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The current COVID-19 pandemic continues to have, and other public health crises, epidemics or pandemics could have, a material adverse effect on our business, results of operations, financial condition, and cash flows, particularly resulting from supply chain disruptions, reductions in demand for our products, disruptions or other developments negatively impacting our workforce or workplace conditions, and/or reduced access to capital markets and reductions in liquidity.
−Removed: During our fiscal 2020, the novel coronavirus known as "COVID-19" spread throughout the world creating a global pandemic.
+Added: Beginning at the end of our second quarter of fiscal 2020 and continuing throughout fiscal 2021, the novel coronavirus known as "COVID-19" spread throughout the world, resulting in a global pandemic.
The pandemic has, among other impacts:
• negatively impacted demand for school buses due to schools operating totally or partially virtually;
−Removed: triggered a significant downturn in capital markets;
+Added: • triggered significant volatility in capital markets;
• caused significant disruptions in global supply chains;
• significantly altered global consumer demand;
−Removed: halted a material number of global manufacturing operations resulting from plant shut-downs;
+Added: • halted a material number of global manufacturing operations resulting from permanent and temporary plant shut-downs;
• changed global workplace conditions resulting from "shelter-in-place" orders and "work from home" employer policies.
−Removed: The degree to which the COVID-19 pandemic impacts our future business, results of operations and financial condition will depend on future developments, which are uncertain, including but not limited to the duration, spread and severity of the pandemic, government responses and other actions to mitigate the spread of and to treat COVID-19, and when and to what extent normal business, economic and social activity and conditions resume.
−Removed: We are similarly unable to predict the extent to which the pandemic impacts our customers, suppliers and other partners and their financial conditions, but adverse effects on these parties could also adversely affect us.
+Added: The degree to which the COVID-19 pandemic impacts our future business, results of operations and financial condition will depend on future developments, which are uncertain, including but not limited to the duration, spread and severity of the pandemic, government responses and other actions to mitigate the spread of and to treat COVID-19, and when and to what extent more normal business, economic and social activity and conditions resume and continue without further disruption.
+Added: We are similarly unable to predict the extent to which the pandemic will continue to impact our customers, suppliers and other partners and their financial conditions, but adverse effects on these parties would likely also adversely affect us.
Finally, the COVID-19 pandemic makes it challenging for management to estimate the future performance of our business.
−Removed: The pandemic materially impacted our fiscal 2020 results, causing lower customer orders for both buses and bus parts, supply disruptions, and absenteeism among our hourly production workforce.
−Removed: 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, or liquidity, but we experienced reduced orders and enacted a manufacturing plant shut-down for the first two weeks of our third quarter in fiscal 2020.
−Removed: A prolonged economic downturn resulting from the continuing pandemic would likely have a material adverse impact on our business, financial condition, results of operations, and liquidity.
+Added: The pandemic materially impacted our fiscal 2021 results, causing, among other matters, lower customer orders for both buses and bus parts, primarily during the first half of the fiscal year;
+Added: supply chain disruptions, which became more prevalent and had a much more significant, unfavorable impact on our operations and results in the second half of the fiscal year;
+Added: higher rates of absenteeism among our hourly production workforce and several temporary shutdowns of our manufacturing facilities as a result of an inadequate supply of critical components to allow us to initiate or complete, as applicable, the production process to fulfill sales orders.
+Added: The continuing development and fluidity of the pandemic and its trailing impact precludes any prediction as to the ultimate severity of the adverse impacts on our business, financial condition, results of operations, and liquidity.
At the present time, we consider the following areas to be the most significant material risks to our business resulting from the current pandemic:
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We also currently rely on a limited number of single-source suppliers and/or have limited alternatives for important bus parts such as diesel engines and emission components, propane and gasoline engines including powertrains, control modules, steering systems, seats, specialty resins, and other key components.
−Removed: In addition to protecting our employees' health, our plant shut-down was partially due to an inability to obtain critical components from our suppliers in the first several months of the COVID-19 pandemic.
+Added: Our manufacturing facilities shutdowns during fiscal 2021 were partially due to an inability to obtain critical components from our
Future delays or interruptions in the supply chain due to the COVID-19 pandemic expose us to the following risks which would likely significantly increase our costs and/or impact our ability to meet customer demand:
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• our third-party suppliers may encounter financial hardships unrelated to our demand, which could inhibit their ability to fulfill our orders and meet our requirements.
−Removed: Reductions in demand for buses and bus parts
−Removed: The school bus market is predominantly driven by long-term trends in the level of spending by states, municipalities, and independent contractors.
−Removed: Demand for school buses is further influenced by overall acquisition priorities of municipalities, availability of school bus financing, student population changes, school district busing policies, price and other competitive factors, fuel prices and environmental regulations.
−Removed: In response to the pandemic, many school systems in North America canceled in-person schooling for the remainder of the 2019-2020 school year.
−Removed: The cancellations disrupted the seasonal order pattern for school buses.
−Removed: There remains uncertainty as to when traditional in-person schooling will resume, but we do know that many school systems did not resume in person classes for the fall of 2020.
−Removed: Uncertainty in the form of learning (e.g., a reduction of in-person to more remote arrangements) may lead to a reduction in bus orders until a degree of normalcy returns to the manner in which K-12 education is provided.
−Removed: Delays in the start of the 2020-2021 school year also impacted the near-term demand for our buses.
−Removed: Reductions in bus orders would negatively impact revenues in our Bus segment.
−Removed: A reduction in bus usage will likely reduce the demand for maintenance and replacement parts, which would negatively impact revenues in our Parts segment.
Disruptions or other developments negatively impacting our workforce or workplace conditions
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states, including Georgia where our headquarters and manufacturing facilities are located, have issued “shelter-in-place” orders, quarantines, executive orders and similar government orders, restrictions and recommendations for their residents to control the spread of COVID-19.
−Removed: Many of these orders have been and may continue to be re-issued at or after their expiration, and future orders may introduce broader restrictions.
−Removed: Such orders, restrictions and recommendations, and the perception that additional orders, restrictions or recommendations could occur, have resulted in widespread closures of businesses not deemed “essential,” work stoppages, interruptions, slowdowns and delays, work-from-home policies and travel restrictions.
−Removed: While our business has been deemed essential by the State of Georgia, we have employed remote work policies when and where possible to be responsive to the health risks that may impact our employees.
+Added: These orders may continue to be re-issued in the future and may introduce broader restrictions.
+Added: Such orders, restrictions and recommendations have resulted in widespread closures of businesses, work stoppages, interruptions, slowdowns and delays, work-from-home policies and travel restrictions.
+Added: While our business has been deemed "essential" by the State of Georgia, we have employed remote work policies when and where necessary to be responsive to the health risks that may impact our employees.
Given the nature of our business, we do not have the ability to manufacture a bus without our on-site manufacturing personnel.
While we have not experienced any pervasive COVID-19 illnesses to date, if we were to experience some form of outbreak within our facilities, we would take all appropriate measures to protect the health and safety of our employees, which could include a temporary halt in production.
−Removed: Any extended production halt or diminution in production capacity would likely have a negative impact on our ability to fulfill orders and thus negatively impact our revenues, profitability and cash flows.
−Removed: Reduced profitability and liquidity, resulting in possible restructuring of our credit facilities, and/or inadequate access to credit and capital markets
+Added: Any extended production halt or diminution in production capacity would have a negative impact on our ability to fulfill orders and thus negatively impact our revenues, profitability and cash flows.
+Added: Reduced profitability and liquidity, resulting in the restructuring of our credit facilities, and/or inadequate access to credit and capital markets
The COVID-19 pandemic has materially adversely impacted global commercial activity and has contributed to significant volatility in financial markets.
−Removed: The pandemic continues to have a materially adverse impact on economic and market conditions, and may result in an extended period of global economic slowdown and significant disruptions in global financial markets, potentially reducing our ability to access capital, which could in the future negatively affect our liquidity.
+Added: The pandemic continues to have a materially adverse impact on economic and market conditions, potentially reducing our ability to access capital, which could in the future negatively affect our liquidity.
The continuing pandemic could cause a more severe contraction in our profits and/or liquidity which could lead to issues complying with the financial covenants in our credit facility.
Our primary financial covenants are (i) for fiscal 2022, minimum consolidated EBITDA, which is an adjusted EBITDA metric that could differ from Adjusted EBITDA appearing in the Company’s periodic filings on Form 10-K or Form 10-Q as the adjustments to the calculations are not uniform, at the end of each fiscal quarter for the consecutive four fiscal quarter period most recently then ending;
−Removed: b) for fiscal 2021 and the first two quarters of fiscal 2022, minimum liquidity at the end of each month, and (iii) beginning in fiscal 2022 and thereafter, Total Net Leverage Ratio, defined as the ratio of (a) consolidated net debt to (b) consolidated EBITDA.
+Added: (ii) for fiscal 2022 and through April 1, 2023, minimum liquidity at the end of each fiscal month;
+Added: (iii) when applicable during fiscal 2022, minimum school bus units manufactured calculated on a three month trailing basis at the end of each fiscal month;
+Added: and (iv) beginning in fiscal 2023 and thereafter, Total Net Leverage Ratio ("TNLR"), defined as the ratio of (a) consolidated net debt to (b) consolidated EBITDA.
We may need to seek amendment for additional covenant relief or even refinance the debt to a "covenant light" or "no covenant" structure.
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Significant deterioration in the economic environment, housing prices, property tax levels or municipal budgets could result in fewer new orders for school buses or could cause customers to seek to postpone or reduce orders, which could result in lower revenues, profitability and cash flows.
+Added: We may be unable to obtain critical components from suppliers, which could disrupt or delay our ability to deliver products to customers.
+Added: We rely on specialist suppliers for critical components (including engines, transmissions and axles) and replacement of any of these components with like parts from another supplier normally requires engineering and testing resources, which entail costs and take time.
+Added: The lack of ready-to-implement alternatives could give such suppliers, some of which have substantial market power, significant leverage over us if these suppliers elected to exert their market power over us, which leverage could adversely impact the terms and conditions of purchase, including pricing, warranty claims and delivery schedules.
+Added: We seek to mitigate supply chain risks with our key suppliers by entering into long-term agreements, by commencing contract negotiations with suppliers of critical components significantly before contract expiration dates, and by diversifying our suppliers of key components with contingency programs when possible.
+Added: If any of our critical component suppliers limit or reduce the supply of components due to commercial reasons, financial difficulties or other problems, we could experience a loss of revenues due to our inability to fulfill orders, as was the case in the second half of fiscal 2021.
+Added: These single-source and other suppliers are each subject to quality and operational issues, materials shortages, unplanned demand, reduction in capacity and other factors that may disrupt the flow of goods to us or to our customers, which would adversely affect our business and customer relationships.
+Added: We have no assurance that our suppliers will continue to meet our requirements.
+Added: If supply arrangements are interrupted, we may not be able to find another supplier on a timely or satisfactory basis.
+Added: We may incur significant set-up costs, delays and lag time in manufacturing should it become necessary to replace any key suppliers.
+Added: Our business interruption insurance coverage may not be adequate for any interruptions that we could encounter and may not continue to be available in amounts and on terms acceptable to us.
+Added: Production delays could, under certain circumstances, result in penalties or liquidated damages in certain of our GSA contracts.
+Added: We rely substantially on single-source suppliers which could materially and adversely impact us if they were to interrupt the supply of component parts to us.
+Added: We currently rely on a limited number of single-source suppliers and/or have limited alternatives for important bus parts such as diesel engines and emission components, propane and gasoline engines including powertrains, control modules, air brakes, steering systems, seats, specialty resins, and other key components.
+Added: Shortages and allocations by such manufacturers may result in inefficient operations and a build-up of inventory, which could negatively affect our working capital position, as was the case towards the end of fiscal 2021.
Our products may not achieve or maintain market acceptance or competing products could gain market share, which could adversely affect our competitive position.
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Our competitors may develop or gain access to products that are superior to our products, develop methods of more efficiently and effectively providing products and services, or adapt more quickly than we do to new technologies or evolving customer requirements.
−Removed: IC Bus and Thomas Built Bus both sell propane-powered school buses.
−Removed: This brings both competitors into direct competition with our propane-powered school buses.
+Added: IC Bus and Thomas Built Bus both sell electric and propane powered school buses.
+Added: This brings both competitors into direct competition with our electric and propane powered product offerings.
Our competitors may achieve cost savings or be able to withstand a substantial downturn in the market because their businesses are consolidated with other vehicle lines.
In addition, our competitors could be, and have been in the past, vertically integrated by designing and manufacturing their own components (including engines) to reduce their costs.
−Removed: The school bus market does not have “Buy America” regulations, so competitors or new entrants to the market could manufacture school buses in more cost-effective jurisdictions and import them to the United States to compete with us.
+Added: The school bus market does not have “Buy America” regulations, so competitors or new entrants to the market could manufacture school buses in more cost-effective jurisdictions and import them to the U.S.
+Added: to compete with us.
Any increase in competition may cause us to lose market share or compel us to reduce prices to remain competitive, which could result in reduced sales, profitability and cash flows.
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An economic downturn may reduce, and in the past, including 2020, has reduced, demand for school buses, resulting in lower sales volumes, lower prices and decreased profits.
−Removed: Primarily as a result of the seasonal nature of our business, we operate with negative working capital for significant portions of our fiscal year.
+Added: Primarily as a result of the historical seasonal nature of our business, we operate with negative working capital for significant portions of our fiscal year.
During economic downturns, this tends to result in our utilizing a substantial portion of our cash reserves.
−Removed: We may be unable to obtain critical components from suppliers, which could disrupt or delay our ability to deliver products to customers.
−Removed: We rely on specialist suppliers for critical components (including engines, transmissions and axles) and replacement of any of these components with like parts from another supplier normally requires engineering and testing resources, which entail costs and take time.
−Removed: The lack of ready-to-implement alternatives could give such suppliers, some of which have substantial market power, significant leverage over us if these suppliers elected to exert their market power over us, which leverage could adversely impact the terms and conditions of purchase, including pricing, warranty claims and delivery schedules.
−Removed: We seek to mitigate supply chain risks with our key suppliers by entering into long-term agreements, by commencing contract negotiations with suppliers of critical components significantly before contract expiration dates, and by diversifying our suppliers of key components with contingency programs when possible.
−Removed: If any of our critical component suppliers limit or reduce the supply of components due to commercial reasons, financial difficulties or other problems, we could experience a loss of revenues due to our inability to fulfill orders.
−Removed: These single-source and other suppliers are each subject to quality and operational issues, materials shortages, unplanned demand, reduction in capacity and other factors that may disrupt the flow of goods to us or to our customers, which would adversely affect our business and customer relationships.
−Removed: We have no assurance that our suppliers will continue to meet our requirements.
−Removed: If supply arrangements are interrupted, we may not be able to find another supplier on a timely or satisfactory basis.
−Removed: We may incur significant set-up costs, delays and lag time in manufacturing should it become necessary to replace any key suppliers.
−Removed: Our business interruption insurance coverage may not be adequate for any interruptions that we could encounter and may not continue to be available in amounts and on terms acceptable to us.
−Removed: Production delays could, under certain circumstances, result in penalties or liquidated damages in certain of our GSA contracts.
Our ability to sell our products may be negatively affected by trade policies and tariffs.
We import some of our components from China and other foreign countries.
−Removed: Our purchases may be subject to the effects of the United States trade policy, including the imposition of tariffs and anti-dumping/countervailing duties on these components.
+Added: Our purchases may be subject to the effects of the U.S.
+Added: trade policy, including the imposition of tariffs and anti-dumping/countervailing duties on these components.
We cannot assure you that our ability to sell our products at reasonable margins will not be impaired by the imposition of tariffs or other changes in trade policy which may make it more difficult or more expensive to purchase our products.
−Removed: We rely substantially on single-source suppliers which could materially and adversely impact us if they were to interrupt the supply of component parts to us.
−Removed: We currently rely on a limited number of single-source suppliers and/or have limited alternatives for important bus parts such as diesel engines and emission components, propane and gasoline engines including powertrains, control modules, steering systems, seats, specialty resins, and other key components.
−Removed: Shortages and allocations by such manufacturers may result in inefficient operations and a build-up of inventory, which could negatively affect our working capital position.
+Added: We enter into firm fixed-price school bus sales contracts without price escalation clauses which could subject us to losses if we have cost overruns or if our costs increase.
+Added: We often bid on contracts weeks or months before school buses are delivered and enter into school bus sales contracts with fixed prices per bus.
+Added: The sales contracts generally do not have an indexed price escalation formula to account for economic fluctuations between the contract date and the delivery date.
+Added: As a result, we typically are unable to pass along increased costs due to economic fluctuations to our customers, which is generally expected to occur for sales occurring in the first half of fiscal 2022 and could continue into future periods.
+Added: We generally purchase steel one quarter in advance, but because we usually do not hedge our other primary raw materials (rubber, aluminum and copper), changes in prices of raw materials can significantly impact operating margins.
+Added: Our actual costs and any gross profit realized on these fixed-price contracts could vary from the estimated costs on which these contracts were originally based.
New laws, regulations or governmental policies regarding environmental, health and safety standards, or changes in existing ones, may have a significant negative impact on how we do business.
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Safety or durability incidents associated with a school bus malfunction may result in loss of school bus sales that could have material adverse effects on our business.
−Removed: The school bus industry has few competitors due to the importance of brand and reputation for safety and durability, compliance with stringent safety and regulatory requirements, an understanding of the specialized product specifications in each region and specialized technological and manufacturing know-how.
+Added: The school bus industry has few participants due to the importance of brand and reputation for safety and durability, compliance with stringent safety and regulatory requirements, an understanding of the specialized product specifications in each region and specialized technological and manufacturing know-how.
If incidents associated with school bus malfunction transpired that called into question our reputation for safety or durability, it could harm our brand and reputation and cause consumers to question the safety, reliability and durability of our products.
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We manufacture school buses at facilities in Fort Valley, Georgia and distribute parts from a distribution center located in Delaware, Ohio.
−Removed: If operations at our manufacturing or distribution facilities were to be disrupted for a significant length of time as a result of significant equipment failures, natural disasters, power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes, cyber-attacks or other reasons, we may be unable to fill dealer or customer orders and otherwise meet demand for our products, which would have an adverse effect on our business, financial condition and results of operations.
−Removed: Any interruption in production or distribution capability could require us to make substantial capital expenditures to fill customer orders, which could negatively affect our profitability and financial condition.
+Added: If operations at our manufacturing or distribution facilities were to be disrupted for a significant length of time as a result of significant equipment failures, critical component shortages, natural disasters, power outages, fires, explosions, terrorism, adverse weather conditions, labor disputes, cyber-attacks or other reasons, we may be unable to fulfill dealer or customer orders and otherwise meet demand for our products, which would have an adverse effect on our business, financial condition and results of operations.
+Added: Any interruption in production or distribution capability could require us to make substantial capital expenditures to fulfill customer orders, which could negatively affect our profitability and financial condition.
We maintain property damage insurance that we believe to be adequate to provide for reconstruction of facilities and equipment, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss.
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Rationalization or restructuring of manufacturing facilities, including plant expansions and system upgrades at our manufacturing facilities, may cause production capacity constraints and inventory fluctuations.
−Removed: The rationalization of our manufacturing facilities has at times resulted in, and similar rationalizations or restructurings in the future may result in, temporary constraints upon our ability to produce the quantity of products necessary to fill orders and thereby complete sales in a timely manner.
+Added: The rationalization of our manufacturing facilities has at times resulted in, and similar rationalizations or restructurings in the future may result in, temporary constraints upon our ability to produce the quantity of products necessary to fulfill orders and thereby complete sales in a timely manner.
In addition, system upgrades at our manufacturing facilities that impact ordering, production scheduling and other related manufacturing processes are complex, and could impact or delay production targets.
−Removed: A prolonged delay in our ability to fill orders on a timely basis could affect customer demand for our products and increase the size of our raw material inventories, causing future reductions in our manufacturing schedules and adversely affecting our results of operations.
+Added: A prolonged delay in our ability to fulfill orders on a timely basis could affect customer demand for our products and increase the size of our raw material inventories, causing future reductions in our manufacturing schedules and adversely affecting our results of operations.
Moreover, our continuous development and production of new products will often involve the retooling of existing manufacturing equipment.
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We may also be required to remedy or retrofit buses in the event that an order is not built to a customer’s specifications or where a design error has been made.
−Removed: Significant retrofit and remediation costs or product recalls could have a material adverse effect on our financial condition, results of operations and cash flows.
+Added: Significant retrofit
+Added: and remediation costs or product recalls could have a material adverse effect on our financial condition, results of operations and cash flows.
A failure to renew dealer agreements or cancellation of, or significant delay in, new bus orders may result in unexpected declines in revenue and profitability.
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In addition, our new bus orders are subject to potential reduction, cancellation and/or significant delay.
−Removed: Although dealers generally only order buses from us after they have a firm order from a school district, orders for buses are also generally cancelable until 14 weeks prior to delivery.
−Removed: The inability to attract and retain key personnel could adversely affect our business and results of operations.
−Removed: Our ability to operate our business and implement our strategies depends, in part, on the efforts of our executive officers and other key employees.
−Removed: Our future success depends, in large part, on our ability to attract and retain qualified personnel, including manufacturing personnel, sales professionals and engineers.
−Removed: The unexpected loss of services of any of our key personnel or the failure to attract or retain other qualified personnel could have a material adverse effect on the operation of our business.
−Removed: While we have enjoyed good relations and a collaborative approach with our work force, employment relationships can deteriorate over time.
−Removed: Given the extent to which we rely on our employees, any significant deterioration in our relationships with our key employees or overall workforce could materially harm us.
−Removed: Work stoppages or instability in our relationships with our employees could delay the production and/or development of our products, which could strain relationships with customers and cause a loss of revenues which would adversely affect our operations.
−Removed: In addition, local economic conditions in the Central Georgia area (where our principal manufacturing facilities are located) may impact our ability to attract and retain qualified personnel.
+Added: Although dealers generally only order buses from us after they have a firm order from a school district, orders for buses are also generally cancellable until 14 weeks prior to delivery.
Changes in laws or regulations related to the manufacture of school buses, or a failure to comply with such laws and regulations, could adversely affect our business and results of operations.
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There are currently no proposed remediation actions to be included in the corrective action plan.
−Removed: Based on the data generated from the latest site investigation, we believe our environmental risks have been reduced, but not eliminated.
−Removed: Our worker’s compensation insurance may not provide adequate coverage against potential liabilities.
−Removed: Although we maintain a workers’ compensation insurance stop loss policy to cover us for costs and expenses we may incur due to injuries to our employees resulting from work-related injuries over our self-insured limit, this insurance may not provide adequate coverage against potential liabilities as we incur the costs and expenses up to our self-insured limit.
−Removed: In addition, we may incur substantial costs in order to comply with current or future health and safety laws and regulations.
−Removed: These current or future laws and regulations may negatively impact our manufacturing operations.
−Removed: Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
+Added: Based on the data generated from the latest site investigation, we believe our environmental risks have been reduced substantially, but not eliminated.
Our future competitiveness and ability to achieve long-term profitability depend on our ability to control costs, which requires us to improve our organization continuously and to increase operating efficiencies and reduce costs.
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Our business is subject to seasonal and other fluctuations.
−Removed: In particular, we have historically experienced higher revenues during the third quarter and fourth quarter versus the first quarter and second quarter during each fiscal year.
+Added: In particular, we have historically experienced higher revenues during the third and fourth quarters when compared with the first and second quarters during each fiscal year.
This seasonality is caused primarily by school districts ordering more school buses prior to the beginning of a school year.
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A failure to deliver in accordance with our performance obligations may result in financial penalties under certain of our GSA contracts and damage to existing customer relationships, damage to our reputation and a loss of future bidding opportunities, which could cause the loss of future business and could negatively impact our financial performance.
−Removed: With the COVID-19 pandemic impact on school systems and the uncertainty surrounding in-person schooling schedules and duration, seasonality and sales cycle trends have become unpredictable.
−Removed: Seasonality and variations from historical seasonality have impacted and could continue to impact the comparison of results between fiscal periods.
−Removed: Our defined benefit pension plan is currently underfunded and pension funding requirements could increase significantly due to a reduction in funded status as a result of a variety of factors, including weak performance of financial markets, declining interest rates and investments that do not achieve adequate returns.
+Added: Our defined benefit pension plan is currently underfunded and pension funding requirements could increase significantly due to a reduction in funded status as a result of a variety of factors, including weak performance of financial markets, decreasing interest rates and investments that do not achieve adequate returns.
Our defined benefit pension plan currently holds a significant amount of equity and fixed income securities.
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If future funding requirements increase, we would be required to contribute more funds, which would negatively impact our cash flows.
−Removed: We enter into firm fixed-price school bus sales contracts without price escalation clauses which could subject us to losses if we have cost overruns or if our costs increase.
−Removed: We often bid on contracts weeks or months before school buses are delivered and enter into school bus sales contracts with fixed prices per bus.
−Removed: The sales contracts generally do not have an indexed price escalation formula to account for economic fluctuations between the contract date and the delivery date.
−Removed: As a result, we typically are unable to pass along increased costs due to economic fluctuations to our customers.
−Removed: We generally purchase steel one quarter in advance, but because we generally do not hedge our other primary raw materials (rubber, aluminum and copper), changes in prices of raw materials can significantly impact operating margins.
−Removed: Our actual costs and any gross profit realized on these fixed-price contracts could vary from the estimated costs on which these contracts were originally based.
Our current or future indebtedness could impair our financial condition and reduce the funds available to us for growth or other purposes.
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As is typical for a vehicle manufacturer, we have significant fixed costs and, therefore, changes in our school bus sales volume can have a disproportionately large effect on profitability.
−Removed: If our school bus sales decline to levels significantly below our assumptions, due to a financial downturn, renewed recessionary conditions, changes in consumer confidence, geopolitical events, inability to produce sufficient quantities of school buses, limited access to financing or other factors, our financial condition, results of operations and cash flows would be materially adversely affected.
−Removed: We may need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.
−Removed: Our future growth, including the potential for future market expansion and opportunities for future international growth, may require substantial additional capital.
−Removed: We will consider raising additional funds through various financing sources, including the sale of our equity securities or the procurement of additional commercial debt financing.
−Removed: However, there can be no assurance that such funds will be available on commercially reasonable terms, if at all.
−Removed: If such financing is not available on satisfactory terms, we may be unable to execute our growth strategy, and operating results may be adversely affected.
−Removed: Any additional debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility.
−Removed: If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and our stockholders may experience additional dilution in net book value per share.
−Removed: If the amount of capital we are able to raise from financing activities, together with our revenues from operations, are not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our future product offerings and market expansion opportunities and potentially curtail operations.
−Removed: Interest rates could change substantially, materially impacting our profitability.
−Removed: Our borrowings under our credit facility are at variable rates of interest and expose us to interest rate risk.
−Removed: We monitor and manage this exposure as part of our overall risk management program, which recognizes the unpredictability of interest rates and seeks to reduce potentially adverse effects on our business.
−Removed: The majority of our debt interest payments are protected against increases in short-term rates, however, changes in interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings volatility.
−Removed: An impairment in the carrying value of goodwill and other long-lived intangible assets could negatively affect our operating results.
−Removed: We have a substantial amount of goodwill and purchased intangible assets on our balance sheet, concentrated in our bus segment and specifically related to the dealer network and our trade name.
−Removed: Under generally accepted accounting principles, long-lived assets are required to be reviewed for impairment at least annually, or more frequently if potential interim indicators exist that could result in impairment.
−Removed: If any business conditions or other factors cause profitability or cash flows to significantly decline, we may be required to record a non-cash impairment charge, which could adversely affect our operating results.
−Removed: Events and conditions that could result in impairment include a prolonged period of global economic weakness, a further decline in economic conditions or a slow, weak economic recovery, sustained declines in the price of our Common Stock, adverse changes in the regulatory environment, adverse changes in the market share of our products, adverse changes in interest rates or other factors leading to reductions in the long-term sales or profitability that we expect.
+Added: If our school bus sales decline to levels significantly below our assumptions, due to a financial downturn, renewed recessionary conditions, changes in consumer confidence, geopolitical events, inability to secure an adequate supply of critical components or any other reason that would limit our ability to produce sufficient quantities of school buses, limited access to financing or other factors, our financial condition, results of operations and cash flows would be materially adversely affected.
If Blue Bird Capital Services cannot provide financial services to our dealers and customers to acquire our products, our sales and results of operations could deteriorate.
−Removed: Our dealers and customers benefit from Blue Bird Capital Services (“BBCS”), a private label financing product.
−Removed: BBCS provides floorplan financing for certain of our network dealers and provides a modest amount of vehicle lease financing to school districts.
+Added: Our dealers and customers benefit from their relationships with BBCS, which provides (i) floorplan financing for certain of our network dealers and (ii) a modest amount of vehicle lease financing to school districts.
Although we neither assume any balance sheet risk nor receive any direct economic benefit from BBCS, which is financed by TCF Inventory Finance, Inc., we could be materially adversely affected if BBCS was unable to provide this financing and our dealers were unable to obtain alternate financing, at least until a replacement for BBCS was identified.
BBCS faces a number of business, economic and financial risks that could impair its access to capital and negatively affect its business and operations and its ability to provide financing and leasing to our dealers and customers.
−Removed: Because BBCS serves as an additional source of leasing and financing options for dealers and customers, an impairment of BBCS’ ability to provide such financial services could negatively affect our efforts to expand our market penetration among customers who rely on these financial services to acquire new school buses and dealers that seek financing.
+Added: Because BBCS serves as an additional source of leasing and financing options for dealers and customers, an impairment of BBCS’ ability to provide such financial services could negatively affect our efforts to expand our market penetration among customers that rely on these financial services to acquire new school buses and dealers that seek financing.
We rely heavily on trade secrets to gain a competitive advantage in the market and the unenforceability of our nondisclosure agreements may adversely affect our operations.
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Our employee training may not provide adequate protection of our trade secrets and proprietary information.
−Removed: We may be unable to prevent third parties from using our intellectual property rights, including trade secrets and know-how, without our authorization or from independently developing intellectual property that is the same as or similar to our intellectual property, particularly in those countries where the laws do not protect our intellectual property rights as fully as in the United States.
+Added: We may be unable to prevent third parties from using our intellectual property rights, including trade secrets and know-how, without our authorization or from independently developing intellectual property that is the same as or similar to our intellectual property, particularly in those countries where the laws do not protect our intellectual property rights as fully as in the U.S.
The unauthorized use of our trade secrets or know-how by third parties could reduce or eliminate any competitive advantage we have developed, cause us to lose sales or otherwise harm our business or increase our expenses as we attempt to enforce our rights.
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In addition, while we have not faced intellectual property infringement claims from others in recent years, in the event successful infringement claims are brought against us, particularly claims (under patents or otherwise) against our product design or manufacturing processes, such claims could have a material adverse effect on our business, financial condition or results of operation.
−Removed: Security breaches and other disruptions to our information technology networks and systems could substantially interfere with our operations and could compromise the confidentiality of our proprietary information, notwithstanding the fact that no such breaches or disruptions have materially impacted us to date.
−Removed: We rely upon information technology systems and networks, some of which are managed by third-parties, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including supply chain management, manufacturing, invoicing and collection of payments from our dealer network and customers.
−Removed: Additionally, we collect and store sensitive data, including intellectual property, proprietary business information, the proprietary business information of our dealers and suppliers, as well as personally identifiable information of our employees, in data centers and on information technology systems.
−Removed: The secure operation of these information technology systems, and the processing and maintenance of this information, is critical to our business operations and strategy.
−Removed: Despite security measures and business continuity plans, our information technology systems and networks may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers or breaches due to errors or malfeasance by employees, contractors and others who have access to our networks and systems, or other disruptions during the process of upgrading or replacing computer software or hardware, hardware failures, software errors, third-party service provider outages, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events.
−Removed: The occurrence of any of these events could compromise our systems and the information stored there could be accessed, publicly disclosed, lost or stolen.
−Removed: Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and reduce the competitive advantage we hope to derive from our investment in technology.
−Removed: Our insurance coverage may not be available or adequate to cover all the costs related to significant security attacks or disruptions resulting from such attacks.
Our business could be materially adversely affected by changes in foreign currency exchange rates.
−Removed: We sell the majority of our buses and parts in United States Dollars.
+Added: We sell the majority of our buses and parts in U.S.
Our foreign customers have exposures to risks related to changes in foreign currency exchange rates on our sales in that region.
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The manufacture of our Type A buses is conducted by the Micro Bird joint venture that we do not control and cannot operate solely for our benefit.
−Removed: The manufacture of Type A buses is carried out by a 50/50 Canadian joint venture, Micro Bird Holdings, Inc., an unconsolidated Canadian joint venture with Girardin Minibus JV Inc.
−Removed: (“Micro Bird”).
+Added: The manufacture of Type A buses is carried out by a 50/50 Canadian joint venture, Micro Bird, which we do not control or consolidate.
In joint ventures, we share ownership and management of a company with one or more parties who may not have the same goals, strategies, priorities or resources as we do and may compete with us outside the joint venture.
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The benefits from a successful joint venture are shared among the co-owners, so that we do not receive all the benefits from our joint venture.
+Added: General Risk Factors
+Added: The inability to attract and retain key personnel could adversely affect our business and results of operations.
+Added: Our ability to operate our business and implement our strategies depends, in part, on the efforts of our executive officers and other key employees.
+Added: Our future success depends, in large part, on our ability to attract and retain qualified personnel, including manufacturing personnel, sales professionals and engineers.
+Added: The unexpected loss of services of any of our key personnel or the failure to attract or retain other qualified personnel could have a material adverse effect on the operation of our business.
+Added: While we have enjoyed good relations and a collaborative approach with our work force, employment relationships can deteriorate over time.
+Added: Given the extent to which we rely on our employees, any significant deterioration in our relationships with our key employees or overall workforce could materially harm us.
+Added: Work stoppages or instability in our relationships with our employees could delay the production and/or development of our products, which could strain relationships with customers and cause a loss of revenues which would adversely affect our operations.
+Added: In addition, local economic conditions in the Central Georgia area (where our principal manufacturing facilities are located) may impact our ability to attract and retain qualified personnel.
+Added: Our worker’s compensation insurance may not provide adequate coverage against potential liabilities.
+Added: Although we maintain a workers’ compensation insurance stop loss policy to cover us for costs and expenses we may incur resulting from work-related injuries to our employees over our self-insured limit, this insurance may not provide adequate coverage against potential liabilities as we incur the costs and expenses up to our self-insured limit.
+Added: In addition, we may incur substantial costs in order to comply with current or future health and safety laws and regulations.
+Added: These current or future laws and regulations may negatively impact our manufacturing operations.
+Added: Failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.
+Added: We may need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.
+Added: Our ability to execute current and future business plans, including the potential for future market and/or product expansion and opportunities for future international growth, may require substantial additional capital.
+Added: We will consider raising additional funds through various financing sources, including the sale of our equity securities or the procurement of additional commercial debt financing.
+Added: However, there can be no assurance that such funds will be available on commercially reasonable terms, if at all.
+Added: If such financing is not available on satisfactory terms, we may be unable to execute our growth strategy, and operating results may be adversely affected.
+Added: Any additional debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility.
+Added: If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and our stockholders may experience additional dilution in net book value per share.
+Added: If the amount of capital we are able to raise from financing activities, together with our revenues from operations, are not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our future product offerings and market expansion opportunities and potentially curtail operations.
+Added: Interest rates could change substantially, materially impacting our profitability.
+Added: Our borrowings under our credit facility are at variable rates of interest and expose us to interest rate risk.
+Added: We monitor and manage this exposure as part of our overall risk management program, which recognizes the unpredictability of interest rates and seeks to reduce
+Added: potentially adverse effects on our business.
+Added: The majority of our debt interest payments are protected against increases in short-term rates;
+Added: however, changes in interest rates cannot always be predicted, hedged, or offset with price increases to eliminate earnings volatility.
+Added: An impairment in the carrying value of goodwill and other long-lived intangible assets could negatively affect our operating results.
+Added: We have a substantial amount of goodwill and purchased intangible assets on our balance sheet, concentrated in our bus segment and specifically related to the dealer network and our trade name.
+Added: These long-lived assets are required to be reviewed for impairment at least annually, or more frequently if potential interim indicators exist that could result in impairment.
+Added: If any business conditions or other factors cause profitability or cash flows to significantly decline, we may be required to record a non-cash impairment charge, which could adversely affect our operating results.
+Added: Events and conditions that could result in impairment include a prolonged period of global economic weakness, a further decline in economic conditions or a slow, weak economic recovery, sustained declines in the price of our common stock, adverse changes in the regulatory environment, adverse changes in the market share of our products, adverse changes in interest rates or other factors leading to reductions in the long-term sales or profitability that we expect.
+Added: Security breaches and other disruptions to our information technology networks and systems could substantially interfere with our operations and could compromise the confidentiality of our proprietary information, notwithstanding the fact that no such breaches or disruptions have materially impacted us to date.
+Added: We rely upon information technology systems and networks, some of which are managed by third-parties, to process, transmit and store electronic information, and to manage or support a variety of business processes and activities, including supply chain management, manufacturing, invoicing and collection of payments from our dealer network and customers.
+Added: Additionally, we collect and store sensitive data, including intellectual property, proprietary business information, the proprietary business information of our dealers and suppliers, as well as personally identifiable information of our employees, in data centers and on information technology systems.
+Added: The secure operation of these information technology systems, and the processing and maintenance of this information, is critical to our business operations and strategy.
+Added: Despite security measures and business continuity plans, our information technology systems and networks may be vulnerable to damage, disruptions or shutdowns due to attacks by hackers or breaches due to errors or malfeasance by employees, contractors and others who have access to our networks and systems, or other disruptions during the process of upgrading or replacing computer software or hardware, hardware failures, software errors, third-party service provider outages, power outages, computer viruses, telecommunication or utility failures or natural disasters or other catastrophic events.
+Added: The occurrence of any of these events could compromise our systems and the information stored there could be accessed, publicly disclosed, lost or stolen.
+Added: Any such access, disclosure or other loss of information could result in legal claims or proceedings, liability or regulatory penalties under laws protecting the privacy of personal information, disrupt operations and reduce the competitive advantage we hope to derive from our investment in technology.
+Added: Our insurance coverage may not be available or adequate to cover all the costs related to significant security attacks or disruptions resulting from such attacks.
Other Risk Factors Relating to an Investment in Our Common Stock
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Concentration of ownership of our common stock may have the effect of delaying or preventing a change in control.
−Removed: Approximately 42% of our Common Stock is owned by ASP Holdings LLC, an entity owned by American Securities LLC ("American Securities").
−Removed: As a result, American Securities has the ability to significantly influence the outcome of corporate actions of our Company requiring stockholder approval.
+Added: At October 2, 2021, approximately 35% of our common stock was owned by ASP, an affiliate of American Securities LLC ("American Securities").
+Added: As a result, American Securities has the ability to significantly influence the outcome of corporate actions of
+Added: our Company requiring stockholder approval.
This concentration of ownership may have the effect of delaying or preventing a change in control and might adversely affect the market price of our common stock.
−Removed: Shares of our Common Stock are reserved for issuance, which would have the effect of diluting the existing shareholders.
+Added: Shares of our common stock are reserved for current and future issuance, which would have the effect of diluting the existing shareholders.
On May 28, 2015 and March 12, 2020, we registered 3,700,000 and 1,500,000 common stock shares, respectively, representing the shares of common stock issuable under the Blue Bird Corporation 2015 Omnibus Equity Incentive Plan (the “Incentive Plan”) and, pursuant to Rule 416(c) under the Securities Act of 1933, as amended, an indeterminable number of additional shares of common stock issuable under the Incentive Plan, as such amount may be adjusted as a result of stock splits, stock dividends, recapitalizations, anti-dilution provisions and similar transactions.
At October 2, 2021, there were 1,358,263 common stock shares remaining to be issued under the Incentive Plan.
+Added: 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.
+Added: 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.
+Added: Refer to Note 19, Subsequent Events , to the Company’s consolidated financial statements for additional information regarding this transaction.
+Added: 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 several different type of securities, including shares of common stock, from time to time in one or more offerings.
+Added: The number of shares is indeterminable and is dependent on whether or not common stock is a security being sold in a future offering and, if so, the amount of capital we are attempting to raise and the price at which the shares of common stock can be sold.
+Added: Any such sale of shares may also be adjusted as a result of stock splits, stock dividends, recapitalizations, anti-dilution provisions and similar transactions.
Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.
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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.