What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2020-12-17 compared with 2019-12-12 · 201 added, 266 removed, 791 unchanged (37% of the section changed)

Financial Statements and Supplementary Data

Selected Quarterly Financial Data (Unaudited)

(in thousands except per share data)

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

Operating profit

Net (loss) income

Earnings per share:

Net (loss) income (from above)

Basic (loss) earnings per share

Diluted (loss) earnings per share

Operating (loss) profit

Net (loss) income

Earnings per share:

Net (loss) income (from above)

preferred stock dividends

Net (loss) income available to common stockholders

Basic (loss) earnings per share

Diluted (loss) earnings per share

Report of Independent Registered Public Accounting Firm

Shareholders and Board of Directors

Stockholders and Board of Directors

Blue Bird Corporation

1 unchanged sentence

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Blue Bird Corporation (the “Company”) and subsidiaries as of September 28, 2019 and September 29, 2018, the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit, and cash flows for each of the three years in the period ended September 28, 2019, and the related notes and schedules (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at September 28, 2019 and September 29, 2018, and the results of their operations and their cash flows for each of the three years in the period ended September 28, 2019 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated December 12, 2019 expressed an unqualified opinion thereon.

We have audited the accompanying consolidated balance sheets of Blue Bird Corporation (the “Company”) as of October 3, 2020 and September 28, 2019, the related consolidated statements of operations and comprehensive income, stockholders’ deficit, and cash flows for each of the three years in the period ended October 3, 2020, and the related notes and schedule (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at October 3, 2020 and September 28, 2019, and the results of its operations and its cash flows for each of the three years in the period ended October 3, 2020 , in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of October 3, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) and our report dated December 17, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

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Opinion on Internal Control over Financial Reporting

We have audited Blue Bird Corporation’s (the “Company’s”) internal control over financial reporting as of September 28, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of September 28, 2019, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of September 28, 2019 and September 29, 2018, the related consolidated statements of operations and comprehensive income (loss), stockholders’ deficit, and cash flows for each of the three years in the period ended September 28, 2019, and the related notes and schedules and our report dated December 12, 2019 expressed an unqualified opinion thereon.

We have audited Blue Bird Corporation’s (the “Company’s”) internal control over financial reporting as of October 3, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO criteria”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of October 3, 2020, based on the COSO criteria .

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated balance sheets of the Company as of October 3, 2020 and September 28, 2019, the related consolidated statements of operations and comprehensive income, stockholders’ deficit, and cash flows for each of the three years in the period ended October 3, 2020, and the related notes and schedule and our report dated December 17, 2020 expressed an unqualified opinion thereon.

Basis for Opinion

21 unchanged sentences

(in thousands except for share data)

September 28, 2019

October 3, 2020

September 28, 2019

27 unchanged sentences

Stockholders' deficit

Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 and 93,000 issued with liquidation preference of $0 and $9,300 at September 28, 2019 and September 29, 2018, respectively

Common stock, $0.0001 par value, 100,000,000 shares authorized, 26,476,336 and 27,259,262 shares outstanding at September 28, 2019 and September 29, 2018, respectively.

Preferred stock, $0.0001 par value, 10,000,000 shares authorized, 0 issued with liquidation preference of $0 at October 3, 2020 and September 28, 2019

Common stock, $0.0001 par value, 100,000,000 shares authorized, 27,048,404 and 26,476,336 shares outstanding at October 3, 2020 and September 28, 2019, respectively.

Additional paid-in capital

1 unchanged sentence

Accumulated other comprehensive loss

Treasury stock, at cost, 1,782,568 and 0 shares at September 28, 2019 and September 29, 2018, respectively

Treasury stock, at cost, 1,782,568 shares at October 3, 2020 and September 28, 2019

Total stockholders' deficit

11 unchanged sentences

Interest income

Other expense, net

Loss on debt extinguishment

Other income (expense), net

Income before income taxes

4 unchanged sentences

preferred stock dividends

preferred stock repurchase

Net income available to common stockholders

10 unchanged sentences

Net change in defined benefit pension plan

Net unrealized gain on cash flow hedges

Total other comprehensive (loss) income, net of tax

11 unchanged sentences

Equity in net income of affiliate

Loss (gain) on disposal of fixed assets

(Gain) loss on disposal of fixed assets

Deferred taxes

Amortization of deferred actuarial pension losses

Loss on debt extinguishment

Foreign currency hedges

11 unchanged sentences

Cash flows from financing activities

Borrowings under the senior term loan

Repayments under the former senior term loan

Repayments under the new term loan

Borrowings under the term loan

Repayments of the term loan

Principal payments on finance leases

1 unchanged sentence

Cash paid for debt issuance costs

Cash paid to extinguish debt

Payment of dividends on preferred stock

10 unchanged sentences

Supplemental disclosures of cash flow information

Cash paid during the period for:

Cash paid or received during the period:

Interest paid, net of interest received

Income tax paid, net of tax refunds

Income tax (received) paid, net of tax refunds

Non-cash Investing and Financing Activities:

15 unchanged sentences

Total Stockholders' Deficit

Balance, October 1, 2016

Exercise of stock warrants

Restricted stock activity

Stock option activity

Preferred stock dividends

Share repurchase program

Share-based compensation expense

Other comprehensive income, net of tax

Balance, September 30, 2017

11 unchanged sentences

Restricted stock activity

Exercise of stock options, cashless

Stock option activity

Tender offer share repurchases

3 unchanged sentences

Balance, September 28, 2019

Exercise of stock warrants

Restricted stock activity

Stock option activity

Share-based compensation expense

Other comprehensive loss, net of tax

Balance, October 3, 2020

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

3 unchanged sentences

Nature of Business

On February 24, 2015, Hennessy Capital Acquisition Corp.

("HCAC"), a special purpose acquisition company (SPAC), consummated its business combination (the “Business Combination”), pursuant to which HCAC acquired all of the outstanding capital stock of School Bus Holdings, Inc.

(“SBH”) from The Traxis Group B.V.

(the “Seller”).

SBH operates its business of designing and manufacturing school buses through subsidiaries and under the Blue Bird Corporation (“Blue Bird”) name.

In the Business Combination, the total purchase price was paid in a combination of cash ( $100.0 million ) and in shares of HCAC’s Common Stock ( 12,000,000 shares valued at a total of $120.0 million ).

In connection with the closing of the Business Combination, we changed our name from Hennessy Capital Acquisition Corp.

to Blue Bird Corporation.

Blue Bird Body Company, a wholly-owned subsidiary of Blue Bird, was incorporated in 1958 and has manufactured, assembled and sold school buses to a variety of municipal, federal and commercial customers since 1927.

2 unchanged sentences

References in these notes to financial statements to “Blue Bird”, the “Company,” “we,” “our,” or “us” refer to Blue Bird Corporation and its wholly-owned subsidiaries, unless the context specifically indicates otherwise.

Beginning in our second fiscal quarter of 2020, the novel coronavirus known as "COVID-19" began to spread throughout the world, resulting in a global pandemic.

The pandemic impacted our fiscal 2020 results, causing lower customer orders for both buses and bus parts, supply disruptions, higher rates of absenteeism among our hourly production workforce and a temporary shutdown of manufacturing.

The continuing development and fluidity of the pandemic precludes any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.

A prolonged economic downturn resulting from the continuing pandemic would likely have a material adverse impact on our financial results.

Basis of Presentation

2 unchanged sentences

The Company’s fiscal year ends on the Saturday closest to September 30 with its quarters consisting of thirteen weeks in most years.

In fiscal years 2019 , 2018 , and 2017 , there were a total of 52 weeks.

The Business Combination was accounted for as a reverse acquisition since immediately following completion of the transaction the sole stockholder of SBH immediately prior to the Business Combination maintained effective control of Blue Bird Corporation, the post-combination company.

For accounting purposes, SBH is deemed the accounting acquirer in the transaction and, consequently, the transaction is treated as a recapitalization of SBH (i.e., a capital transaction involving the issuance of stock and payment of cash by HCAC for the stock of SBH).

Accordingly, the consolidated assets, liabilities and results of operations of SBH are the historical financial statements of Blue Bird Corporation, and HCAC assets, liabilities and results of operations are consolidated with SBH beginning on the acquisition date.

No step-up in basis of intangible assets or goodwill was recorded in this transaction.

We have effected this treatment through opening stockholders' deficit by adjusting the number of our common shares outstanding.

Other than transaction costs paid and a contribution from our majority stockholder for payment of management incentive compensation related to the transaction, the transaction was primarily non-cash and involved exchanges of consideration and equity between our majority stockholder and HCAC and its related entities.

In fiscal year 2020 there were 53 weeks and there were 52 weeks in fiscal years 2019 and 2018 .

Summary of Significant Accounting Policies and Recently Issued Accounting Standards

4 unchanged sentences

For example, significant management judgments are required in determining excess, obsolete, or unsalable inventory, allowance for doubtful accounts, potential impairment of long-lived assets, goodwill and intangibles, the accounting for self-insurance reserves, warranty reserves, pension obligations, income taxes, environmental liabilities and contingencies.

Future events and their effects cannot be predicted with certainty, and, accordingly, the Company’s accounting estimates require the exercise of judgment.

Future events, including the extent and duration of the COVID-19 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 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.

28 unchanged sentences

Revenue related to these contracts is recognized based on the stand-alone selling price of the arrangement, on a straight-line basis over the contract period, and costs thereunder are expensed as incurred.

The Company includes shipping and handling revenues, which represents costs billed to customers, in net sales on the Consolidated Statements of Operations.

The related costs incurred by the Company are included in cost of goods sold on the Consolidated Statements of Operations.

The Company includes shipping and handling revenues, which are costs billed to customers, in net sales on the Consolidated Statements of Operations.

Shipping and handling costs incurred are included in cost of goods sold.

See Note 12 , Revenue , for further revenue information.

See Note 3 , Supplemental Financial Information , for further information on warranties and shipping and handling costs.

See Note 3 , Supplemental Financial Information , for further information on warranties.

Self-Insurance

6 unchanged sentences

The carrying amounts of cash and cash equivalents, trade receivables and accounts payable approximate their fair values because of the short-term maturity and highly liquid nature of these instruments.

The carrying value of the Company’s senior term loan approximates fair value due to the variable interest rate.

The carrying value of the Company’s term loan approximates fair value due to the variable interest rate.

See Note 8 , Debt , for further discussion.

Derivative Instruments

In limited circumstances, we may utilize derivative instruments to manage certain exposures to changes in foreign currency exchange rates or as cash flow hedges for variable rate debt.

In limited circumstances, we may utilize derivative instruments to manage certain exposures to changes in foreign currency exchange rates or interest rates relating to variable rate debt.

The fair values of all derivative instruments are recognized as assets or liabilities at the balance sheet date.

Changes in the fair value of these derivative instruments are recognized in our operating results or included in other comprehensive income (loss), depending on whether the derivative instrument is a fair value or cash flow hedge and whether it qualifies for hedge accounting treatment.

If realized, gains and losses on derivative instruments are recognized in the operating results line item that reflects the underlying exposure that was hedged.

The exchange of cash, if any, associated with derivative transactions is classified in the same category as the cash flows from the items subject to the economic hedging relationships.

If realized, gains and losses on derivative instruments are recognized in the operating results line item that reflects the underlying exposure that was mitigated.

The exchange of cash, if any, associated with derivative transactions is classified in the same category as the cash flows from the underlying items giving rise to the foreign currency or interest rate exposures.

The Company values inventories at the lower of cost or net realizable value.

25 unchanged sentences

The two components of operating lease expense, amortization and interest, are recognized on a straight-line basis over the lease term as a single expense element within selling, general and administrative expenses on the Consolidated Statements of Operations.

Under the finance lease model, interest on the lease liability is recognized in interest expense and amortization of ROU assets are characterized on the Consolidated Statements of Operations based on the underlying use of the assets.

Under the finance lease model, interest on the lease liability is recognized in interest expense and amortization of ROU assets is recorded on the Consolidated Statements of Operations based on the underlying use of the assets.

Impairment of Long-Lived Assets

26 unchanged sentences

Debt Issue Costs

Amounts paid directly to lenders or as an original issue discount and amounts classified as issuance costs are recorded as a reduction in the carrying value of the debt, for which the Company had deferred financing costs totaling $3.1 million and $4.0 million at September 28, 2019 and September 29, 2018 , respectively, incurred in connection with its debt facilities and related amendments.

Amounts paid directly to lenders or as an original issue discount and amounts classified as issuance costs are recorded as a reduction in the carrying value of the debt, for which the Company had deferred financing costs totaling $ 2.2 million and $ 3.1 million at October 3, 2020 and September 28, 2019 , respectively, incurred in connection with its debt facilities and related amendments.

All deferred financing costs are amortized to interest expense.

3 unchanged sentences

The Company accounts for its pension benefit obligations using actuarial models.

The measurement of plan obligations and assets was made at September 28, 2019 .

The measurement of plan obligations and assets was made at October 3, 2020 .

Effective January 1, 2006, the benefit plan was frozen to all participants.

4 unchanged sentences

Product Warranty Costs

The Company’s products are generally warranted against defects in material and workmanship for a period of one to five years.

The Company’s products are generally warranted against defects in material and workmanship for a period of one year to five years .

A provision for estimated warranty costs is recorded at the time a unit is sold.

30 unchanged sentences

Recently Adopted Accounting Standards

ASU 2017-07 — In March 2017, the Financial Accounting Standards Board ("FASB") issued ASU No.

2017-07, Compensation—Retirement Benefits (Topic 715) , Improving the Presentation of Net Periodic Pension Cost and Net Periodic Postretirement Benefit Cost, which requires that an employer report the service cost component (if any) of pension expense in the same line item or items as other compensation costs arising from services rendered by the pertinent employees during the period.

The other components of net benefit cost are required to be presented in the income statement separately from the service cost component and outside a subtotal of income from operations, if one is presented.

If a separate line item or items are used to present the other components of net benefit cost, that line item or items must be appropriately described.

If a separate line item or items are not used, the line item or items used in the income statement to present the other components of net benefit cost must be disclosed.

We adopted this new standard in the first quarter of fiscal 2019 on a retrospective basis, as required.

There is no service cost component to our periodic pension expense.

Previously all components of our pension expense were recorded as a component of operating expenses, and the new standard requires these expenses to be outside a subtotal of operating profit.

As a result, we have revised previously reported results of operations, as follows:

Fiscal Years Ended

(in thousands)

As Previously Reported

New Standard Adjustment

As Previously Reported

New Standard Adjustment

Selling, general and administrative expenses

Operating profit

Other income (expense), net

ASU 2018-15 — In August 2018, the FASB issued ASU No.

2018-15, Intangibles—Goodwill and Other—Internal-Use Software (Subtopic 350-40):

Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract , which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software.

We adopted this standard on a prospective (applies only to eligible costs incurred after adoption) basis in the first quarter of fiscal 2019, and there was not a significant impact on our consolidated financial statements.

ASU 2017-12 — In August 2017, the FASB issued ASU No.

2017-12, Derivatives and Hedging (Topic 815):

Targeted Improvements to Accounting for Hedging Activities , which intends to simplify the application of hedge accounting guidance and better align an entity's risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results.

The amendments expand and refine hedge accounting for both non-financial and financial risk components and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

We adopted this amended guidance in the first quarter of fiscal 2019 using the required modified retrospective approach;

however, we had no hedging relationships in effect at the adoption date that were impacted by the guidance.

We do not expect this amended guidance to have a material impact on the Company's consolidated financial statements.

ASU 2016-12 and 2016-10 — In May 2016, the FASB issued ASU No.

2016-12 , Revenue from Contracts with Customers (Topic 606):

Narrow-Scope Improvements and Practical Expedients , and in April 2016 issued ASU No.

2016-10, Revenue from Contracts with Customers (Topic 606):

Identifying Performance Obligations and Licensing , both of which provide further clarification to be considered when implementing ASU 2014-09, Revenue from Contracts with Customers (Topic 606) .

We adopted this standard in the first quarter of fiscal 2019 using the modified retrospective transition approach, which we applied to all contracts impacted by the new standard at the date of initial application.

At adoption, we accounted for specific sales incentives offered to our customers by recording an increase of $0.9 million in accrued liabilities, a $0.7 million adjustment to retained earnings, and a $0.2 million deferred tax asset.

Amounts recorded in prior comparative periods have not been restated and continue to be reported under the accounting standards in effect for those periods.

Please see Note 12 , Revenue , for additional information regarding the adoption of this new accounting standard.

ASU 2018-05 — In March 2018, the FASB issued ASU No.

2018-05, Income Taxes (Topic 740):

Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No.

118 , which updates income tax accounting to reflect the SEC's interpretive guidance released on December 22, 2017, when the Tax Cuts and Jobs Act (the "Tax Act") was signed into law.

For more information regarding the impact of the Tax Act, see Note 9 , Income Taxes .

ASU 2016-02 — In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) , which requires lessees to recognize assets on the balance sheet for the rights and obligations created by all leases with terms greater than 12 months.

The standard will also require certain qualitative and quantitative disclosures designed to give financial statement users information on the amount, timing, and uncertainty of cash flows arising from leases.

We adopted this standard in the first quarter of fiscal 2019 using the modified retrospective adoption approach with a cumulative-effect adjustment recognized on the balance sheet on the adoption date with prior periods not recast, and electing the practical expedients allowed under the standard.

At adoption, we recognized operating lease right-of-use assets totaling $7.3 million and operating lease liabilities totaling $9.2 million .

The impact on our results of operations and cash flows was not material.

ASU 2016-15 — In August 2016, the FASB issued ASU No.

2016-15, Statement of Cash Flows (Topic 230):

Classification of Certain Cash Receipts and Cash Payments , which made targeted changes to how cash receipts and cash payments are presented and classified in the statement of cash flows.

We adopted this standard in the first quarter of fiscal 2019 and contemporaneous with adoption made a policy election to classify distributions received from our equity method investment using the nature of distribution approach.

Adoption of the standard had no current impact on the Company's consolidated financial statements, as this is the manner in which we have recorded previous distributions from our equity method investee.

In 2019, we received $2.3 million in dividends.

ASU 2018-02 – In February 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2018-02, Income Statement - Reporting Comprehensive Income (Topic 220) .

This ASU provides guidance on a reclassification from accumulated other comprehensive income ("AOCI") to retained earnings for the effect of the tax rate change resulting from the Tax Cuts and Jobs Act (H.R.1) (the "Tax Act").

The amendments eliminate the stranded tax effects resulting from the Tax Act and improve the usefulness of information reported to financial statement users.

This ASU was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted.

We adopted this ASU, in the first quarter of fiscal 2020, and did not elect to reclassify the income tax effects of the Tax Act from AOCI to retained earnings.

We use a specific identification approach to release the income tax effects in AOCI.

ASU 2019-12 – In December 2019, the FASB issued ASU No.

2019-12, Simplifying the Accounting for Income Taxes , which simplifies the process for calculating interim (intraperiod) income taxes and the accounting for deferred tax liabilities for foreign equity-method investments, among other simplifications.

We early adopted this standard effective the first quarter of fiscal 2020 and the the impacts of adopting this standard were not material.

Recently Issued Accounting Standards

We believe that no new accounting guidance was issued during the year ended September 28, 2019 that is relevant to our financial statements.

ASU 2020-04 – On March 12, 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , providing temporary guidance to ease the potential burden in accounting for reference rate reform primarily resulting from the discontinuation of LIBOR, which is currently expected to occur on December 31, 2021.

The amendments in ASU 2020-04 are elective and apply to all entities that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued.

An entity may elect to apply the amendments prospectively from March 12, 2020 through December 31, 2022.

Our debt and derivative agreements currently reference LIBOR.

Contract language is expected to be incorporated into these agreements to address the transition to an alternative reference rate.

We are currently evaluating the impact this ASU may have on our consolidated financial statements.

Supplemental Financial Information

2 unchanged sentences

( in thousands )

September 28, 2019

October 3, 2020

September 28, 2019

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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 fiscal years presented:

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

(in thousands)

3 unchanged sentences

Balance at end of period

With the adoption of ASU No.

2016-12 (as described in Note 2, Summary of Significant Accounting Policies and Recently Issued Accounting Standards), 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 in fiscal 2020 , and the remaining balance thereafter.

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 $ 8.5 million of the outstanding contract liability in fiscal 2021 , and the remaining balance thereafter.

Self-Insurance

1 unchanged sentence

(in thousands)

September 28, 2019

October 3, 2020

September 28, 2019

4 unchanged sentences

Shipping and Handling

Shipping and handling revenues represent costs billed to customers and are presented as part of net sales on the accompanying Consolidated Statements of Operations.

Shipping and handling costs incurred are included in cost of goods sold.

Shipping and handling revenues recognized were $ 16.9 million , $ 19.4 million and $ 20.7 million for the fiscal years ended 2020 , 2019 and 2018 , respectively.

6 unchanged sentences

No payments or receipts are exchanged on the interest rate collar contracts unless interest rates rise above or fall below the contracted ceiling or floor rates.

During the fiscal year ended October 3, 2020 , the three-month LIBOR rate fell below the established floor, which required an immaterial cash payment to the counterparty.

Additionally, $ 0.5 million was accrued as interest expense in the fourth quarter of fiscal 2020 when the three-month LIBOR rate again fell below the established floor and is expected to be paid in the first quarter of fiscal 2021.

Changes in the interest rate collar fair value are recorded in interest expense as the collar does not qualify for hedge accounting.

At September 28, 2019 , the fair value of the interest rate collar contract was $(1.2) million and is included in "other current liabilities" on the Consolidated Balance Sheets.

At October 3, 2020 , the fair value of the interest rate collar contract was $( 3.8 ) million and is included in "other current liabilities" on the Consolidated Balance Sheets.

The fair value of the interest rate collar is a Level 2 fair value measurement, based on quoted prices of similar items in active markets.

1 unchanged sentence

(in thousands)

September 28, 2019

October 3, 2020

September 28, 2019

6 unchanged sentences

(in thousands)

September 28, 2019

October 3, 2020

September 28, 2019

12 unchanged sentences

(in thousands)

September 28, 2019

October 3, 2020

September 28, 2019

3 unchanged sentences

The gross carrying amounts and accumulated amortization of intangible assets are as follows at the dates indicated:

September 28, 2019

October 3, 2020

September 28, 2019

11 unchanged sentences

During the fourth quarters of the fiscal years ended 2020 and 2019 , we performed our annual impairment assessment of our trade name, which did not indicate that an impairment existed;

therefore, no impairments of our indefinite lived intangibles have been recorded.

therefore, no impairment of our indefinite lived intangible has been recorded.

Customer relationships are amortized on a straight-line basis over an estimated life of 20 years.

7 unchanged sentences

Original Credit Agreement

On December 12, 2016, Blue Bird Body Company, a wholly-owned subsidiary of the Company, executed a $235.0 million five -year credit agreement with Bank of Montreal, which acts as the administrative agent and an issuing bank, Fifth Third Bank, as co-syndication agent and an issuing bank, and Regions Bank, as Co-Syndication Agent, together with other lenders (the "Credit Agreement").

On December 12, 2016, Blue Bird Body Company, a wholly-owned subsidiary of the Company (the "Borrower"), executed a $ 235.0 million five -year credit agreement with Bank of Montreal, which acts as the administrative agent and an issuing bank, Fifth Third Bank, as co-syndication agent and an issuing bank, and Regions Bank, as Co-Syndication Agent, together with other lenders (the "Credit Agreement").

The credit facility provided for under the Credit Agreement consisted of a term loan facility in an aggregate initial principal amount of $ 160.0 million (the “Term Loan Facility”) and a revolving credit facility with aggregate commitments of $ 75.0 million .

1 unchanged sentence

The obligations under the Credit Agreement and the related loan documents (including without limitation, the borrowings under the Credit Facilities and obligations in respect of certain cash management and hedging obligations owing to the agents, the lenders or their affiliates), are, in each case, secured by a lien on and security interest in substantially all of the assets of the Company and its subsidiaries including the Borrower, with certain exclusions as set forth in a collateral agreement entered into on the closing date.

As a result of the Credit Agreement, we incurred $3.3 million of debt discount and issuance costs, which have been recorded as contra-debt and will be amortized over the life of the Credit Agreement using the effective interest method.

Proceeds from the Term Loan Facility were used to fully extinguish our previous credit agreement with Societe Generale.

In connection with the extinguishment, we recorded a $10.1 million loss, which was the difference in the reacquisition price of the extinguished debt and the net carrying value at extinguishment.

The loss includes the write-off of unamortized deferred financing costs recorded as a reduction of the prior debt, unamortized issuance costs associated with the previous revolving credit facility recorded in other assets, as well as interest and legal fees incurred to extinguish the prior debt.

Amended Credit Agreement

On September 13, 2018, the Company entered into a first amendment of the December 12, 2016 credit agreement ("Amended Credit Agreement").

The Amended Credit Agreement provided for additional funding of $50.0 million and was funded in the first quarter of fiscal 2019.

First Amendment to the Credit Agreement

On September 13, 2018, the Company entered into a first amendment of the December 12, 2016 Credit Agreement ("First Amended Credit Agreement").

The First Amended Credit Agreement provided for additional funding of $ 50.0 million and was funded in the first quarter of fiscal 2019.

Substantially all of the proceeds were used to complete a tender offer to purchase shares of our common and preferred stock.

The Amended Credit Agreement also increased the revolving credit facility to $100.0 million from $75.0 million , a $25.0 million increase.

The First Amended Credit Agreement also increased the revolving credit facility to $ 100.0 million from $ 75.0 million , a $ 25.0 million increase.

The amendment extended the maturity date to September 13, 2023, five years from the effective date of the first amendment.

amendment also amended the interest rate pricing matrix (as follows) as well as the principal payment schedule (as disclosed at the end of this footnote).

In connection with the first Amended Credit Agreement, we incurred $2.0 million of debt discount and issuance costs, which were recorded as contra-debt and will be amortized over the life of the Amended Credit Agreement using the effective interest method.

The interest rate on the Term Loan Facility is (i) from the first amendment effective date until the first quarter ended on or about September 30, 2018, LIBOR plus 2.25% , and (ii) commencing with the fiscal quarter ended on or about September 30, 2018 and thereafter, dependent on the Total Net Leverage Ratio of the Company, an election of either base rate or LIBOR pursuant to the table below:

The first amendment also amended the interest rate pricing matrix (as follows) as well as the principal payment schedule (as disclosed at the end of this footnote).

In connection with the First Amended Credit Agreement, we incurred $ 2.0 million of debt discount and issuance costs, which were recorded as contra-debt and will be amortized over the life of the First Amended Credit Agreement using the effective interest method.

The interest rate on the Term Loan Facility was (i) from the first amendment effective date until the first quarter ended on or about September 30, 2018, LIBOR plus 2.25 % , and (ii) commencing with the fiscal quarter ended on or about September 30, 2018 and thereafter, dependent on the Total Net Leverage Ratio of the Company, an election of either base rate or LIBOR pursuant to the table below:

Total Net Leverage Ratio

6 unchanged sentences

Greater than 3.50x

Second Amendment to the Credit Agreement

On May 7, 2020, the Company entered into a second amendment which amended the First Amended Credit Agreement, dated as of September 13, 2018 (the “Second Amended Credit Agreement”).

The Second Amended Credit Agreement provided $ 41.9 million in additional revolving commitments bringing the total revolving commitments to $ 141.9 million .

The revolving commitments under the Second Amended Credit Agreement matures on September 13, 2023, which is the fifth anniversary of the effective date of the First Amended Credit Agreement.

The interest rate pricing grid remained unchanged, but the LIBOR floor was amended from 0 % to 0.75 % .

We incurred $ 0.9 million in fees related to the amendment.

The fees were capitalized to other assets on the Consolidated Balance Sheets and are amortized on a straight-line basis to interest expense until maturity of the agreement.

Additional Disclosures

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(in thousands)

September 28, 2019

October 3, 2020

September 28, 2019

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If measured at fair value in the financial statements, the term loans would be classified as Level 2 in the fair value hierarchy.

At September 28, 2019 and September 29, 2018 , $186.3 million and $146.2 million , respectively, were outstanding on the term loans (net of deferred financing costs).

At September 28, 2019 and September 29, 2018 , the stated interest rates on the term loans were 4.4% and 4.5% , respectively.

At September 28, 2019 and September 29, 2018 , the weighted-average annual effective interest rates for the term loans were 5.0% and 4.1% , respectively, which included amortization of the deferred financing costs.

No borrowings were outstanding on the Revolving Credit Facility at September 28, 2019 ;

however, there were $6.9 million of Letters of Credit outstanding on September 28, 2019 , providing the Company the ability to borrow $93.1 million on the revolving line of credit.

At October 3, 2020 and September 28, 2019 , $ 176.4 million and $ 186.3 million , respectively, were outstanding on the term loans.

At October 3, 2020 and September 28, 2019 , the stated interest rates on the term loans were 3.5 % and 4.4 % , respectively.

At October 3, 2020 and September 28, 2019 , the weighted-average annual effective interest rates for the term loans were 4.1 % and 5.0 % , respectively, which included amortization of the deferred financing costs.

No borrowings were outstanding on the Revolving Credit Facility at October 3, 2020 ;

however, there were $ 6.9 million of Letters of Credit outstanding on October 3, 2020 , providing the Company the ability to borrow $ 135.0 million on the revolving line of credit.

Interest expense on all indebtedness for the fiscal years ended 2020 , 2019 and 2018 was $ 12.3 million , $ 12.9 million , and $ 6.7 million , respectively.

The schedule of remaining principal maturities for total debt for the next five fiscal years is as follows:

The schedule of remaining principal maturities for total debt is as follows:

(in thousands)

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Total remaining principal payments

The components of income tax expense were as follows for the fiscal years presented:

The components of income tax (expense) benefit were as follows for the fiscal years presented:

(in thousands)

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Income tax (expense) benefit

At September 28, 2019 , the Company had $0.3 million in federal tax credit carryforwards.

At October 3, 2020 , the Company had $ 8.0 million in state tax credit carryforwards and no federal tax credit carryforwards.

The Company maintains a partial valuation allowance on the state tax credit carryforwards.

Of this balance, the Company estimates approximately $ 3.6 million of state tax credit carryforwards will expire unused between 2029 and 2031.

At October 3, 2020 , the Company had $ 11.3 million in state net operating loss ("NOL") carryforwards and no Federal NOL carryfowards.

Of this balance, the Company estimates approximately $ 10.9 million of state NOL carryforwards will expire unused between 2028 and 2033.

The effective tax rates for the fiscal years ended 2020 , 2019 and 2018 were 14.5 % , 25.6 % and ( 9.7 )% , respectively.

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While the statutory rate was 21 % in 2018, the Company applied a transitional or blended U.S.

statutory federal income tax rate of 24.5% for 2018.

The impact of the Tax Act increased our provision for income taxes by $2.1 million in 2018.

This increase was composed of $2.0 million related to the re-measurement of net deferred tax assets and liabilities and $0.1 million associated with the deemed repatriation tax.

statutory federal income tax rate of 24.5 % for the fiscal year ended 2018.

The impact of the Tax Act decreased our benefit for income taxes by $ 2.1 million in 2018.

The decrease was composed of $ 2.0 million related to the re-measurement of net deferred tax assets and liabilities and $ 0.1 million associated with the deemed repatriation tax.

In 2018, we finalized our tax reform estimates under Staff Accounting Bulletin 118.

The effective tax rate for the fiscal year ended 2019 differed from the statutory federal income tax rate of 21.0% , mainly due to the unfavorable impact of valuation allowances, share-based and other compensation limitations, and state taxes, which includes the application of tax credits claimed as offsets against our payroll tax liabilities.

The valuation allowance increased mainly due to the accrual of income tax credits that are greater than our ability to utilize before expiration.

The effective tax rate for the fiscal year ended 2020 differed from the statutory Federal income tax rate of 21.0 % .

There were minor items that lowered the effective tax rate to 14.5 % , primarily the impacts of tax credits and state taxes on the Federal rate.

These were offset to a lesser degree by the recording of a partial valuation allowance for state taxes and minor provision to return adjustments.

The effective tax rate for the fiscal year ended 2019 significantly differed from the statutory federal income tax rate of 21 % , mainly due to the unfavorable impact of valuation allowances, share-based and other compensation limitations, and state taxes, which included the application of tax credits claimed as offsets against our payroll tax liabilities.

The valuation allowance increased mainly due to the accrual of income tax credits that were greater than our ability to utilize before expiration.

These items were partially offset by benefits from federal and state tax credits.

The effective tax rate for the fiscal year ended 2018 significantly differed from the statutory federal income tax rate of 24.5% , mainly due to one-time events like the decrease in our uncertain tax positions and a re-measurement of our deferred tax assets and liabilities as a result of the Tax Act.

The effective tax rate for the fiscal year ended 2018 differed from the statutory federal income tax rate of 24.5 % , mainly due to one-time events like the decrease in our uncertain tax positions and a re-measurement of our deferred tax assets and liabilities as a result of the Tax Act.

The rate was also favorably impacted by normal tax rate benefit items, such as the domestic production activities deduction, federal and state tax credits, and share based award related deductions in excess of recorded book expense.

The effective tax rate for the fiscal year ended 2017 differed from the statutory federal income tax rate of 35% , reflecting the benefits of income tax credits, the domestic production activities deduction, and recording a tax windfall from share-based compensation awards exercised, which were offset by the application of tax credits claimed as offsets against our payroll tax liabilities, and interest and penalties on uncertain tax positions.

A reconciliation between the reported income tax expense for continuing operations and the amount computed by applying the statutory federal income tax rate is as follows:

A reconciliation between the reported income tax (expense) benefit and the amount computed by applying the statutory federal income tax rate is as follows:

(in thousands)

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The Company recognizes accrued interest and penalties related to unrecognized tax benefits as income tax expense.

There were no accrued interest and penalties at September 28, 2019 and September 29, 2018 .

There were no accrued interest and penalties at October 3, 2020 and September 28, 2019 .

The Company is subject to taxation mostly in the United States and various state jurisdictions.

At September 28, 2019 , tax years prior to 2015 are generally no longer subject to examination by federal and most state tax authorities.

At October 3, 2020 , tax years prior to 2015 are generally no longer subject to examination by federal and most state tax authorities.

The following table sets forth the sources of and differences between the financial accounting and tax bases of the Company’s assets and liabilities which give rise to the net deferred tax assets at the dates indicated:

(in thousands)

September 28, 2019

October 3, 2020

September 28, 2019

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Guarantees, Commitments and Contingencies

At September 28, 2019 , the Company had a number of product liability and other cases pending.

At October 3, 2020 , 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 impact on the Company’s financial statements.

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The Company is currently not involved in any material environmental proceedings and therefore management believes that the resolution of environmental matters will not have a material adverse effect on the Company’s financial statements.

Our environmental liability using a discount rate of 10.5% , included in current accrued expenses and other long-term liabilities on the Consolidated Balance Sheets, was $0.4 million and $0.4 million at September 28, 2019 and September 29, 2018 , respectively.

The estimated aggregate undiscounted amount that will be incurred over the next eight years is $0.8 million .

The estimated payments for each of the next five years are $0.1 million per year and the aggregate amount thereafter is $0.3 million .

Our environmental liability using a discount rate of 8.8 % , included in current accrued expenses and other long-term liabilities on the Consolidated Balance Sheets, was $ 0.2 million and $ 0.4 million at October 3, 2020 and September 28, 2019 , respectively.

The estimated aggregate undiscounted amount that will be incurred over the next seven years is $ 0.6 million .

At October 3, 2020 , the estimated payments for each of the next five years are $0.1 million per year and the aggregate amount thereafter is $0.2 million .

Future expenditures may exceed the amounts accrued and estimated.

In the ordinary course of business, we may provide guarantees for certain transactions entered into by our dealers.

At September 28, 2019 , we had $7.0 million in aggregate guarantees outstanding which relate to guarantees of indebtedness on term loans and credit line increases.

The guarantees have remaining maturities of up to 3.3 years .

The $7.0 million represents the maximum amount we would be required to pay upon default of all guaranteed indebtedness, and we believe the likelihood of required performance to be remote.

At September 28, 2019 , $0.5 million was included in other current liabilities on our Consolidated Balance Sheets for the estimated fair value of the guarantees.

At October 3, 2020 , we had a $ 3.0 million guarantee outstanding which relates to a guarantee of indebtedness for a term loan with a remaining maturity up to 2.3 years .

The $ 3.0 million represents the estimated maximum amount we would be required to pay upon default of all guaranteed indebtedness, and we believe the likelihood of required performance to be remote.

At October 3, 2020 , $ 0.3 million was included in other current liabilities on our Consolidated Balance Sheets for the estimated fair value of the guarantee.

Lease Commitments

We have operating and finance leases for office space, warehouse space, or a combination of both.

Our leases have remaining lease terms ranging from 4 months to 8.2 years with the option to extend leases for up to 5.0 years .

Our leases have remaining lease terms ranging from 4 years, 2 months to 7.2 years with the option to extend leases for up to 5.0 years .

The components of lease costs included on the Consolidated Statements of Operations are as follows:

(in thousands)

Fiscal Year Ended

Fiscal Years Ended

Classification

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Classification depends on the purpose of the underlying lease.

Total rent expense was $2.0 million and $1.3 million for the fiscal years ended 2018 and 2017 , respectively.

Total rent expense was $ 2.0 million for the fiscal year 2018 .

The following table summarizes the lease amounts included on the Consolidated Balance Sheets as follows:

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Balance Sheet Location

October 3, 2020

September 28, 2019

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Total lease liabilities

(1) Net of accumulated amortization of $0.1 million

(1) Net of accumulated amortization of $ 1.3 million and $ 0.1 million , respectively.

The operating leases recorded do not assume renewal based on our analysis of those leases and their contractual terms.

The finance lease recorded does assume renewal based on our expectations with regard to the lease and the contractual terms.

One of our finance leases assumes renewal based on our expectations with regard to the lease and the contractual terms.

Lease liability maturities are presented in the following table:

(in thousands)

September 28, 2019

October 3, 2020

Fiscal Years Ended

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Lease terms and discount rates are presented in the following table:

September 28, 2019

October 3, 2020

Weighted average remaining lease term

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Supplemental cash flow information is presented in the following table:

Fiscal Year Ended

Fiscal Years Ended

(in thousands)

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In the ordinary course of business, the Company enters into short-term contractual purchase orders for manufacturing inventory and capital assets.

The amount of these commitments for the next five fiscal years is expected to be as follows:

The amount of these commitments is expected to be as follows:

(in thousands)

Fiscal Years Ended

Total purchase commitments

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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 United States, Canada and in international markets;

(i) the Bus segment, which includes the manufacture and assembly of buses to be sold to a variety of customers across the United States, Canada, and in 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.

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Interest income

Other expense, net

Loss on debt extinguishment

Other income (expense), net

Income before income taxes

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Total net sales

As noted in Note 2 , Summary of Significant Accounting Policies and Recently Issued Accounting Standards , the Company adopted the new revenue recognition guidance (ASC 606) effective September 30, 2018 using the modified retrospective approach.

As a result, we recognized the cumulative effect of initially applying the new revenue standard as an adjustment to the opening balance of retained earnings at September 30, 2018.

Adopting the new standard primarily impacted the timing of recognition of specific sales incentives offered to our customers.

The comparative information has not been restated and continues to be reported under the accounting standards in effect for those periods.

The difference in revenue recognized under the new guidance versus the previous guidance was an increase of $0.1 million for the fiscal year ended 2019.

Under the new guidance, at adoption, we recorded $0.9 million in accrued liabilities, a deferred tax asset of $0.2 million , and a $0.7 million retained earnings adjustment.

Under previous guidance, we would not have recorded any accrued liabilities or deferred tax assets resulting in no retained earnings impact on our Condensed Consolidated Balance Sheets.

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

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Alternative fuel buses (1)

(1) Includes buses sold with any fuel source other than diesel (e.g.

gasoline, propane, CNG, electric).

(1) Includes buses sold with any fuel source other than diesel (e.g., gasoline, propane, CNG, electric).

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

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There were no dividends paid with the conversion.

On September 23, 2017, the Company entered into a Securities Purchase Agreement with one holder of preferred stock, pursuant to which the preferred stock holder agreed to sell and the Company agreed to purchase all of (i) the shares of common stock, par value $0.0001 (the “Common Stock”) of the Company, (ii) the shares of the Preferred Stock, and (iii) the warrants to acquire Common Stock, in each case, owned by the preferred stock holder (the “Transaction Securities”).

The Company purchased the Transaction Securities for an aggregate purchase price of $32.1 million , reflecting a price per share of Common Stock of $18.65 .

On October 15, 2018, the Company received $ 50.0 million in funding from the Amended Credit Agreement (refer to Note 8 , Debt , for more information).

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The total aggregate cost was approximately $ 50.3 million , which includes fees and expenses related to the tender offer.

At September 28, 2019 , there were a total of 748,316 warrants outstanding to purchase 374,158 shares of our Common Stock.

Earnings Per Share

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preferred stock dividends

preferred stock repurchase

Net income available to common stockholders

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Diluted earnings per share

(1) Basic earnings per share is calculated by dividing income available to common stockholders by the weighted average common shares outstanding during the period.

(2) Diluted earnings per share is calculated by adjusting the weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding during the period, determined by using the treasury-stock method, and adjusting for the dilutive effect of our convertible preferred stock, determined by using the if-converted method.

For the fiscal year ended 2017, 4,302,212 shares of potentially dilutive convertible preferred stock were excluded from the calculation since the if-converted impact would be anti-dilutive and, as a result, the numerator used in the calculation included the impact on income of preferred stock dividends and the excess of fair value over carrying value for preferred stock repurchase.

(1) Potentially dilutive securities representing 0.4 million and 0.2 million shares of common stock were excluded from the computation of diluted earnings per share for the fiscal years ended October 3, 2020 and September 28, 2019, respectively, as their effect would have been anti-dilutive.

Share-Based Compensation

In fiscal 2015, we adopted the Omnibus Equity Incentive Plan (the "Plan").

The Plan is administered by the Compensation Committee of our Board of Directors.

Under the Plan, the Committee may grant awards for the issuance up to an aggregate of 3,700,000 shares of common stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights (collectively, “SARs” and each individually a “SAR”), restricted stock, restricted stock units, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards.

In fiscal 2015, we adopted the Omnibus Equity Incentive Plan and in fiscal 2020 amended and restated the 2015 Omnibus Equity Incentive Plan (the "Plan").

The Plan is administered by the Compensation Committee of our Board of Directors and the Committee may grant awards for the issuance up to an aggregate of 5,200,000 shares of common stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights (collectively, “SARs” and each individually a “SAR”), restricted stock, restricted stock units, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards.

The exercise price of a share subject to a stock option may not be less than 100% of the fair market value of a share of the Company's common stock with respect to the grant date of such stock option.

In fiscal years prior to 2015, we had not granted any stock options or other stock-settled awards.

No portion of the options shall vest and become exercisable after the date on which the optionee’s service with the Company and its subsidiaries terminates.

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New shares of the Company's common stock are issued upon stock option exercises, or at the time of vesting for restricted stock.

Stock-based payments to employees, including grants of stock options, restricted stock awards ("RSAs") and restricted stock units ("RSUs"), are recognized in the financial statements based on their fair value.

We have granted performance awards as part our overall compensation plans.

The vesting of these awards is primarily based upon the attainment of certain performance metrics established under our annual management incentive plan, with the Compensation Committee of the Board of Directors maintaining final discretion over vesting amounts.

Stock-based payments to employees, including grants of stock options, restricted stock awards ("RSA") and restricted stock units ("RSU"), are recognized in the financial statements based on their fair value.

The fair value of each stock option award on the grant date is estimated using the Black-Scholes option-pricing model with the following assumptions:

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The volatility assumption used in the Black-Scholes option-pricing model is based on peer group volatility because we do not have a sufficient trading history as a stand-alone public company.

Because we do not have sufficient history with respect to stock option activity and post-vesting cancellations, the

expected term assumption is based on the simplified method under GAAP, which is based on the vesting period and contractual term for each vesting tranche of awards.

Because we do not have sufficient history with respect to stock option activity and post-vesting cancellations, the expected term assumption is based on the simplified method under GAAP, which is based on the vesting period and contractual term for each vesting tranche of awards.

The mid-point between the vesting date and the expiration date is used as the expected term under this method.

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Restricted Stock Awards

The following table summarizes the Company's RSA and RSU award activity for the fiscal year presented:

The following table summarizes the Company's RSA and RSU activity for the fiscal year presented:

Restricted Stock Activity

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Compensation expense for restricted stock awards, recognized in selling, general and administrative expenses on the Consolidated Statements of Operations, was $ 2.7 million , $ 2.6 million , and $ 1.6 million for the fiscal years ended 2020 , 2019 , and 2018 , respectively, with associated tax benefits of $ 0.7 million , $ 0.7 million , and $ 0.4 million , respectively.

At September 28, 2019 , unrecognized compensation cost related to restricted stock awards totaled $0.6 million and is expected to be recognized over a weighted-average period of three months .

At October 3, 2020 , unrecognized compensation cost related to restricted stock awards totaled $ 1.1 million and is expected to be recognized over a weighted-average period of one year .

Stock Option Awards

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(1) Stock options exercised during the fiscal year had an aggregate intrinsic value totaling $ 4.3 million .

(2) Stock options outstanding at the end of the fiscal year had an aggregate intrinsic value totaling $3.3 million .

(3) Fully vested and exercisable options at fiscal year-end had an aggregate intrinsic value totaling $2.6 million with a weighted average contractual term of 6.5 years .

The total aggregate intrinsic value of stock options exercised during the fiscal years ended 2018 and 2017 were $4.2 million and $2.3 million , respectively.

(2) Stock options outstanding at the end of the fiscal year had no intrinsic value.

(3) Fully vested and exercisable options at fiscal year-end had no intrinsic value.

The total aggregate intrinsic value of stock options exercised during the fiscal years ended 2019 and 2018 was $ 0.1 million and $ 4.2 million , respectively.

Compensation expense for stock option awards, recognized in selling, general and administrative expenses on the Consolidated Statements of Operations, was $ 1.4 million , $ 1.5 million , and $ 0.9 million for the fiscal years ended 2020 , 2019 , and 2018 , respectively, with associated tax benefits of $ 0.4 million , $ 0.4 million , and $ 0.2 million , respectively.

At September 28, 2019 , unrecognized compensation cost related to stock option awards totaled $0.4 million and is expected to be recognized over a weighted-average period of three months .

At October 3, 2020 , unrecognized compensation cost related to stock option awards totaled $ 0.7 million and is expected to be recognized over a weighted-average period of one year, two months .

The fair value of each option award at grant date was estimated using the Black-Scholes option-pricing model with the following assumptions made and resulting grant-date fair values during the fiscal years presented:

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Benefit Plans

Defined Benefit Pension Plans

Defined Benefit Pension Plan

The Company has a defined benefit pension plan (the “Defined Benefit Plan”) covering U.S.

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No accrual of future benefits is calculated beyond this date.

The Company contributed $0.0 million and $5.9 million to the Defined Benefit Plan during the fiscal years ended September 28, 2019 and September 29, 2018 , respectively.

For the fiscal years ended September 28, 2019 and September 29, 2018 , benefits paid were $7.3 million and $7.1 million , respectively.

The projected benefit obligation (“PBO”) for the Defined Benefit Plan was $163.6 million and $144.5 million at September 28, 2019 and September 29, 2018 , respectively.

The Company contributed $ 0.5 million and $ 0.0 million to the Defined Benefit Plan during the fiscal years ended October 3, 2020 and September 28, 2019 , respectively.

For the fiscal years ended October 3, 2020 and September 28, 2019 , benefits paid were $ 8.2 million and $ 7.3 million , respectively.

The projected benefit obligation (“PBO”) for the Defined Benefit Plan was $ 169.7 million and $ 163.6 million at October 3, 2020 and September 28, 2019 , respectively.

The reconciliation of the beginning and ending balances of the PBO for the Defined Benefit Plan for the fiscal years indicated is presented in the following table:

4 unchanged sentences

Assumption changes (1)

Actuarial (gain) loss

Actuarial gain

Benefits paid

13 unchanged sentences

(in thousands)

September 28, 2019

October 3, 2020

September 28, 2019

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The Company determines the fair value of its financial instruments in accordance with the Fair Value Measurements and Disclosures Topic of the ASC.

Fair value is the price to hypothetically sell an asset or transfer a liability in an orderly manner in the principal market for that asset or liability.

Fair value represents the price to hypothetically sell an asset or transfer a liability in an orderly manner in the principal market for that asset or liability.

This topic provides a hierarchy that gives highest priority to unadjusted quoted market prices in active markets for identical assets or liabilities.

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During the fiscal years ended 2020 and 2019 , there were no transfers between levels.

There are no sources of significant concentration risk in the invested assets at September 28, 2019 , the measurement date.

There are no sources of significant concentration risk in the invested assets at October 3, 2020 , the measurement date.

The following table sets forth, by level within the fair value hierarchy, a summary of the Defined Benefit Plan’s investments measured at fair value:

(in thousands)

September 28, 2019

October 3, 2020

Equity securities

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Total loss (gain) recognized in net periodic pension benefit cost and other comprehensive income

(1) As disclosed in Note 2 , we reclassified previously reported pension expense amounts of $1.8 million and $5.0 million from selling, general and administrative expenses to other expense, net for the fiscal years ended 2018 and 2017 , respectively.

The estimated net loss for the Defined Benefit Plan that will be amortized from accumulated other comprehensive loss into net periodic benefit cost over the next fiscal year is $ 1.9 million .

3 unchanged sentences

Weighted-average assumptions used to determine benefit obligations:

September 28, 2019

October 3, 2020

September 28, 2019

2 unchanged sentences

Weighted-average assumptions used to determine net periodic benefit cost:

September 28, 2019

October 3, 2020

September 28, 2019

4 unchanged sentences

The Defined Benefit Plan asset allocations at the dates indicated, the measurement date, are as follows:

September 28, 2019

October 3, 2020

September 28, 2019

17 unchanged sentences

Total expected future benefit payments

Defined Contribution Plans

Defined Contribution Plan

The Company offers a defined contribution 401(k) plan covering substantially all U.S.

8 unchanged sentences

Employee Compensation Plans

The Management Incentive Plan (the “MIP”) compensates certain key salaried management employees and is derived from "EBITDA" (earnings before interest, taxes, depreciation, and amortization) and "free cash flow" metrics.

MIP bonus liabilities of $4.8 million and $2.4 million are included in accrued expenses on the Consolidated Balance Sheets at September 28, 2019 and September 29, 2018 , respectively.

The Management Incentive Plan (the “MIP”) compensates certain key salaried management employees and is derived from "Adjusted EBITDA" (earnings before interest, taxes, depreciation, and amortization, as adjusted) and "free cash flow" metrics.

MIP bonus liabilities of $ 0.0 million and $ 4.8 million are included in accrued expenses on the Consolidated Balance Sheets at October 3, 2020 and September 28, 2019 , respectively.

Equity Investment in Affiliate

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Blue Bird Micro Bird by Girardin Type A buses are produced in Drummondville, Quebec by Micro Bird.

The Company holds a 50% equity interest in Micro Bird Holdings, Inc.

("Micro Bird"), and accounts for Micro Bird under the equity method of accounting as the Company does not have control to direct the activities that most significantly impact Micro Bird’s financial performance based on the shared powers of the venture partners.

The carrying amount of the equity method investment is adjusted for the Company’s proportionate share of net earnings or losses and reduced by any dividends received.

At September 28, 2019 and September 29, 2018 , the Company had an investment of $11.1 million and $11.1 million , respectively.

During fiscal years ended 2019 , 2018 , and 2017 , Micro Bird paid dividends to all common stockholders, and the Company received $2.3 million , $1.8 million , and $4.6 million , respectively, gross of any required withholding taxes.

The Company holds a 50 % equity interest in Micro Bird, utilizing the equity method of accounting as the Company does not have control to direct the activities that most significantly impact Micro Bird’s financial performance based on the shared powers of the venture partners.

The carrying amount of the equity method investment is adjusted for the Company’s proportionate share of net earnings or losses and any dividends received.

At October 3, 2020 and September 28, 2019 , the carrying value of the Company's investment was $ 14.3 million and $ 11.1 million , respectively.

During fiscal years ended 2019 and 2018 , Micro Bird paid dividends to all common stockholders, and the Company received $ 2.3 million , and $ 1.8 million , respectively, gross of any required withholding taxes.

The dividends reduced the carrying value of our investment and are presented as cash inflows in the operating section of our Consolidated Statements of Cash Flows.

In recognizing the Company’s 50 % portion of Micro Bird net income, the Company recorded $ 3.2 million , $ 2.2 million , and $ 1.3 million in equity in net income of non-consolidated affiliate for the fiscal years ended 2020 , 2019 , and 2018 , respectively.

Accumulated Other Comprehensive Income

The following table provides information on changes in accumulated other comprehensive income (“AOCI”) for the periods presented:

Micro Bird's summarized balance sheet information at its September 30 year end is as follows:

Balance Sheet

(in thousands)

Current assets

Non-current assets

Current liabilities

Non-current liabilities

Total liabilities

Micro Bird's summarized financial results for its three fiscal years ended September 30 are as follows:

Income Statement

(in thousands)

Operating income

Accumulated Other Comprehensive Loss

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

(in thousands)

Defined Benefit Pension Plan

Cash Flow Hedges (Effective Portion)

Balance, October 1, 2016

Other comprehensive income, gross

Amounts reclassified from other comprehensive income and included in earnings

Total other comprehensive income, before taxes

Income tax expense

Balance, September 30, 2017

Other comprehensive income, gross

Amounts reclassified from other comprehensive income and included in earnings

Total other comprehensive income, before taxes

Income tax expense

Amounts reclassified and included in earnings

Total before taxes

Balance, September 29, 2018

Other comprehensive income, gross

Amounts reclassified from other comprehensive income and included in earnings

Total other comprehensive income, before taxes

Income tax expense

Other comprehensive loss, gross

Amounts reclassified and included in earnings

Total before taxes

Balance, September 28, 2019

Other comprehensive loss, gross

Amounts reclassified and included in earnings

Total before taxes

Balance, October 3, 2020

Subsequent Events

Third Amendment to the Credit Agreement

On December 4, 2020, the Company executed a third amendment to the Credit Agreement, the First Amended Credit Agreement and the Second Amended Credit Agreement (the "Third Amended Credit Agreement").

The Third Amended Credit Agreement, among other things, provides for certain temporary amendments to the Credit Agreement from the third amendment effective date through and including the first date on which (a)(i) a compliance certificate is timely delivered with respect to a fiscal quarter ending on or after March 31, 2022 demonstrating compliance with certain financial performance covenants for such fiscal quarter (the “Limited Availability Period”), or (ii) the Borrower elects to terminate the Limited Availability Period;

and (b) the absence of a default or event of default.

Amendments to the financial performance covenants provide that during the Limited Availability Period, a higher maximum total net leverage ratio is permitted, and requires the Company to maintain liquidity (in the form of undrawn availability under the Revolving Credit Facility and unrestricted cash and cash equivalents) of at least $ 15.0 million .

For the duration between the fiscal quarter ending December 31, 2020 and the fiscal quarter ending September 30, 2021 that falls within the Limited Availability Period, a quarterly minimum consolidated EBITDA covenant applies instead of a maximum Total Net Leverage Ratio.

The pricing grid in the First Amended Credit Agreement, which is based on the ratio of the Company’s consolidated net debt to consolidated EBITDA, remains unchanged.

However, during the Limited Availability Period, an additional margin of 0.50 % applies.

During the Limited Availability Period, the Borrower is required to prepay existing revolving loans and, if undrawn and unreimbursed letters of credit exceed $ 7.0 million , cash collateralize letters of credit if unrestricted cash and cash equivalents exceed $ 20.0 million , as determined on a semimonthly basis.

Any issuance, amendment, renewal, or extension of credit during the Limited Availability Period may not cause unrestricted cash and cash equivalents to exceed $ 20.0 million , or cause the aggregate outstanding Revolving Credit Facility principal to exceed $ 100.0 million .

The Third Amended Credit Agreement also implements a cap on permissible investments, restricted payments, certain payments of indebtedness and the fair market value of all assets subject to permitted dispositions during the Limited Availability Period.

For the duration of the Limited Availability Period, there are additional monthly reporting requirements and requirements relating to subordination agreements and intercreditor arrangements for certain other indebtedness and liens subject to administrative agent approval.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data