blbd-20241228

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q


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

For the quarterly period ended December 28, 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 January 31, 2025, 32,111,078 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			2
Item 1. Financial Statements (Unaudited)			2
Condensed Consolidated Balance Sheets			2
Condensed Consolidated Statements of Operations			3
Condensed Consolidated Statements of Comprehensive Income			4
Condensed Consolidated Statements of Cash Flows			5
Condensed Consolidated Statements of Stockholders' Equity			7
Notes to Condensed Consolidated Financial Statements			8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.			17
Item 3. Quantitative and Qualitative Disclosures About Market Risk.			28
Item 4. Controls and Procedures.			29
PART II – OTHER INFORMATION			30
Item 1. Legal Proceedings.			30
Item 1A. Risk Factors.			30
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.			30
Item 5. Other Information.			31
Item 6. Exhibits.			32
SIGNATURES			33

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)	December 28, 2024		September 28, 2024
Assets
Current assets
Cash and cash equivalents	$	136,119	$	127,687
Accounts receivable, net	13,996		59,099
Inventories	163,120		127,798
Other current assets	17,623		8,795
Total current assets	$	330,858	$	323,379

Property, plant and equipment, net	$	98,384	$	97,322
Goodwill	18,825		18,825
Intangible assets, net	43,087		43,554
Equity investment in affiliates	34,393		32,089
Deferred tax assets	2,112		2,399
Finance lease right-of-use assets	156		332
Pension	5,156		4,649
Other assets	2,251		2,345
Total assets	$	535,222	$	524,894
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable	$	137,757	$	143,156
Warranty	7,059		7,166
Accrued expenses	46,738		55,775
Deferred warranty income	9,907		9,421
Finance lease obligations	436		975
Other current liabilities	22,530		14,480
Current portion of long-term debt	5,000		5,000
Total current liabilities	$	229,427	$	235,973
Long-term liabilities
Revolving credit facility	$	—	$	—
Long-term debt	88,828		89,994
Warranty	9,068		9,013
Deferred warranty income	19,652		18,541
Deferred tax liabilities	368		2,783
Finance lease obligations	6		6
Other liabilities	8,168		9,020

Total long-term liabilities	$	126,090	$	129,357
Guarantees, commitments and contingencies (Note 6)
Stockholders' equity
Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 shares outstanding at December 28, 2024 and September 28, 2024	$	—	$	—
Common stock, $0.0001 par value, 100,000,000 shares authorized, 32,111,078 and 32,268,022 shares issued and outstanding at December 28, 2024 and September 28, 2024, respectively	3		3
Additional paid-in capital	187,379		185,977
Retained earnings	18,686		—
Accumulated other comprehensive loss	(26,363)		(26,416)

Total stockholders' equity	$	179,705	$	159,564
Total liabilities and stockholders' equity	$	535,222	$	524,894

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended
(in thousands of dollars except for share data)	December 28, 2024		December 30, 2023
Net sales	$	313,872	$	317,660
Cost of goods sold	253,555		254,102
Gross profit	$	60,317	$	63,558
Operating expenses
Selling, general and administrative expenses	27,275		25,602
Operating profit	$	33,042	$	37,956
Interest expense	(1,915)		(3,631)
Interest income	1,568		1,088
Other income (expense), net	2,916		(1,221)
Loss on debt refinancing	—		(1,558)
Income before income taxes	$	35,611	$	32,634
Income tax expense	(8,693)		(8,446)
Equity in net income of non-consolidated affiliates	1,804		1,962
Net income	$	28,722	$	26,150

Earnings per share:
Basic weighted average shares outstanding	32,227,723		32,170,779
Diluted weighted average shares outstanding	33,360,940		32,429,127
Basic earnings per share	$	0.89	$	0.81
Diluted earnings per share	$	0.86	$	0.81

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Net income	$	28,722	$	26,150
Other comprehensive income, net of tax:
Net change in defined benefit pension plan	53		131

Total other comprehensive income	$	53	$	131
Comprehensive income	$	28,775	$	26,281

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Cash flows from operating activities
Net income	$	28,722	$	26,150
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization expense	3,856		3,618
Non-cash interest expense	84		132
Share-based compensation expense	2,506		2,051
Equity in net income of non-consolidated affiliates	(1,804)		(1,962)
Dividend from equity investment in affiliates	—		2,991
Loss on disposal of fixed assets	20		4


Deferred income tax expense	(2,145)		1,143
Amortization of deferred actuarial pension losses	70		172
Loss on debt refinancing	—		1,558
Changes in assets and liabilities:
Accounts receivable	45,103		1,467
Inventories	(35,322)		(7,171)
Other assets	(9,241)		(3,095)
Accounts payable	(5,473)		(23,103)
Accrued expenses, pension and other liabilities	34		(3,738)

Total adjustments	$	(2,312)	$	(25,933)
Total cash provided by operating activities	$	26,410	$	217
Cash flows from investing activities
Cash paid for fixed assets	$	(4,594)	$	(2,904)
Equity investment in affiliates (Note 12)	(500)		—

Total cash used in investing activities	$	(5,094)	$	(2,904)
Cash flows from financing activities
Revolving credit facility borrowings	$	—	$	36,220

Term loan borrowings	—		100,000
Term loan repayments	(1,250)		(131,800)
Principal payments on finance leases	(538)		(145)
Cash paid for debt costs	—		(3,128)


Repurchase of common stock in connection with repurchase program (Note 13)	(10,036)		—
Repurchase of common stock in connection with stock award exercises	(1,445)		(301)
Cash received from stock option exercises	385		149

Total cash (used in) provided by financing activities	$	(12,884)	$	995
Change in cash and cash equivalents	8,432		(1,692)
Cash and cash equivalents at beginning of period	127,687		78,988
Cash and cash equivalents at end of period	$	136,119	$	77,296


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Supplemental disclosures of cash flow information
Cash paid or received during the period:
Interest paid	$	2,368	$	2,895
Interest received	(1,436)		(1,088)
Income tax paid, net of tax refunds	80		2
Non-cash investing and financing activities:
Changes in accounts payable for capital additions to property, plant and equipment	$	1,940	$	953



Warrants issued for equity investment in affiliate	—		7,416

Right-of-use assets obtained in exchange for operating lease obligations	—		1,241

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

BLUE BIRD CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(Unaudited)


	Three Months Ended
(in thousands of dollars, except for share data)	Common Stock					Convertible Preferred Stock							Treasury Stock
	Shares	Par Value		Additional Paid-In-Capital		Shares	Amount		Accumulated Other Comprehensive Loss		Retained Earnings (Accumulated Deficit)		Shares	Amount		Total Stockholders' Equity
Balance, September 28, 2024	32,268,022	$	3	$	185,977	—	$	—	$	(26,416)	$	—	—	$	—	$	159,564



Restricted stock activity	57,420	—		(1,445)		—	—		—		—		—	—		(1,445)
Stock option activity	29,086	—		385		—	—		—		—		—	—		385

Share-based compensation expense	—	—		2,462		—	—		—		—		—	—		2,462
Share repurchases (Note 13)	(243,450)	—		—		—	—		—		(10,036)		—	—		(10,036)


Net income	—	—		—		—	—		—		28,722		—	—		28,722
Other comprehensive income, net of tax	—	—		—		—	—		53		—		—	—		53
Balance, December 28, 2024	32,111,078	$	3	$	187,379	—	$	—	$	(26,363)	$	18,686	—	$	—	$	179,705

Balance, September 30, 2023	32,165,225	$	3	$	177,861	—	$	—	$	(31,884)	$	(55,700)	1,782,568	$	(50,282)	$	39,998
Issuance of warrants	—	—		7,416		—	—		—		—		—	—		7,416

Restricted stock activity	22,115	—		(301)		—	—		—		—		—	—		(301)
Stock option activity	11,252	—		149		—	—		—		—		—	—		149

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


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

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 10 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 27, 2025 ("fiscal 2025") and ended September 28, 2024 ("fiscal 2024") consist or consisted of 52 weeks. The first quarters of fiscal 2025 and fiscal 2024 both included 13 weeks.

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

The Condensed Consolidated Balance Sheet data as of September 28, 2024 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 September 28, 2024 as set forth in the Company's fiscal 2024 Form 10-K filed with the Securities and Exchange Commission ("SEC") on November 25, 2024.

Impacts of Supply Chain Constraints on Our Business

The global automotive industry supply chain constraints that arose subsequent to the novel coronavirus pandemic known as "COVID-19" and that were further exacerbated by additional stress resulting from Russia’s invasion of Ukraine in February 2022 continued to impact our business and operations during the first quarters of fiscal 2024 and 2025. Specifically, they continued to result in higher purchasing costs, including freight costs incurred to deliver critical components, to procure the raw materials inventory needed to produce buses to fulfill sales orders. Additionally, there were still occasional shortages of certain critical components that limited the number and/or mix of school buses that we could produce and sell. Nonetheless, ongoing improvements in manufacturing operations that have resulted in the consistent production of buses, when coupled with periodic pricing actions taken to ensure that the increased sales prices charged for buses keep pace with increased costs to procure inventory to produce buses, have resulted in the Company reporting gross profit and gross margin in the first quarters of fiscal 2025 and 2024 that exceeded those reported in pre-pandemic fiscal years.

Significant uncertainty still exists concerning the magnitude and duration of the ongoing supply chain constraints and accordingly, precludes any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.

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 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 2024 Form 10-K, filed with the SEC on November 25, 2024. Our senior management has reviewed these significant accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies in the three months ended December 28, 2024.

Recently Issued Accounting Standards

ASU 2023-07 On November 27, 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public business entities ("PBEs") to disclose information about their reportable segments’ significant expenses on an interim and annual basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024, with early adoption permitted.

ASU 2023-09 On December 14, 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires entities to disclose more detailed information in their reconciliation of their statutory tax rate to their effective tax rate. PBEs are required to provide this incremental detail in a numerical, tabular format. The ASU also requires entities to disclose more detailed information about income taxes paid, including by jurisdiction; pretax income (or loss) from continuing operations; and income tax expense (or benefit). The ASU is effective for PBEs in fiscal years beginning after December 15, 2024, with early adoption permitted.

ASUs 2024-03 & 2025-01 On November 4, 2024, the FASB issued ASU 2024-03, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires PBEs to disclose disaggregated information about certain income statement expense line items. On January 6, 2025, the FASB issued ASU 2025-01, Income Statement — Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date, to clarify the effective date of ASU 2024-03, which is for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027.

The new ASUs will not impact amounts recorded in the financial statements but instead, will require more detailed disclosures in the footnotes to the financial statement. The Company plans to provide the updated disclosures required by the ASUs in the periods in which they are effective.

3. Supplemental Financial Information

Inventories

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


(in thousands of dollars)	December 28, 2024		September 28, 2024
Raw materials	$	104,495	$	83,027
Work in process	38,256		32,556
Finished goods	20,369		12,215
Total inventories	$	163,120	$	127,798

Product Warranties

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


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Balance at beginning of period	$	16,179	$	15,434
Add current period accruals	2,538		2,341
Current period reductions of accrual	(2,590)		(2,492)
Balance at end of period	$	16,127	$	15,283

Extended Warranties

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


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Balance at beginning of period	$	27,962	$	23,123
Add current period deferred income	3,929		2,998
Current period recognition of income	(2,332)		(2,003)
Balance at end of period	$	29,559	$	24,118

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 $8.6 million of the outstanding contract liability during the remainder of fiscal 2025, $13.6 million in fiscal 2026, 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)	December 28, 2024		September 28, 2024
Current portion	$	4,723	$	5,008
Long-term portion	2,596		2,248
Total accrued self-insurance	$	7,319	$	7,256

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 $5.1 million and $4.7 million for the three months ended December 28, 2024 and December 30, 2023, respectively. The related cost of goods sold was $4.6 million and $4.3 million for the three months ended December 28, 2024 and December 30, 2023, respectively.

Pension (Income) Expense

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


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Interest cost	$	1,312	$	1,484
Expected return on plan assets	(1,819)		(1,620)
Amortization of prior loss	70		172
Net periodic pension benefit (income) expense	$	(437)	$	36
Amortization of prior loss, recognized in other comprehensive income	(70)		(172)
Total recognized in net periodic pension benefit (income) expense and other comprehensive income	$	(507)	$	(136)

4. Debt

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


(in thousands of dollars)	December 28, 2024		September 28, 2024
Term loan borrowings, net of deferred financing costs of $1,172 and $1,256, respectively	$	93,828	$	94,994
Less: current portion of long-term debt	5,000		5,000
Long-term debt, net of current portion	$	88,828	$	89,994

Term loan borrowings are recognized on the Condensed Consolidated Balance Sheets at the unpaid principal balance, and are not subject to fair value measurement; however, given the variable rates on the loans, the Company estimates that the unpaid principal balance approximates fair value. If measured at fair value in the financial statements, the term loans would be classified as Level 2 in the fair value hierarchy. At December 28, 2024 and September 28, 2024, $95.0 million and $96.3 million, respectively, were outstanding on the term loans.

At December 28, 2024 and September 28, 2024, the stated interest rates on the term loans were 6.4% and 6.9%, respectively. At December 28, 2024 and September 28, 2024, the weighted-average annual effective interest rates for the term loans were 7.0% and 8.2%, respectively, which include amortization of the deferred financing costs.

At December 28, 2024, $6.7 million of letters of credit were outstanding, which reduces the availability on the revolving line of credit. There were no borrowings outstanding on the Revolving Credit Facility; therefore, the Company would have been able to borrow $143.3 million on the revolving line of credit.

Interest expense on all indebtedness was $1.9 million and $3.6 million for the three months ended December 28, 2024 and December 30, 2023, respectively.

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


(in thousands of dollars)
Fiscal Year	Principal Payments
2025	$	3,750
2026	5,000
2027	5,000
2028	5,000
2029	5,000
Thereafter	71,250
Total remaining principal payments	$	95,000

5. Income Taxes

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

Three Months

The effective tax rate for the three months ended December 28, 2024 was 24.4% and differed from the statutory federal income tax rate of 21%. The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter.

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

6. Guarantees, Commitments and Contingencies

Litigation

At December 28, 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
	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Bus (1)	$	288,147	$	293,437
Parts (1)	25,725		24,223
Segment net sales	$	313,872	$	317,660

(1) Parts segment revenue includes $1.9 million and $1.6 million for the three months ended December 28, 2024 and December 30, 2023, respectively, related to inter-segment sales of parts that was eliminated by the Bus segment upon consolidation.


Gross profit
	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Bus	$	47,172	$	51,294
Parts	13,145		12,264
Segment gross profit	$	60,317	$	63,558

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


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Segment gross profit	$	60,317	$	63,558
Adjustments:
Selling, general and administrative expenses	(27,275)		(25,602)
Interest expense	(1,915)		(3,631)
Interest income	1,568		1,088
Other income (expense), net	2,916		(1,221)
Loss on debt refinancing	—		(1,558)
Income before income taxes	$	35,611	$	32,634

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


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
U.S.	$	287,957	$	302,532
Canada	24,603		15,119
Rest of world	1,312		9
Total net sales	$	313,872	$	317,660

8. Revenue

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


	Three Months Ended
(in thousands of dollars)	December 28, 2024		December 30, 2023
Diesel buses	$	124,372	$	84,998
Alternative power buses (1)	148,922		195,329
Other (2)	15,487		13,697


Parts	25,091		23,636
Net sales	$	313,872	$	317,660

(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 Per Share

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


	Three Months Ended
(in thousands except for share data)	December 28, 2024		December 30, 2023
Numerator:
Net income	$	28,722	$	26,150

Denominator:
Weighted-average common shares outstanding	32,227,723		32,170,779
Weighted-average dilutive securities, restricted stock	479,759		145,759
Weighted-average dilutive securities, stock options	249,233		100,170
Weighted-average dilutive securities, warrants	404,225		12,419

Weighted-average shares and dilutive potential common shares (1)	33,360,940		32,429,127

Earnings per share:
Basic earnings per share	$	0.89	$	0.81
Diluted earnings per share	$	0.86	$	0.81

(1) Potentially dilutive securities representing approximately 0.2 million shares of common stock were excluded from the computation of diluted earnings per share for the three months ended December 30, 2023, as their effect would have been antidilutive.

10. Accumulated Other Comprehensive Loss

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


	Three Months Ended
(in thousands of dollars)	Defined Benefit Pension Plan		Total AOCL
December 28, 2024
Beginning Balance	$	(26,416)	$	(26,416)

Amounts reclassified and included in earnings	70		70
Total before taxes	70		70
Income taxes	(17)		(17)
Ending Balance December 28, 2024	$	(26,363)	$	(26,363)

December 30, 2023
Beginning Balance	$	(31,884)	$	(31,884)

Amounts reclassified and included in earnings	172		172
Total before taxes	172		172
Income taxes	(41)		(41)
Ending Balance December 30, 2023	$	(31,753)	$	(31,753)

11. Stockholder Transaction Costs

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

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

The Offering closed on December 19, 2023. Although the Company did not sell any shares or receive any proceeds from the Offering, it was required to pay certain expenses in connection with the transaction that totaled approximately $1.2 million for the three months ended December 30, 2023. The $1.2 million of expense is included within other income (expense), net on the Condensed Consolidated Statements of Operations for the three months ended December 30, 2023. No such expense was incurred in the three months ended December 28, 2024.

12. Equity Investment in Affiliates

The Company has made investments in the below entities and utilizes the equity method of accounting to record its interest in them as it does not have control to direct the activities that most significantly impact their financial performance based on the shared powers of the venture partners. The carrying amount of the equity method investments is adjusted for any contribution that the Company makes to them as well as for the Company’s proportionate share of net earnings or losses and any dividends received.

Micro Bird Holdings, Inc.

The Company holds a 50% equity interest in Micro Bird Holdings, Inc. ("Micro Bird"), our unconsolidated Canadian joint venture that produces Blue Bird Micro Bird by Girardin Type A buses in Drummondville, Quebec.

In recognizing the Company’s 50% portion of Micro Bird's net income or loss, the Company recorded $2.1 million and $2.0 million in equity in net income of non-consolidated affiliates on the Condensed Consolidated Statements of Operations for the three months ended December 28, 2024 and December 30, 2023, respectively.

In December 2023, Micro Bird 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 affiliates 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. No dividends were paid in the three months ended December 28, 2024.

At December 28, 2024 and September 28, 2024, the carrying value of the Company's investment in Micro Bird included within equity investment in affiliates on the Condensed Consolidated Balance Sheets was $26.6 million and $24.4 million, respectively.

Clean Bus Solutions, LLC

The Company holds a 50% equity interest in Clean Bus Solutions, LLC ("CBS"), our unconsolidated joint venture that provides a fleet-as-a-service ("FaaS") offering using electric school buses manufactured and sold by the Company. The service is offered to qualified customers of the Company by providing them 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.

During the three months ended December 28, 2024, the Company made a $0.5 million cash contribution to CBS and during the three months ended December 30, 2023, the Company recorded the $7.4 million fair value of warrants it issued to the joint venture partner as its initial investment in CBS, both of which increased the balance of equity investment in affiliates on the Condensed Consolidated Balance Sheets.

In recognizing the Company’s 50% portion of CBS' net income or loss, the Company recorded $(0.3) million (a loss) in equity in net income of non-consolidated affiliates on the Condensed Consolidated Statements of Operations for the three months ended December 28, 2024, while no amount was recorded in the three months ended December 30, 2023. CBS paid no dividends in either period.

At December 28, 2024 and September 28, 2024, the carrying value of the Company's investment in CBS included within equity investment in affiliates on the Condensed Consolidated Balance Sheets was $7.8 million and $7.7 million, respectively.

13. Stockholders’ Equity

Share Repurchase Program and Common Stock Retirement

On January 31, 2024, the Board of Directors of the Company authorized and approved a share repurchase program for up to $60 million of outstanding shares of the Company’s common stock over a period of 24 months, expiring January 31, 2026. Under the share repurchase program, the Company may repurchase shares through open market purchases, privately negotiated transactions, accelerated share repurchase transactions, block purchases or otherwise in accordance with applicable federal securities laws, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended.

During the three months ended December 28, 2024, the Company repurchased 243,450 shares of its common stock for $10.0 million, pursuant to the share repurchase plan. The Company constructively retired these shares immediately after repurchase, with the $10.0 million amount paid in excess of the $0.0001 par value of each share recorded as a reduction in retained earnings. No such repurchases were made during the three months ended December 30, 2023. The total remaining authorization for future common stock repurchases under the Company's share repurchase program was $40.0 million as of December 28, 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 Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three months ended December 28, 2024 and December 30, 2023 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 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 pandemics, epidemics or similar widespread disease or illness outbreaks (collectively, "public health crises") 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 public health crises;

◦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 public health crises, including possible cost containment actions;

◦financial difficulties of our customers impacted by public health crises;

◦reductions in market demand for our products due to public health crises; and

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

•future impacts resulting from current and/or future military conflicts, 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 countries impacted by military conflicts; 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 entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s fiscal year 2024 Form 10-K, filed with the SEC on November 25, 2024. 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 fiscal year 2024 Form 10-K, filed with the SEC on November 25, 2024.

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 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 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 27, 2025 as "fiscal 2025," the fiscal year ended 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 the fiscal year ended October 2, 2021 as "fiscal 2021." There will be or were 52 weeks in fiscal 2025 and fiscal 2024. The first quarters of fiscal 2025 and fiscal 2024 both included 13 weeks.

Impacts of Supply Chain Constraints on Our Business

During the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints that arose subsequent to the novel coronavirus pandemic known as "COVID-19." Additionally, the already challenged global supply chain for automotive parts was further impacted, including continuing escalating inventory purchase costs, by additional stress resulting from Russia’s invasion of Ukraine in February 2022. 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. Specifically, they resulted in 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, that outpaced the sales prices that we charged for the buses we sold during these periods.

During fiscal 2023 and fiscal 2024, 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. However, the higher costs charged by suppliers to procure inventory continued over these same periods and adversely impacted our operations and results. However, the cumulative increases in sales prices we charged for our buses outpaced the higher costs we paid to procure inventory, resulting in gross profit and gross margin in fiscal 2023 and fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Supply chain disruptions continued into the first quarter of fiscal 2025 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 and/or mix of school buses that we could produce and sell as well as increasing the costs to manufacture buses. Nonetheless, the lessons learned, and resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain challenges and consistently produce buses to fulfill sales orders. Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses keep pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin that are materially consistent with those reported in fiscal 2024.

New bus orders during fiscal 2024 and continuing into fiscal 2025 remained 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 as discussed previously above. Accordingly, the Company's backlog remained strong at approximately 4,800 units and 4,400 units as of September 28, 2024 and December 28, 2024, respectively, despite it selling 9,000 units in fiscal 2024 and over 2,100 units in the first quarter of fiscal 2025.

In general, management believes that supply chain disruptions, including those resulting from current or future military conflicts, 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. They have resulted, and could continue to result, in significant economic disruption and have adversely affected our business. They could adversely impact our business for the remainder of fiscal 2025 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of 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 production and supply chain disruptions and their related financial impacts on our business cannot be estimated at this time.

The impacts from supply chain constraints on the Company's business and operations beginning during the second half of fiscal 2021 and continuing into fiscal 2025 negatively affected our inventory procurement costs, gross profit, income and cash flows. We continue to monitor and assess the ability of suppliers to maintain operations and to provide parts and supplies in sufficient quantities to meet our production needs and our ability to maintain continuous production during the remainder of fiscal 2025 and beyond. See PART I, Item 1.A. "Risk Factors," of our fiscal 2024 Form 10-K, filed with the SEC on November 25, 2024, for a discussion of the material risks we believe we face particularly related to supply chain disruptions and related constraints.

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 fiscal 2024 Form 10-K, filed with the SEC on November 25, 2024, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” which description is incorporated herein by reference. Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the three months ended December 28, 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/or recently adopted accounting 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. In the fiscal years preceding the 2020 COVID-19 pandemic, our sales were 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 were typically greater than the first and second fiscal quarters due to the desire of municipalities to have any new buses that they ordered available to them at the beginning of the new school year. Since 2020, 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 as discussed previously above, 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 Russia's invasion of Ukraine have significantly increased our inventory purchase costs, including freight costs incurred to deliver critical components, reflected in cost of goods sold during all of fiscal 2022 and continuing, to a lesser extent, into fiscal 2023, fiscal 2024 and the first quarter of fiscal 2025. In response, the Company announced a number of sales price increases over this same period that applied to new sales orders and, in one limited circumstance, partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results. These cumulative price increases have had a significant, positive impact on sales and gross profit during fiscal 2023, fiscal 2024 and continuing into the first quarter of fiscal 2025.

Factors Affecting Our Expenses and Other Items

Our expenses and other line items on our 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 and/or mix, 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, if any.

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

•Equity in net income or loss of non-consolidated affiliates. We include in this line item our 50% share of net income or loss from our investments in Micro Bird Holdings, Inc. and Clean Bus Solutions, LLC, our unconsolidated joint ventures.

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, as and when applicable, to determine (a) the annual cash bonus payouts, if any, to be made to certain 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 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"), which is also utilized in determining the interest rate we pay on borrowings under our 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 as well as certain charges such as (i) transaction related costs or (ii) discrete expenses related to major cost cutting and/or operational transformation initiatives. While certain of the charges that are added back in the Adjusted EBITDA calculation, such as transaction related costs and major cost cutting and/or operational transformation 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, we expect Free Cash Flow to 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 sale of school buses and extended warranties; and (ii) the Parts segment, which includes the sale of replacement bus parts. Financial information is reported on the basis that it is used internally by the chief operating decision maker (“CODM”) in evaluating segment performance and deciding how to allocate resources to segments. The President and Chief Executive Officer of the Company has been identified as the CODM. Management evaluates the segments based primarily upon revenues and gross profit.

Consolidated Results of Operations for the Three Months Ended December 28, 2024 and December 30, 2023:


	Three Months Ended
(in thousands of dollars)	December 28, 2024			December 30, 2023
Net sales	$	313,872		$	317,660
Cost of goods sold	253,555			254,102
Gross profit	$	60,317		$	63,558
Operating expenses
Selling, general and administrative expenses	27,275			25,602
Operating profit	$	33,042		$	37,956
Interest expense	(1,915)			(3,631)
Interest income	1,568			1,088
Other income (expense), net	2,916			(1,221)
Loss on debt refinancing	—			(1,558)
Income before income taxes	$	35,611		$	32,634
Income tax expense	(8,693)			(8,446)
Equity in net income of non-consolidated affiliates	1,804			1,962


Net income	$	28,722		$	26,150
Other financial data:
Adjusted EBITDA	$	45,753		$	47,604
Adjusted EBITDA margin	14.6		%	15.0		%

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


(in thousands of dollars)	Three Months Ended
Net Sales by Segment	December 28, 2024		December 30, 2023
Bus	$	288,147	$	293,437
Parts	25,725		24,223
Total	$	313,872	$	317,660

Gross Profit (Loss) by Segment
Bus	$	47,172	$	51,294
Parts	13,145		12,264

SEC Form 10-Q filed by Blue Bird Corporation