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 ~~April 1, 2023~~March 30, 2024


☐			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 May ~~8, 2023, 32,036,149~~3, 2024, 32,299,065 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)	April 1, 2023		October 1, 2022		(in thousands of dollars, except for share data)	March 30, 2024	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	$	17,773	$	10,479
Accounts receivable, net	Accounts receivable, net	13,635		12,534
Inventories	Inventories	129,161		142,977
Other current assets	Other current assets	11,478		8,486
Total current assets	Total current assets	$	172,047	$	174,476
Restricted cash		$	238	$	—

Property, plant and equipment, net
Property, plant and equipment, net
Property, plant and equipment, net	Property, plant and equipment, net	98,506		100,608
Goodwill	Goodwill	18,825		18,825
Intangible assets, net	Intangible assets, net	46,428		47,433
Equity investment in affiliate	Equity investment in affiliate	12,325		10,659
Deferred tax assets	Deferred tax assets	12,507		10,907
Finance lease right-of-use assets	Finance lease right-of-use assets	1,385		1,736
Other assets	Other assets	2,088		1,482
Total assets	Total assets	$	364,349	$	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	$	136,622	$	107,937
Warranty	Warranty	6,597		6,685
Accrued expenses	Accrued expenses	21,748		16,386
Deferred warranty income	Deferred warranty income	7,404		7,205
Finance lease obligations	Finance lease obligations	576		566
Other current liabilities	Other current liabilities	5,620		6,195
Current portion of long-term debt	Current portion of long-term debt	19,800		19,800
Total current liabilities	Total current liabilities	$	198,367	$	164,774
Long-term liabilities	Long-term liabilities
Revolving credit facility	Revolving credit facility	$	—	$	20,000
Revolving credit facility
Revolving credit facility
Long-term debt	Long-term debt	119,752		130,390
Warranty	Warranty	8,957		9,285
Deferred warranty income	Deferred warranty income	12,677		11,590
Deferred tax liabilities	Deferred tax liabilities	143		—
Finance lease obligations	Finance lease obligations	1,283		1,574
Other liabilities	Other liabilities	8,506		11,107
Pension	Pension	15,782		16,024
Total long-term liabilities	Total long-term liabilities	$	167,100	$	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 April 1, 2023 and October 1, 2022		$	—	$	—
Common stock, $0.0001 par value, 100,000,000 shares authorized, 32,036,149 and 32,024,911 shares outstanding at April 1, 2023 and October 1, 2022, respectively		3		3
Stockholders' equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at March 30, 2024 and September 30, 2023
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at March 30, 2024 and September 30, 2023
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at March 30, 2024 and September 30, 2023
Common stock, $0.0001 par value, 100,000,000 shares authorized, 32,299,065 and 32,165,225 shares outstanding at March 30, 2024 and September 30, 2023, respectively
Additional paid-in capital	Additional paid-in capital	174,313		173,103
Accumulated deficit	Accumulated deficit	(83,676)		(79,512)
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(41,476)		(41,930)
Treasury stock, at cost, 1,782,568 shares at April 1, 2023 and October 1, 2022		(50,282)		(50,282)
Total stockholders' (deficit) equity		$	(1,118)	$	1,382
Total liabilities and stockholders' (deficit) equity		$	364,349	$	366,126
Treasury stock, at cost, 1,782,568 shares at March 30, 2024 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				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars except for share data)	(in thousands of dollars except for share data)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars except for share data)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Net sales	Net sales	$	299,814	$	207,659	$	535,546	$	336,882
Cost of goods sold	Cost of goods sold	264,165		204,502		492,440		317,528
Gross profit	Gross profit	$	35,649	$	3,157	$	43,106	$	19,354
Operating expenses	Operating expenses
Selling, general and administrative expenses	Selling, general and administrative expenses	23,205		19,858		40,037		38,091
Operating profit (loss)		$	12,444	$	(16,701)	$	3,069	$	(18,737)
Selling, general and administrative expenses
Selling, general and administrative expenses
Operating profit
Interest expense	Interest expense	(5,192)		(2,491)		(9,388)		(5,573)
Interest income	Interest income	12		—		12		—
Other (expense) income, net		(342)		744		(578)		1,480
Loss on debt modification		—		—		(537)		(561)
Other expense, net
Loss on debt refinancing or modification
Income (loss) before income taxes	Income (loss) before income taxes	$	6,922	$	(18,448)	$	(7,422)	$	(23,391)
Income tax (expense) benefit	Income tax (expense) benefit	(1,389)		7,415		1,592		9,177
Equity in net income (loss) of non-consolidated affiliate		1,597		(1,114)		1,666		(2,015)
Equity in net income of non-consolidated affiliate
Net income (loss)	Net income (loss)	$	7,130	$	(12,147)	$	(4,164)	$	(16,229)

Earnings (loss) per share:	Earnings (loss) per share:
Earnings (loss) per share:
Earnings (loss) per share:
Basic weighted average shares outstanding
Basic weighted average shares outstanding
Basic weighted average shares outstanding	Basic weighted average shares outstanding	32,033,709		31,981,073		32,029,999		30,039,240
Diluted weighted average shares outstanding	Diluted weighted average shares outstanding	32,322,163		31,981,073		32,029,999		30,039,240
Basic earnings (loss) per share	Basic earnings (loss) per share	$	0.22	$	(0.38)	$	(0.13)	$	(0.54)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.22	$	(0.38)	$	(0.13)	$	(0.54)

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(Unaudited)


		Three Months Ended				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Net income (loss)	Net income (loss)	$	7,130	$	(12,147)	$	(4,164)	$	(16,229)
Other comprehensive income, net of tax:	Other comprehensive income, net of tax:
Net change in defined benefit pension plan	Net change in defined benefit pension plan	227		221		454		442
Net change in defined benefit pension plan
Net change in defined benefit pension plan

Total other comprehensive income	Total other comprehensive income	$	227	$	221	$	454	$	442
Total other comprehensive income
Total other comprehensive income
Comprehensive income (loss)	Comprehensive income (loss)	$	7,357	$	(11,926)	$	(3,710)	$	(15,787)

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)


		Six Months Ended
	Six Months Ended								Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023
Cash flows from operating activities	Cash flows from operating activities
Net loss		$	(4,164)	$	(16,229)
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	7,068		6,678
Non-cash interest expense	Non-cash interest expense	777		2,509
Share-based compensation expense	Share-based compensation expense	1,288		2,486
Equity in net (income) loss of non-consolidated affiliate		(1,666)		2,015
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	11		12

Impairment of fixed assets		—		1,354
Deferred income tax benefit		(1,600)		(9,127)

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	598		581
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	(1,101)		(1,236)
Inventories	Inventories	13,816		(30,469)
Other assets	Other assets	(2,380)		(3,072)
Accounts payable	Accounts payable	28,116		38,883
Accrued expenses, pension and other liabilities	Accrued expenses, pension and other liabilities	3,416		(6,356)

Total adjustments	Total adjustments	$	48,880	$	4,819
Total cash provided by (used in) operating activities		$	44,716	$	(11,410)
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	$	(3,740)	$	(3,478)

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	$	(3,740)	$	(3,478)
Cash flows from financing activities	Cash flows from financing activities
Revolving credit facility borrowings		$	35,000	$	55,000
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	(55,000)		(100,000)
Term loan borrowings - new credit agreement (Note 4)
Term loan repayments (Note 4)
Principal payments on finance leases
Cash paid for debt costs (Note 4)

Term loan repayments		(9,900)		(7,425)
Principal payments on finance leases		(281)		(659)
Cash paid for debt costs		(3,272)		(2,468)
Sale of common stock		—		75,000
Cash paid for common stock issuance costs		—		(202)

Repurchase of common stock in connection with stock award exercises

Repurchase of common stock in connection with stock award exercises

Repurchase of common stock in connection with stock award exercises	Repurchase of common stock in connection with stock award exercises	(57)		(1,503)
Cash received from stock option exercises	Cash received from stock option exercises	66		303

Total cash (used in) provided by financing activities		$	(33,444)	$	18,046
Total cash used in financing activities
Total cash used in financing activities
Total cash used in financing activities
Change in cash, cash equivalents, and restricted cash	Change in cash, cash equivalents, and restricted cash	7,532		3,158
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	$	18,011	$	14,867

Supplemental disclosures of cash flow information
Cash paid or received during the period:
Interest paid, net of interest received		$	8,125	$	6,940
Income tax (received) paid, net of tax refunds		(52)		18
Non-cash investing and financing activities:
Changes in accounts payable for capital additions to property, plant and equipment		$	1,019	$	1,119

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


	Six Months Ended
(in thousands of dollars)	March 30, 2024		April 1, 2023

Supplemental disclosures of cash flow information
Cash paid or received during the period:
Interest paid, net of interest received	$	3,678	$	8,125
Income tax paid (received), net of tax refunds	9,443		(52)
Non-cash investing and financing activities:
Changes in accounts payable for capital additions to property, plant and equipment	$	780	$	1,019





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
	Three Months Ended																								Three Months Ended
(in thousands of dollars, except for share data)	(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, December 31, 2022		32,032,067	$	3	$	173,592	—	$	—	$	(41,703)	$	(90,806)	1,782,568	$	(50,282)	$	(9,196)
		Shares
		Shares
		Shares																	Par Value	Additional Paid-In-Capital	Shares	Amount	Accumulated Other Comprehensive Loss	Accumulated Deficit		Shares	Amount	Total Stockholders' Equity (Deficit)
Balance, December 30, 2023

Stock option activity	Stock option activity	4,082	—		66		—	—		—		—		—	—		66

Stock option activity

Stock option activity

Share-based compensation expense
Share-based compensation expense
Share-based compensation expense	Share-based compensation expense	—	—		655		—	—		—		—		—	—		655

Net income	Net income	—	—		—		—	—		—		7,130		—	—		7,130

Net income

Net income
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—	—		227		—		—	—		227
Balance, April 1, 2023		32,036,149	$	3	$	174,313	—	$	—	$	(41,476)	$	(83,676)	1,782,568	$	(50,282)	$	(1,118)
Balance, March 30, 2024

Balance, January 1, 2022		31,975,274	$	3	$	171,150	—	$	—	$	(44,573)	$	(37,835)	1,782,568	$	(50,282)	$	38,463
Private placement stock issuance costs		—	—		(24)		—	—		—		—		—	—		(24)
Balance, December 31, 2022
Balance, December 31, 2022
Balance, December 31, 2022

Stock option activity

Stock option activity

Stock option activity	Stock option activity	15,586	—		284		—	—		—		—		—	—		284

Share-based compensation expense	Share-based compensation expense	—	—		781		—	—		—		—		—	—		781
Share-based compensation expense
Share-based compensation expense

Net loss		—	—		—		—	—		—		(12,147)		—	—		(12,147)
Net income

Net income

Net income
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—	—		221		—		—	—		221
Balance, April 2, 2022		31,990,860	$	3	$	172,191	—	$	—	$	(44,352)	$	(49,982)	1,782,568	$	(50,282)	$	27,578
Balance, April 1, 2023


	Six Months Ended																								Six Months Ended
(in thousands of dollars, except for share data)
		Shares
		Shares
		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
Issuance of warrants (Note 12)

Restricted stock activity
Restricted stock activity
Restricted stock activity
Stock option activity

Share-based compensation expense
Share-based compensation expense
Share-based compensation expense

		Six Months Ended
(in thousands of dollars, except for share data)		Common Stock					Convertible Preferred Stock							Treasury Stock

Net income

Net income

Net income
Other comprehensive income, net of tax
Balance, March 30, 2024
		Shares	Par Value		Additional Paid-In-Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Accumulated Deficit		Shares	Amount		Total Stockholders' Equity (Deficit)
Balance, October 1, 2022	Balance, October 1, 2022	32,024,911	$	3	$	173,103	—	$	—	$	(41,930)	$	(79,512)	1,782,568	$	(50,282)	$	1,382
Balance, October 1, 2022
Balance, October 1, 2022

Restricted stock activity

Restricted stock activity

Restricted stock activity	Restricted stock activity	7,156	—		(57)		—	—		—		—		—	—		(57)
Stock option activity	Stock option activity	4,082	—		66		—	—		—		—		—	—		66

Share-based compensation expense	Share-based compensation expense	—	—		1,201		—	—		—		—		—	—		1,201
Share-based compensation expense
Share-based compensation expense

Net loss

Net loss

Net loss	Net loss	—	—		—		—	—		—		(4,164)		—	—		(4,164)
Other comprehensive income, net of tax	Other comprehensive income, net of tax	—	—		—		—	—		454		—		—	—		454
Balance, April 1, 2023	Balance, April 1, 2023	32,036,149	$	3	$	174,313	—	$	—	$	(41,476)	$	(83,676)	1,782,568	$	(50,282)	$	(1,118)

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	—		74,798		—	—		—		—		—	—		74,798

Restricted stock activity		82,505	—		(1,484)		—	—		—		—		—	—		(1,484)
Stock option activity		15,586	—		284		—	—		—		—		—	—		284

Share-based compensation expense		—	—		2,423		—	—		—		—		—	—		2,423

Net loss		—	—		—		—	—		—		(16,229)		—	—		(16,229)
Other comprehensive income, net of tax		—	—		—		—	—		442		—		—	—		442
Balance, April 2, 2022		31,990,860	$	3	$	172,191	—	$	—	$	(44,352)	$	(49,982)	1,782,568	$	(50,282)	$	27,578

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

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 second quarters of fiscal ~~2023~~2024 and fiscal ~~2022~~2023 both included 13 weeks. The six month periods in fiscal ~~2023~~2024 and ~~2022~~2023 both included 26 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.

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, primarily in an indirect manner since the Company does not sell to customers located in, or source goods directly from, either country. Specifically, it 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.

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 ~~second quarter~~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 ~~quarter. However,~~quarters. While the gross margin on bus sales during the second quarter of fiscal 2023 ~~still lags~~lagged the historical gross margin reported prior to the COVID-19 ~~pandemic.~~

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 significantly impacted our financial resultspandemic, it returned to more normal historical levels during the second half of fiscal 2022 and continuing into the first half 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 the second half of fiscal 2022 and continuing into the firstlatter half of fiscal 2023.

~~Significant uncertainty exists concerning~~Supply chain disruptions continued into the ~~magnitude~~first half 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 ~~duration~~operations by limiting the number of school buses that we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, the ~~pandemic~~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 ~~accordingly, precludes 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 half 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 six months ended ~~April 1, 2023.~~March 30, 2024.

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 are effective for all entities from March 12, 2020 through December 31, 2024. An entity may elect to apply~~new ASUs will not impact amounts recorded in the amendments to contract modifications on a (i) full retrospective basis as of any date from the beginning of an interim period that 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 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 ~~issued or available to be issued.~~effective.

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 and has no plans to enter such contracts prior to the discontinuation of LIBOR. The change in interest rate indices from LIBOR to SOFR occurred at the end of December 2022 when the LIBOR interest rate on outstanding borrowings on the fifth amendment effective date matured. At that time, 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)	April 1, 2023		October 1, 2022		(in thousands of dollars)	March 30, 2024	September 30, 2023
Raw materials	Raw materials	$	94,589	$	106,070
Work in process	Work in process	29,479		35,398
Finished goods	Finished goods	5,093		1,509
Total inventories	Total inventories	$	129,161	$	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)	April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023
Cash and cash equivalents	Cash and cash equivalents	$	17,773	$	14,867
Restricted cash	Restricted cash	238		—
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	$	18,011	$	14,867

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				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Balance at beginning of period	Balance at beginning of period	$	15,580	$	17,252	$	15,970	$	18,550
Add current period accruals	Add current period accruals	2,432		2,051		4,465		3,287
Current period reductions of accrual	Current period reductions of accrual	(2,458)		(2,318)		(4,881)		(4,852)
Balance at end of period	Balance at end of period	$	15,554	$	16,985	$	15,554	$	16,985

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				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Balance at beginning of period	Balance at beginning of period	$	19,290	$	19,088	$	18,795	$	20,144
Add current period deferred income	Add current period deferred income	2,756		1,421		5,092		2,360
Current period recognition of income	Current period recognition of income	(1,965)		(2,095)		(3,806)		(4,090)
Balance at end of period	Balance at end of period	$	20,081	$	18,414	$	20,081	$	18,414

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 ~~$3.9~~$4.5 million of the outstanding contract liability during the remainder of fiscal ~~2023, $6.3~~2024, $7.8 million in fiscal ~~2024,~~2025, and the remaining balance thereafter.

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)	April 1, 2023		October 1, 2022		(in thousands of dollars)	March 30, 2024	September 30, 2023
Current portion	Current portion	$	3,585	$	3,996
Long-term portion	Long-term portion	1,751		1,794
Total accrued self-insurance	Total accrued self-insurance	$	5,336	$	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 ~~$4.2~~$5.0 million and ~~$3.5~~$4.2 million for the three months ended March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively, and ~~$8.5~~$9.7 million and ~~$6.9~~$8.5 million for the six months ended March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively. The related cost of goods sold was ~~$3.9~~$4.4 million and ~~$3.1~~$3.9 million for the three months ended March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively, and ~~$7.7~~$8.7 million and ~~$6.2~~$7.7 million for the six months ended March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively.

Pension Expense

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


		Three Months Ended				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Interest cost	Interest cost	$	1,509	$	1,092	$	3,018	$	2,184
Expected return on plan assets	Expected return on plan assets	(1,630)		(2,122)		(3,260)		(4,244)
Amortization of prior loss	Amortization of prior loss	299		291		598		582
Net periodic benefit expense (income)		$	178	$	(739)	$	356	$	(1,478)
Net periodic pension benefit expense
Amortization of prior loss, recognized in other comprehensive income	Amortization of prior loss, recognized in other comprehensive income	(299)		(291)		(598)		(582)
Total recognized in net periodic pension benefit expense (income) and other comprehensive income		$	(121)	$	(1,030)	$	(242)	$	(2,060)
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~~

Borrower has the right to prepay the loans outstanding under the 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 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 our election.

~~For purposes~~The Term Loan Facility is subject to amortization of ~~complying with~~principal, payable in equal quarterly installments on the ~~above minimum consolidated EBITDA covenant, the Company’s consolidated EBITDA for the (i) two~~last day of each fiscal quarter, ~~period ending July 1, 2023 is multiplied by 2 and (ii) three fiscal quarter period ending September~~which commenced on March 30, ~~2023 is multiplied by 4/3.~~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

~~The minimum liquidity (in the form of undrawn availability~~aggregate principal amount outstanding under the ~~revolving credit facility and unrestricted cash and cash equivalents) that~~Term Loan Facility, as well as any outstanding borrowings under the ~~Company is required to maintain at~~Revolving Credit Facility, will be payable on the ~~end~~November 17, 2028 maturity date of ~~each fiscal month during~~ the ~~Amended Limited Availability Period is amended as set forth in the table below (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 to be calculated 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~~

Credit Agreement.

The ~~pricing grid in~~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 that ended after the Closing Date, with pricing as of March 30, 2024 set at Level I.

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 quarters 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.~~

March 30, 2024.

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)	(in thousands of dollars)	April 1, 2023		October 1, 2022		(in thousands of dollars)	March 30, 2024	September 30, 2023
2023 term loan, net of deferred financing costs of $2,148 and $1,410, respectively		$	139,552	$	150,190
Term loan borrowings, net of deferred financing costs of $1,428 and $1,456, respectively
Less: current portion of long-term debt	Less: current portion of long-term debt	19,800		19,800
Long-term debt, net of current portion	Long-term debt, net of current portion	$	119,752	$	130,390

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 ~~April 1,~~March 30, 2024 and September 30, 2023, ~~and October 1, 2022, $141.7~~$98.8 million and ~~$151.6~~$131.8 million, respectively, were outstanding on the term loans.

At ~~April 1,~~March 30, 2024 and September 30, 2023, ~~and October 1, 2022,~~ the stated interest rates on the term loans were ~~10.5%~~7.2% and ~~7.9%~~10.0%, respectively. At ~~April 1,~~March 30, 2024 and September 30, 2023, ~~and October 1, 2022,~~ the weighted-average annual effective interest rates for the term loans were ~~11.6%~~8.2% and ~~8.0%~~10.9%, respectively, which ~~includes~~include amortization of the deferred financing ~~costs and interest relating to the interest rate collar, as applicable.~~costs.

At ~~April 1, 2023, $6.3~~March 30, 2024, $6.7 million of letters of credit were outstanding, which reduces the availability on the revolving line of credit. There were no in borrowings outstanding on the ~~revolving credit facility;~~Revolving Credit Facility; therefore, the Company would have been able to borrow ~~$83.7~~$143.3 million on the revolving line of credit.

Interest expense on all indebtedness was ~~$5.2~~$2.8 million and ~~$2.5~~$5.2 million for the three months ended March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively, and ~~$9.4~~$6.4 million and ~~$5.6~~$9.4 million for the six months ended March 30, 2024 and April 1, 2023, ~~and April 2, 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		$	9,900
2024	2024	19,800
2025	2025	112,000

2026
2027
2028
Thereafter
Total remaining principal payments	Total remaining principal payments	$	141,700

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 March 30, 2024 was 25.5% 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 April 1, 2023 was 20.1%, 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.

Six Months

The effective tax rate for the ~~three~~six months ended ~~April 2, 2022~~March 30, 2024 was ~~40.2%, which~~25.7% and differed from the statutory federal income tax rate of 21%. The ~~difference is mainly~~increase was primarily due to ~~normal tax rate items, including~~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)~~, which were partially offset by~~ and discrete period ~~tax expense resulting from net non-deductible compensation expenses and other tax adjustments.~~

~~Six Months~~items during the period.

The effective tax rate for the six months ended April 1, 2023 was 21.4%, 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 period.

The effective tax rate for the six months ended April 2, 2022 was 39.2% and differed from the statutory federal income tax rate of 21%. The difference is mainly due to normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), which were 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 ~~April 1, 2023,~~March 30, 2024, 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	Net sales
		Three Months Ended				Six Months Ended
		Three Months Ended
		Three Months Ended
		Three Months Ended											Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024	April 1, 2023
Bus (1)	Bus (1)	$	273,472	$	188,484	$	486,721	$	300,921
Parts (1)	Parts (1)	26,342		19,175		48,825		35,961
Segment net sales	Segment net sales	$	299,814	$	207,659	$	535,546	$	336,882

(1) Parts segment revenue includes ~~$1.3~~$2.7 million and ~~$1.1~~$1.3 million for the three months ended March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively, and ~~$2.4~~$4.3 million and ~~$1.9~~$2.4 million for the six months ended March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively, related to ~~the~~ inter-segment ~~sale~~sales of parts that was eliminated by the Bus segment upon consolidation.


Gross profit (loss)
	Three Months Ended				Six Months Ended
(in thousands of dollars)	March 30, 2024		April 1, 2023		March 30, 2024		April 1, 2023
Bus	$	49,589	$	23,099	$	100,883	$	19,368
Parts	14,050		12,550		26,314		23,738
Segment gross profit	$	63,639	$	35,649	$	127,197	$	43,106

Gross profit (loss)
Three Months Ended Six Months Ended
(in thousands of dollars) April 1, 2023 April 2, 2022 April 1, 2023 April 2, 2022
Bus $ 23,099 $ (3,984) $ 19,368 $ 5,658
Parts 12,550 7,141 23,738 13,696
Segment gross profit $ 35,649 $ 3,157 $ 43,106 $ 19,354

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


		Three Months Ended				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Segment gross profit	Segment gross profit	$	35,649	$	3,157	$	43,106	$	19,354
Adjustments:	Adjustments:
Selling, general and administrative expenses	Selling, general and administrative expenses	(23,205)		(19,858)		(40,037)		(38,091)
Selling, general and administrative expenses
Selling, general and administrative expenses
Interest expense	Interest expense	(5,192)		(2,491)		(9,388)		(5,573)
Interest income	Interest income	12		—		12		—
Other (expense) income, net		(342)		744		(578)		1,480
Loss on debt modification		—		—		(537)		(561)
Other expense, net
Loss on debt refinancing or modification
Income (loss) before income taxes	Income (loss) before income taxes	$	6,922	$	(18,448)	$	(7,422)	$	(23,391)

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


		Three Months Ended				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
United States		$	264,281	$	194,245	$	468,822	$	294,792
U.S.
Canada	Canada	32,234		12,193		62,755		38,497
Rest of world	Rest of world	3,299		1,221		3,969		3,593
Total net sales	Total net sales	$	299,814	$	207,659	$	535,546	$	336,882

8. Revenue

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


		Three Months Ended				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Diesel buses	Diesel buses	$	89,795	$	96,281	$	161,289	$	142,314
Alternative power buses (1)	Alternative power buses (1)	171,269		82,733		303,215		140,370
Other (2)	Other (2)	13,040		10,071		23,495		19,368

Parts	Parts	25,710		18,574		47,547		34,830

Parts

Parts
Net sales	Net sales	$	299,814	$	207,659	$	535,546	$	336,882

(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. Earnings (Loss) Per Share

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


		Three Months Ended				Six Months Ended
	Three Months Ended												Three Months Ended		Six Months Ended
(in thousands except for share data)	(in thousands except for share data)	April 1, 2023		April 2, 2022		April 1, 2023		April 2, 2022		(in thousands except for share data)	March 30, 2024	April 1, 2023		March 30, 2024		April 1, 2023
Numerator:	Numerator:
Net income (loss)	Net income (loss)	$	7,130	$	(12,147)	$	(4,164)	$	(16,229)
Net income (loss)
Net income (loss)

Denominator:	Denominator:
Denominator:
Denominator:
Weighted-average common shares outstanding
Weighted-average common shares outstanding
Weighted-average common shares outstanding	Weighted-average common shares outstanding	32,033,709		31,981,073		32,029,999		30,039,240
Weighted-average dilutive securities, restricted stock	Weighted-average dilutive securities, restricted stock	270,156		—		—		—
Weighted-average dilutive securities, stock options
Weighted-average dilutive securities, warrants (Note 12)

Weighted-average dilutive securities, stock options		18,298		—		—		—

Weighted-average shares and dilutive potential common shares (1)
Weighted-average shares and dilutive potential common shares (1)
Weighted-average shares and dilutive potential common shares (1)	Weighted-average shares and dilutive potential common shares (1)	32,322,163		31,981,073		32,029,999		30,039,240

Earnings (loss) per share:	Earnings (loss) per share:
Earnings (loss) per share:
Earnings (loss) per share:
Basic earnings (loss) per share
Basic earnings (loss) per share
Basic earnings (loss) per share	Basic earnings (loss) per share	$	0.22	$	(0.38)	$	(0.13)	$	(0.54)
Diluted earnings (loss) per share	Diluted earnings (loss) per share	$	0.22	$	(0.38)	$	(0.13)	$	(0.54)

(1) Potentially dilutive securities representing ~~0.4 million~~approximately zero and ~~0.3~~0.4 million shares of common stock were excluded from the computation of diluted earnings per share for the three ~~month periods~~months ending March 30, 2024 and April 1, 2023, ~~and April 2, 2022,~~ respectively, and potentially dilutive securities representing ~~0.7 million~~approximately zero and ~~0.3~~0.7 million shares of common stock were excluded from the computation of diluted earnings per share for the six months ending March 30, 2024 and April 1, 2023, ~~and April 2, 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
		Three Months Ended
		Three Months Ended										Six Months Ended
(in thousands of dollars)										(in thousands of dollars)	Defined Benefit Pension Plan		Total AOCL	Defined Benefit Pension Plan	Total AOCL
March 30, 2024
Beginning Balance
Beginning Balance
Beginning Balance
		Three Months Ended		Six Months Ended
(in thousands of dollars)		Defined Benefit Pension Plan		Total AOCL		Defined Benefit Pension Plan		Total AOCL
Amounts reclassified and included in earnings
Amounts reclassified and included in earnings
Amounts reclassified and included in earnings
Total before taxes
Income taxes
Ending Balance March 30, 2024

April 1, 2023
April 1, 2023
April 1, 2023	April 1, 2023
Beginning Balance	Beginning Balance	$	(41,703)	$	(41,703)	$	(41,930)	$	(41,930)
Beginning Balance
Beginning Balance

Amounts reclassified and included in earnings
Amounts reclassified and included in earnings
Amounts reclassified and included in earnings	Amounts reclassified and included in earnings	299		299		598		598
Total before taxes	Total before taxes	299		299		598		598
Income taxes	Income taxes	(72)		(72)		(144)		(144)
Ending Balance April 1, 2023	Ending Balance April 1, 2023	$	(41,476)	$	(41,476)	$	(41,476)	$	(41,476)

April 2, 2022
Beginning Balance		$	(44,573)	$	(44,573)	$	(44,794)	$	(44,794)

Amounts reclassified and included in earnings		291		291		582		582
Total before taxes		291		291		582		582
Income taxes		(70)		(70)		(140)		(140)
Ending Balance April 2, 2022		$	(44,352)	$	(44,352)	$	(44,352)	$	(44,352)

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 (“December Offering”).

On February 15, 2024, the Company entered into an underwriting agreement with Barclays Capital Inc., as representative of the several underwriters and the Selling Stockholder, pursuant to which the Selling Shareholder agreed to sell 4,042,650 shares of common stock at a purchase price of $32.90 per share ("February Offering," and collectively with the December Offering, “Offerings”).

The December Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, and the February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, both 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 December Offering closed on December 19, 2023 and the February Offering closed on February 21, 2024. Although the Company did not sell any shares or receive any proceeds from the Offerings, it was required to pay certain expenses in connection with the Offerings that totaled approximately $1.9 million and $3.2 million for the three and six month periods ended March 30, 2024, with $0.7 million of similar expense recorded during both the three and six month periods ended April 1, 2023. The $1.9 million and $3.2 million of expense is included within other expense, net on the Condensed Consolidated Statements of Operations for the three and six month periods ended March 30, 2024, respectively, while the $0.7 million of expense is included within selling, general and administrative expenses on the Condensed Consolidated Statements of Operations for the three and six month periods ended April 1, 2023, but was subsequently reclassified to other expense, net, during the third quarter of fiscal 2023.

12. Joint Ventures

Micro Bird Holdings, Inc.

In December 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 and six month periods ended March 30, 2024.

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 and six months ended March 30, 2024 and April 1, 2023 ~~and April 2, 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

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 second quarters of fiscal ~~2023~~2024 and fiscal ~~2022~~2023 both included 13 weeks. The six month periods in fiscal ~~2023~~2024 and ~~2022~~2023 both included 26 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 the Company's revenues during these periods. The Company has also experienced significant increased purchase costs for many of its raw materials as a result of supply chain disruptions over these same periods and continuing into fiscal 2023 that have negatively impacted the 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,~~Specifically, such cost increases outpaced the increases in sales prices that we charged for the buses that were sold 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 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~~many of which were included in the backlog as of fixed price sales orders originating in fiscal 2021 and the ~~end~~early months of fiscal ~~2022. However, they had a positive impact~~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 ~~and gross profit~~ during the second quarter of fiscal 2023 ~~which is expected~~lagged the historical gross margin reported prior to ~~continue for~~ the ~~remainder~~COVID-19 pandemic, it returned to more normal historical levels during the latter half of fiscal ~~2023, as~~2023.

Supply chain disruptions continued into the ~~Company fulfills sales orders (i) from the backlog existing as of the end~~first half of fiscal ~~2022 and (ii) that are taken during 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 ~~contained, or will contain, most or all~~impacted our business and operations by limiting the number of school buses that we could produce and sell as well as increasing the ~~cumulative~~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 ~~increases~~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 half of fiscal 2024 that ~~have been announced since July 2021.~~were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

New bus orders during ~~the first half 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 second quarter of fiscal ~~2022.~~2024. Accordingly, the Company's backlog remained ~~in excess of 5,700~~strong at approximately 4,600 units and 5,900 units as of ~~April 1,~~September 30, 2023 and March 30, 2024 despite it selling over ~~4,200~~8,500 units during ~~the first half of~~ fiscal 2023, ~~most~~the majority of which were included in the backlog that existed as of October 1, ~~2022.~~2022, and almost 4,400 units in the first half 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) 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 a 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 beginning during the second half of fiscal ~~2020~~2021 and continuing ~~through the first half 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~~beginning in fiscal 2022 and continuing into 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 per ton the last week in September 2022. During fiscal 2023, the decrease in the price of steel continued during the first quarter to $664 per ton the last week in December 2022 but began to increase significantly during the second quarter to $1,152 per ton the last week in March 2023 and continuing into April 2023 (source for all per ton prices: 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 up to ~~six months~~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 half 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 $4.128 per gallon during the firstlatter 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 beginning during the latter part of fiscal 2022 and continuing into ~~the first half of~~ fiscal ~~2023.~~2024. Because peace negotiations do not appear to be productive and because Russia has ~~announced~~continued to intensify 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.

~~Labor Union Representation Petition~~

In April 2023, the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union, AFL-CIO, CLC ("USW") filed a petition with the National Labor Relations Board ("NLRB") seeking a representation election for the Company's full-time and regular part-time production, maintenance, quality control, and warehouse employees at the Company's Fort Valley and Macon (warehouse) facilities, with certain exceptions. The election is expected to be held in mid-May 2023.

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 six months ended ~~April 1, 2023.~~March 30, 2024.

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 half 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 ~~had~~began to have a more significant, positive impact on sales and gross profit during the ~~second quarter of fiscal 2023, which is expected to continue for 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 half 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 manufacturing 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.

2425

Consolidated Results of Operations for the Three Months Ended March 30, 2024 and April 1, ~~2023 and April 2, 2022:~~2023:


			Three Months Ended
		Three Months Ended												Three Months Ended
(in thousands of dollars)	(in thousands of dollars)		April 1, 2023			April 2, 2022			(in thousands of dollars)	March 30, 2024		April 1, 2023
Net sales	Net sales		$	299,814		$	207,659
Cost of goods sold	Cost of goods sold		264,165			204,502
Gross profit	Gross profit		$	35,649		$	3,157
Operating expenses	Operating expenses
Selling, general and administrative expenses	Selling, general and administrative expenses		23,205			19,858
Operating profit (loss)			$	12,444		$	(16,701)
Selling, general and administrative expenses
Selling, general and administrative expenses
Operating profit
Interest expense	Interest expense		(5,192)			(2,491)
Interest income	Interest income		12			—
Other (expense) income, net			(342)			744
Other expense, net

Income (loss) before income taxes			$	6,922		$	(18,448)
Income tax (expense) benefit			(1,389)			7,415
Equity in net income (loss) of non-consolidated affiliate			1,597			(1,114)
Income before income taxes
Income before income taxes
Income before income taxes
Income tax expense
Equity in net income of non-consolidated affiliate

Net income (loss)			$	7,130		$	(12,147)
Net income

Net income

Net income
Other financial data:	Other financial data:
Adjusted EBITDA	Adjusted EBITDA		$	19,841		$	(10,690)
Adjusted EBITDA
Adjusted EBITDA
Adjusted EBITDA margin	Adjusted EBITDA margin		6.6		%	(5.1)		%	Adjusted EBITDA margin	13.2	%	7.0	%

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	April 1, 2023		April 2, 2022		Net Sales by Segment	March 30, 2024	April 1, 2023
Bus	Bus	$	273,472	$	188,484
Parts	Parts	26,342		19,175
Total	Total	$	299,814	$	207,659

Gross Profit by Segment
Gross Profit (Loss) by Segment
Gross Profit (Loss) by Segment
Gross Profit (Loss) by Segment
Bus
Bus
Bus	Bus	$	23,099	$	(3,984)
Parts	Parts	12,550		7,141
Total	Total	$	35,649	$	3,157

Net sales. Net sales were $345.9 million for the second quarter of fiscal 2024, an increase of $46.1 million, or 15.4%, compared to $299.8 million for the second quarter of fiscal ~~2023, an increase of $92.2 million, or 44.4%, compared to $207.7 million for the second 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~~costs, all of certain critical components primarily beginning towards the end of the third quarter of fiscal 2021 and continuing throughout fiscal 2022. However, during the first half of fiscal 2023, supply chain constraints began to improve slightly, allowing for increased production during the second quarter of fiscal 2023 relative to the second quarter of fiscal 2022.which were partially offset by a small decrease in unit bookings.

Bus sales increased ~~$85.0~~$44.5 million, or ~~45.1%~~16.3%, reflecting ~~a 19.3% increase in units booked and a 21.6%~~an 18.8% increase in average sales price per ~~unit.~~unit that was partially offset by a 2.2% decrease in units booked. In the second quarter of fiscal ~~2023, 2,304~~2024, 2,254 units were booked compared to ~~1,931~~2,304 units booked for the same period in fiscal ~~2022.~~2023. The ~~increase~~small decrease in units sold was primarily due to product mix changes as well as a slight increase in supply chain constraints inimpacting the Company's ability to produce and deliver buses due to shortages of critical components induring the second quarter of 2024 relative to the second quarter of fiscal ~~2022.~~2023. The ~~21.6%~~ increase in unit price for the second 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 ~~$7.2~~$1.6 million, or ~~37.4%~~6.1%, for the second quarter of fiscal ~~2023~~2024 compared to the second 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 second quarter of fiscal 2023 relative to the second quarter of fiscal 2022.~~channel mix.

Cost of goods sold. Total cost of goods sold was $282.3 million for the second quarter of fiscal 2024, an increase of $18.1 million, or 6.9%, compared to $264.2 million for the second quarter of fiscal ~~2023, an increase of $59.7 million, or 29.2%, compared to $204.5 million for the second quarter of fiscal 2022.~~2023. As a percentage of net sales, total cost of goods sold improved from ~~98.5%~~88.1% to ~~88.1%.~~81.6%, primarily due to the pricing actions discussed above taking effect.

Bus segment cost of goods sold increased ~~$57.9~~$18.0 million, or ~~30.1%~~7.2%, for the second quarter of fiscal ~~2023~~2024 compared to the same period in fiscal ~~2022.~~2023. The increase was primarily driven by ~~the 19.3% increase in units booked, in the second quarter of fiscal 2023 compared to the same period in fiscal 2022. Also contributing was~~ increased inventory costs, as the average cost of goods sold per unit for the second quarter of fiscal ~~2023~~2024 was ~~9.0%~~9.6% higher compared to the second 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 increase in inventory costs was partially offset by a 2.2% decrease in units booked in the second quarter of fiscal 2024 compared to the same period in fiscal 2023.

The ~~$1.8~~$0.1 million, or ~~14.6%~~0.8%, increase in parts segment cost of goods sold for the second quarter of fiscal ~~2023~~2024 compared to the second quarter of fiscal ~~2022~~2023 was primarily due to 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 profit ~~(loss)~~. Operating profit was $36.1 million for the second quarter of fiscal 2024, an increase of $23.6 million, compared to operating profit of $12.4 million for the second quarter of fiscal ~~2023, an increase of $29.1 million, compared to operating loss of $16.7 million for the second quarter of fiscal 2022.~~2023. Profitability was primarily impacted by an increase of ~~$32.5~~$28.0 million in gross profit as outlined in the revenue and cost of goods sold discussions above. The increase in gross profit was partially offset by an increase of $4.4 million in selling, general and administrative expenses, primarily due to an increase in labor costs.

Interest expense. Interest expense was $2.8 million for the second quarter of fiscal 2024, a decrease of $2.4 million, or 45.8%, compared to $5.2 million for the second quarter of fiscal 2023. The decrease was primarily attributable to a decrease in the stated term loan interest rate from 10.5% at April 1, 2023 to 7.2% at March 30, 2024, as well as lower outstanding borrowings in the second quarter of fiscal 2024 compared to the second quarter of fiscal 2023.

Other expense, net. Other expense, net, was $2.0 million for the second quarter of fiscal 2024, an increase of $1.6 million, or 475.4%, compared to $0.3 million of other expense, net, for the same period in fiscal 2023.

On February 15, 2024, the Company entered into an underwriting agreement with Barclays Capital Inc., as representative of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which the Selling Shareholder agreed to sell 4,042,650 shares of common stock at a purchase price of $32.90 per share ("February Offering").

The February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, 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 February Offering closed on February 21, 2024. Although the Company did not sell any shares or receive any proceeds from the February Offering, it was required to pay certain expenses in connection with the February Offering that totaled approximately $1.9 million for the three month period ended March 30, 2024, with $0.7 million of similar expense recorded during the three month period ended April 1, 2023. However, the $0.7 million of expense was included within selling, general and administrative expenses for the three month period ended April 1, 2023, but was subsequently reclassified to other expense, net, during the third quarter of fiscal 2023.

Income taxes. Income tax expense was $8.3 million for the second quarter of fiscal 2024 compared to $1.4 million for the same period in fiscal 2023.

The effective tax rate for the three months ended April 1, 2023 was 20.1%, which aligned with the statutory federal income tax rate of 21% and was 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.

Adjusted EBITDA. Adjusted EBITDA was $45.8 million, or 13.2% of net sales, for the second quarter of fiscal 2024, an increase of $24.7 million, or 117.0%, compared to $21.1 million, or 7.0% of net sales, for the second quarter of fiscal 2023. The increase is primarily the result of the $18.9 million increase in net income as a result of the factors discussed above as well as the $6.9 million corresponding increase in income tax expense.

The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods presented:


	Three Months Ended
(in thousands of dollars)	March 30, 2024			April 1, 2023
Net income	$	26,023		$	7,130
Adjustments:
Interest expense, net (1)	1,860			5,281
Income tax expense	8,261			1,389
Depreciation, amortization, and disposals (2)	3,988			4,181
Operational transformation initiatives	—			137
Share-based compensation expense	2,492			699


Stockholder transaction costs	1,933			743

Other	(1)			281
Subtotal (Adjusted EBITDA as previously presented)	$	44,556		$	19,841
Micro Bird Holdings, Inc. total interest expense, net; income tax expense or benefit; depreciation expense and amortization expense	1,195			1,247
Adjusted EBITDA	$	45,751		$	21,088
Adjusted EBITDA margin (percentage of net sales)	13.2		%	7.0		%

(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 $0.3 million and $0.4 million for the three months ended March 30, 2024 and April 1, 2023, 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.

Consolidated Results of Operations for the Six Months Ended March 30, 2024 and April 1, 2023:


	Six Months Ended
(in thousands of dollars)	March 30, 2024			April 1, 2023
Net sales	$	663,575		$	535,546
Cost of goods sold	536,378			492,440
Gross profit	$	127,197		$	43,106
Operating expenses
Selling, general and administrative expenses	53,173			40,037
Operating profit	$	74,024		$	3,069
Interest expense	(6,443)			(9,388)
Interest income	2,142			12
Other expense, net	(3,189)			(578)
Loss on debt modification	(1,558)			(537)
Income (loss) before income taxes	$	64,976		$	(7,422)
Income tax (expense) benefit	(16,707)			1,592
Equity in net income of non-consolidated affiliate	3,904			1,666


Net income (loss)	$	52,173		$	(4,164)
Other financial data:
Adjusted EBITDA	$	93,355		$	17,552
Adjusted EBITDA margin	14.1		%	3.3		%

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


(in thousands of dollars)	Six Months Ended
Net Sales by Segment	March 30, 2024		April 1, 2023
Bus	$	611,396	$	486,721
Parts	52,179		48,825
Total	$	663,575	$	535,546

Gross Profit by Segment
Bus	$	100,883	$	19,368
Parts	26,314		23,738
Total	$	127,197	$	43,106

Net sales. Net sales were $663.6 million for the six months ended March 30, 2024, an increase of $128.0 million, or 23.9%, compared to $535.5 million for the six months ended April 1, 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.

Bus sales increased $124.7 million, or 25.6%, reflecting a 2.9% increase in units booked and a 22.1% increase in average sales price per unit. 4,383 units booked in the six months ended March 30, 2024 compared with 4,261 units booked during the same period in fiscal 2023. The increase in units sold was primarily due to slight improvements in supply chain constraints impacting the Company's ability to produce and deliver buses due to shortages of critical components during the first half of fiscal 2024 relative to the same period in fiscal 2023. The increase in unit price for the first half of fiscal 2024 compared to the same period in fiscal 2023 reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $3.4 million, or 6.9%, for the six months ended March 30, 2024 compared to the six months ended April 1, 2023. This increase is primarily attributed to price increases, driven by ongoing inflationary pressures, as well as higher fulfillment volumes and slight variations due to product and channel mix.

Cost of goods sold. Total cost of goods sold was $536.4 million for the six months ended March 30, 2024, an increase of $43.9 million, or 8.9%, compared to $492.4 million for the six months ended April 1, 2023. As a percentage of net sales, total cost of goods sold improved from 92.0% to 80.8%.

Bus segment cost of goods sold increased $43.2 million, or 9.2%, for the six months ended March 30, 2024 compared to the six months ended April 1, 2023. The increase was partially attributable to the 2.9% increase in units booked in the six months ended March 30, 2024 compared to the same period in fiscal 2023. Also contributing was increased inventory costs, as the average cost of goods sold per unit for the six months ended March 30, 2024 was 6.2% higher compared to the six months ended April 1, 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.

The $0.8 million, or 3.1%, increase in parts segment cost of goods sold for the six months ended March 30, 2024 compared to the six months ended April 1, 2023 was primarily due to 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 profit. Operating profit was $74.0 million for the six months ended March 30, 2024, an increase of $71.0 million compared to operating profit of $3.1 million for the six months ended April 1, 2023. Profitability was primarily impacted by an increase of $84.1 million in gross profit as outlined in the revenue and cost of goods sold discussions. The increase in gross profit was partially offset by an increase of ~~$3.3~~$13.1 million in selling, general and administrative expenses, primarily due to an increase in 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 ~~$5.2~~$6.4 million for the ~~second quarter~~six months ended March 30, 2024, a decrease of ~~fiscal 2023, an increase of $2.7~~$2.9 million, or ~~108.4%~~31.4%, compared to ~~$2.5~~$9.4 million for the ~~second quarter of fiscal 2022.~~six months ended April 1, 2023. The ~~increase~~decrease was primarily attributable to ~~an increase~~a decrease in the stated term loan interest rate from ~~6.1% at April 2, 2022 to~~ 10.5% at April 1, 2023 to 7.2% at March 30, 2024, as well as lower outstanding borrowings in the first half of fiscal 2024 compared to the first half of fiscal 2023.

Other expense, net. Other expense, net, was $3.2 million for the six months ended March 30, 2024, an increase of $2.6 million, or 451.7%, compared to $0.6 million for the six months ended April 1, 2023. We recorded $0.1 million of net periodic pension expense during the six months ended March 30, 2024 when compared with $0.4 million recorded during the six months ended April 1, 2023.

Additionally, 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 the 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 (“December Offering” and collectively with the February Offering, “Offerings”).

The December 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 December Offering closed on December 19, 2023.

Although the Company did not sell any shares or receive any proceeds from the Offerings, it was required to pay certain expenses in connection with the Offerings that totaled approximately $3.2 million for the six month period ended March 30, 2024, with $0.7 million of similar expense recorded during the six month period ended April 1, 2023. However, the $0.7 million of expense was included within selling, general and administrative expenses for the six month period ended April 1, 2023, but was subsequently reclassified to other expense, net, during the third quarter of fiscal 2023.

Income taxes. Income tax expense was ~~$1.4~~$16.7 million for the ~~second quarter of fiscal 2023,~~six months ended March 30, 2024 compared to income tax benefit of ~~$7.4~~$1.6 million for the ~~same period in fiscal 2022.~~six months ended April 1, 2023.

The effective tax rate for the ~~three~~six months ended March 30, 2024 was 25.7% 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 period.

The effective tax rate for the six months ended April 1, 2023 was ~~20.1%~~21.4%, 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 April 2, 2022 was 40.2%, 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 were partially offset by discrete period tax expense resulting from net non-deductible compensation expenses and other tax adjustments.period.

Adjusted EBITDA. Adjusted EBITDA was ~~$19.8~~$93.4 million, or ~~6.6%~~14.1% of net sales, for the ~~second quarter of fiscal 2023,~~six months ended March 30, 2024, an increase of ~~$30.5~~$75.8 million, or ~~285.6%~~431.9%, compared to ~~$(10.7)~~$17.6 million, or ~~(5.1)%~~3.3% of net sales, for the ~~second quarter of fiscal 2022.~~six months ended April 1, 2023. The increase in Adjusted EBITDA is primarily the result of the ~~$19.3~~$56.3 million increase in net income ~~and the related $8.8 million increase in income tax expense, as well as the $2.7 million increase in interest expense,~~ as a result of the factors discussed ~~above.~~above as well as the $18.3 million corresponding increase in income tax expense.

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


		Three Months Ended
	Six Months Ended											Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023			April 2, 2022			(in thousands of dollars)	March 30, 2024		April 1, 2023
Net income (loss)	Net income (loss)	$	7,130		$	(12,147)
Adjustments:	Adjustments:
Interest expense, net (1)	Interest expense, net (1)	5,281			2,563
Interest expense, net (1)
Interest expense, net (1)
Income tax expense (benefit)	Income tax expense (benefit)	1,389			(7,415)
Depreciation, amortization, and disposals (2)	Depreciation, amortization, and disposals (2)	4,181			3,622
Operational transformation initiatives	Operational transformation initiatives	137			1,585
Share-based compensation		699			813
Product redesign initiatives		—			281
Loss on debt refinancing or modification
Share-based compensation expense

Stockholder transaction costs

Stockholder transaction costs

Stockholder transaction costs
Other	Other	1,024			8
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	Adjusted EBITDA	$	19,841		$	(10,690)
Adjusted EBITDA margin (percentage of net sales)	Adjusted EBITDA margin (percentage of net sales)	6.6		%	(5.1)		%	Adjusted EBITDA margin (percentage of net sales)	14.1	%	3.3	%

(1) Includes ~~$0.1~~$0.2 million for both ~~fiscal~~six month 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 million and $0.2 million for the three months ended April 1, 2023 and April 2, 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.

~~Consolidated Results of Operations for the Six Months Ended April 1, 2023 and April 2, 2022:~~
Six Months Ended
(in thousands of dollars) April 1, 2023 April 2, 2022
Net sales $ 535,546 $ 336,882
Cost of goods sold 492,440 317,528
Gross profit $ 43,106 $ 19,354
Operating expenses
Selling, general and administrative expenses 40,037 38,091
Operating profit (loss) $ 3,069 $ (18,737)
Interest expense (9,388) (5,573)
Interest income 12 —
Other (expense) income, net (578) 1,480
Loss on debt modification (537) (561)
Loss before income taxes $ (7,422) $ (23,391)
Income tax benefit 1,592 9,177
Equity in net income (loss) of non-consolidated affiliate 1,666 (2,015)
Net loss $ (4,164) $ (16,229)
Other financial data:
Adjusted EBITDA $ 15,596 $ (7,091)
Adjusted EBITDA margin 2.9 % (2.1) %

2730

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

(in thousands of dollars) Six Months Ended
Net Sales by Segment April 1, 2023 April 2, 2022
Bus $ 486,721 $ 300,921
Parts 48,825 35,961
Total $ 535,546 $ 336,882
Gross Profit by Segment
Bus $ 19,368 $ 5,658
Parts 23,738 13,696
Total $ 43,106 $ 19,354

~~Net sales~~. Net sales were $535.5 million for the six months ended April 1, 2023, an increase of $198.7 million, or 59.0%, compared to $336.9 million for the six months ended April 2, 2022. 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 most of fiscal 2022. However, during the first half of fiscal 2023, supply chain constraints began to improve slightly, allowing for increased production relative to the first half of fiscal 2022.

Bus sales increased $185.8 million, or 61.7%, reflecting a 38.3% increase in units booked and a 16.9% increase in average sales price per unit. 4,261 units booked in the six months ended April 1, 2023 compared with 3,080 units booked during the same period in fiscal 2022. The increase in units sold was primarily due to constraints in the Company's ability to produce and deliver buses due to shortages of critical components in the first half of fiscal 2022. The increase in unit price for the first half of fiscal 2023 compared to the same period in fiscal 2022 reflects pricing actions taken by management as well as product and customer mix changes.

Parts sales increased $12.9 million, or 35.8%, for the six months ended April 1, 2023 compared to the six months ended April 2, 2022. This increase is primarily attributed to pricing actions taken by management to offset increases in purchased parts costs and increased inventory availability as supply chain constraints began to improve slightly during the first half of fiscal 2023 relative to the first half of fiscal 2022.

~~Cost of goods sold~~. Total cost of goods sold was $492.4 million for the six months ended April 1, 2023, an increase of $174.9 million, or 55.1%, compared to $317.5 million for the six months ended April 2, 2022. As a percentage of net sales, total cost of goods sold decreased from 94.3% to 92.0%.

Bus segment cost of goods sold increased $172.1 million, or 58.3%, for the six months ended April 1, 2023 compared to the six months ended April 2, 2022. The increase was primarily driven by the 38.3% increase in units booked in the six months ended April 1, 2023 compared to the same period in fiscal 2022. Also contributing was increased inventory costs, as the average cost of goods sold per unit for the six months ended April 1, 2023 was 14.4% higher compared to the six months ended April 2, 2022, 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.

The $2.8 million, or 12.7%, increase in parts segment cost of goods sold for the six months ended April 1, 2023 compared to the six months ended April 2, 2022 was primarily due to 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 profit (loss)~~. Operating profit was $3.1 million for the six months ended April 1, 2023, an increase of $21.8 million compared to operating loss of $18.7 million for the six months ended April 2, 2022. Profitability was primarily impacted by an increase of $23.8 million in gross profit as outlined in the revenue and cost of goods sold discussions. The increase in gross profit was partially offset by an increase of $1.9 million in selling, general and administrative expenses, primarily due to an increase in labor costs.

~~Interest expense~~. Interest expense was $9.4 million for the six months ended April 1, 2023, an increase of $3.8 million, or 68.5%, compared to $5.6 million for the six months ended April 2, 2022. The increase was primarily attributable to an increase in the stated term loan interest rate from 6.1% at April 2, 2022 to 10.5% at April 1, 2023.

~~Income taxes. Income tax benefit was $1.6 million and $9.2 million for the six months ended April 1, 2023 and April 2, 2022, respectively.~~

The effective tax rate for the six months ended April 1, 2023 was 21.4%, which aligned with the statutory federal 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 period.

The effective tax rate for the six months ended April 2, 2022 was 39.2%, which differed from the statutory federal income tax rate of 21%. The difference is mainly due to normal tax rate items, including impacts from state taxes and federal and state tax credits (net of valuation allowances), which were partially offset by discrete period tax expense resulting from net non-deductible compensation expenses and other tax adjustments.

~~Adjusted EBITDA~~. Adjusted EBITDA was $15.6 million, or 2.9% of net sales, for the six months ended April 1, 2023, an increase of $22.7 million, or 319.9%, compared to $(7.1) million, or (2.1)% of net sales, for the six months ended April 2, 2022. The increase in Adjusted EBITDA is primarily the result of the $12.1 million decrease in net loss and the related $7.6 million decrease in income tax benefit, as well as the $3.8 million increase in interest expense, as a result of the factors discussed above.

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

Six Months Ended
(in thousands of dollars) April 1, 2023 April 2, 2022
Net loss $ (4,164) $ (16,229)
Adjustments:
Interest expense, net (1) 9,570 5,720
Income tax benefit (1,592) (9,177)
Depreciation, amortization, and disposals (2) 7,996 7,145
Operational transformation initiatives 937 1,586
Loss on debt modification 537 561
Share-based compensation 1,288 2,486
Product redesign initiatives — 534
Other 1,024 283
Adjusted EBITDA $ 15,596 $ (7,091)
Adjusted EBITDA margin (percentage of net sales) 2.9 % (2.1) %

(1) Includes $0.2 million and $0.1 million for the six months ended April 1, 2023 and April 2, 2022, respectively, 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 $0.9 million ~~and $0.4 million~~ for ~~the~~both six ~~months ended April 1, 2023 and April 2, 2022, respectively,~~month periods, 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.

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 ~~April 1, 2023,~~March 30, 2024, the Company had ~~$17.8~~$93.1 million of available cash (net of outstanding checks) and ~~$83.7~~$143.3 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~~$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 America; and a syndicate of other lenders (the "Credit Agreement").

The credit facilities provided for under the Credit Agreement ~~dated as~~consist of ~~December 12, 2016 ("~~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 ~~Agreement"); as amended by~~Facility,” and together with the ~~first amendment to~~Term Loan Facility, each a “Credit Facility” and collectively, the “Credit Facilities”).

A minimum of $100.0 million of additional term loans and/or revolving credit commitments may be incurred under the Credit Agreement, ~~dated~~subject to certain limitations as set forth in the Credit Agreement, and which additional loans and/or commitments would require further commitments from existing lenders or from new lenders.

Borrower has the right to prepay the loans outstanding under the 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 reborrowed from time to time at our election.

The Term Loan Facility is subject to amortization of ~~September 13, 2018 (the "First~~ principal, payable in equal quarterly installments on the last day of each fiscal quarter, which commenced 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 ~~second amendment to~~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, ~~dated~~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 ~~May 7, 2020 (the "Second Amended Credit Agreement"~~New York ("SOFR") plus 0.10%, plus an applicable margin depending on the ~~third amendment to~~TNLR (which is defined in the Credit Agreement ~~dated~~ as the ratio of ~~December 4, 2020 (the "Third Amended Credit Agreement");~~consolidated net debt to consolidated EBITDA on a trailing four quarter basis) of the ~~fourth amendment to the Credit Agreement, dated~~Company 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 Agreement"). The Sixth Amended Credit Agreement, among other things, extends the maturity date for both thefollows:

2931

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.~~


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%

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 Pricing on the ~~date on which~~Closing Date was set at Level III until receipt of the ~~Company’s~~ ~~TNLR, defined as the ratio of (a) consolidated net debt to (b) consolidated EBITDA,~~financial information and related compliance certificate for the ~~two~~first fiscal ~~quarters most recently ended~~quarter ending after the Closing Date, with pricing as of March 30, 2024 set at Level I.

Borrower is ~~each less than 4.00x~~also required to pay lenders an unused commitment fee of between 0.25% and ~~no default or event of default has occurred and is continuing. However,~~0.45% per annum on the ~~Amended Limited Availability Period can re-occur upon a default or event of default or if~~undrawn commitments under the Revolving Credit Facility, depending on the TNLR, ~~for the immediately preceding fiscal quarter is equal to or greater than 4.00x.~~quarterly in arrears.

The ~~minimum consolidated EBITDA~~Credit Agreement also includes a requirement that the Company ~~is required to maintain during the Amended Limited Availability Period is updated as set forth in the table below (in millions):~~

~~Period~~

~~Minimum Consolidated EBITDA~~

~~Fiscal quarter ending July 1, 2023~~

~~$50.0~~

~~Fiscal quarter ending September 30, 2023~~

~~$60.0~~

~~For purposes of complying~~comply with the ~~above minimum consolidated EBITDA covenant,~~following financial covenants on 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 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 the Amended Limited Availability Period is amended as set forth~~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 ~~table below (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”)~~Credit Agreement) of not fall below certain pre-set thresholds on a three month trailing basis (“Units Covenant”) is amended for Units to be calculated 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~~


~~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~~

The pricing grid 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 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 quarters 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 ~~April 1, 2023, the~~March 30, 2024, 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 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 half of~~ fiscal 2023. However, the higher costs charged by suppliers to procure inventory that continued into ~~the first half of~~ fiscal 2023 ~~and~~ 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 ~~second quarter~~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 ~~quarter. However,~~quarters. While the gross margin on bus sales during the second quarter of

fiscal 2023 ~~still lags~~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 half 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 half 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:


		Six Months Ended
	Six Months Ended								Six Months Ended
(in thousands of dollars)	(in thousands of dollars)	April 1, 2023		April 2, 2022		(in thousands of dollars)	March 30, 2024	April 1, 2023
Cash, cash equivalents and restricted cash at beginning of period	Cash, cash equivalents and restricted cash at beginning of period	$	10,479	$	11,709
Total cash provided by (used in) operating activities		44,716		(11,410)
Total cash provided by operating activities
Total cash used in investing activities	Total cash used in investing activities	(3,740)		(3,478)
Total cash (used in) provided by financing activities		(33,444)		18,046
Total cash used in financing activities
Change in cash, cash equivalents and restricted cash	Change in cash, cash equivalents and restricted cash	$	7,532	$	3,158
Cash, cash equivalents and restricted cash at end of period	Cash, cash equivalents and restricted cash at end of period	$	18,011	$	14,867

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

Cash flows provided by operating activities totaled ~~$44.7~~$54.8 million for the six months ended ~~April 1, 2023,~~March 30, 2024, an increase of ~~$56.1~~$10.1 million from the ~~$11.4~~$44.7 million of cash flows ~~used in~~provided by operating activities during the six months ended April ~~2, 2022.~~1, 2023. The increase was primarily ~~due~~attributable to ~~$44.3~~a $56.3 million ~~$9.8~~increase in net income and a $3.0 million increase in the dividend received from our unconsolidated Canadian joint venture during the first half of fiscal 2024 when compared with the corresponding period in fiscal 2023.

However, these increases werre partially offset by the effect of net changes in operating assets and ~~$7.5~~liabilities that negatively impacted operating cash flows by $54.1 million ~~increases~~during the six months ended March 30, 2024 when compared with the six months ended April 1, 2023. The primary drivers in ~~cash provided by favorable~~this category were unfavorable changes in inventory ~~accrued expenses, pension~~ and ~~other liabilities,~~accounts payable of $23.9 million and ~~deferred income tax benefit, respectively, as well as the $12.1~~$25.8 million, ~~decrease in net loss.~~respectively. At the end of fiscal 2022 and during the first half 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 half of fiscal 2023, resulted in a significant increase in the accounts payable balance (a net source of cash) when compared with a small increase in the accounts payable balance during the first half of fiscal 2024 (a net source 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 half of fiscal ~~2023 when compared with the first half 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 second quarter of fiscal 2023 (a net source of cash) ~~when compared with a significant~~. In comparison, we had an increase in the inventory balance at the end of the ~~corresponding period~~second 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 changes were partially offset by several unfavorable changes including a $10.8 million decrease in cash provided by changes in accounts payable, $3.7 million increase in equity in net income of non-consolidated affiliate, $1.7 million decrease in non-cash interest expense, $1.4 million decrease in impairment of fixed assets, and $1.2 million decrease in share-based compensation expense.

Total cash used in investing activities

Cash flows used in investing activities totaled $5.6 million for the six months ended March 30, 2024 as compared to $3.7 million for the six months ended April 1, ~~2023, as compared to $3.5 million for the six months ended April 2, 2022.~~2023. The ~~$0.3~~$1.9 million increase was primarily due to ~~a reduction~~an increase in spending on fixed assets, as increased profitability in the first half of fiscal 2024 when compared with the same period in fiscal 2023 allowed for more capital spending. During the first half 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 ~~(used in) provided by~~used in financing activities

Cash flows used in financing activities totaled $35.0 million for the six months ended March 30, 2024 as compared to $33.4 million for the six months ended April 1, ~~2023, as compared to $18.0~~2023. The $1.6 million ~~of cash flows provided by financing activities for the six months ended April 2, 2022. The $51.5 million difference~~increase between fiscal periods was primarily attributable to ~~$75.0~~a $123.2 million increase in term loan principal repayments, which was partially offset by $100.0 million of proceeds received from term loan borrowings under the ~~issuance and sale of common stock in~~Credit Agreement, a ~~private placement transaction during the first half of fiscal 2022 with no similar activity in the corresponding period of fiscal 2023. This cash inflow was partially offset by a~~$20.0 million net ~~$25.0 million decrease (i.e., repayments)~~increase in revolving line of credit ~~facility~~ borrowings and a $1.7 million increase in ~~the six months ended April 1, 2023 compared to the six months ended April 2, 2022.~~cash received from stock option exercises.

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:

Six Months Ended

(in thousands of dollars)

April 1, 2023

April 2, 2022

(in thousands of dollars)

March 30, 2024

April 1, 2023

Net cash provided by (used in) operating activities

44,716

(11,410)

Net cash provided by operating activities

Cash paid for fixed assets

(3,740)

(3,478)

Free Cash Flow

40,976

(14,888)

Free Cash Flow for the six months ended ~~April 1, 2023~~March 30, 2024 was ~~$55.9~~$8.2 million higher than for the six months ended April ~~2, 2022,~~1, 2023 due to a ~~$56.1~~$10.1 million increase in net cash provided by ~~(used in)~~ operating activities ~~as well as an~~that was partially offset by a $1.9 million increase ~~of $0.3 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 ~~April 1, 2023,~~March 30, 2024, 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 ~~April 1, 2023.~~March 30, 2024.

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 ~~April 1, 2023~~March 30, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

3435

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 second quarter of fiscal 2024, 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. However, Philip Horlock’s previously disclosed Rule 10b5-1 trading plan expired during the quarter in accordance with its terms as all shares covered under such plan have been sold.

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*						Change in Control Plan , effective as of January 25, 2024.

10.2*						O mnibus Amendment to Outstanding Stock Option and Restricted Stock Unit Awards Under the Amended and Restated Blue Bird Corporation 2015 Omnibus Equity Incentive Plan, effective as of January 25, 2024.

10.3*						Employment Agreement effective May 15 , 2023, between Phil Horlock and Blue Bird Corporation .

10.4*						Employment Agreement effective July 1, 2023, between Britton Smith and Blue Bird Corporation .

10.5*						Employment Agreement effective October 1, 2023, between Razvan Radulescu and Blue Bird Corporation .

10.6*						Employment Agreement effective October 1, 2023, between Ted Scartz and Blue Bird Corporation .

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.

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.

3537

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:	May ~~11, 2023~~8, 2024	/s/ ~~Matthew Stevenson~~Philip Horlock
		~~Matthew Stevenson~~Philip Horlock
		Chief Executive Officer

Dated:	May ~~11, 2023~~8, 2024	/s/ Razvan Radulescu
		Razvan Radulescu
		Chief Financial Officer

3638


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%