What changed in this filing

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Item 1. Business

2021-12-15 compared with 2020-12-17 · 117 added, 90 removed, 198 unchanged (51% of the section changed)

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to Blue Bird Corporation.

Unless expressly stated otherwise in this Report, Blue Bird Corporation shall be referred to as “Blue Bird” or the “Company,” and includes its consolidated subsidiaries.

Unless expressly stated otherwise in this Report, Blue Bird Corporation shall be referred to as "Blue Bird," the "Company," "we," "our" or "us," and includes its consolidated subsidiaries.

In May 2016, the Seller, ASP BB Holdings LLC, a Delaware limited liability company (“ASP”), and the Company, entered into an agreement pursuant to which the Seller agreed to sell the 12,000,000 shares of Common Stock of the Company owned by Seller (the “Transaction Shares”) to ASP.

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There were no proceeds to the Company from this transaction.

The following description of our business describes the business historically operated by School Bus Holdings and its subsidiaries under the “Blue Bird” name as an independent enterprise prior to the Business Combination and as subsidiaries of Blue Bird Corporation (formerly Hennessy Capital Acquisition Corp.) after the Business Combination.

The periodic reports filed by us with the Securities and Exchange Commission (“SEC”) pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our website:

The following discussion of our business describes the business historically operated by School Bus Holdings and its subsidiaries under the “Blue Bird” name as an independent enterprise prior to the Business Combination and as subsidiaries of Blue Bird Corporation (formerly Hennessy Capital Acquisition Corp.) after the Business Combination.

The periodic reports filed by us with the SEC pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, are available free of charge on our website:

http://investors.blue-bird.com .

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Any amendments to our Code of Ethics or waivers granted to our directors and executive officers will be posted on our corporate website.

In addition to the information contained in this Form 10-K for the fiscal year ended October 3, 2020 (“ 2020 Form 10-K Report” or “Report”), information about our Company can be found at http://investors.blue-bird.com , including extensive information about our management team, our products and our corporate governance.

The foregoing information regarding content on our website is for convenience only and shall not be deemed to be incorporated by reference into this Report nor filed with the SEC.

In addition to the information contained in this Annual Report on Form 10-K for the fiscal year ended October 2, 2021 (“2021 Form 10-K Report” or “Report”), information about our Company can be found at http://investors.blue-bird.com , including extensive information about our management team, our products and our corporate governance.

The foregoing information regarding content on our website is for convenience only and is not deemed to be incorporated by reference into this Report or filed with the SEC.

We are the leading independent designer and manufacturer of school buses, with more than 585,000 buses sold since our formation in 1927.

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Refer to Note 11, Segment Information , to the Company’s consolidated financial statements for additional financial information regarding our reportable segments including the primary geographic areas in which we earn revenues.

Throughout this Report, we refer to the fiscal year ended October 2, 2021 as “fiscal 2021,” the fiscal year ended October 3, 2020 as “fiscal 2020” and the fiscal year ended September 28, 2019 as “fiscal 2019.” There were 52 weeks in fiscal 2021 and fiscal 2019, and there were 53 weeks in fiscal 2020.

Our performance in recent years has been driven by the implementation of repeatable processes focused on product initiatives, continuous improvement of both competitiveness and manufacturing flexibility, and lowering our cost of capital, as described below:

Alternative Fuel Initiatives — We believe Blue Bird is the clear leader in alternative fuel school buses (defined as buses that do not operate on diesel fuel) and we continue to introduce new products to support growing consumer demand for these products.

Alternative Power Initiatives — We believe Blue Bird is the clear leader in alternative powered school buses (defined as buses that do not operate on diesel fuel) and we continue to introduce new products to support growing consumer demand for these products.

• Propane — In fiscal 2012, we entered into our exclusive relationship with Ford Motor Company and Roush Clean Tech to offer propane powered Type C school buses.

We have continued to lead the industry with this offering.

We launched the industry’s first .05g/bhp-hr NOx propane engine in fiscal 2017.

◦ We launched the industry’s first .05g/bhp-hr nitrogen oxide ("NOx") propane engine in fiscal 2017.

This engine operates four times cleaner than the current emission standard and is significantly better for the environment than competitors' published offerings.

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We offer electric solutions in both our Type C and Type D buses and commenced delivery to customers in fiscal 2018.

With demand and interest growing quickly, we have expanded our capacity six-fold in fiscal 2020 to 1,000 electric vehicles.

With demand and interest growing quickly, we have taken, and will continue to take, actions to expand our electric vehicle production capacity.

• Gasoline — In fiscal 2016, we re-introduced gasoline engines in school buses, again using a Ford engine and transmission and a Roush Clean Tech fuel delivery.

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Product Initiatives — We continue to update and improve our products.

Blue Bird introduced the first Electronic Stability Control system on school buses as an optional offering in fiscal 2017, and made it a standard feature in fiscal 2019.

We also made rear-view cameras standard in fiscal 2019.

During fiscal 2020, we continued our transition work from the Ford 6.8L V10 engine to the all-new 7.3L V8 engine.

We expect to deliver our first units with the new 7.3L V8 Ford engines in April 2021.

• During fiscal 2021, we successfully launched the all-new, Ford 7.3L V8 engine in our gasoline and propane powered offerings.

Manufacturing and Process Initiatives — We have commenced a number of initiatives to continue to build customer loyalty, reduce costs, and enhance competitiveness.

We launched our all-new, state-of-the-art 60,000 square foot paint facility in July 2019.

Using robotic technology, the new paint facility is designed to paint a bus three times faster than can be done manually, with a higher paint transfer rate and consistent, outstanding coverage.

• We launched our state-of-the-art 60,000 square foot paint facility in July 2019.

Using robotic technology, the paint facility is designed to paint a bus three times faster than can be done manually, with a higher paint transfer rate and consistent, outstanding coverage.

In keeping with Blue Bird's going green, the facility features a zero-to-landfill design.

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• We contracted with industry leaders to revise our production techniques in our plant.

The result was a six-fold increase in our electric powered bus capacity and the ability to transition to one operating shift from two, and still meet demand for the production of our buses during our peak manufacturing times.

The result was a material increase in our electric powered bus capacity and the ability to transition to one operating shift from two, and still meet demand for the production of our buses during our peak manufacturing times.

The single-shift operation was successfully run throughout fiscal 2021.

• We commenced an initiative with industry leaders to make structural reductions in cost on existing and future products to enhance our cost competitiveness.

Access to Capital — We refinanced our term debt on substantially better terms in December 2016 (the "Credit Agreement").

Since then, the Credit Agreement has been amended on three different occasions and as of the date of this filing, provides total revolving commitments of $100.0 million.

Additional details and discussion of these amendment can be found in the "Liquidity and Capital Resources" section of Item 7.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K.

Our management believes that Blue Bird is in a leading position in the industry due to our range of alternative fuel offerings and our strong diesel offering.

We believe that alternative fuels will continue to capture market share in the industry as customers realize benefits on the total cost of ownership and as the adoption of green technology gains traction.

Furthermore, we believe that our new product, process, and manufacturing initiatives are fully aligned with our long-term objectives.

As a result of the concentration of Blue Bird’s sales in the school bus industry in the United States and Canada, our operations are affected by national, state, and local economic and political factors that impact spending for public and, to a lesser extent, private education.

Unlike the discretionary portion of school budgets, the offering of school bus services is typically viewed as a mandatory part of the public infrastructure across the United States and Canada, ensuring that funding for new school buses receives some level of priority in all economic climates.

Since then, the Credit Agreement has been amended on four different occasions and as of the date of this filing, provides total revolving commitments of $110.0 million.

Additional details and discussion of these amendments can be found in the "Liquidity and Capital Resources" section of Item 7.

"Management’s Discussion and Analysis of Financial Condition and Results of Operations" of this Report.

On December 15, 2021, we issued and sold through a private placement an aggregate 4,687,500 shares of our common stock at $16.00 per share.

The $75.0 million of net proceeds that we received from this transaction may be used for working capital and other general corporate purposes, which may include acquisitions, investments in technologies or businesses, operating expenses and capital expenditures.

Refer to Note 19, Subsequent Events , to the Company’s consolidated financial statements for additional information regarding this transaction.

Additionally, on November 16, 2021, we filed a Registration Statement on Form S-3 that allows the Company to sell up to $200.0 million in the aggregate of any combination of common stock, preferred stock, warrants, debt securities and/or units from time to time in one or more offerings.

Our management believes that Blue Bird is in a leading position in the industry due to our range of alternative power offerings and our strong diesel offering.

We believe that our alternative power options will continue to capture market share in the industry as customers realize benefits on the total cost of ownership and as the adoption of green technology gains traction.

Furthermore, we believe that our product, process, and manufacturing initiatives are appropriately aligned with our long-term objectives.

As a result of the concentration of Blue Bird’s sales in the school bus industry in the United States of America ("U.S.") and Canada, our operations are affected by national, state, and local economic and political factors that impact spending for public and, to a lesser extent, private education.

Unlike the discretionary portion of school budgets, the offering of school bus services is typically viewed as a mandatory part of the public infrastructure across the U.S.

and Canada, ensuring that funding for new school buses receives some level of priority in all economic climates.

All 50 States, the District of Columbia, and the 13 Canadian Provinces have fleets of school buses in operation.

Our buses are sold through an extensive network of 50 United States and Canadian dealers that, in their territories, are exclusive to our Company on Type C and Type D school buses.

We also sell directly to major fleet operators, the United States Government, state governments and authorized dealers in a number of foreign countries.

Our buses are sold through an extensive network of 50 U.S.

and Canadian dealers that, in their territories, are exclusive to our Company on Type C and Type D school buses.

We also sell directly to major fleet operators, the U.S.

Government, state governments and authorized dealers in a number of foreign countries.

In fiscal 2021, we sold 6,679 buses throughout the world.

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Regardless of specifications, all school bus bodies that we manufacture include our signature 14-gauge one-piece steel bows roof system, complemented by a rugged and sturdy floor structure.

Specialty buses include school buses that are converted to suit applications required by the United States Government, state and local governments, and various customers for commercial and export markets.

Specialty buses include school buses that are converted to suit applications required by the U.S.

Government, state and local governments, and various customers for commercial and export markets.

The Blue Bird Micro Bird by Girardin Type A bus is produced through Micro Bird Holdings, Inc., an unconsolidated Canadian joint venture with Girardin Minibus JV Inc.

(“Micro Bird”), and is sold through our dealer network.

This is a smaller bus than the Type C or Type D bus and is produced on a chassis provided by either Ford or GM.

This is a smaller bus than the Type C or Type D bus and is produced on a traditional chassis provided by either Ford or GM or on an electric chassis provided by a smaller supplier.

Parts Segment

Parts are key for routine maintenance, replacement of parts that are damaged in service, and replacement of parts that suffer from wear and tear through the useful life of the vehicle.

Parts are key for routine maintenance, replacement of parts that are damaged in service, and replacement of parts that suffer from wear and tear throughout the useful life of the vehicle.

In fiscal 2021, parts sales represented 8.6% of Company net sales.

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To fulfill demand for parts that are not maintained at the distribution center, we are linked to approximately 40 suppliers that ship directly to dealers and independent service centers.

Our 50 dealers have approximately 250 parts and service locations across the United States and Canada, the majority of which are owned by independent operators, to complement their primary locations.

Our 50 dealers have approximately 250 parts and service locations across the U.S.

and Canada, the majority of which are owned by independent operators, to complement their primary locations.

Field service engineers provide technical support to our dealer network.

At the end of fiscal 2020 , service engineers had an average of over 25 years of experience with our Company and are strategically placed throughout the United States and Canada to better serve both dealers and end-customers.

At the end of fiscal 2021, service engineers had an average of over 25 years of experience with our Company and are strategically placed throughout the U.S.

and Canada to better serve both dealers and end-customers.

The network leverages our parts inventory, technical training, and online warranty network to address customer service needs.

The school bus serves a critical role in the United States and Canadian education systems.

According to School Transportation News, in normal non-pandemic years, nearly 50 percent of the U.S.

The school bus serves a critical role in the U.S.

and Canadian education systems.

In normal non-pandemic years, approximately half of the U.S.

student population rides a school bus.

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Our management utilizes this and other models to assess historical experience and to predict demand for school buses in future periods.

The ability to purchase new buses to fulfill predicted demand, however, is based on the assumption that funds will be available through property taxes and other state sources.

The United States and Canadian school bus industry for Type C and Type D buses has averaged approximately 31,000 unit sales annually between 1985 and 2019.

Unit sales for fiscal 2020 are projected to be about 28,500 , a decrease of 15.7% versus fiscal 2019 primarily driven by school closures due to the COVID-19 pandemic.

The ability to purchase new buses to fulfill predicted demand, however, is based on the assumption that funds will be available through property taxes and other state and federal sources.

and Canadian school bus industry for Type C and Type D buses has averaged approximately 30,800 unit sales annually between 1985 and 2021.

Unit sales for fiscal 2021 are projected to be about 27,800, a decrease of 2.5% when compared with fiscal 2020, primarily due to a combination of school closures and supply chain constraints, both resulting from the COVID-19 pandemic.

Historical registration data are based on R.L.

Polk vehicle registration data.

The low point in the industry occurred in 2011, at approximately 23,800 units, and was the result of the decline in the United States economy and, in particular, the collapse of the housing market in 2008 and 2009.

Property taxes are the primary source of funds for school bus purchases and were impacted in the 2010-2011 period as a result of the substantial recession in the United States economy in general, and housing market in particular, preceding and during that period.

The school bus industry fully recovered from the downturn in 2010-2011 and since 2016 had been operating at levels approximately 10% higher than the long-term average, supported by positive demographic trends, pent-up demand from several years of below-trend bus sales, and a growing tax base for education-related spending.

In 2020, countermeasures taken to battle the COVID-19 pandemic included virtual and hybrid schooling in many jurisdictions throughout the US and Canada.

The uncertainty of when and how schools would open materially affected the Type C and Type D school bus industry in 2020.

We expect that for so long as these measures remain in place, demand for school buses will be depressed making historical seasonality unpredictable.

Post pandemic, our management believes, based on our models, that Type C and Type D school bus registrations will return to a similar level as has been experienced over the last several years (2016-2019).

We believe that (i) the industry has been operating below its historical long-term average of approximately 31,000 unit sales per year since the recession and that the pandemic adds to that demand, (ii) there are over 175,000 buses in the United States and Canadian fleets that have been in service for 15 or more years, and (iii) the population of school age children is increasing.

The low point in the industry occurred in 2011, at approximately 23,800 units, and was the result of the decline in the U.S.

economy and, in particular, the collapse of the housing market in 2008 and 2009.

Property taxes are the primary source of funds for school bus purchases and were impacted in the 2010-2011 period as a result of the substantial recession in the U.S.

economy in general, and housing market in particular, preceding and during that period.

The school bus industry fully recovered from the downturn in 2010-2011 and from 2016 to 2019 had been operating at levels approximately 10% higher than the long-term average, supported by positive demographic trends, pent-up demand from several years of below-trend bus sales, and a growing tax base for education-related spending.

In 2020, countermeasures taken to battle the COVID-19 pandemic included virtual and hybrid schooling in many jurisdictions throughout the U.S.

The uncertainty of when and how schools would open materially affected the Type C and Type D school bus industry in 2020 and continued into the early part of 2021.

However, demand for Type C and Type D school buses strengthened substantially throughout 2021 as COVID-19 vaccines were administered and many school jurisdictions returned to in-person learning environments.

Nonetheless, the ongoing

impact of the COVID-19 pandemic resulted in supply chain shortages for certain components, such as microchips and products containing resins, that are critical to the manufacture of school buses, which depressed sales during fiscal 2021, particularly in periods that have historically been higher volume months resulting from seasonality.

We expect that for so long as these significant supply chain challenges continue, the Company could continue to struggle producing sufficient units to meet the strong current demand for school buses, thereby making historical seasonality unpredictable.

Our management believes, based on our models, that Type C and Type D school bus registrations will return to a similar level as has been experienced over recent pre-pandemic years (2016-2019) once the supply chain constraints are addressed.

We believe that (i) since the start of the pandemic, the industry has been operating below its historical long-term average of approximately 30,800 unit sales per year, (ii) there are over 175,000 buses in the U.S.

and Canadian fleets that have been in service for 15 or more years, and (iii) the population of school age children is increasing.

Local property and municipal tax receipts are key drivers of school district transportation budgets.

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The forecast for continued appreciation in housing prices due to the national shortage of homes is expected to have a positive effect on property tax receipts in the near-term, and school transportation budgets are expected to directly benefit from larger municipal spending budgets.

We believe that incremental demand may be achieved as a result of (i) the average age of a school bus in service (approximately 11.5 years), and (ii) an increased student population during the period from 2013 to 2020 (based on information from the National Center of Education Studies, we expect total student enrollment in the United States to increase by over 0.5 million students from 2018 to 2025).

In addition to strong property tax collections, additional funding for school buses is being made available in connection with the Volkswagen ("VW") settlement with the Federal Government in regard to emissions violations.

We believe that incremental demand may be achieved as a result of (i) the average age of a school bus in service and (ii) an increased student population (based on information from the most recent National Center of Education Studies Projection of Education Statistics , we expect total student enrollment in the U.S.

to increase by 2%, or 1 million students, from 2016 to 2028).

In addition to strong property tax collections, additional funding for school buses is being made available in connection with the Volkswagen ("VW") settlement with the U.S.

Government in regard to emissions violations.

Of the $14.7 billion in settlement funds, $2.9 billion was allocated to the VW Diesel Emissions Environmental Mitigation Trust for state government projects to reduce NOx output from ten categories;

school buses are one of the ten categories.

To date, all 52 states and/or territories (includes DC and Puerto Rico) spending plans have been issued, with 50 finalized.

Nearly $270 million of the $2.9 billion in VW settlement funds has been awarded thus far;

many more millions are under review by state agencies but are not yet publicly available.

Of the $270 million awarded, $109 million has been issued to school bus projects.

Several states are continuing and/or increasing their focus on school bus projects.

Given the historical trend and future projections, we expect as much as $1 billion in additional VW funds may ultimately be allocated, or have a high probability of allocation, to school bus purchases through 2028.

Beyond the VW funds, traditional grant programs are expected to persist, including the EPA's National Clean Diesel Program and its various state versions.

Nearly $440 million of the $2.9 billion has been awarded thus far and many more millions are under review by state agencies but are not yet publicly available.

Of the $440 million awarded, approximately $160 million has been issued to school bus projects and several states are continuing and/or increasing their focus on similar projects.

Given the historical trend and future projections, we expect as much as $1 billion in additional VW settlement funds may ultimately be allocated, or have a high probability of allocation, to the purchases of "cleaner running" school buses through 2028.

Beyond the VW funds, traditional grant programs are expected to continue, including the U.S Environmental Protection Agency ("EPA") National Clean Diesel Program and its various state versions.

These are valuable programs for potential propane and CNG engine platform sales, as annual budgets for these programs usually range from $40.0 to $100.0 million.

Additionally, in November 2020, the Bezos Earth Fund awarded a grant of $100 million, to be disbursed over a five-year period, to the World Resources Institute, a global research organization that focuses on climate initiatives, among others.

A portion of this grant will be used to accelerate the adoption of zero emission school buses in the United States.

We believe our leadership in alternative fuels, coupled with this external funding, provides a strong foundation to continue to increase sales of our propane, gasoline, CNG and electric bus platforms.

A portion of this grant will be used to accelerate the adoption of zero emission school buses in the U.S.

Finally, in mid-November 2021, the U.S.

Infrastructure Investment and Jobs Act ("IIJA") was signed into law.

The IIJA allocates $5 billion of federal funds to help local school jurisdictions purchase alternative powered school buses over the next five years.

Specifically, $2.5 billion of the funds are allocated for the purchase of electric powered buses, while the remaining $2.5 billion of funds are allocated for the purchase of other "cleaner running" school buses, a relatively broad category that generally includes buses that are powered by propane and CNG.

We believe our leadership in alternative power options, coupled with this external funding, provides a strong foundation to continue to increase sales of our propane, gasoline, CNG and electric powered bus platforms.

Our Competitive Strengths

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We are the only principal manufacturer with chassis and body production specifically designed for school bus applications and the only school bus company to offer compliance with industry recognized safety tests - Altoona Testing, Colorado Rack Test and the Kentucky Pole Test - as a standard specification across our entire product line.

Alternative fuel leadership .

We believe we are the market leader in electric, propane, gasoline, and CNG fuel powered-buses, having sold approximately eight times more alternative fuel school buses than all of our competitors combined from fiscal 2010 through fiscal 2020 .

In fiscal 2020 , we sold 4,262 propane, gasoline, CNG, and electric powered buses, a decrease of 20% versus the prior year, primarily caused by school closures due to the COVID-19 pandemic.

Alternative powered bus leadership .

We believe we are the market leader in electric, propane, gasoline, and CNG powered buses, having sold approximately 67% of all alternative powered school buses from fiscal 2012 through fiscal 2021.

In fiscal 2021, we sold 3,358 propane, gasoline, CNG, and electric powered buses, a decrease of 21% when compared with the prior year, primarily caused by supply chain constraints due to the COVID-19 pandemic.

Innovative product leadership .

We believe we have consistently led the school bus industry with innovative product leadership through several industry firsts, including the first Type D CNG school bus, the first unique school bus chassis, and the first OEM-manufactured propane bus.

We believe we have consistently led the school bus industry with innovative product leadership through several industry firsts, including the first Type D CNG powered school bus, the first unique school bus chassis, and the first OEM-manufactured propane powered bus.

In fiscal 2016, years ahead of our competition, we launched the industry's first gasoline powered Type C bus (utilizing an exclusive Ford and Roush CleanTech powertrain) and we were first-to-market with Electronic Stability Control.

Also in 2016, we launched a new CNG product using a Ford engine and transmission and a Roush Clean Tech fuel delivery system to provide CNG in a Type C bus.

Also in 2016, we launched a new CNG powered product using a Ford engine and transmission and a Roush Clean Tech fuel delivery system in a Type C bus.

In fiscal 2018, we sold our first Type D electric vehicles and in fiscal 2019 we introduced our Type C electric vehicle.

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Strong distribution model .

We have built an extensive, experienced network of 50 dealers to distribute our buses across the United States and Canada, and during recent years have significantly enhanced our relationships with large fleet operators.

We have built an extensive, experienced network of 50 dealers to distribute our buses across the U.S.

and Canada, and during recent years have significantly enhanced our relationships with large fleet operators.

Our dealers have an average tenure of more than 30 years with us and do not sell competing Type C or Type D school bus products in the areas assigned to them by us.

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Strong management team .

We are led by a highly experienced and committed management team with an established track record in the United States and Canadian school bus industry.

We are led by a highly experienced and committed management team with an established track record in the U.S.

and Canadian school bus and heavy-duty vehicle industries.

In fiscal 2021, we sold 6,679 Type C and Type D buses, including 6,348 school buses, 156 commercial buses, 9 export buses and 166 Government Services Administration ("GSA") buses.

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Our Dealer Network

In fiscal 2020 , we sold approximately 93% of our vehicles through our United States and Canadian dealer network, currently consisting of 50 dealers that, in their territories, are exclusive to us with Type C and D school buses.

School buses sold in the United States and Canada through our dealer network are purchased by school districts and private schools, as well as small and medium size contractors that provide services to school districts on a fee basis.

In fiscal 2021, we sold approximately 94% of our vehicles through our U.S.

and Canadian dealer network, currently consisting of 50 dealers that, in their territories, are exclusive to us with Type C and D school buses.

School buses sold in the U.S.

and Canada through our dealer network are purchased by school districts and private schools, as well as small and medium size contractors that provide services to school districts on a fee basis.

Bus purchases and contractor fees are funded through local school district budgets.

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Other Specialty Sales .

We also sell buses through our United States GSA contract, an expedited procurement procedure designed to meet the needs of bus customers authorized to purchase through the GSA contracting offices, including the U.S.

We also sell buses through our U.S.

GSA contract, an expedited procurement procedure designed to meet the needs of bus customers authorized to purchase through the GSA contracting offices, including the U.S.

Air Force, U.S.

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We also offer a full line of activity bus and Multi-Function School Activity Bus (“MFSAB”) products.

With varying vehicle sizes, capacities, fuel choices, and engine types, our bus options enable our customers to tailor their transportation solutions to their specific needs, be it transporting a church congregation or shuttling workers to job sites.

With varying vehicle sizes, capacities, power choices, and engine types, our bus options enable our customers to tailor their transportation solutions to their specific needs, be it transporting a church congregation or shuttling workers to job sites.

Government Contracts

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In addition, our U.S.

government contracts generally permit the contracting government agency to terminate the contract, in whole or in part, either for the convenience of the government or for default based on our failure to perform under the contract.

We purchase our engine and transmission components on a single-source basis from major OEM manufacturers with sophisticated engineering, production and logistics capabilities, as reflected in the table below:

Diesel engines

Diesel emissions kits

Propane, gasoline, and CNG (Type C) engines and transmissions

Ford Motor Company

Diesel transmissions

Allison Transmission

Component OEM Supplier

Diesel engines Cummins Inc.

Diesel emissions kits Cummins Inc.

Propane, gasoline, and CNG (Type C) engines and transmissions Ford Motor Company

Diesel transmissions Allison Transmission

Propane, gasoline, and CNG (Type C) fueling kits

Roush CleanTech

Our purchasing department continually works to improve our purchasing processes by rationalizing the supplier base (reducing the supplier base by approximately one-third in the last five years) and by implementing improved control processes.

Our purchasing department continually works to improve our purchasing processes by rationalizing the supplier base and by implementing improved control processes.

We regularly perform supplier audits and, when necessary, will meet with under-performing suppliers in order to enhance performance.

At October 2, 2021, we had in place long-term supply contracts (addressing both component price and supply) covering nearly 64% of the value of our purchases from suppliers, including long-term agreements with our major single-source suppliers.

As a result of the COVID-19 pandemic, we have experienced intermittent supplier shortages.

While we experienced some shortages due to the pandemic, we continue to work with our suppliers to receive our material components on a regular basis.

As a result of the COVID-19 pandemic, we have experienced significant supplier shortages of critical components, which has prevented the Company from initiating or completing, as applicable, the production process for certain units that were otherwise scheduled to be delivered to customers during fiscal 2021.

For further details and discussion about the impact of COVID-19, refer to the "Impact of COVID-19 on Our Business" section of Item 7.

"Management's Discussion and Analysis of Financial Condition and Results of Operations."

The school bus industry is highly competitive.

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Intellectual Property and Technology

We seek trademark protection in the United States and outside of the United States where available and when appropriate.

Among other trademarks, we have registered trademark rights in the principal names and designs used by us and Micro Bird in the United States, Canada and elsewhere.

We seek trademark protection in the U.S.

and outside of the U.S.

where available and when appropriate.

Among other trademarks, we have registered trademark rights in the principal names and designs used by us and Micro Bird in the U.S., Canada and elsewhere.

We use these registered marks in connection with all aspects of our branding.

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Failure to comply with such requirements could lead to substantial additional regulatory costs.

At the federal level, Federal Motor Vehicle Safety Standards (“FMVSS”) govern the safety of all motor vehicles sold for use in the United States.

At the federal level, Federal Motor Vehicle Safety Standards (“FMVSS”) govern the safety of all motor vehicles sold for use in the U.S.

More than half of the FMVSS regulations apply to school buses.

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These regulations are patterned after the FMVSS regulations, although differences do exist between the two regulatory systems.

Historically, our business has been highly seasonal with school districts buying their new schools buses so that they will be available for use on the first day of the school year, typically in mid-August to early September.

Historically, our business has been highly seasonal with school districts buying their new school buses so that they will be available for use on the first day of the school year, typically in mid-August to early September.

This has resulted in our third and fourth fiscal quarters becoming our two busiest quarters, the latter ending on the Saturday closest to September 30.

Our quarterly results of operations, cash flows, and liquidity have been and are likely to be impacted by the seasonal patterns.

Working capital has historically been a significant use of cash during the first fiscal quarter and a significant source of cash generation in the fourth fiscal quarter with planned shutdowns during our first fiscal quarter.

With the COVID-19 pandemic impact on school systems and the uncertainty surrounding in-person schooling schedules and duration, seasonality and working capital trends have become unpredictable.

Seasonality and variations from historical seasonality have impacted the comparison of working capital and liquidity results between fiscal periods.

Our quarterly results of operations, cash flows, and liquidity have been and are likely to continue to be impacted by the seasonal patterns.

Working capital has historically been a significant use of cash during the first fiscal quarter due to planned shutdowns and a significant source of cash generation in the fourth fiscal quarter.

With the COVID-19 pandemic impact on school systems and the uncertainty regarding (i) in-person schooling schedules and duration and (ii) the severity and duration of ongoing supply chain constraints, seasonality and working capital trends have become unpredictable.

Accordingly, seasonality and variations from historical seasonality have impacted the comparison of working capital and liquidity results between fiscal periods.

Environmental Matters

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Among other things, more rigorous GHG emission requirements are in various stages of development.

For example, the United States Environmental Protection Agency (“U.S.

EPA”) has promulgated the GHG Reporting Rule, which requires reporting of GHG data and other relevant information from large sources and suppliers in the United States, and the GHG Tailoring Rule, which requires certain facilities with significant GHG emissions to obtain emissions permits under the authority of the Clean Air Act (typically limited to only the largest stationary sources of GHG).

The United States Congress has also considered imposing additional restrictions on GHG emissions.

Any additional regulation of GHG emissions by either the United States Congress and/or the U.S.

For example, the U.S.

EPA has promulgated the GHG Reporting Rule, which requires reporting of GHG data and other relevant information from large sources and suppliers in the U.S., and the GHG Tailoring Rule, which requires certain facilities with significant GHG emissions to obtain emissions permits under the authority of the Clean Air Act (typically limited to only the largest stationary sources of GHG).

Congress has also considered imposing additional restrictions on GHG emissions.

Any additional regulation of GHG emissions by either the U.S.

Congress and/or the U.S.

EPA could include a cap-and-trade system, technology mandate, emissions tax, reporting requirement, or other program and could subject us to significant costs, including those relating to emission credits, pollution control equipment, monitoring, and reporting, as well as increased energy and raw material prices.

3 unchanged sentences

Refer to Note 2, Summary of Significant Accounting Policies and Recently Issued Accounting Standards , to the accompanying consolidated financial statements for information on research and development.

We provide warranties on all of the buses and parts we sell.

We provide warranties on virtually all of the buses and parts we sell.

Warranties are offered for specific periods of time and mileage, and vary depending upon the type of product and the geographic location of its sale.

Pursuant to these warranties, we will repair, replace, or adjust all parts on a bus that are defective in factory-supplied materials or workmanship during the specified warranty period.

Pursuant to these warranties, we will repair, replace, or adjust certain parts on a bus that are defective in factory-supplied materials or workmanship during the specified warranty period.

In addition to the costs associated with this warranty coverage provided on our vehicles, we also incur costs as a result of field service actions (i.e., safety recalls and service bulletins), and customer satisfaction actions.

3 unchanged sentences

Although no assurances can be given about the final outcome of pending legal proceedings, at the present time our management does not believe that the resolution or outcome of any of our pending legal proceedings will have a material adverse effect on our financial condition, liquidity or results of operations.

At October 3, 2020 , we employed 1,736 full-time employees.

At October 2, 2021, we employed 1,790 employees, of which 1,702 were full-time.

Our workforce is non-union.

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 1. Business