -------------  ------------- 
                                                                -------------  ------------- 

F-11

424B3
22nd Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 22nd
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

2. LEASES RECEIVABLE (CONTINUED)                                                
   Interest income recognized on leases receivable was $4,947,064, $2,914,928,
and $2,652,570 for the years ended November 2, 1996, October 28, 1995, and      
October 29, 1994, respectively. The primary expenses associated with the        
Company's finance lease activities relate to the interest expense from the      
revolving credit facility of Blue Bird Capital (Note 4). Identifiable assets of 
the Company's finance lease activities include the total leases receivable      
balance included on the face of the financial statements and as discussed above.

3. NET CASH SURRENDER VALUE OF LIFE INSURANCE                                   

 Details of the net cash surrender value of life insurance on the lives of
individuals in whom BBC has an insurable interest as of November 2, 1996 and    
October 28, 1995 are as follows:                                                

                                                        [Enlarge/Download Table]

                                                                    1996           1995      
                                                                -------------  ------------- 
                                                                                             
Cash values.................................................... $   7,302,352  $   7,193,239 
  Less life insurance loans....................................    (4,457,000)    (4,458,000)
                                                                -------------  ------------- 
Net cash surrender value, included in other assets............. $   2,845,352  $   2,735,239 
                                                                -------------  ------------- 
                                                                -------------  ------------- 

4. DEBT                                                                         

  Outstanding debt at November 2, 1996 and October 28, 1995 consisted of the
following:                                                                      

                                                        [Enlarge/Download Table]

                                                                                        1996            1995     
                                                                                   --------------  --------------
                                                                                                                 
Bank term loan, principal and interest payable in quarterly installments through                                 
  October 31, 1998; interest payable at the option of BBC at either the prime                                    
  rate plus .75% or the Eurodollar rate plus 1.75%; interest rate at 8.25% on                                    
  November 2, 1996; collateralized by all real, personal, and mixed property, as                                 
  defined........................................................................  $   36,000,000  $   48,000,000
11.75% Series B senior subordinated notes, due April 15, 2002; interest payable                                  
  semiannually; sinking fund deposits of $18,750,000 due on April 15, 2000 and                                   
  April 15, 2001; subordinated to senior debt....................................  $   50,000,000  $   75,000,000
Revolving credit facility with final maturity on March 31, 1999; interest payable                                
  quarterly at either the prime rate or the Eurodollar rate plus 1.125%, at the                                  
  option of BBC; collateralized by all Blue Bird Capital stock...................      58,600,000      35,661,573
Industrial development bonds, due March 2001; interest payable quarterly;                                        
  interest rate at 3.6% on November 2, 1996; secured by a letter of credit.......       2,750,000       2,750,000
                                                                                   --------------  --------------
                                                                                      147,350,000     161,411,573
Less:                                                                                                            
  Current portion of debt........................................................      16,000,000      12,000,000
  Revolving credit facility......................................................               0      35,661,573
                                                                                   --------------  --------------
Long-term debt and bonds payable.................................................  $  131,350,000  $  113,750,000
                                                                                   --------------  --------------
                                                                                   --------------  --------------

F-12

424B3
23rd Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 23rd
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

4. DEBT (CONTINUED)                                                             
On April 15, 1992, BBC entered into a $170,000,000 bank credit agreement
with Bankers Trust Company (the "Bank Credit Agreement"), secured by the capital
stock of BBC and 66% of the capital stock of Canadian Blue Bird Coach, Ltd. (a  
wholly owned subsidiary of BBC). The Bank Credit Agreement provides for a term  
loan and a revolving credit facility comprised of working capital loans and     
swing line loans. The revolving credit facility matures in October 1998 and     
requires interest payable quarterly. Interest rates on the working capital loans
are, at the option of BBC, at the prime rate plus .75% or the Eurodollar rate   
plus 1.75% and are the prime rate plus .25% on the swing line loans. The        
weighted average interest rate of the revolving credit facility for the years   
ended November 2, 1996 and October 28, 1995 was 7.03% and 8.65%, respectively.  
The revolving credit facility is collateralized by all real, personal, and mixed
property, as defined. No amounts were outstanding under this revolving credit   
facility at November 2, 1996 or October 28, 1995. The Bank Credit Agreement     
contains certain restrictive covenants. The most restrictive covenants include  
(a) a maximum leverage ratio, as defined, (b) a minimum fixed charge coverage   
ratio, as defined, (c) a minimum interest coverage ratio, as defined, (d)       
limitations of capital expenditures, and (e) certain restrictions on dividend   
distributions, as defined. All of these covenants have been met as of November  
2, 1996.                                                                        

The maximum available borrowing amount on the Bank Credit Agreement     
revolving credit facility, as amended, is $77,000,000. The revolving credit     
facility requires quarterly payment of a commitment fee equal to .375% per annum
of the daily unused portion.                                                    

In connection with the creation of Blue Bird Capital (Note 2), BBC      
negotiated a new credit facility (the "New Facility") with LaSalle National     
Bank. The maximum capacity of the New Facility is $100,000,000, subject to      
meeting certain covenants, as defined. The New Facility requires quarterly      
payments of a commitment fee equal to .15% at November 2, 1996 (not to exceed   
.275%) per annum of the daily unused portion of the credit commitment. The New
Facility contains certain restrictive covenants, including net income, tangible 
net worth, and interest coverage ratio. All of these financial ratios have been 
met as of November 2, 1996.                                                     

In connection with the Bank Credit Agreement and the New Facility, BBC  
purchased interest rate caps with notional principal amounts totaling           
$86,000,000 in order to reduce the impact of changes in interest rates on its   
floating rate long-term debt. The interest rate agreements mature at dates      
ranging from April 1997 to April 1999.                                          

   The industrial development bonds accrue interest based on a variable weekly
interest rate, with interest payments due quarterly. An irrevocable letter of   
credit backing the bonds has been issued by Wachovia Bank of Georgia, N.A. This 
letter of credit requires adherence to certain terms and financial ratios which 
are the same or less restrictive than those under the revolving credit          
facilities and term loan, all of which have been met as of November 2, 1996.    

F-13

424B3
24th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 24th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

4. DEBT (CONTINUED)                                                             
   The future minimum principal payments by fiscal year of outstanding debt at
November 2, 1996 are as follows:                                                

                                                                [Download Table]
                                                                            
1997..........................................................  $16,000,000 
1998..........................................................   20,000,000 
1999..........................................................   58,600,000 
2000..........................................................            0 
2001..........................................................    2,750,000 
Thereafter....................................................   50,000,000 
                                                                ----------- 
                                                                $147,350,000
                                                                ----------- 
                                                                ----------- 

 In December 1995, the Company repurchased $25,000,000 principal amount of
Series B senior subordinated notes. As a result, the Company recorded an        
extraordinary loss of $1,415,302, net of a tax benefit of $838,364.             

5. INCOME TAXES                                                                 

  BBC follows the provisions of SFAS No. 109, "Accounting for Income Taxes,"
for financial reporting purposes. SFAS No. 109 requires, among other things, the
determination of deferred income taxes using the liability method, under which  
deferred tax assets and liabilities are determined based on the differences     
between the financial accounting and tax bases of assets and liabilities.       
Deferred tax assets or liabilities at the end of each period are determined     
using the currently enacted tax rates to apply to taxable income in the periods 
in which the deferred tax asset or liability is expected to be settled or       
realized.                                                                       

The components of the net deferred tax liability are as follows:        

                                                        [Enlarge/Download Table]

                                                                   1996            1995      
                                                              --------------  -------------- 
                                                                                             
Total deferred tax liabilities............................... $   31,400,496  $   31,759,029 
Total deferred tax assets....................................    (17,014,129)    (16,325,955)
                                                              --------------  -------------- 
Net deferred tax liability................................... $   14,386,367  $   15,433,074 
                                                              --------------  -------------- 
                                                              --------------  -------------- 

F-14

424B3
25th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 25th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

5. INCOME TAXES (CONTINUED)                                                     
The sources of and differences between the financial accounting and tax 
bases of BBC's assets and liabilities which give rise to the deferred tax       
liabilities are as follows:                                                     

                                                        [Enlarge/Download Table]

                                                                    1996           1995     
                                                                -------------  -------------
                                                                                            
Deferred tax liabilities:                                                                   
  Stepped-up basis in net assets............................... $  20,625,370  $  20,633,323
  Depreciation.................................................     1,984,361      2,520,201
  Other........................................................     8,790,765      8,605,505
                                                                -------------  -------------
                                                                $  31,400,496  $  31,759,029
                                                                -------------  -------------
                                                                -------------  -------------
Deferred tax assets:                                                                        
  Warranty reserves............................................ $   5,247,237  $   5,198,629
  Pension reserve..............................................     1,726,652      1,935,666
  Deferred compensation reserve................................     3,346,739      3,053,529
  Workers' compensation reserve................................     1,761,631      1,656,866
  Other........................................................     4,931,870      4,481,265
                                                                -------------  -------------
                                                                $  17,014,129  $  16,325,955
                                                                -------------  -------------
                                                                -------------  -------------

    The components of the provision (benefit) for income taxes are as follows as
of November 2, 1996, October 28, 1995, and October 29, 1994:                    

                                                        [Enlarge/Download Table]

                                                                         1996           1995           1994      
                                                                     -------------  -------------  ------------- 
                                                                                                                 
Current:                                                                                                         
  Federal........................................................... $  13,871,802  $   9,945,714  $  10,956,249 
  Foreign...........................................................       596,516        542,000        410,894 
  State.............................................................     1,450,732      1,193,331      1,072,741 
                                                                     -------------  -------------  ------------- 
    Total current...................................................    15,919,050     11,681,045     12,439,884 
                                                                     -------------  -------------  ------------- 
Deferred:                                                                                                        
  Federal and state.................................................    (1,043,058)         5,011     (2,278,490)
  Foreign...........................................................        (3,649)             0         (4,146)
                                                                     -------------  -------------  ------------- 
Deferred, net.......................................................    (1,046,707)         5,011     (2,282,636)
                                                                     -------------  -------------  ------------- 
Tax provision, net.................................................. $  14,872,343  $  11,686,056  $  10,157,248 
                                                                     -------------  -------------  ------------- 
                                                                     -------------  -------------  ------------- 

Income (loss) from foreign subsidiaries was approximately $825,000,     
$(201,000), and $1,410,000 for the years ended November 2, 1996, October 28,    
1995, and October 29, 1994, respectively.                                       

F-15

424B3
26th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 26th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

5. INCOME TAXES (CONTINUED)                                                     
The income tax provision as of November 2, 1996, October 28, 1995, and  
October 29, 1994 differs from the amount computed by applying the statutory     
rates for U.S. federal income taxes to income before income taxes because of the
following:                                                                      

                                                        [Enlarge/Download Table]

                                                     1996           1995           1994      
                                                 -------------  -------------  ------------- 
                                                                                             
Income tax computed at statutory rates.......... $  14,018,446  $   9,988,188  $   8,947,726 
Foreign tax impact..............................       317,070       (119,078)       (86,608)
Tax-exempt interest income......................    (1,372,866)      (700,359)      (286,294)
State income taxes, net of federal income tax                                                
  effect........................................       942,976        775,665        562,360 
Goodwill amortization...........................     1,296,524      1,307,024      1,321,381 
Other...........................................      (329,807)       434,616       (301,317)
                                                 -------------  -------------  ------------- 
                                                 $  14,872,343  $  11,686,056  $  10,157,248 
                                                 -------------  -------------  ------------- 
                                                 -------------  -------------  ------------- 

  U.S. income taxes have not been provided for the undistributed earnings of
foreign subsidiaries. These amounts will be offset largely by foreign tax       
credits which will arise when this income is recognized for U.S. income tax     
purposes.                                                                       

6. BENEFIT PLANS                                                                

PENSION PLANS                                                           

BBC has several defined benefit pension plans and a defined contribution
plan covering substantially all domestic employees and a defined contribution   
plan for Canadian employees. Total pension expenses amounted to $3,857,044,     
$3,399,151, and $2,785,030 for the years ended November 2, 1996, October 28,    
1995, and October 29, 1994, respectively.                                       

The board of directors adopted a supplemental excess retirement plan    
effective January 1, 1991. This plan is restricted to certain key executives, is
not qualified under the Employee Retirement Income Security Act of 1974         
("ERISA"), as amended, and is unfunded.                                         

   The board of directors adopted a supplemental excess retirement plan in the
form of a rabbi trust (a grantor trust set up to fund deferred compensation for 
certain individuals as allowed under the Internal Revenue Code) effective       
November 1, 1995. This plan is restricted to certain executives, is not         
qualified under ERISA, and is not funded.                                       

   BBC's funding policy is to contribute the net periodic pension cost accrued
each year to the U.S. salaried and hourly defined benefit plans. However, the   
contribution will not be less than the minimum required contribution under ERISA
or greater than the maximum tax-deductible contribution.                        

F-16

424B3
27th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 27th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

6. BENEFIT PLANS (CONTINUED)                                                    
  Net pension cost for the U.S. defined benefit plans includes the following
as of November 2, 1996, October 28, 1995, and October 29, 1994:                 

                                                        [Enlarge/Download Table]

                                                                     1996           1995           1994      
                                                                 -------------  -------------  ------------- 
                                                                                                             
Service costs/benefits earned during the period................. $   1,860,568  $   1,337,279  $   1,246,107 
Interest costs on projected benefit obligations.................     3,486,859      3,320,053      3,025,245 
Return on plan assets...........................................    (8,793,737)    (8,189,694)    (1,069,849)
Net amortization and deferral...................................     5,377,327      5,453,920     (1,630,964)
                                                                 -------------  -------------  ------------- 
Net periodic pension costs...................................... $   1,931,017  $   1,921,558  $   1,570,539 
                                                                 -------------  -------------  ------------- 
                                                                 -------------  -------------  ------------- 

The following table sets forth these plans' funded status at November 2,
1996:                                                                           

                                                        [Enlarge/Download Table]

                                                                      DEFINED                                 
                                                                      BENEFIT                                 
                                                                      PENSION       UNQUALIFIED      RABBI    
                                                                       PLANS           PLAN          TRUST    
                                                                   --------------  -------------  ----------- 
                                                                                                              
Pension benefit obligation:                                                                                   
  Vested benefits................................................. $  (39,873,315) $  (2,644,567) $  (200,000)
  Nonvested benefits..............................................       (901,310)             0            0 
                                                                   --------------  -------------  ----------- 
Accumulated benefit obligation.................................... $  (40,774,625) $  (2,644,567) $  (200,000)
                                                                   --------------  -------------  ----------- 
                                                                   --------------  -------------  ----------- 
Projected benefit obligation...................................... $  (46,968,270) $  (2,644,567) $  (200,000)
Market value of plan assets.......................................     51,367,964              0            0 
                                                                   --------------  -------------  ----------- 
Overfunded (unfunded) projected benefit obligation................      4,399,694     (2,644,567)    (200,000)
Unrecognized net gain.............................................     (9,189,120)             0            0 
Unrecognized prior service costs..................................         22,639              0            0 
Other adjustment..................................................        (12,672)             0            0 
                                                                   --------------  -------------  ----------- 
Pension liability recognized in balance sheets.................... $   (4,779,459) $  (2,644,567) $  (200,000)
                                                                   --------------  -------------  ----------- 
                                                                   --------------  -------------  ----------- 

Assets of the salaried and hourly plans are invested primarily in U.S.  
government securities, common stock funds, cash management funds, and insurance 
company group annuity contracts. For 1996 and 1995, the discount rate and       
expected long-term rate of return on assets were both approximately 8%. The     
expected average rate of increase in future compensation levels used was 4.8%   
and 5% for 1996 and 1995, respectively.                                         

The 401(k) plan for domestic employees and the pension plan covering    
Canadian employees are defined contribution plans. Such actuarial information as
presented above is not applicable to these plans. Total expenses under such     
plans for the years ended November 2, 1996, October 28, 1995, and October 29,   
1994 amounted to $1,926,026, $1,477,593, and $1,214,491, respectively.          

POSTRETIREMENT BENEFITS                                                 

The Predecessor discontinued its postretirement health care and dental  
benefits in 1991. Coverage was available and will continue only for employees   
over age 55 who had elected early retirement and are currently entitled to such 
benefits, which are subject to certain limitations. BBC has recorded a liability
of                                                                              

F-17

424B3
28th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 28th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

6. BENEFIT PLANS (CONTINUED)                                                    
approximately $800,000 at November 2, 1996 and October 28, 1995, which          
represents management's best estimate of expected future benefits.              

MEDICAL, DENTAL, AND ACCIDENT AND SICKNESS BENEFITS                     

    BBC provides and is partially self-insured for medical, dental, and accident
and sickness benefits. BBC maintains a voluntary employee benefit association   
trust through which all cash used to pay claims is processed. The trust is fully
funded at year-end to cover incurred but not reported claims. Therefore, neither
the trust's assets nor the liability for claims is reported in the accompanying 
balance sheets.                                                                 

7. DEFERRED COMPENSATION AND SUPPLEMENTAL RETIREMENT BENEFITS                   

At November 2, 1996 and October 28, 1995, the accompanying financial    
statements reflect liabilities for anticipated payment of deferred compensation 
and supplemental retirement benefits described above in the amounts of          
$1,077,086 and $1,157,435, respectively.                                        

8. REDEEMABLE COMMON STOCK AND STOCK SUBSCRIPTIONS RECEIVABLE                   

Redeemable common stock represents shares of common stock purchased by  
members of management ("Management Investors"), primarily in conjunction with   
the acquisition. The Management Investors have the right, prior to the earlier  
of an initial public offering of equity securities or the tenth anniversary of  
the stockholders' agreement, to put these shares to BBC in the event of their   
disability, involuntary termination not for cause, retirement (all as defined in
the stockholders' agreement), or death for a fair value price, as defined in the
stockholders' agreement. The redeemable common stock was recorded at fair value 
on the date of issuance. The excess of the fair value price over the original   
fair value is being accreted by periodic charges to retained earnings. The      
amounts recorded in the balance sheets represent the estimated maximum amount   
payable if all management investors met the specified criteria and exercised    
their put rights.                                                               

Stock subscriptions receivable represent notes due from members of      
management for stock issued in April 1992 in conjunction with the acquisition.  
The notes bear interest at an 8% interest rate. Interest is payable annually.   

9. DIVIDENDS DECLARED                                                           

    No dividends were declared for the years ended November 2, 1996, October 28,
1995, and October 29, 1994.                                                     

10. LEASES                                                                      

    BBC has no capitalized leases in which it is the lessee. Rental expenses for
operating leases were approximately $1,194,880, $1,625,000, and $1,562,000 for  
the years ended November 2, 1996, October 28, 1995, and October 29, 1994,       
respectively. Operating leases relate primarily to computer equipment and       

F-18

424B3
29th Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 29th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

10. LEASES (CONTINUED)                                                          
software, office space, and miscellaneous office equipment. The future minimum  
lease payments under operating leases by fiscal year as of November 2, 1996 are 
approximately as follows:                                                       

                                                                [Download Table]
                                                                            
1997............................................................  $ 619,602 
1998............................................................    606,675 
1999............................................................    484,841 
2000............................................................     48,880 
2001 and thereafter.............................................          0 
                                                                  --------- 
                                                                  $1,759,998
                                                                  --------- 
                                                                  --------- 

11. CONTINGENCIES                                                               

As of November 2, 1996, BBC had a number of product liability and other 
cases pending. At the date of this report, neither the outcome of the cases nor 
the amounts of any company liabilities related to these cases are known.        
Management believes that, considering BBC's insurance coverage and its intention
to vigorously defend its position, the ultimate resolution of these matters will
not have a material adverse impact on BBC's financial position or results of    
operations.                                                                     

12. MANAGEMENT STOCK OPTION PLAN                                                

 Effective April 15, 1992, BBC's board of directors adopted a nonqualified
management stock option plan (the "Plan") which provided for the granting of    
options to key employees of BBC to purchase up to 850,000 shares of common      
stock. Pursuant to the Plan, on April 15, 1992, key employees were granted      
options (the "Vested Options") to purchase an aggregate of 400,000 shares of    
common stock at an exercise price equal to $10 per share (the fair value of the 
stock at the grant date, as determined by the board of directors). The Vested   
Options were fully vested at the time of grant. Additionally, on April 15, 1992,
key employees were granted options (the "Performance Options") to purchase an   
aggregate of 400,000 shares at an exercise price equal to $10 per share. The    
Performance Options vest ratably over the next five years based on BBC's        
achieving certain levels of earnings performance, as defined in the Plan, and in
any case ten years from the date of grant. During the year ended October 30,    
1993, options for 70,000 shares were canceled and options for 10,000 shares were
issued. As of November 2, 1996 and October 28, 1995, 720,000 options to purchase
shares were outstanding.                                                        

13. SUBSEQUENT EVENT                                                            

    In November 1996, the Company effected a recapitalization, pursuant to which
the Company refinanced approximately $90,000,000 of its indebtedness and paid a 
special cash dividend of $201,400,000 on all shares of its common stock (the    
"Recapitalization"). Holders of the Company's options received cash payments on 
an as-exercised basis. They were not required to exercise their options to      
receive their PRO RATA portions of the dividend distribution discussed above,   
nor were they entitled to any antidilution adjustment to the exercise price for 
their options.                                                                  

As part of the Recapitalization, holders of $50,000,000 of the Company's
outstanding 11.75% Series B subordinated notes (the "Old Notes") agreed to sell 
their Old Notes to the Company and consented to certain amendments to the       
indenture governing the Old Notes for aggregate payments (including accrued     

F-19

424B3
Last Page of 30
TOC
1st
Previous
Next
↓Bottom
Just 30th
BLUE BIRD CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

NOVEMBER 2, 1996, OCTOBER 28, 1995, AND OCTOBER 29, 1994

13. SUBSEQUENT EVENT (CONTINUED)                                                
interest) of approximately $54,000,000. The Company's existing Bank Credit      
Agreement has been replaced and refinanced by an amended credit agreement (the  
"New Credit Agreement") which will provide for aggregate availability of        
$255,000,000, including $175,000,000 of term loan facilities and $480,000,000 of
revolving credit facilities.                                                    

 In addition to the New Credit Agreement, the Company sold $100,000,000 of
10.75% senior subordinated notes due November 15, 2006 (the "Offering").        
Proceeds from the Offering, borrowings under the New Credit Agreement, and cash 
on hand were used to fund the retirement of the Old Notes, the refinancing of   
the Bank Credit Agreement, the payment of the dividend distribution discussed   
above, and the payment of related fees and expenses.                            

  As a result of the Recapitalization, the redeemable common stock accretion
(as discussed in Note 8) will result in a significantly lower value being       
assigned to the redeemable common stock. Additionally, as part of the           
Recapitalization, management will be required to repay the stock subscriptions  
receivable with the proceeds from the distribution. The Recapitalization will   
also result in a compensation charge to earnings of approximately $16,000,000 in
fiscal 1997.                                                                    

F-20

Dates Referenced Herein   and   Documents Incorporated by Reference

				Referenced-On Page
This ‘424B3’ Filing		Date		First		Last			Other Filings
		11/15/06		30
		4/15/02		22
		4/15/01		22
		4/15/00		22
		3/31/99		22
		10/31/98		22					10-K405,  10-K405/A
		3/10/97		1
		1/24/97		1
Filed on:		1/10/97		1
		12/12/96		1
		12/5/96		12
		11/2/96		1		30			10-K405
		12/14/95		7
		11/1/95		26
		10/28/95		4		30
		10/29/94		3		30
		10/30/93		16		29
		10/31/92		5
		4/30/92		5
		4/15/92		18		29
									List all Filings