Greetings and welcome to the Blue Bird Corporation Fiscal 2017 First Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mark Benfield, Director of Investor Relations. Thank you. You may begin.

Thank you, Welcome to Blue Bird’s fiscal first quarter 2017 earnings conference call. The audio for our call is webcast live on blue-bird.com under the Investor Relations tab. You can access the supporting slides on our website by clicking on the Presentations box on the Investor Relations landing page. Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings releases and filings with the SEC. Blue Bird disclaims any obligation to update the information in this call. This afternoon, you will hear from Blue Bird’s President and CEO, Phil Horlock; and CFO, Phil Tighe. Then, we will take some questions. So, let’s get started. Phil.

Thanks Mark. Well, good afternoon and thank you all for joining us today for our fiscal 2017 first quarter earnings call. We welcome this opportunity to share with you our latest quarter results, let’s get started with an overview of our financial results on Slide 4 of the presentation. As we have previously explained, the school bus industry is extremely seasonal we achieved solid results in a softest quarter of the year. The first quarter is a softest quarter, it covers a three months immediately following the start of the new school year and consequently is a slowest quarter for new school bus sales. We plan for this by taking annual shutdown, vacation shutdown for our employees in October and of course, we have the holiday shutdown periods over Thanksgiving on the December holiday period. This means typically first quarter unit sales represent no more than 15% of the full-year volume. This is also is our expectation for fiscal 2017. So we sold just under 1,500 buses in the first quarter, which is 6% higher than last year. At a $137 million, net sales were 4% higher than last year's first quarter. So the net sales revenue growth was a little lower than the unit sales growth, which we expected, as we saw a number of specific customers shifting their new bus purchases from the first quarter to later in the year. Our alternative-fuel powered school bus sales mix was stronger 23%, although was a little bit lower than last year's mix, because of later order timing by specific customers that I just mentioned. However, since the first quarter we have experienced a surge in alternative-fuel bus orders. Such that at the close of business just two days ago, our year-to-date Blue-Bird propane bus orders are 29% higher than the…

Thanks, Phil, and good afternoon, everyone. It’s my pleasure to present you some further details on 2016 first quarter results for Blue-Bird. On Slide 9, you will see a summary of the results for the first quarter. I won’t go through all about on this page, but we will call out a few areas of interest. Phil has already covered some discussion around the volumes; you can see we are up by about 6% in the first quarter. This achievement was better than our internal plan, which is a good result for us. I would comment through that dealers are doing extremely well in the first quarter and dealers [indiscernible] to our export markets were up about 12%. Government and direct fleets were a bit slower than last year, but we expected that the government sales will stop to increase as we move forward. Net revenue again was 136.7 million up about 4% and with both higher box and top sales, but there obviously was a lower mix of propane, which drove the average revenue down and also we had an increase mix of the value across gasoline bus, which has an impact on our average revenue as well. Gross margin at 13.3% this was down about a point versus the last quarter - versus last year. The decline was driven largely by propane. Propane mix was about 11% in the first quarter versus over 20% in the first quarter of last year and Phil has already talked you through some of that customer issues there. We also had some higher labor costs in the first quarter and this was basically due to carrying the second shift quite that's through the first quarter and so we had some excess meaning there. But I will talk a little later about what…

Okay. Thanks, for that Phil. So, let’s now focus on the outlook for the year and our full-year guidance and please turn to Slide 14. As ahead of line says we are forecasting alternative growths in both the industry and the Blue Bird. We are projecting new booking sales as measured by in store registrations compelled by [indiscernible] to grow between 3% to 4%, so we reach around 33,534,000 new buses this year. That’s our expectation. Now we are forecasting Blue Bird unit sales growth of between 6% to 8%, outpacing the industry and supporting impart by the fully available with our new engine choices that we introduced last year and of course our CNG that we have just laid in the last fiscal quarter. Our substantial year-to-date growth of 75% in alternative-fuel powered bus orders clearly supports the strategy. We believe it's working. Our total bookings and order backlog was stronger 22% above the same time last year and quote activity is higher too again all bodes well for our volume growth plans for the year. Now with the seasonality of our business, we project growth in financial performance in the second half of the year, as we will then see the peak demand come in, in support of school start. So, I just want to [Technical Difficulty] second half of the year where we think that we will see the growth in financial performance versus 2016. That said, we articulately invested in the development of new and exciting products that will foster future growth and we are mindful of potentially increasing commodity prices particularly steel hence that's reflected in our EBITDA forecast guidance that we provide. So, let's now turn to fiscal 2017 guidance on Slide 15, which reflects all of these factors. So, we are reaffirming the full-year guidance we provided on last earnings call with the growth projected in each of the three metrics. Net sales between 980 million and 1,010 million, a 48 million to 78 million from fiscal 2016. Adjusted EBITDA of between $72 million to $76 million, that's flat to an increase of $4 million over last year as we continue to invest in new products to drive future growth. And adjusted free cash flow continues to be a strong feature of our business model representing over 50% of our adjusted EBITDA. We are providing guidance for adjusted free cash flow of between $38 million to $42 million, an increase of between $5 million to $9 million over fiscal 2016. So, in wrapping up, we believe we had a solid first quarter performance in the softest and slowest quarter of the year. As we look to continue growth in fiscal 2017 particularly the second half as demand increases and our guidance supports this. We will continue to update you on our progress each quarter towards those [indiscernible] those guidance numbers. And that concludes our formal presentation, and I will pass it back to our moderator, Audrey to begin the Q&A session.

Ladies and gentlemen at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Matt Koranda with Roth Capital. Please proceed with your question.

Hey good afternoon guys, thanks for taking the question. I think you guys did a good job explaining some of the customer order timing in the prepared remarks, but I wondered if you could just get into a little bit more detail around the engineered expenses that happened in the quarter specifically what those are for and then maybe just how you expect those to kind of trend through the rest of fiscal 2017?

The engineering in the first quarter Matt - it's Phil Tighe Matt, good to talk to you. The engineering expense was largely around testing and validation of some changes in regulations on the propane engines; there is a fair lead time and getting all that through [indiscernible], it’s something you may recall that we had some timing challenges getting the gas engines done last year. So we elected to go fairly conservative and pull ahead that the testing, so we can get our submissions in well ahead of time and make sure that was in. And make sure we did not miss any production on the propane as we enter into the peak season and as you can see from what we have told people about where the propane backlog stands, we really need to be able to push those buses out pretty quickly through the second half and so that's the story Matt, it was basically protecting ourselves for the peak.

Got it, so those aren’t really expected to be recurring throughout the year it was kind of the onetime thing in the quarter then.

Yes, just about million dollars [indiscernible] in the quarter maybe in trade and like I said direct field side and we plan to spend at least from the unit, but our plan together was just really timing no repeat of that.

Got it, okay, helpful guys. Thank you. Then when I look at the backlog of alternative buses obviously very impressive about 75% year-over-year. Just wanted to see if you can speak to kind of the relative strength between propane, CNG, gas. I mean our trucks have indicated that there is definitely a lot of appetite for the gas engine especially in certain regions, but just wondered if you could maybe speak to the mix in there and see other facility?

Yes, this is Phil Tighe again Matt. So not surprisingly but propane is certainly leader in there, the 1,300 or so units we talked about in our backlog there and the orders that are service is already made the predominant product in there is still propane, [indiscernible] just over 800 of those units to actually propane-powered school buses. Propane continues to be the - and we firmly believed here the flagship engine for the school bus industry, it's the best cost of ownership of any ownership of any player in the marketplace. In addition to that it's clean, it's green, you get all the benefits of cold weather start that a diesel doesn’t have, it’s easy to maintain, it's very efficient, so it's a very attractive product. Gasoline was also very good for us in the quarter, year-to-date, we have around over just 400 of those engines right now, which is very good to think about [indiscernible] launch that to our customers in September. So this has been a really nice quarter for us and the slowest quarter of the year and obviously a little bit further than that as we looking today orders that come in January and February. Gasoline, as Phil called it earlier, which is our value end for the thing about gasoline and to make simple. You run off all the emissions hard work of these engines has and consequently it's easy to maintain everyone is used to gasoline most people have gasoline vehicles technicians understand it. So from a simplistic standpoint it's easy to work on and again you get there as the benefits of great cold weather start, it's very understandable, easy to maintain, it's quite and it drives very well. I mean I will tell you, having I think seeing our annual report that we just finished in last week we had a first testimonial there from one of our first customers here in Georgia Top County and they were absolutely extracting about the product. Until the performance it's fuel economy and the drivers love it. So we feel we are off to a great start with that. Now compressed natural gas obviously it's a smallest element of our products [Indiscernible] comes down to fuel selling capability, it is expensive to install natural gas filling stations are typically you will sell a compressed natural gas bus where as the municipality has already installed a fuelling facility. And they typically start with the $1 million that goes high as $2 million or $3 million depending on the size. You contrast that with gasoline and propane, it's a very simple installation above grand tank very easy. So we see compressed natural gas typically where there is already fuel availability. It's a more expensive product than either the propane or the gasoline, because when it is compressed the fuel tanks have to handle incredible pressure of that fuel, there are [indiscernible] coated tanks cost more money. So, while that has grown, [indiscernible] propane and gasoline.

But you know we are just [indiscernible] through all three and you probably saw in our announcement just that there will be a grant there for electric bus , we are looking to that really sometime early I think 2019 and that'll give us real nice surrounding here on the alternative-fuel solutions that we can offer other than diesel.

Great very helpful Phil. May be one more just on the alternative-fuel front, note that a supplier of your competitors that typically provides alternative-fuel engines had been going through some issues and just wondering if any of that filtered through sort of end customers yet and sort of are you guys in a position to capitalize on being able to fulfill immediate demand for certain school districts that are looking to get into propane or gas sooner than later?

I think the thing is [indiscernible] to me comment on PSI, and which obviously as you are referring there; and I respect them and they are trying to do a good job there, so I'm not going to comment on that. I will just tell you this, we will build up 10,000 propane engine [indiscernible] no one have the coverage we have got; we are in virtually every state of North America or the U.S. and Canada and probably just Canada have received our buses at some point. So, we have a probably I think six to seven times more alternative-fuel powered buses on their roads than all of our competitors combined. The whole market understands our product, the Ford/Roush product that we offer, and we have had it on the market since 2012, its exclusive to us, we know how to sell it, we know how to maintain it, we know how to look after. I just think it's a recognition when I talk about our propane being up some 29% and it's in the eight few of our us producing propane, we are just feeling right now that 29% that's pretty impressive, I think people just know and understand our product very well. We are much better known than anybody else in the marketplace and we play it to all strength.

Understandable. Thanks, I will jump back in queue.

Thank you. Our next question comes from the line of Eric Stine with Craig-Hallum. Please proceed with your question.

I was wondering if you can just talk a little bit about the overall market, you gave your view of the current year, but when you think about the health of the market maybe where we are in the cycle I believe the last peak it was 37,000 buses. Are there trends in your markets or in the industry that that 37,000 that maybe that's a higher number or do you see that playing out, where do you think we are in this cycle?

Well I think we still have some good run way Eric, I really do because you are right the last cycle it was a nice peak that that's ended - lastly we ended just under 33,000 like 33,900 probably a lot more quicker than we thought actually to that level. I would say in this study under the correlation is for our business as we looked at year-after-year could it correlates so closely to housing prices. So propane tax is a major funding mechanism. I think it's still not the housing prices they are still going up I think that's all [Indiscernible] the same growth in housing prices year-over-year in the month of December I just recently saw and that bodes well for us. I think the new administration -I don’t see anything in the horizon that would threaten that and it's always talking to our dealers, we look at our dealers as they understand what's going on this stage, they understand the funding of capabilities available in the plan budgets. I would say it's a pretty good outlook right now that we have. I don’t see any market particularly saying things are looking terrible versus a year-ago, I think the average in this at least as good as if not better than the year ago. So [Indiscernible] so they chose us and that why we strive at the growing in the market but I think we are in a good function to cycle. Now we will say that where the lesser session hit there was no question it was the read out to some of the old boxes out there they were probably about 40,000 to 50,000 buses were taken off the road. Now when we look at those buses not also those what we call they weren’t good in a whole lot of work anyway, so they were been ready so they for use those sort of being we did outs so there is a little on the road but I can tell you there is still over a 130,000 actually near a 150,000 on being told. [Indiscernible] school buses is on the road today, there are over 15 years of age. So there is still a lot of demand and desire by districts to upgrade their fleet. It's a question of the only thing that present more being installed is the funding availability and I just said I think when I look at the housing price situation what is going in the housing market we feel quite bullish still about, we got a nice run way ahead.

Okay, thanks for that. And I know clearly expecting the gain share and then lot of that alternative-fuel regardless, so what the market does, but maybe just talk about some of the growth initiatives I believe last quarter. You have talking a little bit about commercial buses transit buses that you are starting to see pretty solid code activity, testing activity maybe characterize how that has progressed, and do you see or maybe when do you see commercial and transit being a more meaningful contributor to results?

Okay, so when I look at the commercial bus, I think I talked about them in the last quarter we have mentioned that we have been to [indiscernible] showing Kansas City in earlier in the year and we presented out Blue Bird range of products and the Micro Bird range of products through not away the smaller buses are very well receive and we have been we think those are on the road show ran the country customers heard by our dealer network and on the products that we developed. That where are we in stage is that. Well, I think we are going to look few hundred units this year of commercial buses it's probably more than in the couple of 100 less than 500 is the way I would look at it and it will be up from last year and so were still in the early stages it launches our first year of same where we want to be in the commercial bus space we think we offer a very compelling, very attractive price point do we offer every [Indiscernible] transit bus coming the answer is no, we don’t, but we offer a very attractive price point product that's gone last through and durable, it's that all – all the requirements, testing requirements that commercial buses require [indiscernible] call are two major things that transit buses have to have but we have all of our buses meet those requirements. So, I think again I'm looking to I think we are on nice run way, I can see it's -- well it's going to be few 100 units Eric as the way I think of it and year-after-year it's going a few 100 units more. Same in international I think -- we have been successful internationally and in Central America particularly with Columbia in recent years and we have brought on a new deal in El Salvador, working in other markets right now and we have been tendering the business there and I think we will have some success in that later in the fiscal year. So, I think all bodes well but look I want to make clear that the predominant business we have we want to grow is our North American school buses, that's our priority.

Understood. Maybe last one from me, just given the health of the balance sheet your free cash flow expectations just maybe thoughts on the capital allocation strategy, I would assume debt repayment is top of the list but maybe just some of the other things under consideration?

We continue to look at our debt, it's at a 150 and changing. We will have the discussion with the Board in the few months’ time on whether we want to make another payment this year. But we are also starting to think about whether we should perhaps provide for sum of what we are seeing is our upside by adding a little bit more efficiency in the plant, so that might take a little bit of cash. I wouldn't say taking major chunks but a little bit of cash. We could certainly use some more productivity edged in the plant, I think at this at the present time, because the volume is there and plant are final glide but we could do with a bit of modernization I suspect. Beyond that, we are approaching this discussion with the Board about what we do, it's a little bit early for us to say.

I think it's fair to say - just to add to what Phil said, we have reviewed this with the Board, we are talking about this with the Board, we are talking about the use of the cash, and the Board's challenge us which is the great one to have is - it's something that we should in regarding in automation from upgrading our facilities, we launched the second shift just only just last year so we are sort of the same if you like facility support system here and footprint here that we have [running] it in one shift, I mean that would decrease the volume dramatically. So, I think it's something we are definitely going to look at, one way to think about it is obviously we just talked about these act as a new refinancing, generated some interest payment driver savings of some $5 million this year and we haven't floored that through yet. We haven't changed it in our free cash flow obviously to reflect that in our guidance to you. So, if you're looking at - maybe got a good use of it, maybe we would make some good use of that to help us in some automation on select facility upgrades.

Okay. Got it. Thanks for the color.

Thank you. Question comes from line of Chris Moore with CJS. Please proceed with your question.

Hey guys. Thank for taking the question. Most of mine have been answered, but I wanted to talk a little bit more on alternative-fuels, just in terms of the purchasing decision, is there any cannibalism between propane and the gas, I know that the gas is kind of earlier in less expensive version but your customers typically chose between the two or is this just a diesel customer that's going to drive something on the gas side for example?

Hi Chris its Philip Horlock here. Yes, good two question. I think what we have seen so and again it's just early stage is to relive a gas and they are going into the market to why it is like for about five or six months now but I would say what was being as we are seeing both of those products will replacing diesel when you look at the spot rate in thousands are so in school buses and the industry there are 95% of those of diesel engines. So what we are seeing is as folks coming and looking at propane or they look at gasoline they are doing interest for a different reason. Propane we talk about this that's on the cost of ownership value, you do play a little bit more for it we get a very quick payback to the TCO value, gasoline is all about that low price. So what we have seen so far is that really going to be great products to replace diesel, diesel is still it's been other issues you still get the diesel the whole working on the engine or complexity of it. It's a world class product look I'm not knocking diesel because they are great products I just think these are the products right now where we have to generate our further alternatives that make it easy for the operator to work with and also what we have seen there. I'll say that because of the propane product and diesel, I don’t need CNG or gasoline I don’t need CNG have what we call the same architecture the same forward engine, It’s the same forward transmission the systems develop by large clean ROUSH CleanTech that the delivery filed delivery system so we are seeing that once you have sold the customer on propane they really get gasoline very easily we understand it and similarly you never saw probably [Indiscernible] talk about gasoline they get gasoline it's a really sell really as to understand, so but again I would say personal experience so far it's they have been replacing diesel with those products.

And can you just refresh me. The relative kind of gross margin between the propane and gasoline?

Well, we don’t declare that I mean I would just say that propane is a lot of new technology in that products it's a higher price product has a, it has the higher margin as a higher margin products absolutely and the gasoline also the good margin for us extra, but we give a good value and for both products to our customers now they understand the value preposition.

All right, guys I appreciate it.

Thank you. Our next question comes from Mike Baudendistel with Stifel. Please proceed with your question.

Thank you. Good afternoon. I just wanted to ask a question, I was just looking to my notes on the other companies recover and couple of these saw [indiscernible] transmission was talking about school bus production being down in 2017 and calling that out as a headwind and I'm just trying to reconcile that with I think you said school bus production of 3% to 4% a year and it may have been just been talking about diesel only and is that how you would interpretive diesel is going to be down in 2017 and it's sort of these results turn at fuels that make it up 3% or 4%?

Hey Mike this is Phil Tighe. I suspect I don’t know I didn’t see the [indiscernible] thing and I suspect the [indiscernible] talking about the diesel mix of it. Because as we come to seeing a view at the moment of production is through the material publish by OTT research and my understanding for the first quarter is they are showing the their school bus production is up now they don’t obviously get into parallel trends mixes or anything like that but they are showing it is up, I think they also show that there was pretty strong orders coming in the last couple of months of the prior year as well. So, the other thing and I'm not sure Mike whether this has got any impact but you do know that Eaton who is [indiscernible] competitor in truck segments in the higher levels did come in with that maybe in used transmission and that could be influencing Allison as well. But again not completely clear to me what they referenced was. The only one I could suggest you is ITT research and that's showing the volume is up.

Okay, got it. And then you mentioned in the press release that you want some first time accounts during the quarter, and who were those school districts or the contractors and what enabled you win that business?

Yes, they were school districts, I mean they are all school districts, I mean it's and I think we went out and met with those guys, demoed our buses, a good probably half of those customers propane was their product of choice, we showed them our propane bus, they tried it out, they tested it, liked what they saw and ordered that. But we went out there and we showed them what we could do and they - in many cases [indiscernible] come to our plants here, meet us, walk through production line, we work hard to win that business but I would say it was based on relationship with our dealers, technology we offer, and we offer good value too, good value for the customers. So, but, like I said it before it's a combination of both the diesel engine and the propane product where the winners of those [indiscernible] customers for us.

And just want to ask you also about the parts revenue I mean that was up more on a percent basis then the bus revenue, you talked about you had some initiatives in parts, can you maybe explain that a little bit more?

What we have been bringing in a lot of new what we call SKUs, a lot of new parts in our parts bin. I think traditionally Blue Bird is if we go back - what we sell is what we put up in new bus, but we have actually been expanding that, because ultimately you get a five, six, seven year old bus, 10 year old bus, the guy is buying those parts might not necessarily want an original equipment part, might have more of a [indiscernible] for the part. So we have been able to go out and really utilize the fact we have a lot of school buses out there, Blue Bird has many buses out there, we are the major provider of parts through our dealer channel that we have been able to expand our portfolio parts that we have offered customers. We have also been carrying a lot for the season; you get into the winter season and sort of that cold climate. I think you talk about stainless steel packages, things that really just help the customer in the winter customer, anti corrosion sort of products and features and we sort of really will have to mark these items, put some really nice packages together to be successful there. And real going out and [indiscernible] to really get out there and sell to the customers, don't wait for an order to come in, get out there and visit school districts, sell to them short because we have a tremendous range of parts in the Blue Bird portfolio. So, I think it's been a combination of all those things, just been aggressive and going out and marking ourselves with a broader range of products.

Got it. Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session. At this time, I would like to turn the call back to Phil Horlock for closing remarks.

Well, thank you Audrey, and thanks to everyone for joining us on the call today. We do appreciate your particular interest in Blue Bird; we have lot of exiting things going on. I think you can see that we have focus on possible growth and it can deliver on our commitments and we believe we are well position for growth both today and in the future. So and please, don’t hesitate to contact the Head of Investor Relations Mark Benfield, should you have any follow up questions. So again thanks from all of the team of Blue Bird and wish you a good evening. Thanks very much.

This concludes today’s conference. You may disconnect your line at this time.