UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December ~~31, 2022~~30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ................................ to ...............................................

Commission File Number 001-36267

BLUE BIRD CORPORATION

(Exact name of registrant as specified in its charter)

Delaware 46-3891989

(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)

3920 Arkwright Road, 2nd Floor, Macon, Georgia 31210

(Address of principal executive offices and zip code)

(478) 822-2801

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common stock, $0.0001 par value

BLBD

NASDAQ Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated Filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

At February 2, ~~2023, 32,032,067~~2024, 32,198,592 shares of the registrant’s common stock, $0.0001 par value, were outstanding.

BLUE BIRD CORPORATION

FORM 10-Q

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


(in thousands of dollars, except for share data)	(in thousands of dollars, except for share data)	December 31, 2022		October 1, 2022		(in thousands of dollars, except for share data)	December 30, 2023	September 30, 2023
Assets	Assets
Current assets	Current assets
Current assets
Current assets
Cash and cash equivalents
Cash and cash equivalents
Cash and cash equivalents	Cash and cash equivalents	$	5,664	$	10,479
Accounts receivable, net	Accounts receivable, net	9,125		12,534
Inventories	Inventories	129,120		142,977
Other current assets	Other current assets	14,048		8,486
Total current assets	Total current assets	$	157,957	$	174,476
Restricted cash		$	236	$	—

Property, plant and equipment, net
Property, plant and equipment, net
Property, plant and equipment, net	Property, plant and equipment, net	99,110		100,608
Goodwill	Goodwill	18,825		18,825
Intangible assets, net	Intangible assets, net	46,931		47,433
Equity investment in affiliate	Equity investment in affiliate	10,727		10,659
Deferred tax assets	Deferred tax assets	13,892		10,907
Finance lease right-of-use assets	Finance lease right-of-use assets	1,560		1,736
Other assets	Other assets	2,367		1,482
Total assets	Total assets	$	351,605	$	366,126
Liabilities and Stockholders' (Deficit) Equity
Liabilities and Stockholders' Equity
Current liabilities	Current liabilities
Current liabilities
Current liabilities
Accounts payable
Accounts payable
Accounts payable	Accounts payable	$	124,789	$	107,937
Warranty	Warranty	6,525		6,685
Accrued expenses	Accrued expenses	18,713		16,386
Deferred warranty income	Deferred warranty income	7,238		7,205
Finance lease obligations	Finance lease obligations	571		566
Other current liabilities	Other current liabilities	6,681		6,195
Current portion of long-term debt	Current portion of long-term debt	19,800		19,800
Total current liabilities	Total current liabilities	$	184,317	$	164,774
Long-term liabilities	Long-term liabilities
Revolving credit facility	Revolving credit facility	$	5,000	$	20,000
Revolving credit facility
Revolving credit facility
Long-term debt	Long-term debt	124,341		130,390
Warranty	Warranty	9,055		9,285
Deferred warranty income	Deferred warranty income	12,052		11,590
Deferred tax liabilities	Deferred tax liabilities	72		—
Finance lease obligations	Finance lease obligations	1,428		1,574
Other liabilities	Other liabilities	8,633		11,107
Pension	Pension	15,903		16,024
Total long-term liabilities	Total long-term liabilities	$	176,484	$	199,970
Guarantees, commitments and contingencies (Note 6)	Guarantees, commitments and contingencies (Note 6)					Guarantees, commitments and contingencies (Note 6)
Stockholders' (deficit) equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at December 31, 2022 and October 1, 2022		$	—	$	—
Common stock, $0.0001 par value, 100,000,000 shares authorized, 32,032,067 and 32,024,911 shares outstanding at December 31, 2022 and October 1, 2022, respectively		3		3
Stockholders' equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at December 30, 2023 and September 30, 2023
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at December 30, 2023 and September 30, 2023
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at December 30, 2023 and September 30, 2023
Common stock, $0.0001 par value, 100,000,000 shares authorized, 32,198,592 and 32,165,225 shares outstanding at December 30, 2023 and September 30, 2023, respectively
Additional paid-in capital	Additional paid-in capital	173,592		173,103
Accumulated deficit	Accumulated deficit	(90,806)		(79,512)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(41,703)		(41,930)
Treasury stock, at cost, 1,782,568 shares at December 31, 2022 and October 1, 2022		(50,282)		(50,282)
Total stockholders' (deficit) equity		$	(9,196)	$	1,382
Total liabilities and stockholders' (deficit) equity		$	351,605	$	366,126
Treasury stock, at cost, 1,782,568 shares at December 30, 2023 and September 30, 2023
Total stockholders' equity
Total liabilities and stockholders' equity

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended
(in thousands of dollars except for share data) December 31, 2022 January 1, 2022
Net sales $ 235,732 $ 129,223
Cost of goods sold 228,275 113,026
Gross profit $ 7,457 $ 16,197
Operating expenses
Selling, general and administrative expenses 16,832 18,233
Operating loss $ (9,375) $ (2,036)
Interest expense (4,196) (3,082)
Other (expense) income, net (236) 736
Loss on debt modification (537) (561)
Loss before income taxes $ (14,344) $ (4,943)
Income tax benefit 2,981 1,762
Equity in net income (loss) of non-consolidated affiliate 69 (901)
Net loss $ (11,294) $ (4,082)
Loss per share:
Basic weighted average shares outstanding 32,026,311 28,118,450
Diluted weighted average shares outstanding 32,026,311 28,118,450
Basic loss per share $ (0.35) $ (0.15)
Diluted loss per share $ (0.35) $ (0.15)


	Three Months Ended
(in thousands of dollars except for share data)	December 30, 2023		December 31, 2022
Net sales	$	317,660	$	235,732
Cost of goods sold	254,102		228,275
Gross profit	$	63,558	$	7,457
Operating expenses
Selling, general and administrative expenses	25,602		16,832
Operating profit (loss)	$	37,956	$	(9,375)
Interest expense	(3,631)		(4,196)
Interest income	1,088		—
Other expense, net	(1,221)		(236)
Loss on debt refinancing or modification	(1,558)		(537)
Income (loss) before income taxes	$	32,634	$	(14,344)
Income tax (expense) benefit	(8,446)		2,981
Equity in net income of non-consolidated affiliate	1,962		69
Net income (loss)	$	26,150	$	(11,294)

Earnings (loss) per share:
Basic weighted average shares outstanding	32,170,779		32,026,311
Diluted weighted average shares outstanding	32,429,127		32,026,311
Basic earnings (loss) per share	$	0.81	$	(0.35)
Diluted earnings (loss) per share	$	0.81	$	(0.35)

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE ~~LOSS~~INCOME (LOSS)

(Unaudited)

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Net loss

(11,294)

(4,082)

(in thousands of dollars)

Net income (loss)

Other comprehensive income, net of tax:

Net change in defined benefit pension plan

227

221

Total other comprehensive income

227

221

Comprehensive loss

(11,067)

(3,861)

Total other comprehensive income

Comprehensive income (loss)

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


		Three Months Ended
	Three Months Ended								Three Months Ended
(in thousands of dollars)	(in thousands of dollars)	December 31, 2022		January 1, 2022		(in thousands of dollars)	December 30, 2023	December 31, 2022
Cash flows from operating activities	Cash flows from operating activities
Net loss		$	(11,294)	$	(4,082)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Net income (loss)
Net income (loss)
Net income (loss)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization expense
Depreciation and amortization expense
Depreciation and amortization expense	Depreciation and amortization expense	3,361		3,288
Non-cash interest expense	Non-cash interest expense	417		1,143
Share-based compensation expense	Share-based compensation expense	589		1,673
Equity in net (income) loss of non-consolidated affiliate		(69)		901
Equity in net income of non-consolidated affiliate
Dividend from equity investment in affiliate
Loss on disposal of fixed assets	Loss on disposal of fixed assets	—		9

Deferred income tax benefit		(2,986)		(1,704)
Deferred income tax expense (benefit)

Deferred income tax expense (benefit)

Deferred income tax expense (benefit)
Amortization of deferred actuarial pension losses	Amortization of deferred actuarial pension losses	299		291
Loss on debt modification		537		561
Loss on debt refinancing or modification
Changes in assets and liabilities:	Changes in assets and liabilities:
Accounts receivable
Accounts receivable
Accounts receivable	Accounts receivable	3,409		3,827
Inventories	Inventories	13,857		(16,747)
Other assets	Other assets	(5,227)		(2,554)
Accounts payable	Accounts payable	16,572		(11,115)
Accrued expenses, pension and other liabilities	Accrued expenses, pension and other liabilities	461		(8,568)

Total adjustments	Total adjustments	$	31,220	$	(28,995)
Total cash provided by (used in) operating activities		$	19,926	$	(33,077)
Total adjustments
Total adjustments
Total cash provided by operating activities
Cash flows from investing activities	Cash flows from investing activities
Cash paid for fixed assets	Cash paid for fixed assets	$	(1,146)	$	(1,570)

Cash paid for fixed assets
Cash paid for fixed assets
Proceeds from sale of fixed assets
Total cash used in investing activities	Total cash used in investing activities	$	(1,146)	$	(1,570)
Cash flows from financing activities	Cash flows from financing activities
Revolving credit facility borrowings		$	5,000	$	35,000
Revolving credit facility borrowings (Note 4)
Revolving credit facility borrowings (Note 4)
Revolving credit facility borrowings (Note 4)
Revolving credit facility repayments	Revolving credit facility repayments	(20,000)		(75,000)
Term loan borrowings - new credit agreement (Note 4)
Term loan repayments - previous credit agreement (Note 4)
Principal payments on finance leases
Cash paid for debt costs (Note 4)

Term loan repayments		(4,950)		(3,713)
Principal payments on finance leases		(141)		(328)
Cash paid for debt costs		(3,211)		(2,468)
Sale of common stock		—		75,000

Repurchase of common stock in connection with stock award exercises	Repurchase of common stock in connection with stock award exercises	(57)		(1,484)

Repurchase of common stock in connection with stock award exercises

Total cash (used in) provided by financing activities		$	(23,359)	$	27,007
Repurchase of common stock in connection with stock award exercises
Cash received from stock option exercises

Total cash provided by (used in) financing activities
Total cash provided by (used in) financing activities
Total cash provided by (used in) financing activities
Change in cash, cash equivalents, and restricted cash	Change in cash, cash equivalents, and restricted cash	(4,579)		(7,640)
Cash, cash equivalents, and restricted cash at beginning of period	Cash, cash equivalents, and restricted cash at beginning of period	10,479		11,709
Cash, cash equivalents, and restricted cash at end of period	Cash, cash equivalents, and restricted cash at end of period	$	5,900	$	4,069

Supplemental disclosures of cash flow information
Cash paid or received during the period:
Interest paid, net of interest received		$	3,170	$	3,648
Income tax (received) paid, net of tax refunds		(90)		—
Non-cash investing and financing activities:
Changes in accounts payable for capital additions to property, plant and equipment		$	672	$	469

Accrue debt modification costs		61		—
Accrue common stock issuance costs		—		178
Right-of-use assets obtained in exchange for operating lease obligations		199		—


	Three Months Ended
(in thousands of dollars)	December 30, 2023		December 31, 2022

Supplemental disclosures of cash flow information
Cash paid or received during the period:
Interest paid, net of interest received	$	1,807	$	3,170
Income tax paid (received), net of tax refunds	2		(90)
Non-cash investing and financing activities:
Changes in accounts payable for capital additions to property, plant and equipment	$	953	$	672



Accrue debt modification costs	—		61

Right-of-use assets obtained in exchange for operating lease obligations	1,241		199
Warrants issued for equity investment in affiliate	7,416		—

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) ~~EQUITY~~

(Unaudited)

Three Months Ended
(in thousands of dollars, except for share data) Common Stock Convertible Preferred Stock Treasury Stock
Shares Par Value Additional Paid-In-Capital Shares Amount Accumulated Other Comprehensive Loss Accumulated Deficit Shares Amount Total Stockholders' (Deficit) Equity
Balance, October 1, 2022 32,024,911 $ 3 $ 173,103 — $ — $ (41,930) $ (79,512) 1,782,568 $ (50,282) $ 1,382
Restricted stock activity 7,156 — (57) — — — — — — (57)
Share-based compensation expense — — 546 — — — — — — 546
Net loss — — — — — — (11,294) — — (11,294)
Other comprehensive income, net of tax — — — — — 227 — — — 227
Balance, December 31, 2022 32,032,067 $ 3 $ 173,592 — $ — $ (41,703) $ (90,806) 1,782,568 $ (50,282) $ (9,196)
Balance, October 2, 2021 27,205,269 $ 3 $ 96,170 — $ — $ (44,794) $ (33,753) 1,782,568 $ (50,282) $ (32,656)
Private placement 4,687,500 — 74,822 — — — — — — 74,822
Restricted stock activity 82,505 — (1,484) — — — — — — (1,484)
Share-based compensation expense — — 1,642 — — — — — — 1,642
Net loss — — — — — — (4,082) — — (4,082)
Other comprehensive income, net of tax — — — — — 221 — — — 221
Balance, January 1, 2022 31,975,274 $ 3 $ 171,150 — $ — $ (44,573) $ (37,835) 1,782,568 $ (50,282) $ 38,463


	Three Months Ended
(in thousands of dollars, except for share data)	Common Stock					Convertible Preferred Stock							Treasury Stock
	Shares	Par Value		Additional Paid-In-Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated Deficit		Shares	Amount		Total Stockholders' Equity (Deficit)
Balance, September 30, 2023	32,165,225	$	3	$	177,861	—	$	—	$	(31,884)	$	(55,700)	1,782,568	$	(50,282)	$	39,998


Issuance of warrants (Note 12)	—	—		7,416		—	—		—		—		—	—		7,416
Restricted stock activity	22,115	—		(301)		—	—		—		—		—	—		(301)
Stock option activity	11,252	—		149		—	—		—		—		—	—		149

Share-based compensation expense	—	—		2,034		—	—		—		—		—	—		2,034



Net income	—	—		—		—	—		—		26,150		—	—		26,150
Other comprehensive income, net of tax	—	—		—		—	—		131		—		—	—		131
Balance, December 30, 2023	32,198,592	$	3	$	187,159	—	$	—	$	(31,753)	$	(29,550)	1,782,568	$	(50,282)	$	75,577

Balance, October 1, 2022	32,024,911	$	3	$	173,103	—	$	—	$	(41,930)	$	(79,512)	1,782,568	$	(50,282)	$	1,382


Restricted stock activity	7,156	—		(57)		—	—		—		—		—	—		(57)


Share-based compensation expense	—	—		546		—	—		—		—		—	—		546


Net loss	—	—		—		—	—		—		(11,294)		—	—		(11,294)
Other comprehensive income, net of tax	—	—		—		—	—		227		—		—	—		227
Balance, December 31, 2022	32,032,067	$	3	$	173,592	—	$	—	$	(41,703)	$	(90,806)	1,782,568	$	(50,282)	$	(9,196)

BLUE BIRD CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of Business and Basis of Presentation

Nature of Business

Blue Bird Body Company ("BBBC"), a wholly-owned subsidiary of Blue Bird Corporation, was incorporated in 1958 and has manufactured, assembled and sold school buses to a variety of municipal, federal and commercial customers since 1927. The majority of BBBC’s sales are made to an independent dealer network, which in turn sells buses to ultimate end users. References in these notes to condensed consolidated financial statements to “Blue Bird,” the “Company,” “we,” “our,” or “us” relate to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise. We are headquartered in Macon, Georgia.

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company transactions and accounts have been eliminated in consolidation.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial reporting and Article 810 of Regulation S-X. The Company’s fiscal year ends on the Saturday closest to September 30 with its quarters consisting of thirteen weeks in most years. The fiscal years ending September 28, 2024 ("fiscal 2024") and ended September 30, 2023 ("fiscal 2023"~~) and ended October 1, 2022 ("fiscal 2022"~~) consist or consisted of 52 weeks. The first quarters of fiscal ~~2023~~2024 and fiscal ~~2022~~2023 both included 13 weeks.

In the opinion of management, all adjustments considered necessary for a fair presentation of financial results have been made. Such adjustments consist of only those of a normal recurring nature. Operating results for any interim period are not necessarily indicative of the results that may be expected for the entire year. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements.

The Condensed Consolidated Balance Sheet data as of ~~October 1, 2022~~September 30, 2023 was derived from the Company’s audited financial statements but does not include all disclosures required by U.S. GAAP. For additional information, including the Company’s significant accounting policies, refer to the consolidated financial statements and related footnotes as of and for the fiscal year ended ~~October 1, 2022~~September 30, 2023 as set forth in the Company's fiscal ~~2022~~2023 Form 10-K filed with the Securities and Exchange Commission ("SEC") on December ~~12, 2022.~~11, 2023.

Impacts of COVID-19 and Subsequent Supply Chain Constraints on our Business

~~Towards the end of our second quarter of~~As discussed in detail in the fiscal ~~year that ended October 3, 2020 ("fiscal 2020"),~~2023 Form 10-K filed with the SEC on December 11, 2023, the novel coronavirus known as "COVID-19" spread throughout the world, resulting in a global pandemic. Countermeasures taken to address the COVID-19 pandemic included virtual and hybrid schooling in many jurisdictions throughout the United States of America ("U.S.") and Canada. The uncertainty of when and how schools would open materially affected demand for new buses and replacement/maintenance parts during the second half of our fiscal year that ended October 3, 2020 ("fiscal 2020") and first half of ~~the~~our fiscal year that ended October 2, 2021 ("fiscal 2021"), significantly impacting our business and operations.

~~Demand~~ Although demand for school buses strengthened substantially during the second half of fiscal 2021, as COVID-19 vaccines were administered and many jurisdictions began preparing for a return to in-person learning environments for the new school year that began in mid-August to early September 2021. However, during this same period of time, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints ~~resulting from, among others, labor shortages; the lack~~around this same period of maintenance on, and acquisition of, capital assets by suppliers during the extended COVID-19 global lockdowns; significant increased demand for consumer products containing certain materials required for the production of vehicles, such as microchips, as consumers spent stimulus and other funds on items for their homes; etc.time. These supply chain disruptions had a significant adverse impact on our operations and results during the second half of fiscal 2021 and all of fiscal 2022 due to higher purchasing costs, including freight costs incurred to expedite receipt of critical components, increased manufacturing inefficiencies and our inability to complete the production of buses to fulfill sales orders. Towards the end of fiscal 2022 and continuing throughout the first quarter of fiscal 2023, there were slight improvements in the supply chain's ability to deliver the parts and components necessary to support our production operations, resulting in increased (i) manufacturing efficiencies and (ii) production of buses to fulfill sales orders during the first quarter of fiscal 2023. However, the higher costs charged by suppliers to procure inventory continued into the first quarter of fiscal 2023 and had a significant adverse impact on our operations and results as such costs outpaced the increases in sales prices that we

charged for the buses that were sold during the quarter, all of which were included in the backlog of fixed price sales orders originating in fiscal 2021 and 2022 that carried forward into fiscal 2023.

Additionally, Russian military forces launched a large-scale invasion of Ukraine on February 24, 2022, which further exacerbated global supply chain disruptions.While the Company has no assets or customers in either of these countries, this military conflict has significantly impacted our financial results, ~~during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023,~~ primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country. Specifically, it ~~has~~ contributed to increased a) costs charged by suppliers for the purchase of inventory that is at least partially dependent on resources originating from either of the countries and b) freight costs, both of which negatively impacted the gross profit recognized on sales during fiscal 2022, fiscal 2023 and continuing into fiscal 2024.

Towards the ~~second half~~end of fiscal 2022 and continuing into fiscal 2023, there were slight improvements in the supply chain's ability to deliver the parts and components necessary to support our production operations, resulting in increased (i) manufacturing efficiencies and (ii) production of buses to fulfill sales orders during fiscal 2023. However, the higher costs charged by suppliers to procure inventory that continued into fiscal 2023 had a significant adverse impact on our operations and results. Specifically, such cost increases outpaced the increases in sales prices that we charged for the buses that were sold during the first quarter of fiscal 2023, many of which were

included in the backlog of fixed price sales orders originating in fiscal 2021 and the early months of fiscal 2022 that carried forward into fiscal 2023. During the remainder of fiscal 2023, the buses that were sold were generally included in the backlog of fixed price sales orders originating more recently (i.e., the latter months of fiscal 2022 and in fiscal 2023), with the cumulative increases in sales prices we charged for those buses generally outpacing the higher costs we paid to procure inventory, resulting in gross profit during the quarters. While the gross margin on bus sales during the second quarter of fiscal 2023 lagged the historical gross margin reported prior to the COVID-19 pandemic, it returned to more normal historical levels during the latter half of fiscal 2023.

~~The continuing development~~Supply chain disruptions continued into the first quarter of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and ~~fluidity~~operations by limiting the number of school buses that we could produce and sell as well as increasing the ~~pandemic~~costs to manufacture buses. Nonetheless, the lessons learned, and ~~subsequent~~resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain ~~constraints~~challenges and ~~their trailing impacts preclude any prediction as~~consistently produce buses to fulfill sales orders. Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first quarter of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the ~~ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.~~COVID-19 pandemic.

Use of Estimates and Assumptions

The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions. At the date of the financial statements, these estimates and assumptions affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities, and during the reporting period, these estimates and assumptions affect the reported amounts of revenues and expenses. For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory; the allowance for doubtful accounts; potential impairment of long-lived assets, goodwill and intangible assets; and the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies. Future events, including the extent and duration of ~~any COVID-19 outbreaks and~~ continued supply chain constraints and their related economic impacts, and their effects cannot be predicted with certainty, and, accordingly, the Company’s accounting estimates require the exercise of judgment. The accounting estimates used in the preparation of the Company’s condensed consolidated financial statements may change as new events occur, as more experience is acquired, as additional information is obtained and as the Company’s operating environment changes. The Company evaluates and updates its assumptions and estimates on an ongoing basis and may employ outside experts to assist in the Company’s evaluations. Actual results could differ from the estimates that the Company has used.

2. Summary of Significant Accounting Policies and Recently Issued Accounting Standards

The Company’s significant accounting policies are described in the Company’s fiscal ~~2022~~2023 Form 10-K, filed with the SEC on December ~~12, 2022.~~11, 2023. Our senior management has reviewed these significant accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the three months ended December ~~31, 2022.~~30, 2023.

Recently Issued Accounting Standards

ASU ~~2020-04~~2023-07 On ~~March 12, 2020,~~November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") ~~2020-04,~~2023-07, ~~Reference Rate Reform~~Segment Reporting (Topic ~~848)~~280): ~~Facilitation of the Effects of Reference Rate Reform on Financial Reporting~~Improvements to Reportable Segment Disclosures, ~~providing temporary guidance~~which requires public entities to ~~ease the potential burden in accounting~~disclose information about their reportable segments’ significant expenses on an interim and annual basis. The ASU is effective for ~~reference rate reform primarily resulting from the discontinuation of LIBOR (defined below), which was initially expected to occur on~~fiscal years beginning after December ~~31, 2021. The amendments in ASU 2020-04 are elective~~15, 2023, and ~~apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.~~interim periods beginning after December 15, 2024, with early adoption permitted.

ASU ~~2021-01~~2023-09 On ~~January 7, 2021,~~December 14, 2023, the FASB issued ASU ~~2021-01,~~2023-09, ~~Reference Rate Reform~~Income Taxes (Topic ~~848)~~740): ~~Scope~~Improvements to Income Tax Disclosures, which ~~refines the scope~~requires entities to disclose more detailed information in their reconciliation of ~~Accounting Standards Codification Topic~~their statutory tax rate to their effective tax rate. Public business entities ("~~ASC"~~PBEs") ~~848,~~ ~~Reference Rate Reform, and clarifies some of its guidance as part of the FASB’s ongoing monitoring of global reference rate reform activities.~~are required to provide this incremental detail in a numerical, tabular format. The ASU ~~permits~~also requires entities to ~~elect certain optional expedients~~disclose more detailed information about income taxes paid, including by jurisdiction; pretax income (or loss) from continuing operations; and ~~exceptions when accounting~~income tax expense (or benefit). The ASU is effective for ~~derivative contracts~~PBEs in fiscal years beginning after December 15, 2024, and ~~certain hedging relationships affected by changes in the interest rates used for discounting cash flows, computing variation margin settlements, and calculating price alignment interest in connection~~interim periods beginning after December 15, 2025, with ~~reference rate reform activities under way in global financial markets.~~

~~ASU 2022-06~~ ~~On December 21, 2022, the FASB issued ASU 2022-06,~~ ~~Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which defers the sunset date of ASC 848 from December 31, 2022 to December 31, 2024, after which entities will no longer be permitted to apply the relief in ASC 848.~~early adoption permitted.

The ~~above amendments~~new ASUs will not impact amounts recorded in the financial statements but instead, will require more detailed disclosures in the footnotes to the financial statement. The Company plans to provide the updated disclosures required by the ASUs in the periods in which they are effective for all entities from March 12, 2020 through December 31, 2024. An entity may elect to apply the amendments to contract modifications on a (i) full retrospective basis as of any date from the beginning of an interim period thateffective.

includes or is subsequent to March 12, 2020 or (ii) prospective basis from any date within an interim period that includes or is subsequent to March 12, 2020 through the date that the interim financial statements are issued or available to be issued.

On March 5, 2021, the Intercontinental Exchange, Inc. ("ICE") Benchmark Administration ("IBA"), the administrator of the United States Dollar London Interbank Offering Rate ("LIBOR"), issued a statement, following the completion of a formal consultation process, reaffirming the preliminary announcement it made on November 30, 2020, to cease publication of (i) 1 week and 2 month LIBOR subsequent to December 31, 2021 and (ii) the overnight and 1, 3, 6 and 12 month LIBOR tenors subsequent to June 30, 2023. The IBA’s statement regarding such cessation dates primarily resulted from a majority of LIBOR panel banks communicating to the IBA that they would be unwilling to continue contributing to the relevant LIBOR settings after such dates. As a result, the IBA determined that it would be unable to publish the relevant LIBOR settings on a representative basis after such dates. The United Kingdom Financial Conduct Authority ("FCA"), which regulates the IBA, confirmed that, based on information it received from LIBOR panel banks, it does not expect that any LIBOR settings will become unrepresentative before the announced cessation dates summarized above.

With the maturity of the interest rate collar on September 30, 2022 and execution of the Fifth Amended Credit Agreement (defined below) on September 2, 2022, which, among other things, changed one of the market interest rate indices that the Company can elect to accrue interest on outstanding borrowings from LIBOR to the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York (“SOFR”) and became effective at the end of the applicable interest period for any LIBOR borrowings outstanding on the fifth amendment effective date, the Company no longer has any contracts that reference LIBOR as of December 31, 2022 and has no plans to enter such contracts prior to the discontinuation of LIBOR. The change in interest rate indices from LIBOR to SOFR had virtually no impact on the first quarter of fiscal 2023 as the LIBOR interest rate on outstanding borrowings on the fifth amendment effective date remained in place through approximately the end of December 2022. Accordingly, interest was accrued utilizing SOFR for only a short period of time and the Company adjusted the effective interest rate on outstanding borrowings on a prospective basis, which did not have a material impact on the condensed consolidated financial statements.

3. Supplemental Financial Information

Inventories

The following table presents the components of inventories at the dates indicated:


(in thousands of dollars)	(in thousands of dollars)	December 31, 2022		October 1, 2022		(in thousands of dollars)	December 30, 2023	September 30, 2023
Raw materials	Raw materials	$	89,099	$	106,070
Work in process	Work in process	36,961		35,398
Finished goods	Finished goods	3,060		1,509
Total inventories	Total inventories	$	129,120	$	142,977

Restricted Cash

The following table provides a reconciliation of cash, cash equivalents, and restricted cash reported on the applicable Condensed Consolidated Balance Sheets that sum to the total of such amounts reported on the Condensed Consolidated Statements of Cash Flows:


(in thousands of dollars)	(in thousands of dollars)	December 31, 2022		January 1, 2022		(in thousands of dollars)	December 30, 2023	December 31, 2022
Cash and cash equivalents	Cash and cash equivalents	$	5,664	$	4,069
Restricted cash	Restricted cash	236		—
Total cash, cash equivalents, and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	Total cash, cash equivalents, and restricted cash reported on the Condensed Consolidated Statements of Cash Flows	$	5,900	$	4,069

Amounts included in restricted cash represent those that were required by a contractual agreement with a financial institution to serve as collateral against outstanding balances pertaining to the Company's corporate credit card program.

Product Warranties

The following table reflects activity in accrued warranty cost (current and long-term portions combined) for the periods presented:

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Balance at beginning of period

15,970

18,550

Balance at beginning of period

Add current period accruals

2,033

1,236

Current period reductions of accrual

(2,423)

(2,534)

Current period reductions of accrual

Balance at end of period

15,580

17,252

Balance at end of period

Extended Warranties

The following table reflects activity in deferred warranty income (current and long-term portions combined), for the sale of extended warranties of two to five years, for the periods presented:

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Balance at beginning of period

18,795

20,144

Balance at beginning of period

Add current period deferred income

2,336

939

Current period recognition of income

(1,841)

(1,995)

Current period recognition of income

Balance at end of period

19,290

19,088

Balance at end of period

The outstanding balance of deferred warranty income in the table above is considered a "contract liability," and represents a performance obligation of the Company that we satisfy over the term of the arrangement but for which we have been paid in full at the time the warranty was sold. We expect to recognize ~~$5.6~~$6.4 million of the outstanding contract liability during the remainder of fiscal ~~2023, $5.7~~2024, $6.9 million in fiscal ~~2024,~~2025, and the remaining balance thereafter.

Other Current Liabilities

The balance in other current liabilities as of December 30, 2023 includes approximately $7.1 million of funds awarded by the U.S. Environmental Protection Agency in administering the U.S. Infrastructure Investment and Jobs Act ("IIJA") that was signed into law in mid-November 2021. The IIJA allocates federal funds to help local school jurisdictions purchase zero and low emission school buses over a five year period. The Company expects to recognize this amount as revenue during fiscal 2024 as the underlying buses are produced and delivered.

Self-Insurance

The following table reflects our total accrued self-insurance liability, comprised of workers' compensation and health insurance related claims, at the dates indicated:


(in thousands of dollars)	(in thousands of dollars)	December 31, 2022		October 1, 2022		(in thousands of dollars)	December 30, 2023	September 30, 2023
Current portion	Current portion	$	3,813	$	3,996
Long-term portion	Long-term portion	1,893		1,794
Total accrued self-insurance	Total accrued self-insurance	$	5,706	$	5,790

The current and long-term portions of the accrued self-insurance liability are reflected in accrued expenses and other liabilities, respectively, on the Condensed Consolidated Balance Sheets.

Shipping and Handling Revenues

Shipping and handling revenues were ~~$4.3~~$4.7 million and ~~$3.4~~$4.3 million for the ~~quarters~~three months ended December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022, respectively. The related cost of goods sold was ~~$3.8~~$4.3 million and ~~$3.1~~$3.8 million for the ~~quarters~~three months ended December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022, respectively.

Pension Expense

Components of net periodic pension benefit expense ~~(income)~~ were as follows for the periods presented:

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Interest cost

1,509

1,092

Interest cost

Expected return on plan assets

(1,630)

(2,122)

Amortization of prior loss

299

291

Net periodic benefit expense (income)

178

(739)

Amortization of prior loss

Net periodic pension benefit expense

Amortization of prior loss, recognized in other comprehensive income

(299)

(291)

Total recognized in net periodic pension benefit expense (income) and other comprehensive income

(121)

(1,030)

Amortization of prior loss, recognized in other comprehensive income

Total recognized in net periodic pension benefit expense and other comprehensive income

4. Debt

On November ~~21, 2022,~~17, 2023 (the “Closing Date”), BBBC, ~~(as "Borrower")~~as Borrower, executed a ~~sixth amendment to the Credit Agreement, dated~~$250.0 million five-year credit agreement with Bank of Montreal, acting as administrative agent and an issuing bank; several joint lead arranger partners and issuing banks, including Bank of ~~December 12, 2016 ("Credit Agreement"); as amended by the first amendment to the Credit Agreement, dated as~~America; and a syndicate of ~~September 13, 2018~~other lenders (the "First Amended Credit Agreement"), the second amendment to the Credit Agreement, dated as of May 7, 2020 (the "Second Amended Credit Agreement"), the third amendment to the Credit Agreement, dated as of December 4, 2020 (the "Third Amended Credit Agreement"); the fourth amendment to the Credit Agreement, dated as of November 24, 2021 (the "Fourth Amended Credit Agreement:); the fifth amendment and limited waiver to the Credit Agreement, dated as of September 2, 2022 (the "Fifth Amended Credit Agreement"); and as further amended by the sixth amendment (the "Sixth Amended Credit Agreement" and collectively, the "Amended Credit"Credit Agreement"). The Sixth Amended Credit Agreement, among other things, extends the maturity date for both the term loan and revolving credit facilities from September 13, 2023 to December 31, 2024. The total revolving credit facility commitment is reduced to an aggregate principal amount of $90.0 million, of which $80.0 million is available for Borrower to draw, with the remaining $10.0 million subject to written approval from the lenders, which, once obtained, will be irrevocable. There was no change in the term loan facility commitment; however, the Sixth Amended Credit Agreement requires principal repayments approximating $5.0 million on a quarterly basis through September 30, 2024, with the remaining balance due upon maturity.~~There were $151.6 million of term loan borrowings outstanding on the sixth amendment effective date.~~

The Sixth Amended Credit Agreement also provides for temporary amendments to certain financial performance covenants during the period from the third amendment effective date, December 4, 2020, through and including April 1, 2023 (the “Amended Limited Availability Period:), which will terminate ~~on the date on which the Company’s~~ ~~Total Net Leverage Ratio ("TNLR"), defined as the ratio of (a) consolidated net debt to (b) consolidated EBITDA,~~ for the two fiscal quarters most recently ended is each less than 4.00x and no default or event of default has occurred and is continuing. However, the Amended Limited Availability Period can re-occur upon a default or event of default or if the TNLR for the immediately preceding fiscal quarter is equal to or greater than 4.00x.

The credit facilities provided for under the Credit Agreement consist of a term loan facility in an aggregate initial principal amount of $100.0 million (the “Term Loan Facility”) and a revolving credit facility with aggregate commitments of $150.0 million. The revolving credit facility includes a $25.0 million letter of credit sub-facility and $5.0 million swingline sub-facility (the “Revolving Credit Facility,” and together with the Term Loan Facility, each a “Credit Facility” and collectively, the “Credit Facilities”).

A minimum ~~consolidated EBITDA that~~of $100.0 million of additional term loans and/or revolving credit commitments may be incurred under the ~~Company is required~~Credit Agreement, subject to ~~maintain during the Amended Limited Availability Period is updated~~certain limitations as set forth in the ~~table below (in millions):~~Credit Agreement, and which additional loans and/or commitments would require further commitments from existing lenders or from new lenders.

~~Period~~

~~Minimum Consolidated EBITDA~~

~~Fiscal quarter ending July 1, 2023~~

~~$50.0~~

~~Fiscal quarter ending September 30, 2023~~

~~$60.0~~

~~For purposes of complying with~~Borrower has the ~~above minimum consolidated EBITDA covenant,~~right to prepay the ~~Company’s consolidated EBITDA for the (i) two fiscal quarter period ending July 1, 2023 is multiplied by 2 and (ii) three fiscal quarter period ending September 30, 2023 is multiplied by 4/3.~~

~~The minimum liquidity (in the form of undrawn availability~~loans outstanding under the ~~revolving credit facility and unrestricted cash and cash equivalents) that the Company is required~~Credit Facilities without premium or penalty (subject to ~~maintain at the end of each fiscal month during the Amended Limited Availability Period is amended as set forth in the table below~~customary breakage costs, if applicable). Additionally, proceeds from asset sales, condemnation, casualty insurance and/or debt issuances (in ~~millions):~~


~~Period~~						~~Minimum Liquidity~~
~~Sixth amendment effective date through December 30, 2023~~						~~$30.0~~

~~Additionally, the financial performance covenant requiring that school bus units manufactured by the Company (“Units”) not fall below~~ certain ~~pre-set thresholds on a three month trailing basis (“Units Covenant”) is amended for Units~~circumstances) are required to be ~~calculated~~used to prepay borrowings outstanding under the Credit Facilities. Borrowings under the Term Loan Facility, which were made on the Closing Date, may not be reborrowed once they are repaid while borrowings under the Revolving Credit Facility may be repaid and reborrowed from time to time at the end of each applicable fiscal month on a cumulative basis, with the minimum cumulative threshold that the Company is required to maintain during the Amended Limited Availability Period amended as set forth in the table below. ~~The Units Covenant is triggered only if the Company’s liquidity for the most-recently ended fiscal month is less than $50.0 million during the Amended Limited Availability Period:~~


~~Period~~						~~Minimum Units Manufactured~~
~~Period from October 2, 2022 and ending October 29, 2022~~						~~450~~
~~Period from October 2, 2022 and ending November 26, 2022~~						~~900~~
~~Period from October 2, 2022 and ending December 31, 2022~~						~~1,400~~
~~Period from October 2, 2022 and ending January 28, 2023~~						~~1,900~~
~~Period from October 2, 2022 and ending February 25, 2023~~						~~2,400~~
~~Period from October 2, 2022 and ending April 1, 2023~~						~~3,000~~

The Company is not required to comply with a maximum TNLR financial maintenance covenant for any fiscal quarters from the sixth amendment effective date through September 30, 2023, with the maximum threshold amended thereafter as follows:


~~Period~~						Maximum Total Net Leverage Ratio
~~Fiscal Quarter ending December 30, 2023 through the fiscal quarter ending March 30, 2024~~						~~4.00:1.00~~
~~Fiscal quarter ending June 29, 2024 and thereafter~~						~~3.50:1.00~~

our election.

The ~~pricing grid~~Term Loan Facility is subject to amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, commencing on March 30, 2024, with 5.0% of the $100.0 million aggregate principal amount of all initial term loans outstanding at the Closing Date payable each year prior to the maturity date of the Term Loan Facility. The remaining initial aggregate principal amount outstanding under the Term Loan Facility, as well as any outstanding borrowings under the Revolving Credit Facility, will be payable on the November 17, 2028 maturity date of the Credit Agreement.

The Credit Facilities are guaranteed by all of the Company’s wholly-owned domestic restricted subsidiaries (subject to customary exceptions) and are secured by a security agreement which pledges a lien on virtually all of the assets of Borrower, the Company and the Company’s other wholly-owned domestic restricted subsidiaries, other than any owned or leased real property and subject to customary exceptions.

The $100.0 million of Term Loan Facility proceeds and $36.2 million of Revolving Credit Facility proceeds that were borrowed on the Closing Date were used to pay (i) the $131.8 million of term loan indebtedness outstanding under the previous credit agreement ("Amended Credit Agreement"), (ii) interest and commitment fees accrued under the Amended Credit Agreement through the Closing Date and (iii) transaction costs associated with the consummation of the Credit Agreement.

Under the terms of the Credit Agreement, Borrower, the Company and the Company’s other wholly-owned domestic restricted subsidiaries are subject to customary affirmative and negative covenants and events of default for facilities of this type (with customary grace periods, as applicable, and lender remedies).

Borrowings under the Credit Facilities bear interest, at our option, at (i) base rate ("ABR") or (ii) the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York ("SOFR") plus 0.10%, plus an applicable margin depending on the Total Net Leverage Ratio ("TNLR," which is ~~based~~defined in the Credit Agreement as the ratio of consolidated net debt to consolidated EBITDA on a trailing four quarter basis) of the Company as follows:


Level	TNLR	ABR Loans	SOFR Loans
I	Less than 1.00x	0.75%	1.75%
II	Greater than or equal to 1.00x and less than 1.50x	1.50%	2.50%
III	Greater than or equal to 1.50x and less than 2.25x	2.00%	3.00%
IV	Greater than or equal to 2.25x	2.25%	3.25%

Pricing on the Closing Date was set at Level III until receipt of the financial information and related compliance certificate for the first fiscal quarter ending after the Closing Date.

Borrower is also required to pay lenders an unused commitment fee of between 0.25% and 0.45% per annum on the undrawn commitments under the Revolving Credit Facility, depending on the TNLR, ~~is applicable to both term loan and revolving borrowings and is determined~~quarterly in ~~accordance with the amended pricing matrix set forth below:~~arrears.

Level Total Net Leverage Ratio ABR Loans SOFR Loans
I Less than 2.00x 0.75% 1.75%
II Greater than or equal to 2.00x and less than 2.50x 1.00% 2.00%
III Greater than or equal to 2.50x and less than 3.00x 1.25% 2.25%
IV Greater than or equal to 3.00x and less than 3.25x 1.50% 2.50%
V Greater than or equal to 3.25x and less than 3.50x 1.75% 2.75%
VI Greater than or equal to 3.50x and less than 4.00x 2.00% 3.00%
VII Greater than or equal to 4.00x and less than 4.50x 2.75% 3.75%
VIII Greater than or equal to 4.50x and less than 5.00x 3.75% 4.75%
IX Greater than 5.00x 4.75% 5.75%

~~Further,~~The Credit Agreement also includes a requirement that the ~~pricing margins for levels VII though IX above are~~Company comply with the following financial covenants on the last day of each ~~increased (x) by 0.25% if the aggregate revolving borrowings are equal to or~~fiscal quarter through maturity: (i) a pro forma TNLR of not greater than ~~$50.0 million~~3.00:1.00 and (ii) a pro forma fixed charge coverage ratio (as defined in the Credit Agreement) of not less than ~~or equal to $80.0 million and (y) by 0.50% if the aggregate revolving borrowings are greater than $80.0 million.On the sixth amendment effective date, the interest rate~~1.20:1.00. The Company was ~~set at SOFR plus 5.75% and will be adjusted,~~in compliance with such covenants as ~~applicable, for future fiscal quarter in accordance with the amended pricing grid set forth above.~~

~~Finally, the Company is required to deliver to the administrative agent, on a quarterly basis, a projected consolidated balance sheet and consolidated statements~~ of ~~projected operations and cash flows containing the next four fiscal quarters.~~December 30, 2023.

The Company incurred approximately ~~$3.3~~$3.1 million in lender fees and other issuance costs relating to the ~~sixth amendment.~~Credit Agreement. Of such total, approximately ~~$1.2~~$1.9 million and ~~$1.5~~$0.8 million was capitalized within other assets and long-term debt (as a contra-balance), respectively, on the Condensed Consolidated Balance Sheets and will be amortized as an adjustment to interest expense on a straight-line basis and utilizing the effective interest method, respectively, until maturity of the ~~Amended~~ Credit Agreement. The remaining approximate ~~$0.5~~$0.4 million was recorded to loss on debt refinancing or modification on the Condensed Consolidated Statements of Operations.

In conjunction with executing the Credit Agreement, previously capitalized lender fees and other issuance costs relating to the Amended Credit Agreement and incurred in prior periods totaling $1.1 million were also expensed to loss on debt refinancing or modification on the Condensed Consolidated Statements of Operations.

Term ~~debt~~loan borrowings consisted of the following at the dates indicated:

(in thousands of dollars) December 31, 2022 October 1, 2022
2023 term loan, net of deferred financing costs of $2,509 and $1,410, respectively $ 144,141 $ 150,190
Less: current portion of long-term debt 19,800 19,800
Long-term debt, net of current portion $ 124,341 $ 130,390


(in thousands of dollars)	December 30, 2023		September 30, 2023
Term loan borrowings, net of deferred financing costs of $1,514 and $1,456, respectively	$	98,486	$	130,344
Less: current portion of long-term debt	5,000		19,800
Long-term debt, net of current portion	$	93,486	$	110,544

Term ~~loans~~loan borrowings are recognized on the Condensed Consolidated Balance Sheets at the unpaid principal balance, and are not subject to fair value measurement; however, given the variable rates on the loans, the Company estimates that the unpaid principal balance approximates fair value. If measured at fair value in the financial statements, the term loans would be classified as Level 2 in the fair value hierarchy. At December ~~31, 2022~~30, 2023 and ~~October 1, 2022, $146.7~~September 30, 2023, $100.0 million and ~~$151.6~~$131.8 million, respectively, were outstanding on the term loans.

At December ~~31, 2022~~30, 2023 and ~~October 1, 2022,~~September 30, 2023, the stated interest rates on the term loans were ~~10.5%~~8.5% and ~~7.9%~~10.0%, respectively. AtFor the three month periods ended December ~~31, 2022~~30, 2023 and ~~October 1, 2022,~~September 30, 2023, the weighted-average annual effective interest rates for the term loans were ~~9.6%~~9.9% and ~~8.0%~~10.9%, ~~respectively, which includes amortization of the deferred financing costs and interest relating to the interest rate collar, as applicable.~~respectively.

At December ~~31, 2022, $6.3~~30, 2023, $6.7 million of letters of credit were outstanding, which reduces the availability on the revolving line of credit. There were ~~$5.0~~$36.2 million in borrowings outstanding on the ~~revolving credit facility;~~Revolving Credit Facility; therefore, the Company would have been able to borrow ~~$78.7~~$107.1 million on the revolving line of credit.

Interest expense on all indebtedness was ~~$4.2~~$3.6 million and ~~$3.1~~$4.2 million for the three months ended December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022, respectively.

The schedule of remaining principal payments through maturity for the term loans is as follows:


(in thousands of dollars)	(in thousands of dollars)			(in thousands of dollars)
Fiscal Year	Fiscal Year	Principal Payments		Fiscal Year	Principal Payments
2023		$	14,850
2024	2024	19,800
2025	2025	112,000

2026
2027
2028
Thereafter
Total remaining principal payments	Total remaining principal payments	$	146,650

5. Income Taxes

Income tax provisions for interim periods are based on estimated annual income tax rates, adjusted to reflect the effects of any significant infrequent or unusual items that are required to be discretely recognized within the current interim period. The effective tax rates in the periods presented are largely based upon the annual forecasted pre-tax earnings mix and allocation of certain expenses in various taxing jurisdictions where the Company conducts its business, primarily in the United States of America ("U.S."). In periods where our pre-tax income approximates or is equal to break-even, the effective tax rates for quarter-to-date and full-year periods may not be meaningful due to discrete period items.

Three Months

The effective tax rate for the three months ended December 30, 2023 was 25.9% and differed from the statutory federal income tax rate of 21%. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter.

The effective tax rate for the three months ended December 31, 2022 was 20.8%, which aligned with the statutory federal income tax rate of 21% and is comprised of normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), with discrete period items having a nominal impact on the effective rate during the quarter.

The effective tax rate for the three months ended January 1, 2022 was 35.6%, which differed from the statutory federal income tax rate of 21%. The difference was mainly due to normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), which was partially offset by discrete period tax expense resulting from net non-deductible compensation expenses and other tax adjustments.

6. Guarantees, Commitments and Contingencies

Litigation

At December ~~31, 2022,~~30, 2023, the Company had a number of product liability and other cases pending. Management believes that, considering the Company’s insurance coverage and its intention to vigorously defend its positions, the ultimate resolution of these matters will not have a material adverse effect on the Company’s financial statements.

Environmental

The Company is subject to a variety of environmental regulations relating to the use, storage, discharge and disposal of hazardous materials used in its manufacturing processes. Failure by the Company to comply with present and future regulations could subject it to future liabilities. In addition, such regulations could require the Company to acquire costly equipment or to incur other significant expenses to comply with environmental regulations. The Company is currently not involved in any material environmental proceedings and therefore, management believes that the resolution of pending environmental matters will not have a material adverse effect on the Company’s financial statements.

7. Segment Information

We manage our business in two operating segments: (i) the Bus segment, which includes the manufacturing and assembly of buses to be sold to a variety of customers across the U.S., Canada and in certain limited international markets; and (ii) the Parts segment, which consists primarily of the purchase of parts from third parties to be sold to dealers within the Company’s network and certain large fleet customers. Management evaluates the segments based primarily upon revenues and gross profit, which are reflected in the tables below for the periods presented:

Net sales

Three Months Ended

Net sales

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Bus (1)

213,249

112,437

Bus (1)

Parts (1)

22,483

16,786

Segment net sales

235,732

129,223

Segment net sales

(1) Parts segment revenue includes ~~$1.1~~$1.6 million and ~~$0.8~~$1.1 million for the three months ended December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022, respectively, related to the inter-segment ~~sales~~sale of parts that ~~were~~was eliminated by the Bus segment upon consolidation.

Gross profit

Three Months Ended

Gross profit (loss)

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Bus

(3,731)

9,642

Bus

Parts

11,188

6,555

Segment gross profit

7,457

16,197

Segment gross profit

The following table is a reconciliation of segment gross profit to consolidated ~~loss~~income (loss) before income taxes for the periods presented:

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Segment gross profit

7,457

16,197

Segment gross profit

Adjustments:

Selling, general and administrative expenses

(16,832)

(18,233)

Selling, general and administrative expenses

Interest expense

(4,196)

(3,082)

Other (expense) income, net

(236)

736

Loss on debt modification

(537)

(561)

Loss before income taxes

(14,344)

(4,943)

Interest expense

Interest income

Other expense, net

Loss on debt refinancing or modification

Income (loss) before income taxes

Sales are attributable to geographic areas based on customer location and were as follows for the periods presented:

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

United States

204,541

100,547

(in thousands of dollars)

U.S.

Canada

30,521

26,304

Rest of world

670

2,372

Rest of world

Total net sales

235,732

129,223

Total net sales

8. Revenue

The following table disaggregates revenue by product category for the periods presented:

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Diesel buses

71,494

46,033

Diesel buses

Alternative power buses (1)

131,946

57,637

Alternative power buses (1)

Other (2)

10,455

9,297

Parts

21,837

16,256

Parts

Net sales

235,732

129,223

Net sales

(1) Includes buses sold with any power source other than diesel (e.g., gasoline, propane, compressed natural gas ("CNG") or electric).

(2) Includes shipping and handling revenue, extended warranty income, surcharges and chassis and bus shell sales.

9. ~~Loss~~Earnings (Loss) Per Share

The following table presents the ~~loss~~earnings (loss) per share computation for the periods presented:

Three Months Ended

(in thousands except for share data)

December 31, 2022

January 1, 2022

Numerator:

Net loss

(11,294)

(4,082)

Numerator:

Net income (loss)

Denominator:

Weighted-average common shares outstanding

32,026,311

28,118,450

Weighted-average common shares outstanding

Weighted-average dilutive securities, restricted stock

Weighted-average dilutive securities, stock options

Weighted-average dilutive securities, warrants (Note 12)

Weighted-average shares and dilutive potential common shares (1)

32,026,311

28,118,450

Loss per share:

Basic loss per share

(0.35)

(0.15)

Diluted loss per share

(0.35)

(0.15)

Weighted-average shares and dilutive potential common shares (1)

Earnings (loss) per share:

Basic earnings (loss) per share

Diluted earnings (loss) per share

(1) Potentially dilutive securities representing ~~0.8~~0.2 million and ~~0.4~~0.8 million shares of common stock were excluded from the computation of diluted ~~loss~~earnings per share for the three ~~months~~month periods ending December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022, respectively, as their effect would have been antidilutive.

10. Accumulated Other Comprehensive Loss

The following table provides information on changes in accumulated other comprehensive loss ("AOCL") for the periods presented:

Three Months Ended

(in thousands of dollars)

Defined Benefit Pension Plan

Total AOCL

December 31, 2022

(in thousands of dollars)

December 30, 2023

Beginning Balance

(41,930)

Amounts reclassified and included in earnings

299

Amounts reclassified and included in earnings

Total before taxes

299

Income taxes

(72)

Ending Balance December 31, 2022

(41,703)

Income taxes

Ending Balance December 30, 2023

January 1, 2022

December 31, 2022

Beginning Balance

(44,794)

Amounts reclassified and included in earnings

291

Amounts reclassified and included in earnings

Total before taxes

291

Income taxes

(70)

Ending Balance January 1, 2022

(44,573)

Income taxes

Ending Balance December 31, 2022

11. Stockholder Transaction Costs

On December 14, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc. and Barclays Capital Inc., as representatives of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which the Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share (“Offering”).

The Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No. 333-261858) that was initially filed with the SEC on December 23, 2021.

The Offering closed on December 19, 2023. Although the Company did not sell any shares or receive any proceeds from the Offering, it was required to pay certain expenses in connection with the Offering that totaled approximately $1.2 million for the three month period ending December 30, 2023, with no similar expense recorded during the same period of fiscal 2023. The $1.2 million of expense is included within other expense, net on the Condensed Consolidated Statements of Operations for the three month period ending December 30, 2023.

12. Joint Ventures

Micro Bird Holdings, Inc.

During the three month period ended December 30, 2023, Micro Bird Holdings, Inc., our unconsolidated Canadian joint venture, paid dividends to all common stockholders, with the Company's proportionate share totaling $3.0 million, gross of required withholding taxes. The dividend was recorded as a reduction in the balance of equity investment in affiliate on the Condensed Consolidated Balance Sheets and is presented as a cash inflow in the operating section of the Condensed Consolidated Statements of Cash Flows.

Clean Bus Solutions, LLC

On December 7, 2023, the Company, through its wholly owned subsidiary, BBBC, and GC Mobility Investments I, LLC, a wholly owned subsidiary of Generate Capital, PBC (“Generate Capital”), a sustainable investment company focusing on clean energy, transportation, water, waste, agriculture, smart cities and industrial decarbonization, executed a definitive agreement (“Joint Venture Agreement”) establishing a joint venture, Clean Bus Solutions, LLC, to provide a fleet-as-a-service ("FaaS") offering using electric school buses manufactured and sold by the Company (“Joint Venture”). The service will be offered to qualified customers of the Company. Through the Joint Venture, the Company will provide its end customers with turnkey electrification solutions, including a wide product range consisting of, among others, electric school buses, financing of electric buses and supporting charging infrastructure, project planning and management, and fleet optimization.

The Company and Generate Capital will initially have an equal common ownership interest in the Joint Venture, and will initially jointly share management responsibility and control, with each party having certain customary consent and approval rights and control triggers.The parties have each agreed to contribute up to $10.0 million to the Joint Venture, as agreed from time to time, for common interests to fund administrative expenses, and up to an additional $100.0 million of capital in the form of preferred interests to fund the purchase, delivery, installation, operation and maintenance of FaaS projects, inclusive of Blue Bird electric school buses and associated charging infrastructure.Of this amount, the Company has committed to provide up to $20.0 million and Generate Capital has committed to provide up to $80.0 million, with the Company’s aggregate commitment in any one year not to exceed $10.0 million without its consent.

In accordance with the terms of the Joint Venture Agreement, the Company will promote the Joint Venture as the Company’s preferred FaaS offering for electric school buses and has agreed to not participate as a joint venture partner in any other similar FaaS offering for electric school buses, except as an original equipment manufacturer of buses.The Company’s obligations do not prevent or limit any activities of its dealers.

The Joint Venture has a perpetual duration subject to the right of either party to terminate early upon the occurrence of certain events of default or the failure to achieve certain milestones set forth in the terms of the Joint Venture Agreement.

In connection with the execution of the Joint Venture Agreement, the Company granted Generate Capital warrants to purchase an aggregate of 1,000,000 shares of Company common stock at an exercise price of $25.00 per share during a five-year exercise period (“Warrants”). Two-thirds of the Warrants were immediately exercisable while the remaining Warrants will become exercisable upon Generate Capital satisfying certain funding conditions. The exercise price and the number of shares issuable upon exercise of the Warrants are subject to adjustment in the event of a recapitalization, stock dividend or similar event.

The Company recorded the $7.4 million fair value of the Warrants upon issuance as permanent equity within additional paid-in capital on the Condensed Consolidated Balance Sheets and is not required to subsequently record changes in fair value as long as the Warrants continue to be classified within stockholders' equity. Additionally, since the Warrants were provided in exchange for an investment in the Joint Venture, the Company recorded the cost of its investment based on the fair value of the Warrants upon issuance, which increased the balance of equity investment in affiliate on the Condensed Consolidated Balance Sheets by a corresponding $7.4 million. No other activity was recorded relating to the Joint Venture during the three month period ended December 30, 2023.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations of ~~the Company~~Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three months ended December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report"). Our actual results may not be indicative of future performance. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed or incorporated by reference in the sections of this Report ~~titled~~entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements. Certain monetary amounts, percentages and other figures included in this Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated, may not be the arithmetic aggregation of the percentages that precede them.

Special Note Regarding Forward-Looking Statements

This Report contains forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Except as otherwise indicated by the context, references in this Report to “we,” “us” and “our” are to the consolidated business of the Company. All statements in this Report, including those made by the management of the Company, other than statements of historical fact, are forward-looking statements. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include the assumptions that underlie such statements. Forward-looking statements may contain words such as “may,” “will,” “should,” “could,” “would,” “expect,” “plan,” “estimate,” “project,” “forecast,” “seek,” “target,” “anticipate,” “believe,” “predict,” “potential” and “continue,” the negative of these terms, or other comparable terminology. Examples of forward-looking statements include statements regarding the Company’s future financial results, research and development results, regulatory approvals, operating results, business strategies, projected costs, products, competitive positions, management’s plans and objectives for future operations, and industry trends. These forward-looking statements relate to expectations for future financial performance, business strategies or expectations for our business. Specifically, forward-looking statements may include statements relating to:

•the future financial performance of the Company;

•negative changes in the market for Blue Bird products;

•expansion plans and opportunities;

•challenges or unexpected costs related to manufacturing;

•future impacts from the novel coronavirus pandemic known as "COVID-19," and any other pandemics, public health crises, or epidemics, on capital markets, manufacturing and supply chain abilities, consumer and customer demand, school system operations, workplace conditions, and any other unexpected impacts, which include or could include, among other effects:

◦disruption in global financial and credit markets;

◦supply shortages and supplier financial risk, especially from our single-source suppliers impacted by the pandemic;

◦negative impacts to manufacturing operations or the supply chain from shutdowns or other disruptions in operations;

◦negative impacts on capacity and/or production in response to changes in demand due to the pandemic, including possible cost containment actions;

◦financial difficulties of our customers impacted by the pandemic;

◦reductions in market demand for our products due to the pandemic; and

◦potential negative impacts of various actions taken by federal, state and/or local governments in response to the pandemic.

•future impacts resulting from Russia's invasion of Ukraine, which include or could include, among other effects:

◦disruption in global commodity and other markets;

◦supply shortages and supplier financial risk, especially from suppliers providing inventory that is dependent on resources originating from either of these countries; and

◦negative impacts to manufacturing operations resulting from inventory cost volatility or the supply chain due to shutdowns or other disruptions in operations.

These forward-looking statements are based on information available as of the date of this Report (or, in the case of forward-looking statements incorporated herein by reference, as of the date of the applicable filed document), and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties. Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws. As a result of a number of known and unknown

1718

risks and uncertainties, our actual results or performance may be materially different than those expressed or implied by these forward-looking statements.

Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed in the reports we file with the Securities and Exchange Commission (“SEC”), specifically the sections ~~titled~~entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s ~~2022~~fiscal 2023 Form 10-K, filed with the SEC on December ~~12, 2022.~~11, 2023. Other risks and uncertainties are and will be disclosed in the Company’s prior and future SEC filings. The following information should be read in conjunction with the financial statements included in the Company’s ~~2022~~2023 Form 10-K, filed with the SEC on December ~~12, 2022.~~11, 2023.

Available Information

We are subject to the reporting and information requirements of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as a result are obligated to file or furnish, as applicable, annual, quarterly, and current reports, proxy statements, and other information with the SEC. We make these ~~filings~~documents available free of charge on our website (http://www.blue-bird.com) as soon as reasonably practicable after we electronically file them with, or furnish them to, the SEC. Information on our website does not constitute part of this Report. In addition, the SEC maintains a website (http://www.sec.gov) that contains our annual, quarterly, and current reports, proxy and information statements, and other information we electronically file with, or furnish to, the SEC.

Executive Overview

Blue Bird is the leading independent designer and manufacturer of school buses. Our longevity and reputation in the school bus industry have made Blue Bird an iconic American brand. We distinguish ourselves from our principal competitors by dedicating our focus to the design, engineering, manufacture and sale of school buses, and related parts. As the only principal manufacturer of chassis and body production specifically designed for school bus applications in the United States of America ("U.S."), Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability, efficiency, and lower operating costs. In addition, Blue Bird is the market leader in alternative powered product offerings with its propane-powered, gasoline-powered ~~compressed natural gas ("CNG")-powered,~~ and all-electric-powered school buses.

Blue Bird sells its buses and parts through an extensive network of U.S. and Canadian dealers that, in their territories, are exclusive to Blue Bird on Type C and Type D school buses. Blue Bird also sells directly to major fleet operators, the U.S. Government, state governments, and authorized dealers in certain limited foreign countries.

Throughout this Report, we refer to the fiscal year ending September 28, 2024 as "fiscal 2024," the fiscal year ended September 30, 2023 as "fiscal 2023," the fiscal year ended October 1, 2022 as "fiscal ~~2022" and~~2022," the fiscal year ended October 2, 2021 as “fiscal ~~2021.”~~2021” and the fiscal year ended October 3, 2020 as "fiscal 2020." There will be or were 52 weeks in fiscal ~~2023,~~2024, fiscal ~~2022~~2023 and fiscal ~~2021.~~2022. The first quarters of fiscal ~~2023~~2024 and fiscal ~~2022~~2023 both included 13 weeks.

Impacts of COVID-19 and Subsequent Supply Chain Constraints on Our Business

~~Beginning~~As discussed in ~~our second quarter of~~detail in the fiscal ~~year that ended October 3, 2020 ("fiscal 2020"),~~2023 Form 10-K filed with the SEC on December 11, 2023, the novel coronavirus known as "COVID-19" began to spread throughout the world, resulting in a global pandemic. The pandemic triggered a significant downturn in global commerce as early as February 2020 and the challenging market conditions continued into the early months of calendar year 2021. Countermeasures taken to address the COVID-19 pandemic included virtual and hybrid schooling in many jurisdictions throughout the U.S. and Canada. The uncertainty of when and how schools would open materially affected demand ~~within the Type C~~for new buses and ~~Type D school bus industry in~~replacement/maintenance parts during the second half of ~~the Company's~~ fiscal ~~2020.~~

~~While demand for school buses remained suppressed during the~~2020 and first half of fiscal 2021, ~~as a result of the continuing impact of the COVID-19 pandemic, it~~significantly impacting our business and operations. Although demand for school buses strengthened substantially during the second half of the fiscal year as COVID-19 vaccines were administered and many jurisdictions began preparing for a return to in-person learning environments for the new school year that began in mid-August to early September 2021. However, during the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints around this same period of time. Additionally, the already challenged global supply chain for automotive parts that began in fiscal 2021 was further impacted, including continuing escalating inventory purchase costs, by additional stress resulting from ~~among others, labor shortages due to the ‘great resignation;’ the lack~~Russia’s invasion of maintenance on, and acquisition of, capital assets during the extended COVID-19 global lockdowns; significant increased demand for consumer products containing certain materials required for the production of vehicles, such as microchips, as consumers spent stimulus and other funds on items for their homes; etc.Ukraine in February 2022 (see further discussion below). These supply chain disruptions ~~have~~ had a significant adverse impact on our operations and results during the second half of fiscal 2021 and all of fiscal 2022 due to higher purchasing costs, including freight costs incurred to expedite receipt of critical components, increased manufacturing inefficiencies and our inability to complete the production of buses to fulfill sales orders primarily during the latter half of fiscal 2021 and most of fiscal 2022. Specifically, management estimates that the sale of approximately 2,000 units was deferred from fiscal 2021 into fiscal 2022 as a result of the shortage of critical components that prevented the Company from initiating

or completing, as applicable, the production process for certain units that were otherwise scheduled to be delivered to customers during the year. Including these units, the Company's backlog exceeded 4,200 units as of October 2, 2021.orders.

~~Although there were pockets of COVID-19 outbreaks in~~Towards the U.S. throughout fiscal 2022, most school systems maintained partial or full in-person learning environments for the entirety of the school year. Accordingly, new bus orders during fiscal 2022 remained extremely robust, primarily due to pent-up demand resulting from the cumulative effect of the COVID-19 pandemic when many school systems conducted virtual learning (i.e., approximately January 2020 through June 2021). This strong demand, when coupled with an already challenged global supply chain for automotive parts that continued from fiscal 2021 but that was further impacted, including continuing escalating inventory purchase costs, by additional stress resulting from Russia’s invasion of Ukraine in February 2022 (see further discussion below) and several complete shutdowns in China as a result of widespread COVID-19 outbreaks, resulted in the Company’s order backlog continuing to grow during fiscal 2022, exceeding 5,000 units as of October 1, 2022 (only minimal sales orders were canceled during the fiscal year as a result of continued delays in our production process).

~~Shortages of key components during the second half of fiscal 2021 and most~~end of fiscal 2022 ~~hindered~~and continuing into fiscal 2023, there were slight improvements in the ~~Company's~~supply chain's ability to ~~complete~~deliver the parts and components necessary to support our production operations, resulting in increased (i) manufacturing efficiencies and (ii) production of buses to fulfill sales orders ~~which~~during fiscal 2023. However, the higher costs charged by suppliers to procure inventory that continued into fiscal 2023 had a significant adverse impact on our operations and results. Specifically, such cost increases outpaced the ~~Company's revenues~~increases in sales prices that we charged for the buses that were sold during ~~these periods. The Company has also experienced significant increased purchase costs for~~the first quarter of fiscal 2023, many of ~~its raw materials as a result~~which were included in the backlog of ~~supply~~fixed price sales orders originating in fiscal 2021 and the early months of fiscal 2022 that carried forward into fiscal 2023. During the remainder of fiscal 2023, the buses that were sold were generally included in the backlog of fixed price sales orders originating more recently (i.e., the latter months of fiscal 2022 and in fiscal 2023), with the cumulative increases in sales

prices we charged for those buses generally outpacing the higher costs we paid to procure inventory, resulting in gross profit during the quarters. While the gross margin on bus sales during the second quarter of fiscal 2023 lagged the historical gross margin reported prior to the COVID-19 pandemic, it returned to more normal historical levels during the latter half of fiscal 2023.

Supply chain disruptions ~~over these same periods and continuing~~continued into the first quarter of fiscal ~~2023~~2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that ~~have negatively impacted~~we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, the lessons learned, and resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain challenges and consistently produce buses to fulfill sales orders. Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit it recognized on sales. In response, beginning in July 2021 and continuing throughout fiscal 2022, the Company announced a number of sales price increases that apply to new sales orders and partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results. Additionally, during fiscal 2022, the Company began including price escalation provisions when bidding on contracts so that it can consider economic fluctuations between the bid date and the contract date to determine whether increased costs should be passed along to customers. Most of these price increases were generally not realized in the first half of fiscal 2022 as sales recorded during such quarters related to the backlog of orders that existed prior, and therefore were not subject, to the price increases. While they began to impact sales and gross profit in the latter half of fiscal 2022, such impact did not offset the significant continued increase in the Company's production costs, resulting in further deterioration of the Company's gross profitmargin during ~~the second half of fiscal 2022 and continuing into~~ the first quarter of fiscal ~~2023 as it produced and sold~~2024 that were consistent with, or better than, historic levels experienced prior to the oldest units included in the backlog as of the end of fiscal 2022. However, they are expected to have a positive impact on sales and gross profit during the remainder of fiscal 2023 as the Company fulfills sales orders (i) from the backlog existing as of the end of fiscal 2022 and (ii) that are taken during fiscal 2023, both of which contained, or will contain, most or all of the cumulative sales prices increases that have been announced since July 2021.COVID-19 pandemic.

New bus orders during ~~the first quarter of~~ fiscal 2023 and continuing into fiscal 2024 remained ~~extremely~~ robust, primarily due to a combination of (i) pent-up demand resulting from the cumulative effect of the COVID-19 pandemic when many school systems conducted virtual learning and (ii) the challenged global supply chain for automotive parts that hindered the school bus industry's ability to produce and sell buses that began during the latter half of fiscal 2021 and ~~most~~continued through the first quarter of fiscal ~~2022.~~2024. Accordingly, the Company's backlog remained ~~in excess of 5,000~~strong at approximately 4,600 units and as of both September 30, 2023 and December ~~31, 2022~~30, 2023 despite it selling ~~almost 2,000~~over 8,500 units during ~~the first quarter of~~ fiscal 2023, ~~that~~the majority of which were included in the backlog that existed as of October 1, ~~2022.~~2022, and 2,100 units in the first quarter of fiscal 2024.

In general, management believes that supply chain disruptions could continue in future periods and could materially impact our results if we are unable to i) ~~produce during quarters having higher sales volumes~~obtain parts and supplies in sufficient quantities to meet our production needs and/or ii) pass along rising costs to our customers. Additionally, although we have not experienced any pervasive COVID-19 illnesses to date, if we were to experience some form of outbreak within our facilities, we would take all appropriate measures to protect the health and safety of our employees, which could include another temporary halt in production.

~~The COVID-19 pandemic and subsequent supply chain constraints~~They have resulted, and could to continue to result, in significant economic disruption and have adversely affected our business. They could ~~continue to~~ adversely impact our business for the remainder of fiscal ~~2023~~2024 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of ~~any future COVID-19 outbreaks~~ongoing supply chain constraints and their potential impact on the overall economy, both within the U.S and globally. Accordingly, the magnitude and duration of any ~~demand reductions,~~ production and supply chain disruptions and their related financial impacts on our business cannot be estimated at this time.

The impacts from ~~the COVID-19 pandemic and subsequent~~ supply chain constraints on the Company's business and operations during the second half of fiscal ~~2020~~2021 and continuing ~~through the first quarter of~~into fiscal ~~2023~~2024 negatively affected our ~~revenues,~~inventory procurement costs, gross profit, income and cash flows. We continue to monitor and assess the ~~level of future customer demand, the ability of school boards to maintain normal in-person learning in the foreseeable future, the~~ ability of suppliers to ~~resume and/or~~ maintain operations and to provide parts and supplies in sufficient quantities to meet our production needs ~~the ability of our employees to continue to work,~~ and our ability to maintain continuous production during the remainder of fiscal ~~2023~~2024 and beyond. See PART I, Item 1.A. "Risk Factors," of our ~~2022~~fiscal 2023 Form 10-K, filed with the SEC on December ~~12, 2022,~~11, 2023, for a discussion of the material risks we believe we face particularly related to ~~the COVID-19 pandemic~~supply chain disruptions and ~~subsequent supply chain~~related constraints.

Impact of Russia’s Invasion of Ukraine on Our Business

On February 24, 2022, Russian military forces launched a large-scale invasion of Ukraine. While the Company has no assets or customers in either of these countries, this military conflict has had a significant negative impact on the Company’s operations, cash flows and results during fiscal 2022 and continuing into ~~the first quarter of~~ fiscal ~~2023,~~2024, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country.

Specifically, Ukraine has historically been a large exporter of ferroalloy materials used in the manufacture of steel and the disruption in the supply of these minerals has resulted in a significant ~~increase~~volatility in the price of steel from $1,057 per ton the third week of February 2022 to as high as $1,492 per ton the third week of April 2022 before finally decreasing to an average of $1,078 per ton the last two weeks of June and continuing to decline to $791 and $664 per ton the last weeks in September and December 2022, respectively (source: sheet prices published by the CRU Index every Wednesday that provide price benchmarking in North America for U.S. Midwest Domestic Hot-Rolled Coil Steel).steel. While the Company has generally mitigated its direct exposure to steel prices by executing fixed price purchase contracts (generally purchased ~~one quarter~~up to four quarters in advance) for the majority of the significant amount of steel used in the manufacture of school bus bodies, many suppliers from which the Company purchases components containing steel increased the price that they charge the Company to acquire such inventory, primarily on a lagged basis, ~~during~~starting from the latter half of fiscal 2022 and continuing into ~~the first quarter of~~ fiscal ~~2023.~~2024, as applicable. These inventory costs impact gross profit when school buses are sold and cash flows when the related invoices are paid.

Additionally, Russia has historically been a large global exporter of oil and many countries have ceased buying Russian oil in protest of the invasion and to comply with sanctions imposed by the U.S. and many European countries. Accordingly, the disruption in the supply of oil has significantly impacted the price of goods refined from oil, such as diesel fuel, the price of which ~~increased from $4.055 per gallon~~has been volatile and has remained high since the week ending February 21, 2022 to as high as $5.810 per gallon the week ending June 20, 2022, before decreasing slightly throughout the remainder of our fiscal 2022 to $4.889 per gallon the week ending September 26, 2022 and fluctuating within a range from $5.341 and $4.537 per gallon during our first quarterlatter half of fiscal ~~2023 (source: U.S Energy Information Administration - Weekly U.S. No 2 Diesel Retail Prices).~~2022. These ~~increases have~~higher costs significantly impacted the Company both as a result of the price that suppliers charge the Company to acquire inventory (since diesel fuel impacts their cost of acquiring the inventory used in producing their goods) and the price that the Company pays for freight to deliver the inventory that it acquires. Additionally, such increases are generally implemented with very little lag so that they impact the purchase cost of inventory and cash flows on an almost real-time basis.

Finally, both countries have large quantities of other minerals that impact commodity costs, such as rubber and resin, among others, and the disruption caused by the ongoing military conflict ~~has~~ increased the cost and/or decreased the supply of components containing these materials, further impacting an already challenged global supply chain for automotive parts.

Russia’s invasion of Ukraine has resulted, and is likely to continue to result, in significant economic disruption and has adversely affected our business. Specifically, it has contributed to higher inventory purchase costs, including freight costs, that negatively impacted the gross profit recognized on sales during the latter part of fiscal 2022 and continuing into ~~the first quarter of~~ fiscal ~~2023.~~2024. Because peace negotiations do not appear to be productive and because Russia has ~~announced~~recently intensified its ~~intention to continue~~ military operations in Ukraine, ~~in the immediate term,~~ we currently believe that this matter will continue to adversely impact our business for the remainder of fiscal ~~2023~~2024 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of the ongoing military conflict and its impact on the overall economy, both within the U.S. and globally. Accordingly, the duration of any production and supply chain disruptions, and related financial impacts, cannot be estimated at this time.

Critical Accounting Policies and Estimates, Recent Accounting Pronouncements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Blue Bird evaluates its estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s ~~2022~~fiscal 2023 Form 10-K, filed with the SEC on December ~~12, 2022,~~11, 2023, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” which description is incorporated herein by reference. Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the three months ended December ~~31, 2022.~~

30, 2023.

Recent Accounting Pronouncements

See Note 2 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a discussion of new ~~and~~and/or recently adopted accounting ~~pronouncements.~~pronouncements, as applicable.

Factors Affecting Our Revenues

Our revenues are driven primarily by the following factors:

•Property tax revenues. Property tax revenues are one of the major sources of funding for school districts, and therefore new school buses. Property tax revenues are a function of land and building prices, relying on assessments of property value by state or county assessors and millage rates voted by the local electorate.

•Student enrollment and delivery mechanisms for learning. Increases or decreases in the number of school bus riders have a direct impact on school district demand. Evolving protocols for public health concerns and/or continued technological advancements could shift the future form of educational delivery away from in-person learning on a more permanent basis, with increased remote learning reasonably expected to decrease the number of school bus riders.

•Revenue mix. We are able to charge more for certain of our products (e.g., Type C propane-powered school buses, electric-powered buses, Type D buses, and buses with higher option content) than other products. The mix of products sold in any fiscal period can directly impact our revenues for the period.

•Strength of the dealer network. We rely on our dealers, as well as a small number of major fleet operators, to be the direct point of contact with school districts and their purchasing agents. An effective dealer is capable of expanding revenues within a given school district by matching that district’s needs to our capabilities, offering options that would not otherwise be provided to the district.

•Pricing. Our products are sold to school districts throughout the U.S. and Canada. Each state and each Canadian province has its own set of regulations that governs the purchase of products, including school buses, by their school districts. We and our dealers must navigate these regulations, purchasing procedures, and the districts’ specifications in order to reach mutually acceptable price terms. Pricing may or may not be favorable to us, depending upon a number of factors impacting purchasing

decisions. Additionally, in certain cases, prices originally quoted with dealers and school districts may have become less favorable, or more unfavorable, to us given increasing inventory costs between the time the sales order was contractually agreed upon and the bus is built and delivered as a result of ongoing supply chain disruptions and general inflationary pressures.

•Buying patterns of major fleets. Major fleets regularly compete against one another for existing accounts. Fleets are also continuously trying to win the business of school districts that operate their own transportation services. These activities can have either a positive or negative impact on our sales, depending on the brand preference of the fleet that wins the business. Major fleets also periodically review their fleet sizes and replacement patterns due to funding availability as well as the profitability of existing routes. These actions can impact total purchases by fleets in a given year.

•Seasonality. Historically, our sales have been subject to seasonal variation based on the school calendar with the peak season during our third and fourth fiscal quarters. Sales during the third and fourth fiscal quarters are typically greater than the first and second fiscal quarters due to the desire of municipalities to have any new buses that they order available to them at the beginning of the new school year. With the COVID-19 pandemic impacting the demand for Company products and the impact of the subsequent supply chain constraints hindering the Company's ability to produce and sell buses, seasonality has become unpredictable. Seasonality and variations from historical seasonality have impacted the comparison of results between fiscal periods.

•Inflation. As discussed previously above, supply chain disruptions developing subsequent to the COVID-19 pandemic and ~~more recently,~~ Russia's invasion of Ukraine have significantly increased our inventory purchase costs, including freight costs incurred to expedite receipt of critical components, reflected in cost of goods sold during the latter half of fiscal 2021, all of fiscal 2022 and continuing, to a lesser extent, into ~~the first quarter of~~ fiscal ~~2023.~~2023 and fiscal 2024. In response, beginning in July 2021, the Company has announced several sales price increases that apply to new sales orders and partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results. Most of these price increases ~~were generally not realized in the first half of fiscal 2022 as sales recorded during such quarters related~~only began to ~~the backlog of orders that existed prior, and therefore were not subject, to the price increases. While they began to~~marginally impact sales and gross profit in the latter half of fiscal ~~2022, such impact~~2022. Specifically, they did not offset the significant continued increase in the Company's production costs, resulting in further deterioration of the Company's gross profit during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023 as it produced and sold the oldest units included in the backlog as of the end of fiscal 2022. However, they ~~are expected~~began to have a more significant, positive impact on sales and gross profit during the remainder of fiscal 2023, as the Company ~~fulfills~~fulfilled sales orders (i) from the

backlog existing as of the end of fiscal 2022 that originated more recently (i.e., during the latter months of fiscal 2022) and (ii) that ~~are~~were taken during fiscal 2023, both of which contained ~~or will contain,~~ most or all of the cumulative sales prices increases that have been ~~announced since July 2021.~~announced. These cumulative price increases also continued to have a significant, positive impact on sales and gross profit during the first quarter of fiscal 2024.

Factors Affecting Our Expenses and Other Items

Our expenses and other line items on our unaudited Condensed Consolidated Statements of Operations are principally driven by the following factors:

•Cost of goods sold. The components of our cost of goods sold consist of material costs (principally powertrain components, steel and rubber, as well as aluminum and copper) including freight costs, labor expense, and overhead. Our cost of goods sold may vary from period to period due to changes in sales volume, efforts by certain suppliers to pass through the economics associated with key commodities, fluctuations in freight costs, design changes with respect to specific components, design changes with respect to specific bus models, wage increases for plant labor, productivity of plant labor, delays in receiving materials and other logistical problems, and the impact of overhead items such as utilities.

•Selling, general and administrative expenses. Our selling, general and administrative expenses include costs associated with our selling and marketing efforts, engineering, centralized finance, human resources, purchasing, information technology services, along with other administrative matters and functions. In most instances, other than direct costs associated with sales and marketing programs, the principal component of these costs is salary expense. Changes from period to period are typically driven by the number of our employees, as well as by merit increases provided to experienced personnel.

•Interest expense. Our interest expense relates to costs associated with our debt instruments and reflects both the amount of indebtedness and the interest rate that we are required to pay on our debt. Interest expense also includes unrealized gains or losses from interest rate hedges, if any, and changes in the fair value of interest rate derivatives not designated in hedge accounting relationships, if any, as well as expenses related to debt guarantees, if any.

•Income taxes. We make estimates of the amounts to recognize for income taxes in each tax jurisdiction in which we operate. In addition, provisions are established for withholding taxes related to the transfer of cash between jurisdictions and for uncertain tax positions taken.

•Other expense/income, net. This balance includes periodic pension expense or income as well as gains or losses on foreign currency, if any. Other ~~immaterial~~ amounts not associated with operating expenses may also be included in this balance.

•Equity in net income or loss of non-consolidated affiliate. We include in this line item our 50% share of net income or loss from our investment in Micro Bird Holdings, Inc., our unconsolidated Canadian joint venture.

Key Non-GAAP Financial Measures We Use to Evaluate Our Performance

The condensed consolidated financial statements included in this Report in Item 1. "Financial Statements (Unaudited)" are prepared in conformity with U.S. GAAP. This Report also includes the following financial measures that are not prepared in accordance with U.S. GAAP ("non-GAAP"): “Adjusted EBITDA;” “Adjusted EBITDA Margin;” and “Free Cash Flow.” Adjusted EBITDA and Free Cash Flow are financial metrics that are utilized by management and the board of directors to determine (a) the annual cash bonus payouts, if any, to be made to certain ~~members of management~~employees based upon the terms of the Company’s Management Incentive Plan, and (b) whether the performance criteria have been met for the vesting of certain equity awards granted annually to certain members of management based upon the terms of the Company’s Omnibus Equity Incentive Plan. Additionally, consolidated EBITDA, which is an adjusted EBITDA metric defined by our ~~Amended~~ Credit Agreement (defined below) that could differ from Adjusted EBITDA discussed above as the adjustments to the calculations are not uniform, is used to determine the Company's ongoing compliance with several financial covenant requirements, including being utilized in the denominator of the calculation of the Total Net Leverage Ratio ("TNLR"), ~~as and when applicable,~~ which is also utilized in determining the interest rate we pay on borrowings under our ~~Amended~~ Credit Agreement (defined below). Accordingly, management views these non-GAAP financial metrics as key for the above purposes and as a useful way to evaluate the performance of our operations as discussed further below.

Adjusted EBITDA is defined as net income or loss prior to interest income; interest expense including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our U.S. GAAP financial statements) that represents interest expense on lease liabilities; income taxes; and depreciation and amortization including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our U.S. GAAP financial statements) that represents amortization charges on right-of-use lease assets; as adjusted for certain non-cash charges or credits that we may record on a recurring basis such as share-based compensation expense and unrealized gains or losses on certain derivative financial instruments; net gains or losses on the disposal of assets as well as certain charges such as (i) significant product design changes; (ii) transaction related costs; or (iii) discrete expenses related to major cost cutting and/or operational transformation ~~initiatives; or (iv) costs directly attributed to the COVID-19 pandemic.~~initiatives. While certain of the charges that are

added back in the Adjusted EBITDA calculation, such as transaction related costs and operational transformation and major product redesign initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company’s normal operations. Accordingly, we believe that these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company’s ongoing annual operating performance.

We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net sales. Adjusted EBITDA and Adjusted EBITDA Margin are not measures of performance defined in accordance with U.S. GAAP. The measures are used as a supplement to U.S. GAAP results in evaluating certain aspects of our business, as described below.

We believe that Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors in evaluating our performance because the measures consider the performance of our ongoing operations, excluding decisions made with respect to capital investment, financing, and certain other significant initiatives or transactions as outlined in the preceding paragraphs. We believe the non-GAAP measures offer additional financial metrics that, when coupled with the U.S. GAAP results and the reconciliation to U.S. GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business.

Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as alternatives to net income or loss as an indicator of our performance or as alternatives to any other measure prescribed by U.S. GAAP as there are limitations to using such non-GAAP measures. Although we believe that Adjusted EBITDA and Adjusted EBITDA Margin may enhance an evaluation of our operating performance based on recent revenue generation and product/overhead cost control because they exclude the impact of prior decisions made about capital investment, financing, and certain other significant initiatives or transactions, (i) other companies in Blue Bird’s industry may define Adjusted EBITDA and Adjusted EBITDA Margin differently than we do and, as a result, they may not be comparable to similarly titled measures used by other companies in Blue Bird’s industry, and (ii) Adjusted EBITDA and Adjusted EBITDA Margin exclude certain financial information that some may consider important in evaluating our performance.

We compensate for these limitations by providing disclosure of the differences between Adjusted EBITDA and U.S. GAAP results, including providing a reconciliation to U.S. GAAP results, to enable investors to perform their own analysis of our ongoing operating results.

Our measure of Free Cash Flow is used in addition to and in conjunction with results presented in accordance with U.S. GAAP and it should not be relied upon to the exclusion of U.S. GAAP financial measures. Free Cash Flow reflects an additional way of evaluating our liquidity that, when viewed with our U.S. GAAP results, provides a more complete understanding of factors and trends affecting our cash flows. We strongly encourage investors to review our financial statements and publicly-filed reports in their entirety and not to rely on any single financial measure.

We define Free Cash Flow as total cash provided by/used in operating activities as adjusted for ~~net~~ cash paid for the acquisition of fixed assets and intangible assets. We use Free Cash Flow, and ratios based on Free Cash Flow, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flow since purchases of fixed assets and intangible assets are a necessary component of ongoing operations. Accordingly, Free Cash Flow will be less than operating cash flows.

Our Segments

We manage our business in two operating segments, which are also our reportable segments: (i) the Bus segment, which involves the design, engineering, manufacture and sales of school buses and extended warranties; and (ii) the Parts segment, which includes the sale of replacement bus parts. Financial information is reported on the basis that it is used internally by the chief operating decision maker (“CODM”) in evaluating segment performance and deciding how to allocate resources to segments. The ~~President and~~ Chief Executive Officer of the Company has been identified as the CODM. Management evaluates the segments based primarily upon revenues and gross profit.

Consolidated Results of Operations for the Three Months Ended December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022:


			Three Months Ended
		Three Months Ended												Three Months Ended
(in thousands of dollars)	(in thousands of dollars)		December 31, 2022			January 1, 2022			(in thousands of dollars)	December 30, 2023		December 31, 2022
Net sales	Net sales		$	235,732		$	129,223
Cost of goods sold	Cost of goods sold		228,275			113,026
Gross profit	Gross profit		$	7,457		$	16,197
Operating expenses	Operating expenses
Selling, general and administrative expenses	Selling, general and administrative expenses		16,832			18,233
Operating loss			$	(9,375)		$	(2,036)
Selling, general and administrative expenses
Selling, general and administrative expenses
Operating profit (loss)
Interest expense	Interest expense		(4,196)			(3,082)

Other (expense) income, net			(236)			736
Loss on debt modification			(537)			(561)
Loss before income taxes			$	(14,344)		$	(4,943)
Income tax benefit			2,981			1,762
Equity in net income (loss) of non-consolidated affiliate			69			(901)
Interest income
Other expense, net
Loss on debt refinancing or modification
Income (loss) before income taxes
Income tax (expense) benefit
Equity in net income of non-consolidated affiliate

Net loss			$	(11,294)		$	(4,082)
Net income (loss)

Net income (loss)

Net income (loss)
Other financial data:	Other financial data:
Adjusted EBITDA	Adjusted EBITDA		$	(4,245)		$	3,599
Adjusted EBITDA
Adjusted EBITDA
Adjusted EBITDA margin	Adjusted EBITDA margin		(1.8)		%	2.8		%	Adjusted EBITDA margin	15.0	%	(1.5)	%

The following provides the results of operations of Blue Bird’s two reportable segments:


(in thousands of dollars)	(in thousands of dollars)	Three Months Ended				(in thousands of dollars)	Three Months Ended
Net Sales by Segment	Net Sales by Segment	December 31, 2022		January 1, 2022		Net Sales by Segment	December 30, 2023	December 31, 2022
Bus	Bus	$	213,249	$	112,437
Parts	Parts	22,483		16,786
Total	Total	$	235,732	$	129,223

Gross (Loss) Profit by Segment
Gross Profit (Loss) by Segment
Gross Profit (Loss) by Segment
Gross Profit (Loss) by Segment
Bus
Bus
Bus	Bus	$	(3,731)	$	9,642
Parts	Parts	11,188		6,555
Total	Total	$	7,457	$	16,197

Net sales. Net sales were $317.7 million for the first quarter of fiscal 2024, an increase of $81.9 million, or 34.8%, compared to $235.7 million for the first quarter of fiscal ~~2023, an increase of $106.5 million, or 82.4%, compared to $129.2 million for the first quarter of fiscal 2022.~~2023. The increase in net sales is primarily due to increased unit bookings, product and mix changes, as well as pricing actions taken by management in response to increased inventory purchase costs. Significant supply chain disruptions began limiting the availability of certain critical components primarily beginning towards the end of the third quarter of fiscal 2021 and continuing throughout fiscal 2022. However, by the end of the first quarter of fiscal 2023, supply chain constraints began to improve slightly, allowing for increased production relative to the first quarter of fiscal 2022.

Bus sales increased ~~$100.8~~$80.2 million, or ~~89.7%~~37.6%, reflecting a ~~70.3%~~8.8% increase in units booked and a ~~11.4%~~26.5% increase in average sales price per unit. In the first quarter of fiscal ~~2023, 1,957~~2024, 2,129 units were booked compared to ~~1,149~~1,957 units booked for the same period in fiscal ~~2022.~~2023. The increase in units sold was primarily due to slight improvements in supply chain constraints inimpacting the Company's ability to produce and deliver buses due to shortages of critical components induring the first quarter of 2024 relative to the first quarter of fiscal ~~2022.~~2023. The ~~11.4%~~ increase in unit price for the first quarter of fiscal ~~2023~~2024 compared to the same period in fiscal ~~2022~~2023 reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased ~~$5.7~~$1.7 million, or ~~33.9%~~7.7%, for the first quarter of fiscal ~~2023~~2024 compared to the first quarter of fiscal ~~2022.~~2023. This increase is primarily attributed to ~~pricing actions taken~~price increases, driven by ~~management~~ongoing inflationary pressures, as well as higher fulfillment volumes and slight variations due to ~~offset increases in purchased parts costs~~product and ~~increased inventory availability as supply chain constraints began to improve slightly during the first quarter of fiscal 2023 relative to the first quarter of fiscal 2022.~~channel mix.

Cost of goods sold. Total cost of goods sold was $254.1 million for the first quarter of fiscal 2024, an increase of $25.8 million, or 11.3%, compared to $228.3 million for the first quarter of fiscal ~~2023, an increase of $115.2 million, or 102.0%, compared to $113.0 million for the first quarter of fiscal 2022.~~2023. As a percentage of net sales, total cost of goods sold ~~increased~~improved from ~~87.5%~~96.8% to ~~96.8%.~~80.0%, primarily due to the pricing actions discussed above taking effect.

Bus segment cost of goods sold increased ~~$114.2~~$25.2 million, or ~~111.1%~~11.6%, for the first quarter of fiscal ~~2023~~2024 compared to the same period in fiscal ~~2022.~~2023. The increase was primarily driven by the ~~70.3%~~8.8% increase in units booked in the first quarter of fiscal ~~2023~~2024 compared to the same period in fiscal ~~2022.~~2023. Also contributing was increased inventory costs, as the average cost of goods sold per unit for the first quarter of fiscal ~~2023~~2024 was ~~23.9%~~2.6% higher compared to the first quarter of fiscal ~~2022,~~2023, primarily due to increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures and b) ongoing supply chain disruptions that resulted in higher purchase costs for ~~components and freight.~~components.

The ~~$1.1~~$0.7 million, or ~~10.4%~~5.9%, increase in parts segment cost of goods sold for the first quarter of fiscal ~~2023~~2024 compared to the first quarter of fiscal ~~2022~~2023 was primarily due to ~~the increase in sales volume noted above,~~ increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Operating ~~loss~~profit (loss). Operating profit was $38.0 million for the first quarter of fiscal 2024, an increase of $47.3 million, compared to operating loss ~~was~~of $9.4 million for the first quarter of fiscal ~~2023,~~2023. Profitability was primarily impacted by an increase of ~~$7.3 million, compared to operating loss of $2.0 million for the first quarter of fiscal 2022. Profitability was negatively impacted by a decrease of $8.7~~$56.1 million in gross profit as outlined in the revenue and cost of goods sold ~~discussions. Specifically, the ongoing increases~~discussions above. The increase in manufacturing costs, when coupled with the fact that the Company produced and sold the oldest units in the backlog existing at the end of fiscal 2022, many of which had pricing from as early as fiscal 2021, resulted in the bus segment reporting gross loss of $3.7 million during the first quarter of fiscal 2023. The decrease in total gross profit was partially offset by ~~a decrease~~an increase of ~~$1.4~~$8.8 million in selling, general and administrative expenses, primarily due to ~~a decrease~~an increase in share-based compensation expense as a result of the accelerated vesting of all outstanding stock awards for two of the Company's former executives in connection with their retirements during the first quarter of fiscal 2022, without comparable expense in the first quarter fiscal 2023.labor costs. Additionally, selling, general and administrative expenses during the first quarter of fiscal 2023 benefited from actions taken by management to reduce labor costs and certain discretionary spending to mitigate the significant adverse impact of ongoing supply chain constraints on the Company's operations and results.

Interest expense. Interest expense was $3.6 million for the first quarter of fiscal 2024, a decrease of $0.6 million, or 13.5%, compared to $4.2 million for the first quarter of fiscal ~~2023, an increase of $1.1 million, or 36.1%, compared to $3.1 million for the first quarter of fiscal 2022.~~2023. The ~~increase~~decrease was primarily attributable to ~~an increase~~a decrease in the stated term loan interest rate from ~~6.0% at January 1, 2022 to~~ 10.5% at December 31, ~~2022.~~2022 to 8.5% at December 30, 2023, as well as lower outstanding borrowings in the first quarter of fiscal 2024 compared to the first quarter of fiscal 2023.

Other expense, net. Other expense, net, was $1.2 million for the first quarter of fiscal 2024, an increase of $1.0 million, or 417.4%, compared to $0.2 million of other expense, net, for the same period in fiscal 2023.

Income taxes. ~~We recorded~~Income tax expense was $8.4 million for the first quarter of fiscal 2024 compared to income tax benefit of $3.0 million ~~and $1.8 million~~ for the ~~first quarters~~same period in fiscal 2023.

The effective tax rate for the three months ended December 30, 2023 was 25.9% and differed from the statutory federal income tax rate of ~~fiscal 2023~~21%. The increase was primarily due to the impacts from state taxes and ~~fiscal 2022, respectively.~~certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter.

Adjusted EBITDA. Adjusted EBITDA was ~~$(4.2)~~$47.6 million, or ~~(1.8)~~15.0% of net sales, for the first quarter of fiscal 2024, an increase of $51.1 million, or 1,446.3%, compared to $(3.5) million, or (1.5)% of net sales, for the first quarter of fiscal ~~2023, a decrease~~2023. The increase is primarily the result of ~~$7.8 million, or 217.9%, compared to $3.6 million, or 2.8% of net sales, for~~ the ~~first quarter of fiscal 2022. The decrease in Adjusted EBITDA primarily results from the $7.2~~$37.4 million increase in net ~~loss,~~income as a result of the factors discussed ~~above.~~above as well as the $11.4 million corresponding increase in income tax expense.

The following table sets forth a reconciliation of net ~~loss~~income (loss) to ~~adjusted~~Adjusted EBITDA for the periods presented:

Three Months Ended

(in thousands of dollars)

Net income (loss)

Adjustments:

Interest expense, net (1)

Income tax expense (benefit)

Depreciation, amortization, and disposals (2)

Operational transformation initiatives

Share-based compensation expense

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

Net loss

(11,294)

(4,082)

Adjustments:

Interest expense, net (1)

4,289

3,157

Income tax benefit

(2,981)

(1,762)

Depreciation, amortization, and disposals (2)

3,815

3,523

Operational transformation initiatives

800

Share-based compensation

589

1,673

Product redesign initiatives

—

253

Restructuring and other charges

—

246

Costs directly attributed to the COVID-19 pandemic (3)

—

Loss on debt modification

537

561

Stockholder transaction costs

Loss on debt refinancing or modification

Other

Subtotal (Adjusted EBITDA as previously presented)

Micro Bird Holdings, Inc. total interest expense, net; income tax expense or benefit; depreciation expense and amortization expense

Adjusted EBITDA

(4,245)

3,599

Adjusted EBITDA margin (percentage of net sales)

(1.8)

2.8

Adjusted EBITDA margin (percentage of net sales)

(1) Includes $0.1 million for both fiscal periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes ~~$0.4~~$0.6 million and ~~$0.2~~$0.4 million for the three months ended December ~~31, 2022~~30, 2023 and ~~January 1,~~December 31, 2022, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

~~(3) Primarily represents costs incurred for third party cleaning services and personal protective equipment for our employees in response to the COVID-19 pandemic.~~

Liquidity and Capital Resources

The Company’s primary sources of liquidity are cash generated from its operations, available cash and cash equivalents and borrowings under its revolving credit facility. At December ~~31, 2022,~~30, 2023, the Company had ~~$5.7~~$77.3 million of available cash (net of outstanding checks) and ~~$78.7~~$107.1 million of additional borrowings available under the revolving line of credit portion of its credit facility. The Company’s revolving line of credit is available for working capital requirements, capital expenditures and other general corporate purposes.

~~Sixth Amendment to the~~ Credit Agreement

On November ~~21, 2022, BBBC (as "Borrower"~~17, 2023 (the “Closing Date”), Blue Bird Body Company ("Borrower") executed a ~~sixth amendment to the Credit Agreement, dated~~$250.0 million five-year credit agreement with Bank of Montreal, acting as administrative agent and an issuing bank; several joint lead arranger partners and issuing banks, including Bank of ~~December 12, 2016 ("Credit Agreement"); as amended by the first amendment to the Credit Agreement, dated as~~America; and a syndicate of ~~September 13, 2018~~other lenders (the "First Amended Credit Agreement"), the second amendment to the Credit Agreement, dated as of May 7, 2020 (the "Second Amended Credit Agreement"), the third amendment to the Credit Agreement, dated as of December 4, 2020 (the "Third Amended Credit Agreement"); the fourth amendment to the Credit Agreement, dated as of November 24, 2021 (the "Fourth Amended Credit Agreement:); the fifth amendment and limited waiver to the Credit Agreement, dated as of September 2, 2022 (the "Fifth Amended Credit Agreement"); and as further amended by the sixth amendment (the "Sixth Amended Credit Agreement" and collectively, the "Amended Credit"Credit Agreement"). The Sixth Amended Credit Agreement, among other things, extends the maturity date for both the term loan and revolving credit facilities from September 13, 2023 to December 31, 2024. The total revolving credit facility commitment is reduced to an aggregate principal amount of $90.0 million, of which $80.0 million is available for Borrower to draw, with the remaining $10.0 million subject to written approval from the lenders, which, once obtained, will be irrevocable. There was no change in the term loan facility commitment; however, the Sixth Amended Credit Agreement requires principal repayments approximating $5.0 million on a quarterly basis through September 30, 2024, with the remaining balance due upon maturity.~~There were $151.6 million of term loan borrowings outstanding on the sixth amendment effective date.~~

The Sixth Amended Credit Agreement also provides for temporary amendments to certain financial performance covenants during the period from the third amendment effective date, December 4, 2020, through and including April 1, 2023 (the “Amended Limited Availability Period:), which will terminate ~~on the date on which the Company’s~~ ~~TNLR, defined as the ratio of (a) consolidated net debt to (b) consolidated EBITDA,~~ for the two fiscal quarters most recently ended is each less than 4.00x and no default or event of default has occurred and is continuing. However, the Amended Limited Availability Period can re-occur upon a default or event of default or if the TNLR for the immediately preceding fiscal quarter is equal to or greater than 4.00x.

~~Period~~

~~Minimum Consolidated EBITDA~~

~~Fiscal quarter ending July 1, 2023~~

~~$50.0~~

~~Fiscal quarter ending September 30, 2023~~

~~$60.0~~

~~For purposes of complying with~~Borrower has the ~~above minimum consolidated EBITDA covenant,~~right to prepay the ~~Company’s consolidated EBITDA for~~loans outstanding under the ~~(i) two fiscal quarter period ending July 1, 2023 is multiplied by 2~~Credit Facilities without premium or penalty (subject to customary breakage costs, if applicable). Additionally, proceeds from asset sales, condemnation, casualty insurance and/or debt issuances (in certain circumstances) are required to be used to prepay borrowings outstanding under the Credit Facilities. Borrowings under the Term Loan Facility, which were made at the Closing Date, may not be reborrowed once they are repaid while borrowings under the Revolving Credit Facility may be repaid and ~~(ii) three fiscal quarter period ending September 30, 2023 is multiplied by 4/3.~~reborrowed from time to time at our election.

The ~~minimum liquidity (in~~Term Loan Facility is subject to amortization of principal, payable in equal quarterly installments on the ~~form of undrawn availability under the revolving credit facility and unrestricted cash and cash equivalents) that the Company is required to maintain at the end~~last day of each fiscal ~~month during~~quarter, commencing on March 30, 2024, with 5.0% of the ~~Amended Limited Availability Period is amended~~$100.0 million aggregate principal amount of all initial term loans outstanding at the Closing Date payable each year prior to the maturity date of the Term Loan Facility. The remaining initial aggregate principal amount outstanding under the Term Loan Facility, as ~~set forth in~~well as any outstanding borrowings under the ~~table below (in millions):~~Revolving Credit Facility, will be payable on the November 17, 2028 maturity date of the Credit Agreement.


~~Period~~						~~Minimum Liquidity~~
~~Sixth amendment effective date through December 30, 2023~~						~~$30.0~~

~~Additionally,~~The $100.0 million of Term Loan Facility proceeds and $36.2 million of Revolving Credit Facility proceeds that were borrowed on the ~~financial performance covenant requiring that school bus units manufactured~~Closing Date were used to pay (i) the $131.8 million of term loan indebtedness outstanding under the previous credit agreement ("Amended Credit Agreement"), (ii) interest and commitment fees accrued under the Amended Credit Agreement through the Closing Date and (iii) transaction costs associated with the consummation of the Credit Agreement.

Borrowings under the Credit Facilities bear interest, at our option, at (i) base rate ("ABR") or (ii) the Secured Overnight Financing Rate as administered by the ~~Company (“Units”~~Federal Reserve Bank of New York ("SOFR") ~~not fall below certain pre-set thresholds~~plus 0.10%, plus an applicable margin depending on the TNLR (which is defined in the Credit Agreement as the ratio of consolidated net debt to consolidated EBITDA on a ~~three month~~ trailing ~~basis (“Units Covenant”) is amended for Units to be calculated at the end~~four quarter basis) of ~~each applicable fiscal month on a cumulative basis, with the minimum cumulative threshold that~~ the Company ~~is required to maintain during the Amended Limited Availability Period amended~~ as ~~set forth in the table below.~~ follows:

~~The Units Covenant is triggered only if the Company’s liquidity for the most-recently ended fiscal month is less than $50.0 million during the Amended Limited Availability Period:~~


Level	TNLR	ABR Loans	SOFR Loans
I	Less than 1.00x	0.75%	1.75%
II	Greater than or equal to 1.00x and less than 1.50x	1.50%	2.50%
III	Greater than or equal to 1.50x and less than 2.25x	2.00%	3.00%
IV	Greater than or equal to 2.25x	2.25%	3.25%


~~Period~~						~~Minimum Units Manufactured~~
~~Period from October 2, 2022 and ending October 29, 2022~~						~~450~~
~~Period from October 2, 2022 and ending November 26, 2022~~						~~900~~
~~Period from October 2, 2022 and ending December 31, 2022~~						~~1,400~~
~~Period from October 2, 2022 and ending January 28, 2023~~						~~1,900~~
~~Period from October 2, 2022 and ending February 25, 2023~~						~~2,400~~
~~Period from October 2, 2022 and ending April 1, 2023~~						~~3,000~~

Pricing on the Closing Date was set at Level III until receipt of the financial information and related compliance certificate for the first fiscal quarter ending after the Closing Date.

~~The Company~~Borrower is ~~not~~also required to ~~comply with a maximum~~pay lenders an unused commitment fee of between 0.25% and 0.45% per annum on the undrawn commitments under the Revolving Credit Facility, depending on the TNLR, ~~financial maintenance covenant for any fiscal quarters from the sixth amendment effective date through September 30, 2023, with the maximum threshold amended thereafter as follows~~:


~~Period~~						Maximum Total Net Leverage Ratio
~~Fiscal Quarter ending December 30, 2023 through the fiscal quarter ending March 30, 2024~~						~~4.00:1.00~~
~~Fiscal quarter ending June 29, 2024 and thereafter~~						~~3.50:1.00~~

quarterly in arrears.

The ~~pricing grid~~Credit Agreement also includes a requirement that the Company comply with the following financial covenants on the last day of each fiscal quarter through maturity: (i) a pro forma TNLR of not greater than 3.00:1.00 and (ii) a pro forma fixed charge coverage ratio (as defined in the ~~Amended~~ Credit ~~Agreement, which is based on the TNLR, is applicable to both term loan and revolving borrowings and is determined in accordance with the amended pricing matrix set forth below:~~

~~Further, the pricing margins for levels VII though IX above are each increased (x) by 0.25% if the aggregate revolving borrowings are equal to or greater than $50.0 million and~~Agreement) of not less than ~~or equal to $80.0 million and (y) by 0.50% if the aggregate revolving borrowings are greater than $80.0 million.~~On the sixth amendment effective date, the interest rate was set at SOFR plus 5.75% and will be adjusted, as applicable, for future fiscal quarter in accordance with the amended pricing grid set forth above.

Finally, the Company is required to deliver to the administrative agent, on a quarterly basis, a projected consolidated balance sheet and consolidated statements of projected operations and cash flows containing the next four fiscal quarters.1.20:1.00.

Detailed descriptions of the ~~Credit Agreement as well as the First, Second, Third, Fourth, and Fifth~~ Amended Credit ~~Agreements~~Agreement are set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended ~~October 1, 2022,~~September 30, 2023, filed with the SEC on December ~~12, 2022.~~11, 2023.

At December ~~31, 2022, the~~30, 2023, Borrower and the guarantors under the ~~Amended~~ Credit Agreement were in compliance with all covenants.

Short-Term and Long-Term Liquidity Requirements

Our ability to make principal and interest payments on borrowings under our ~~credit facilities~~Credit Facility\ies and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions. The adverse impacts from ongoing supply chain disruptions ~~which were further exacerbated by Russia's invasion of Ukraine in February 2022,~~ materially impacted our operations and results during the second half of fiscal 2021 and all of fiscal 2022 due to higher purchasing costs, including freight costs incurred to expedite receipt of critical components, increased manufacturing inefficiencies and our inability to complete the production of buses to fulfill sales orders.

Towards the end of fiscal 2022 and continuing ~~throughout the first quarter of~~into fiscal 2023, there were slight improvements in the supply chain's ability to deliver the parts and components necessary to support our production operations, resulting in increased (i) manufacturing efficiencies and (ii) production of buses to fulfill sales orders during ~~the first quarter of~~ fiscal 2023. However, the higher costs charged by suppliers to procure inventory that continued into ~~the first quarter of~~ fiscal 2023 ~~and~~ had a significant adverse impact on our operations and ~~results as~~results. Specifically, such ~~costs~~cost increases outpaced the increases in sales prices that we charged for the buses that were sold during the first quarter ~~all~~of fiscal 2023, many of which were included in the backlog of fixed price sales orders originating in fiscal 2021 and the early months of fiscal 2022 that carried forward into fiscal 2023. During the remainder of fiscal 2023, the buses that were sold were generally included in the backlog of fixed price sales orders originating more recently (i.e., the latter months of fiscal 2022 and in fiscal 2023), with the cumulative increases in sales prices we charged for those buses generally outpacing the higher costs we paid to procure inventory, resulting in gross profit during the quarters. While the gross margin on bus sales during the second quarter of fiscal 2023 lagged the historical gross margin reported prior to the COVID-19 pandemic, it returned to more normal historical levels during the latter half of fiscal 2023.

Supply chain disruptions continued into the first quarter of fiscal 2024 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses kept pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin during the first quarter of fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

The development and fluidity of ongoing or future supply chain constraints preclude any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity. See PART I, Item 1.A. "Risk Factors," of our ~~2022~~fiscal 2023 Form 10-K, filed with the SEC on December ~~12, 2022,~~11, 2023, for a discussion of the material risks we believe we face particularly related to ~~the COVID-19 pandemic~~health epidemics and ~~subsequent~~ supply chain constraints.

Future ~~COVID-19 outbreaks~~health epidemics and/or continuing supply chain constraints could cause a ~~more severe~~ contraction in our profits and/or liquidity, which could lead to issues complying with our ~~Amended~~ Credit Agreement covenants. Our primary financial covenants are (i) minimum consolidated EBITDA, which is an adjusted EBITDA metric that could differ from Adjusted EBITDA appearing in the Company’s periodic filings on Form 10-K or Form 10-Q as the adjustments to the calculations are not uniform, at the end of each fiscal quarter for the trailing four fiscal quarter period most recently then ended for fiscal 2022 and at the end of the third and fourth fiscal quarters of fiscal 2023 calculated on an annualized basis; (ii) for fiscal 2022 through December 30, 2023, minimum liquidity at the end of each fiscal month; (iii) when applicable during fiscal 2022 through April 1, 2023, minimum school bus units manufactured calculated on a three month trailing basis at the end of each fiscal month for fiscal 2022 and on a cumulative basis at the end of each fiscal month for the first and second fiscal quarters of fiscal 2023; and (iv) beginning in the fiscal year ending September 28, 2024 ("fiscal 2024") and thereafter, TNLR at the end of each fiscal quarter. If we are not able to comply with ~~such~~ covenants, we may need to seek amendment for covenant relief or even refinance the debt to a "covenant lite" or "no covenant" structure. We ~~cannot assure our investors~~can offer no assurance that we would be successful in amending or refinancing the existing debt. An amendment or refinancing of our existing debt could lead to higher interest rates and possible up-front expenses not included in our historical financial statements.

To increase our liquidity in future periods, we could pursue raising additional capital via an equity or debt offering utilizing a currently effective "shelf" registration statement. However, we ~~cannot assure our investors~~can offer no assurance that we would be successful in raising this additional capital, which could also lead to increased expense and larger up-front fees when compared with our historical financial statements.

Seasonality

Historically, our business has been highly seasonal with school districts buying their new school buses so that they will be available for use on the first day of the school year, typically in mid-August to early September. This has, in fiscal years prior to the COVID-19 pandemic, resulted in our third and fourth fiscal quarters representing our two busiest quarters from a sales and production perspective, the latter ending on the Saturday closest to September 30. Our quarterly results of operations, cash flows, and liquidity have historically been, and are likely to be in future periods, impacted by seasonal patterns. Working capital has historically been a significant use of cash during the first fiscal quarter due to planned shutdowns and a significant source of cash generation in the fourth fiscal quarter. With the COVID-19 pandemic and subsequent supply chain constraints, seasonality and working capital trends have become unpredictable. Seasonality and variations from historical seasonality have impacted the comparison of working capital and liquidity results between fiscal periods.

Cash Flows

The following table sets forth general information derived from our Condensed Consolidated Statements of Cash Flows:
Three Months Ended
(in thousands of dollars) December 31, 2022 January 1, 2022
Cash and cash equivalents at beginning of period $ 10,479 $ 11,709
Total cash provided by (used in) operating activities 19,926 (33,077)
Total cash used in investing activities (1,146) (1,570)
Total cash (used in) provided by financing activities (23,359) 27,007
Change in cash and cash equivalents $ (4,579) $ (7,640)
Cash and cash equivalents at end of period $ 5,900 $ 4,069


	Three Months Ended
(in thousands of dollars)	December 30, 2023		December 31, 2022
Cash, cash equivalents and restricted cash at beginning of period	$	78,988	$	10,479
Total cash provided by operating activities	217		19,926
Total cash used in investing activities	(2,904)		(1,146)
Total cash provided by (used in) financing activities	995		(23,359)
Change in cash, cash equivalents and restricted cash	$	(1,692)	$	(4,579)
Cash, cash equivalents and restricted cash at end of period	$	77,296	$	5,900

Total cash provided by ~~(used in)~~ operating activities

Cash flows provided by operating activities totaled ~~$19.9~~$0.2 million for the three months ended December ~~31, 2022, an increase~~30, 2023, a decrease of ~~$53.0~~$19.7 million from the ~~$33.1~~$19.9 million of cash flows ~~used in~~provided by operating activities during the three months ended ~~January 1,~~December 31, 2022.

The effect of net changes in operating assets and liabilities negatively impacted operating cash flows by $64.7 million during the three months ended December 30, 2023 compared to the three months ended December 31, 2022. The ~~increase was primarily due to $30.6 million, $27.7 million, and $9.0 million increases~~primary drivers in ~~cash provided by favorable~~this category were unfavorable changes in inventory and accounts payable of $21.0 million and ~~accrued expenses, pension and other liabilities,~~$39.7 million, respectively. At the end of fiscal 2022 and during the first quarter of fiscal 2023, inflationary pressures and supply chain disruptions significantly increased our purchase costs for components and freight, which, when coupled with increased production and sales volumes during the first quarter of fiscal 2023, resulted in a significant increase in the accounts payable balance (a net source of cash) when compared with a significant decrease in the accounts payable balance at the end of the first quarter of fiscal ~~2022~~2024 (a net use of cash). Additionally, we became more efficient at managing supply chain disruptions, and thus building and selling buses, during the ~~latter months of fiscal 2022 and continuing into~~ the first quarter of fiscal ~~2023 when compared with the first quarter of fiscal 2022.~~2023. These efficiencies resulted in us consuming more inventory in production, which resulted in a significant decrease in the inventory balance at the end of the first quarter of fiscal 2023 (a net source of cash) ~~when compared with~~. In comparison, we had a ~~significant~~marginal increase in the inventory balance at the end of the ~~corresponding period~~first quarter of fiscal ~~2022~~2024 (a net use of cash). as we elected to strategically acquire larger quantities of certain components (i) that have longer lead times and could impact our production schedule if not manufactured by our suppliers and delivered to us in a timely manner and (ii) in anticipation of model year changeovers by some of our larger suppliers that are expected to decrease the availability of such inventory later in fiscal 2024.

These ~~favorable~~unfavorable changes were partially offset by ~~several unfavorable changes including~~ a ~~$7.2~~$37.4 million increase in net ~~loss, a $1.1 million decrease in share-based compensation,~~income and a ~~$2.7~~$3.0 million ~~decrease~~increase in ~~cash provided by changes~~the dividend received from our unconsolidated Canadian joint venture during the first quarter of fiscal 2024 when compared with the corresponding period in ~~other assets.~~fiscal 2023.

Total cash used in investing activities

Cash flows used in investing activities totaled $2.9 million for the three months ended December 30, 2023, as compared to $1.1 million for the three months ended December 31, ~~2022, as compared to $1.6 million for the three months ended January 1,~~ 2022. The ~~$0.4~~$1.8 million ~~decrease~~increase was primarily due to ~~a reduction~~an increase in spending on fixed assets, as increased profitability in the first quarter of fiscal 2024 when compared to the same period in fiscal 2023 allowed for more capital spending. During the first quarter of fiscal 2023, capital spending was reduced to lower than normal amounts in an effort to mitigate the ~~ongoing~~ impact of supply chain constraints on our operations, financial results and cash flows.

Total cash provided by (used in) ~~provided by~~ financing activities

Cash flows ~~used in~~provided by financing activities totaled ~~$23.4~~$1.0 million for the three months ended December ~~31, 2022,~~30, 2023 as compared to ~~$27.0~~$23.4 million of cash flows ~~provided by~~used in financing activities for the three months ended ~~January 1,~~December 31, 2022. The ~~$50.4~~$24.4 million ~~decrease~~increase between fiscal periods was primarily attributable to ~~$75.0~~$100.0 million of proceeds received from term loan borrowings under the ~~issuance and sale~~Credit Agreement as well as a $51.2 million net increase in revolving line of ~~common stock in a private placement transaction during the first quarter of fiscal 2022 with no similar activity in the corresponding period of fiscal 2023. This cash inflow was~~credit borrowings, which were partially offset by a $126.9 million net ~~$25.0 million~~ decrease ~~(i.e., repayments)~~ in ~~revolving~~term loan principal repayments under the previous credit ~~facility borrowings in the three months ended December 31, 2022 compared to the three months ended January 1, 2022.~~agreement.

Free cash flow

Management believes the non-GAAP measurement of Free Cash Flow, defined as net cash provided by ~~(used in)~~ operating activities less cash paid for fixed assets and acquired intangible assets, fairly represents the Company’s ability to generate surplus cash that could fund activities not in the ordinary course of business. See “Key Non-GAAP Financial Measures We Use to Evaluate Our Performance” for further discussion. The following table sets forth the calculation of Free Cash Flow for the periods presented:

Three Months Ended

(in thousands of dollars)

December 31, 2022

January 1, 2022

(in thousands of dollars)

December 30, 2023

December 31, 2022

Net cash provided by (used in) operating activities

19,926

(33,077)

Net cash provided by operating activities

Cash paid for fixed assets

(1,146)

(1,570)

Free Cash Flow

18,780

(34,647)

Free Cash Flow for the three months ended December ~~31, 2022~~30, 2023 was ~~$53.4~~$21.5 million ~~higher~~lower than for the three months ended ~~January 1,~~December 31, 2022 due to a ~~$53.0~~$19.7 million ~~increase~~decrease in net cash provided by ~~(used in)~~ operating activities as well as ~~a decrease~~an increase of ~~$0.4~~$1.8 million in cash paid for fixed assets, both as discussed above.

Off-Balance Sheet Arrangements

We had outstanding letters of credit totaling ~~$6.3~~$6.7 million at December ~~31, 2022,~~30, 2023, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

There have not been any material changes to our interest rate, commodity or currency risks previously disclosed in Part II, Item 7A of the Company’s ~~2022~~fiscal 2023 Form 10-K.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains a system of disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in its reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including, as appropriate, the Chief Executive Officer and the Chief Financial Officer, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives.

Based on their evaluations, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of December ~~31, 2022.~~30, 2023.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the fiscal quarter ended December ~~31, 2022~~30, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3130

PART II – OTHER INFORMATION

Items required under Part II not specifically shown below are not applicable.

Item 1. Legal Proceedings.

Blue Bird is engaged in legal proceedings in the ordinary course of its business. Although no assurances can be given about the final outcome of pending legal proceedings, at the present time management does not believe that the resolution or outcome of any of Blue Bird’s pending legal proceedings will have a material adverse effect on its financial condition, liquidity or results of operations.

Item 1A. Risk Factors.

In addition to the other information set forth in this Report, you should carefully consider the risk factors discussed in Part I, Item 1A of the Company's ~~2022~~fiscal 2023 Form 10-K. Such risk factors are expressly incorporated herein by reference, and could materially adversely affect our business, financial condition, cash flows or operating results. The risks described in the ~~2022~~fiscal 2023 Form 10-K are not the only risks facing the Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, cash flows and/or operating results.

Item 5. Other Information.

(c) During the first quarter of fiscal 2024, the Company did not adopt or terminate, and none of the Company's directors or officers adopted or terminated, any "Rule 10b5-1 trading arrangement" or any "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408 of Regulation S-K.

Item 6. Exhibits.

The following Exhibits are filed with this Report:


Exhibit No.						Description
3.1						The registrant’s Second Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on February 26, 2015).

3.2						Bylaws of Blue Bird Corporation, as amended, effective February 2, 2023 ~~(incorporated by reference to~~ ~~Exhibit 3.2 to the registrant's Current Report on Form 8-K, filed~~ ~~by the registrant~~ ~~with the SEC on~~ ~~February 3, 2023).~~

~~10.1~~						~~Sixth~~ ~~Amendment to~~ ~~Credit~~ ~~Agreement, dated~~ ~~as of November 21,~~ ~~2022,~~ ~~by and among the Company, School Bus Holdings, Inc.~~ ~~and~~ ~~certain of its subsidiaries, including~~ ~~Blue Bird~~ ~~Body Company as the borrower, Bank of Montreal, as Administrative Agent and certain other financial institutions party thereto~~ (incorporated by reference to Exhibit ~~10.1~~3.2 to the ~~registrant’s~~registrant's Current Report on Form 8-K, filed by the registrant with the SEC on ~~November 28,~~ ~~2022)~~February 3, 2023).

31.1*						Chief Executive Officer’s Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

31.2*						Chief Financial Officer’s Certification Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934.

32.1*						Chief Executive Officer and Chief Financial Officer Joint Certification Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

10.1						Credit Agreement, dated as of November 17, 2023, by and among the Company, School Bus Holdings, Inc. and certain of its subsidiaries, including Blue Bird Body Company as the borrower, Bank of Montreal, as Administrative Agent and certain other financial institutions party thereto (incorporated by reference to Exhibit 10.1 to the registrant’s Current Report on Form 8-K, filed by the registrant with the SEC on November 20, 2023).

10.2*						Limited Liability Company Agreement of Clean Bus Solutions, LLC, dated as of December 7, 2023, by and among Blue Bird Body Company, Clean Bus Solutions, LLC, and GC Mobility Investments I, LLC.

10.3*						Warrant to Purchase Common Stock of Blue Bird Corporation, dated as of December 7, 2023, by and among Blue Bird Corporation and Generate Capital, PBC.

10.4*						Warrant to Purchase Common Stock of Blue Bird Corporation, dated as of December 7, 2023, by and among Blue Bird Corporation and Generate Capital, PBC.

101.INS*^						XBRL Instance Document

101.SCH*^						XBRL Taxonomy Extension Schema Document

101.CAL*^						XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*^						XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*^						XBRL Taxonomy Extension Label Linkbase Document

101.PRE*^						XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith.

^ In accordance with Regulation S-T, XBRL (Extensible Business Reporting Language) related information in Exhibit No. 101 to this Quarterly Report on Form 10-Q shall be deemed “furnished” and not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, and shall not be incorporated by reference into any registration statement pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		Blue Bird Corporation


Dated:	February ~~8, 2023~~7, 2024	/s/ ~~Matthew Stevenson~~Philip Horlock
		~~Matthew Stevenson~~Philip Horlock
		Chief Executive Officer

Dated:	February ~~8, 2023~~7, 2024	/s/ Razvan Radulescu
		Razvan Radulescu
		Chief Financial Officer


Level	Total Net Leverage Ratio	ABR Loans	SOFR Loans
I	Less than 2.00x	0.75%	1.75%
II	Greater than or equal to 2.00x and less than 2.50x	1.00%	2.00%
III	Greater than or equal to 2.50x and less than 3.00x	1.25%	2.25%
IV	Greater than or equal to 3.00x and less than 3.25x	1.50%	2.50%
V	Greater than or equal to 3.25x and less than 3.50x	1.75%	2.75%
VI	Greater than or equal to 3.50x and less than 4.00x	2.00%	3.00%
VII	Greater than or equal to 4.00x and less than 4.50x	2.75%	3.75%
VIII	Greater than or equal to 4.50x and less than 5.00x	3.75%	4.75%
IX	Greater than 5.00x	4.75%	5.75%